Reducing taxes is an essential piece in preserving your retirement plan. Tax laws can be confusing, and little mistakes lead to larger tax issues. Each year millions of people overpay in taxes without even knowing it, leading to a lower retirement income. Our financial planners offer retirement tax consulting that pays critical attention to tax liability during every step of your financial planning process to minimize problems and potentially maximize tax deductions.
Tax Diversification
There are several ways to develop a tax efficient investment strategy in order to create more flexibility in managing your taxes now and when you are ready to retire. Your money can be held in three different types of accounts and they are all taxed differently. Our advisory services include asset diversification into these three accounts in order to create after-tax net retirement income.
Roth Conversion Strategies
Most individuals have the majority of their retirement assets in tax-deferred accounts that are subject to ordinary income tax. Our financial planners offer tax consulting as part of the retirement planning and recommend strategies to shift assets from the tax-deferred accounts to tax free accounts using Roth conversions. This strategy is important because Roth individual retirement account holders have more control over taxes in retirement. With a Roth conversion, you simply “prepay” the taxes on the amount you convert, which allows you to capture all future growth and income as tax free. Our wealth management team use meticulous strategies to project how much money you should convert to a Roth IRA over a period of time in order to control your tax bracket long-term and get the most value from your investments.
Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including (but not limited to) a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
Tax-Loss Harvesting
Tax-Loss Harvesting is a strategy our financial planners use to help turn money lost from an investment into a profitable opportunity. Our tax planners use the capital losses that inevitably occur to reduce your tax bill. You don’t truly have a gain or a loss on any asset until you sell it. When the asset is sold we are able to use that capital loss to offset your capital gains and income tax. The investment can then be replaced, or harvested, with a similar investment in order to maintain proper balance and diversification within your portfolio.
Additional Comprehensive Strategies
Our financial advisors utilize comprehensive tax preparation strategies when planning how to help maximize your retirement accounts. We will help all retirement plans include investment strategies that are tax-efficient and follow Internal Revenue Service (IRS) guidelines. Some additional financial services include asset allocation, donor-advised funds, defined contribution plans and defined benefit plans, tax-efficient portfolio rebalancing, charitable gifting, and strategies for reducing taxes on real estate transactions.
Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions.