Harvesting Capital Gains vs. Roth Conversions

Typically, financial advisors recommend deferring income to a later date as a strategy to mitigate taxes.

Typically, financial advisors recommend deferring income to a later date as a strategy to mitigate taxes. However, this is only effective when current income levels are higher than expected future income levels.

The reality is that some people are in the other camp, where future income levels will be higher than current ones. Especially when more and more income is deferred to later dates.

In this circumstance, it can be beneficial instead to accelerate income rather than defer it taking advantage of a lower tax bracket now. Two popular strategies for accelerating income are Roth conversions and harvesting gains. Roth conversions accelerate ordinary income while the harvesting strategy accelerates capital gains.

Roth Conversions

We have written plenty about these in the past: you can read about them here. The short story of these is that you convert all or portions of your traditional IRA assets into an after-tax Roth IRA. Doing so forces you to pay the income tax on the converted amount now in exchange for tax free growth and withdrawals later.

Harvesting Gains

The standard strategy here that you are probably familiar with is tax LOSS harvesting where you take losses to try and offset gains and avoid taxes. Tax GAIN harvesting is when you take gains in lower tax bracket years to avoid taking them at higher rates in the future.

Which is right for you?

There are a variety of factors that come into play including forecasting some future events. Thankfully, we have a nice flow chart that should be able to guide your decision included below:

Tax Impact Flowchart




As a client of Blue Bell Private Wealth Management, LLC (“Company”), by selecting the “I Agree” button, I elect to participate in the password-protected access portion of Company Internet web site.  I understand that my participation will allow me to review certain investment-related information published by Company and unaffiliated third parties.  This password-protected access is made available to clients of Company free of charge.  This authorization shall continue until canceled in writing.

I understand that the password-protected section is a secure web site intended only to allow a client access to information relative to his/her/its specific account.  I also understand that I will be assigned an individual password.  I agree not to share my password with any other person. I hereby release and hold Company harmless from any adverse consequences relative to any failure by me to keep the identity of my password secure.



Access your personal financial planning home page. Your homepage allows you to organize, store, and monitor all your personal financial information, including access to all of your accounts, credit cards, mortgages, insurance, and investments from a wide range of sources.

Access your account information, Blue Bell quarterly reports and commentary as well as Schwab statements and tax documents.

Charles Schwab

Access your account information, statements and tax documents.