On my last blog entry, I talked about things to do when the market declines. There are three good opportunities that spring to mind each time I think of a market pull-back, correction or all-out bear market. The three are:

  1. Turn on automatic dividend reinvestment.
  2. Buy more of a quality investment (stock, ETF, low-cost mutual fund) you already hold.
  3. If you have a traditional IRA, move some of the assets to a ROTH IRA.

On Thursday, as the market continued to correct downwards, I moved 500 shares of AT&T Inc (Ticker: T) from my IRA to my ROTH IRA. The reasons are as follows:

  1. The value of the shares was down, so the taxable amount of the transfer was less than it would have been at the beginning of the week.
  2. The income taxes I must pay on this “withdrawal” are, therefore, less than they would have been had I done this the week before.
  3. All future capital gains and dividends on these shares will no longer be taxable. This adds an additional $1,000 per year to my tax-free dividend income based on the current dividend. (And this will also likely grow every year.)

It could be argued that I should have done this transfer earlier (in July) when T was down even more. I prefer to wait until the fourth quarter of the tax year to make this type of decision.