Tax-Efficient Investing
Often overlooked, taxes can significantly impact your income and investment results, affecting the long-term values of your investment portfolios and estate.
Planning to manage the tax consequences of investment decisions efficiently can be an important factor in retaining more of the assets you worked hard to build. It can also significantly impact your current and future income and tax bill.
Areas of current concern may include:
- Structuring your investment portfolio in the most tax-efficient manner.
- Building your estate plan to transfer your wealth with tax efficiency.
- Retaining more of your income after taxes.
- Optimizing distributions from your retirement accounts.
- Determining a draw-down strategy that factors in tax consequences.
Tax-Efficient Strategies
Coordinating with your tax advisor, we can help you implement tax-efficient investment strategies now and in the future to help reduce the likelihood of taxes becoming a burden, including:
- Tax-Loss Harvesting – helps you plan when losses should be taken on your holdings to best offset income and other gains to your advantage for the tax year.
- Tax-Lot Accounting Techniques – helps you determine which shares to liquidate, ultimately helping you to reduce taxes by managing capital gains and losses.
- Legislation and Tax Code Education – gives you access to investor communications from financial planning professionals that can help you stay abreast of any changes that could affect your assets and estate.
- Qualified Retirement Plans – specifically for business owners, strategies to help reduce taxable income, increase tax-deferred retirement savings, or take advantage of tax-free Roth 401(k) options, if appropriate.
Tax-Efficient Investments
We can also recommend which tax-efficient investments suit your needs and goals. Some of the types of considerations we make when making recommendations to you include:
- ETFs and Index Mutual Funds – have a passive-management style and low portfolio turnover and typically tend to be more tax-efficient than many actively managed portfolios, with lower management costs.
- Tax-Managed Mutual Funds – aim to employ tax strategies within the fund to limit annual distributions, lowering their annual tax cost to their investors.
Municipal Bonds (Munis) – offer free income from federal and in some cases, state taxes. - Annuities – offer tax deferral opportunities outside retirement accounts for those who wish to save more efficiently.
DISCLOSURES:
EPE Wealth Advisors and LPL Financial do not provide legal or tax advice. Please consult with your tax or legal advisor regarding your personal situation.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value, and may trade at prices above or below the ETF's net asset value (NAV). Upon redemption, the value of fund shares may be worth more or less than their original cost. ETFs carry additional risks such as not being diversified, possible trading halts, and index tracking errors.
Investing in mutual funds involves risk, including possible loss of principal. Fund value will fluctuate with market conditions and it may not achieve its investment objective.
Municipal bonds are subject to availability and change in price. They are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
