Taking Stock Don’t Cash Out Just Because Everyone Says It’s a Great Time to Sell

Key Takeaways

  • Tax rates are likely going up across the board in 2022.
  • But don’t sell your stocks, bonds, home or even business just to beat higher capital gains rates.
  • Real estate, commodities and precious metals tend to hold up well during inflationary times. Have you considered Whole Life insurance for your safe dollars?

An estimated 45 million U.S. households will transfer $68 trillion over the next 25 years, according to Cerulli Associates. It appears that much of that could occur before December 31st   of 2021, as owners of closely held businesses, homes, stocks, collectibles and even crypto try to cash out and new capital gains tax rates loom on the horizon.

On the flip side, many affluent, successful people can’t take part in the buying and selling frenzy. That’s because they’re not ready to sell their business or home yet, and their money is tied up in retirement accounts or other illiquid assets and investments, so they’re forced to sit on the sidelines. You’ve heard of buyer’s remorse; I call that “unable-to-be-a-buyer’s remorse.”

More on that in a minute.

Tax storm clouds on the horizon

Either way, everyone is bracing for higher tax rates across the board in 2022 (and beyond). Someone has to finance the nation’s ever-rising deficit, the stimulus programs and the newly passed infrastructure bill. Guess who that’s going to be? Right, those of you on the higher end of the income spectrum.

From higher tax brackets on income and capital gains, to eliminating the step-up basis or reducing the estate tax exemption, many successful people are worried about holding on to their wealth in 2022 and beyond.

In response, many folks are looking to take advantage of the higher exemption levels for gifts and looking to put assets in things that are immune from future taxation. People closing in on retirement are also concerned that they’ll be running into a tsunami of increased taxes just when they plan to start using money from qualified retirement plans. They are looking for ways to mitigate the future tax burden and required minimum distributions.

Are home buyers really overpaying?

Everyone sees that home prices are at record levels. Now that they’re unpacked and coming to grips with some repair bills, many recent homebuyers may feel like they overpaid. However, considering the absurdly low interest rates their paying on their monthly mortgage, their house payments are still very affordable by historical standards, especially for those in the higher income brackets.

House rich, liquidity poor

Whether or not we’re in a housing bubble, it’s hard to argue with the long-term returns on real estate—especially during periods of rising inflation. As mentioned earlier, a bigger issue I’m seeing is the need for more liquidity.

When so much of your wealth is tied up in your home and retirement accounts, the only way to access it is to cash out (home) or pay taxes and penalties (early withdrawals from retirement assets). Also, given the threat of a correction in both the housing and stock markets, now could be a good time to take some chips off the table and store them safely. That way, you’ll continue to outpace inflation, but still have easy access to that money when markets correct, or you face financial hardship such as losing a job or facing unplanned medical expenses.

Inflation rearing it’s ugly head

You may not believe the data coming out of Washington, D.C., but if you don’t think inflation is real right now, have you noticed you’re paying a lot more at the pump recently? Have you tried to book airline tickets or a rental car or buy an air conditioner or even a decent bicycle? Ouch.

From where I sit, inflation is not “transitory;” it’s actually much higher than reported and likely to be so for a while. Take housing, prices have appreciated way more than the reported inflation rates.  Like we discussed in our Wealth Eroder book, inflation is the silent killer of assets. It’s time to consider other assets that can benefit from inflation such as precious metals (gold and silver), real estate and commodities such as oil and gas. Precious metals tend to hold up well during times of high inflation, because they are hard currency that can be used in lieu of paper money, and there’s a scarcity component, since they need to be mined and refined. Real estate holds value because it’s tangible and it’s a necessity. People always have to live somewhere.

Also, it’s a good time to consider shifting some of your wealth into assets that are never taxed Roth accounts or Whole Life insurance. More about that in a future post. It’s great to have liquidity, but you don’t want your money sitting in “lazy” assets—savings accounts paying you less than 1% a year. At that rate, you’re not even keeping up with inflation. Whole Life can be a better place to store your “safe dollars.” You’ll earn well above bank rates of return while it’s parked, and you can borrow against your whole life policy whenever you need to and pay the “loan” back to yourself on your terms—not the bank’s terms.  All this while the full amount of your cash value continues to earn and grow uninterrupted.


As Warren Buffet likes to say: “Be Fearful When Others Are Greedy And be Greedy When Others Are Fearful.”