Quick Read – Direct indexing replaces S&P 500 (SPY) with 150-250 constituents to harvest $30,000-$50,000 annual losses, saving $9,500-$12,800 in taxes yearly on $1.2M portfolio. – Lock in tax harvests before concentrated stock events and coordinate with Roth conversions to…
ppress IRMAA surcharges without triggering Medicare lookback penalties. – A 58-year-old engineer in Palo Alto, married filing jointly, earns $750,000 a year, has already stuffed $4 million into 401(k)s and IRAs, and parks another $1.2 million in a brokerage account that holds a single S&P 500 fund. The 401(k) is maxed
The mega backdoor Roth is maxed. The next tax dollar saved has to come from somewhere else, and for households at this income level it almost always comes from the taxable account. Direct indexing is how it gets done.
Instead of owning the SPDR S&P 500 ETF (NYSEARCA:SPY), the investor holds 150 to 250 of the underlying constituents in a separately managed account that mirrors the index within a tight tracking band. The fund wrapper goes away. Every individual lot becomes a tax asset.