Tax Planning
Tax planning has always been an integral part of our wealth management services.
Our Tax Planning Approach
Tax Location Planning
A major tax planning opportunity is tax location planning. This means matching an investment account’s tax characteristics to an investment’s tax characteristics.
For example, you don’t want to put a tax-free municipal bond into a regular IRA. Doing so would take tax-free money and make it taxable. We put most growth assets in Roth IRAs, while putting investments that don’t get a tax break into tax-deferred accounts. We allocate investments that do get a tax break to taxable accounts.
Other opportunities & strategies to enhance after-tax returns can include:
Maximizing advantages of HSAs, 401(k)s, IRAs, and other accounts for retirement planning
Emphasizing long-term capital gains
Long-term and Real-time Data
We analyze our clients’ tax planning plan both in the short term and long term. We know which years will likely be high-tax or low-tax years and know when things will shift. We also have our clients’ investment data right on our computer. We know the tax basis, taxable gain, projected income, what might work well for charitable giving, etc.
With the above information at our fingertips, we can both plan ahead to enhance our clients’ tax savings and react quickly to capitalize on opportunities. When a tax law changes, we know exactly who will be affected and we adjust their portfolio accordingly. When global trends change, we know who has certain kinds of investments, what the tax implications are, and what needs to be done next. In our regular meetings, we suggest further tax reduction strategies.
Studies have shown the potential value of our tax planning approach. An Envestnet study indicates value of 1% per year beyond fees; a Russell study indicates 0.5% beyond fees. Vanguard’s 14-year study indicates up to 0.75%.
Because we are comprehensive wealth managers, our clients receive many other services as well, creating an overall high-value service.
Talk to your financial advisor today!
