TL;DR Answer Box

Year-end portfolio review should start with cash flow timing, not benchmarks. Map your next 1, 5, and 10 years, fund near-term goals with safer capital, place assets in the right accounts for taxes, and use gains and losses to clean up legacy holdings. Finish with a one-page action plan you can actually follow. Last updated: December 19, 2025

Benchmarks do not fund your life

If your portfolio is not mapped to your next 1, 5, and 10 years, it is not a plan. It is a hope.

Most year-end reviews ask, “Am I still 70/30?” That question can be fine, but it is often incomplete. The better question is: “Will my money show up on time for my life, and is it sitting in the right accounts for taxes?”

The better year-end question

Benchmarks do not pay for college, a renovation, or a career downshift. Cash flow does. Timing does. Taxes do.

So give every dollar a job. Assign a date, a purpose, and an account. That is how you reduce stress without sacrificing long-term compounding.

Why generic rebalancing misses the real risk

Volatility is not the enemy. Forced selling is.

The most painful version of risk is needing cash during a drawdown for a goal that should have been protected. This is often called sequence-of-returns risk. The label matters less than the result. You sell at the wrong time, and your long-term plan takes a permanent hit.

Volatility vs forced selling (sequence risk)

When you hear “my portfolio is down,” the follow-up question should be: “Down compared to what timeline?”

A 20% drawdown is uncomfortable. A 20% drawdown right before a down payment is a problem. The difference is not markets. The difference is matching the wrong assets to the wrong date.

Example (Rebecca)

Rebecca needs a vacation home down payment in 18 months and college tuition in three years. Both goals sat inside a balanced fund that fell 18%.

The problem was not that the market moved. The problem was a timeline mismatch. Near-term goals were funded with assets that can drop at the exact wrong time. Rebecca did not need more commentary. She needed a framework that drives decisions.

The year-end timeline reset (15 minutes)

This is the fastest way to turn “portfolio management” into “life funding.” You are building a timeline, not a thesis.

Step 1: Map your next 1, 5, and 10 years

• Next 12 months: list known cash needs, plus your emergency fund target.
• Next 5 years: list big goals with dates and amounts (down payment, renovation, tuition, sabbatical).
• Next 10 years: list optionality and commitments (work-optional runway, phased retirement, second home, family support).

Keep it simple. Dates and dollar amounts. No spreadsheets required.

Step 2: Assign accounts and taxes (quick checklist)

For each goal, answer two questions:

• Which account funds it? Taxable, 401(k), IRA, Roth, cash management, or another bucket.
• What is the tax and penalty cost to access it? Not every dollar is equally “spendable.”

This is where many high earners get surprised. They have plenty of money, but the wrong money for the date. The goal of this exercise is to make “on time” your default.

Core move 1: Match near-term goals to safer capital

The goal is not to become conservative. The goal is to avoid forced selling.

Most people make one of two mistakes. They over-protect long-term money and miss compounding. Or they under-protect near-term goals and take avoidable risk. Right-size risk to time.

0 to 12 months: protect the date

For money you need soon, prioritize stability and liquidity. Examples could include high-yield savings, money market funds, short-term Treasuries, or conservative short-duration bond options.

The point is simple. When the date arrives, the money is there.

3 to 5 years: reduce forced-sale risk

This bucket is tricky. It is long enough that growth matters, but short enough that a drawdown can create real consequences.

A diversified mix with a stability tilt may be appropriate, depending on your goal, your flexibility, and your risk capacity. The point is not an exact allocation. The point is reducing the chance you will be forced to sell equities during a rough window.

10+ years: earn the premium

This is where you can accept short-term noise for long-term growth. If the money is not needed for a decade or more, you can usually afford volatility. The job here is compounding.

Core move 2: Review asset location for tax efficiency

Asset allocation gets the headlines. Asset location quietly improves outcomes year after year.

Asset location is simply placing the right assets in the right accounts based on tax treatment. That can reduce tax drag and keep more of your return.

If you want the deeper version, read Asset Location Strategy for High Earners.

Taxable accounts: keep it tax-efficient and flexible

• Typically best suited for: tax-efficient stock index funds and ETFs, and strategies that keep turnover low.
• Bonus for high earners: taxable is often where tax-loss harvesting happens because losses in retirement accounts do not create deductible capital losses.
• Watch-out: your taxable account is also your flexibility account. It often funds goals and life changes. That makes the timeline reset even more important.

Pre-tax accounts (401(k), traditional IRA): shelter the tax-inefficient income

• Typically best suited for: assets that throw off ordinary income or higher ongoing distributions, such as taxable bond exposure or other income-heavy strategies.
• Why it matters: you are deferring taxes while the account compounds, but withdrawals later are generally taxed as ordinary income (subject to the rules that apply to you).

Roth accounts: reserve for longest horizon and highest growth

• Typically best suited for: higher growth, longer-horizon assets, because qualified Roth withdrawals may be tax-free if eligibility and rules are met.
• Planning tie-in: Roth and tax diversification decisions work best when coordinated with retirement income planning.

For a practical overview of tax diversification across account types, see Introduction to Retirement Planning and Tax Diversification.

Core move 3: Use gains and losses to tidy legacy holdings

Year-end is a natural clean-up window. Not because of headlines, but because you can simplify and reduce tax drag while keeping the portfolio aligned to your timeline.

Tax-loss harvesting: use down positions to your advantage

Tax-loss harvesting means realizing losses in taxable accounts to offset gains, and potentially reduce taxes over time (subject to your tax situation). It can also create “cleaner” exposures when you are consolidating duplicative funds.

If you want a step-by-step breakdown, start here: Harvesting Tax Losses to Beat Capital Gains.

Wash sales: the rule that quietly breaks the strategy

The most common mistake is triggering a wash sale. In plain English, a wash sale can disallow a loss if you buy the same or substantially identical security within the window around the sale (details depend on the rules and how the transactions occur).

This is one reason high earners benefit from a repeatable process and coordinated execution, especially when dividends are reinvested automatically or when multiple accounts hold similar exposures.

Clean-up sequence for legacy holdings

If your taxable account looks like a museum of old positions, here is a practical order of operations:

1. Identify what is duplicative: overlapping funds that do the same job.
2. Identify what is untouchable right now: positions with very large gains that may require multi-year planning.
3. Harvest losses first: create flexibility to offset gains when you trim winners.
4. Trim with purpose: sell to reduce concentration, fund near-term goals, or simplify the lineup.
5. Rebuild exposure intentionally: replace sold positions with a non-identical alternative that keeps the portfolio aligned.

If capital gains basics are fuzzy, read What are Capital Gains?.

Concentrated stock and equity compensation: tidy without breaking the plan

For high earners, “legacy holdings” often include company stock. Sometimes it is intentional. Often it is just what happens when RSUs keep vesting and no one sets sell rules.

Year-end is a good time to answer one question: “If I did not already own this much company stock, would I buy it today with fresh cash?” If the answer is no, you probably want a gradual, rules-based diversification plan.

Depending on your role and restrictions, a 10b5-1 plan may be part of a structured approach (subject to legal requirements, company policy, and your counsel). A practical starting point is 10b5-1 Plans for RSUs.

What this means for high earners

If you earn $400k to $2M+ and your compensation includes bonuses, RSUs, options, or business income, you live in a world of lumpy cash flow and short decision windows.

That reality changes the job of your year-end review. It is not “beat the benchmark.” It is “fund the next chapter with fewer tax surprises and fewer forced decisions.”

• Timeline beats allocation: your 70/30 does not matter if your down payment is sitting in the wrong bucket.
• Taxes are a planning lever: asset location and gain-loss management can reduce lifetime drag, depending on your situation.
• Concentration is common: company stock can quietly dominate your net worth unless you build sell rules.
• Process beats willpower: a repeatable system saves time and reduces errors.

Common mistakes

• Rebalancing to a benchmark without checking your timeline: you can be “disciplined” and still be wrong for your life.
• Funding near-term goals with volatile assets: this creates forced selling risk.
• Keeping too much cash forever: it feels safe, but it may quietly tax your long-term plan.
• Ignoring asset location: paying avoidable taxes year after year is a slow leak.
• Trying to “do TLH” without coordination: wash sales, dividend reinvestment, and overlapping funds can undo the benefit.
• Letting company stock accumulate by default: concentration becomes a risk you did not choose.
• Ending the year without a one-page plan: you start January with good intentions and no execution path.

Action steps (your one-page year-end plan)

If you do nothing else, do these in order. Keep it to one page so it stays alive.

1. Write your 1, 5, and 10-year timeline: dates and amounts.
2. Label each goal with an account: taxable, retirement, Roth, cash, other.
3. Protect the next 12 months: ensure the cash is stable and accessible.
4. Right-size the 3 to 5-year bucket: reduce the chance of forced selling.
5. Confirm the 10+ year bucket can compound: keep long-term money long-term.
6. Do an asset location pass: place tax-inefficient assets where they are sheltered when possible.
7. Run a clean-up sequence in taxable: harvest losses, trim with purpose, simplify duplicative funds.
8. Set rules for equity compensation: what you sell, what you keep, why, and where proceeds go.
9. Summarize in one paragraph: “Here is what we are doing, and here is why.”

Want a fast way to spot gaps between your portfolio and your timeline? Take the Financial Stress Test, then use the results to prioritize the action steps above: Start the Stress Test.

The 2026 upgrade: Life-Driven Investing

In January 2026, we are rolling out our expanded Life-Driven framework. The goal is simple: your portfolio should always serve the plan, and the plan should serve your life.

That includes four liquidity bands, systematic refills and rebalancing tied to your timeline, and tax-aware placement so the portfolio stays aligned even as income, equity, and goals change.

If you are a high earner with equity compensation or business income, this approach can be especially useful because it integrates cash flow timing, taxes, and diversification into one operating system.

Key takeaways

• Match near-term goals to safer capital so you are not forced to sell at the wrong time.
• Use asset location to place tax-inefficient assets in sheltered accounts and preserve flexibility in taxable.
• Use tax-loss harvesting and simplification to reduce tax drag and clean up legacy holdings (subject to the rules).
• Build your portfolio backward from your 1, 5, and 10-year timeline, not from a benchmark.

Facts/FAQ

How much cash should I hold for near-term goals?

Fund 0 to 12-month needs with stable, liquid instruments plus an emergency fund that fits your household risk. Many high earners choose an emergency fund range based on income variability and job risk, not a generic rule. For a practical framework, see Smart Emergency Funds for High Earners.

What is the fastest way to map my portfolio to a 1, 5, and 10-year timeline?

List goals with dates and amounts, then assign each to a specific account and note the tax cost to access it. If the funding source is volatile and the timeline is short, adjust the portfolio to protect the date. Keep the output to a one-page plan so it stays usable.

Where should I place assets for tax efficiency (taxable vs pre-tax vs Roth)?

A common starting point is to keep more tax-efficient equity exposure in taxable, place tax-inefficient income exposure in pre-tax accounts when available, and reserve Roth for long-horizon growth (subject to your eligibility and plan design). The right answer depends on your tax bracket, account mix, and spending timeline. See Asset Location Strategy for High Earners and Introduction to Retirement Planning and Tax Diversification.

How does tax-loss harvesting work, and what is a wash sale?

Tax-loss harvesting generally means realizing losses in taxable accounts to offset gains and potentially reduce taxes over time (depending on your situation). A wash sale can disallow the loss if you buy the same or substantially identical security within the window around the sale, so coordination matters, especially across multiple accounts and dividend reinvestment settings.

How do I trim a concentrated stock position without a big tax hit?

Start by measuring concentration across current shares and expected future vests. Then build a rules-based plan that uses timing, cash needs, and tax coordination to diversify gradually (subject to trading windows and restrictions). Harvested losses can sometimes help offset gains when trimming. If you are an insider or face restrictions, consider whether a 10b5-1 plan is appropriate with counsel and company policy. See 10b5-1 Plans for RSUs.

Should I rebalance to a benchmark at year-end?

Rebalancing can be useful, but the benchmark should not be the boss. First confirm your timeline buckets are funded appropriately. Then rebalance within and across those buckets, ideally in a tax-aware way. The best rebalancing plan is the one that protects near-term goals and keeps long-term assets compounding.

What is “Life-Driven Investing” and how does it change portfolio management?

Life-Driven Investing ties each dollar to a time horizon and purpose so the portfolio is built to fund real life decisions, not just match a benchmark. For Tailored Wealth clients, this approach also integrates automation, tax coordination, equity compensation planning, and systematic rebalancing so the portfolio stays aligned as life changes.

Internal Links

• Asset Location Strategy for High Earners: The deeper rules for placing assets in the right accounts.
• Harvesting Tax Losses to Beat Capital Gains: Step-by-step tax-loss harvesting process and use cases.
• What are Capital Gains?: Quick refresher to make the clean-up plan easier to execute.
• Smart Emergency Funds for High Earners: How to size the “protect the date” bucket intelligently.
• Introduction to Retirement Planning and Tax Diversification: Account-type strategy that supports asset location decisions.
• 10b5-1 Plans for RSUs: A rules-based path for diversification when trading is restricted.

External Links

• IRS Publication 550 (Investment Income and Expenses): Source reference for capital gains, losses, and wash sale rules.
• Investor.gov: Wash Sales: Plain-English overview of the wash sale concept.
• SEC: Modernizing Rule 10b5-1 Insider Trading Plans: Official overview of the 10b5-1 framework and updates.

CTA

If you want your portfolio to fund your life on time, start with the timeline. Then make the three core moves: protect near-term goals, optimize asset location, and clean up gains and losses in a coordinated way.

Take the quick Financial Stress Test to spot gaps between what you own and what your life requires, then we will help you prioritize the fixes: Start the Stress Test.

Disclaimer

This content is for informational purposes only and should not be considered tax, legal, or investment advice. Strategies may depend on your specific facts and eligibility rules, so consider coordinating with your advisor, CPA, and attorney.