When major downturns hit—real ones, not the everyday noise—I don’t panic.

I don’t freeze.

And I don’t pretend I can predict the exact bottom.

I prepare for 30–40% market drawdowns, because history says they will happen.

The question isn’t if—it’s how you react when they do.

When pre-tax, tax-deferred accounts (Traditional 401(k)s, Traditional IRAs) drop hard in value, there are two primary ways I personally take advantage of these periods.

Both are intentional.

Both are disciplined.

And both turn fear into leverage.

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Approach #1: Roth Conversion at or Near the Bottom

(Tax Conversion Harvesting)

The first strategy is what I call tax conversion harvesting.

When markets crash and balances are significantly lower than they were just months earlier, the tax cost of converting drops with them.

Same shares.

Same future upside.

Lower taxable value.

Once the market has fallen and it feels like the selling pressure is exhausting itself—not necessarily the perfect bottom, but somewhere near it—I convert.

Why?

Because I’m moving assets while they’re on sale from a tax-deferred environment into a Roth environment, where all future growth is tax-free.

Nothing about the companies has fundamentally changed.

Nothing about the long-term earning power has disappeared.

But emotionally, humans panic.

And panic creates discounts.

So instead of fearing the downturn, I lock in the lower valuation for tax purposes and let the recovery happen inside the Roth—where the IRS no longer gets a claim on that rebound.

This is one of the rare moments where volatility works for you, not against you.

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Approach #2: Accelerating Contributions While Everything Is on Sale

The second strategy is simpler—but just as powerful.

When markets are down 30–40%, I increase contributions if cash flow allows.

Why?

Because everything is effectively on clearance.

You’re not buying “losers.”

You’re buying the same companies, the same indexes, the same productive assets—just at temporarily reduced prices caused by fear, headlines, and emotion.

This speeds up accumulation.

Every dollar contributed during a downturn buys more shares, which compounds harder on the way back up.

And if you combine this with Roth conversion harvesting?

You’re doing two things at once:

• Locking in lower tax valuations
• Accumulating more future tax-free growth

That’s not timing the market.

That’s responding intelligently to opportunity.

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The Math Most People Don’t Fully Internalize

Here’s the part many people miss—and it’s critical.

When your account drops, the recovery math is not symmetric.

A 30% Drop

• $100,000 → $70,000
• To get back to $100,000, you need a ~43% gain, not 30%

A 40% Drop

• $100,000 → $60,000
• To recover to $100,000, you need a ~67% gain

That recovery is inevitable if the market normalizes—but where that recovery happens matters.

If the rebound happens inside:

• A Traditional account → the IRS still owns a percentage
• A Roth account → the recovery is 100% yours

So when you convert at depressed values, you’re not just saving tax today—you’re shielding the entire recovery from taxation.

That’s leverage most people never calculate.

Why This Accelerates Wealth Building

This practice allows your wealth to grow faster because:

• You’re converting after losses, not before recoveries
• You’re capturing large percentage rebounds inside tax-free structures
• You’re using volatility to reduce lifetime tax drag
• You’re buying when fear creates mispricing—not when optimism peaks

The market didn’t “break.”

Companies didn’t suddenly forget how to generate profits.

Prices dropped because humans are emotional.

And disciplined investors benefit from that.

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The Bigger Picture

This isn’t about being aggressive.

It’s about being prepared.

Market crashes don’t destroy disciplined investors—they expose unprepared ones.

If you understand:

• How pre-tax accounts really work
• How Roth conversions interact with volatility
• And how recovery math actually functions

Then downturns stop being scary.

They become windows.

And windows—if you’re ready—are how long-term wealth is built.