That's a great question—and one that highlights how modern portfolio management has evolved beyond just picking funds or tracking performance.

When you're approaching or already in retirement, tax efficiency becomes just as important as investment returns. Two strategies that can make a meaningful difference here are tax-loss harvesting and direct indexing.

1) What tax-loss harvesting really means

Tax-loss harvesting is the process of selling investments that have declined in value to realize a capital loss, which can offset other gains or even reduce ordinary income (up to $3,000 per year). The idea isn't to “lose money”—it's to turn short-term market dips into long-term tax savings.

For example, if you sell a fund at a $10,000 loss, that loss can offset $10,000 of capital gains from other investments, effectively lowering your tax bill. Then, you can reinvest in a similar (but not “substantially identical”) investment to maintain your market exposure while still realizing the tax benefit.

In other words, it's not market timing—it's tax timing.

2) What direct indexing adds to the equation

Direct indexing takes this concept a step further. Instead of owning a single index fund, you directly own the individual stocks that make up that index.

Why is that powerful? Because it allows for personalized tax management:

• Each stock can be harvested for losses individually (even if the overall index is up).
• You can customize holdings to avoid concentrated positions, exclude certain companies, or align with ESG preferences.
• The process can reduce tax drag over time, especially in taxable accounts.

This level of control simply isn't possible with a single ETF or mutual fund.

3) Why it matters for retirees and pre-retirees

As you transition into retirement, you'll likely be managing taxable withdrawals, Social Security income, and potentially RMDs from IRAs. Tax-loss harvesting and direct indexing can help you:

• Reduce realized capital gains when rebalancing your portfolio
• Smooth out taxable income year-to-year
• Potentially lower Medicare IRMAA brackets or marginal tax rate in key years

It's not just about saving on taxes today—it's about creating flexibility for future income decisions.

4) What to look for from your advisor

If your advisor is using low-cost ETFs or index funds, that's a good start. But if you hold significant taxable assets, you can ask:

• How do you identify and capture tax-loss opportunities throughout the year?
• Do you use automated systems or review portfolios manually?
• Have you considered direct indexing for my situation?

Advisors who incorporate these strategies typically use specialized technology that monitors positions daily for harvesting opportunities.

In summary: tax-loss harvesting and direct indexing aren't just investment tactics—they're tax-management tools that can enhance after-tax returns without increasing risk. If your advisor isn't proactively discussing these, it's worth asking how your portfolio is being managed to minimize taxes today and in the years ahead.