Tax Optimization Strategies

What We Can Do For You
  • Tax sensitive investment strategies
  • Roth conversion strategies
  • Tax impacts due to major life events
  • Tax policy change stress testing
  • Implications of non-qualified withdrawals from college savings plans
  • Implications of changes to life insurance and annuity products
Tax Sensitive Portfolios
When constructing our portfolios, we always take into account the tax status of your investments to consider the optimal investment direction for you. We have portfolios broadly divided into after-tax portfolios and pre-tax portfolios. In planning rotations and changes to the portfolios, we always consider your after-tax accounts with a tax-sensitive lens so as to avoid incurring unnecessary capital gains.
In addition, where appropriate we will execute tax-loss selling towards the end of each calendar year. In these situations, the recognition of short-term losses is a powerful tool to offset any capital gains or other income recognized during the year.
Roth Conversion Strategies
A Roth IRA is structurally similar to a traditional IRA by allowing you to make investments in a tax-sheltered vehicle. The primary difference is that a Roth IRA is funded with after-tax dollars, while a traditional IRA is funded with pre-tax dollars. 
In a Roth conversion, you convert a portion of your IRA contributions into after-tax dollars by paying the ordinary income taxes owed on IRA withdrawals and moving the withdrawal to a Roth IRA account. To develop an effective Roth conversion strategy, we make forecasts about what your income taxes will be in the future based on expected earnings and tax policy. 
To make the strategy work effectively, you will need a period of time in which you will owe very little in income taxes. Each dollar withdrawn from your traditional IRA's is counted towards income taxes, so there is a natural limit for everyone on how much can be converted. In the strategy, we call this "filling up tax brackets". You will fill up tax brackets up to what you anticipate your longer term tax bracket will be.
Roth conversion strategies are a powerful and effective tool at effectively targeting when you will pay taxes on your retirement accounts. Reach out to us to start a conversation to see if this strategy is right for you.
Income Tax Estimation
As a part of building your comprehensive financial plan, we will make forecasts regarding your income tax obligations based on tax bracket, marital status, retirement plan contributions, and other factors relevant to calculating income taxes.
These forecasts allow you to compare and contrast different scenarios to help you analyze the impact of various tax strategies on your financial picture.
Tax Policy Stress Testing
One of the biggest unknowns when forecasting income taxes in a financial plan is the impact of policy changes. While we can know with some certainty how taxes will be in the next 1-2 years, large revisions to the tax code are possible when examining long time horizons that can span 20 - 30 years.
Our tools help us analyze the impact of certain policy changes as it pertains to your comprehensive financial plan. For example, we can model the sunsetting of tax provisions, changes to Social Security benefits, and changes to income tax brackets. Get in touch with us to day to see how these changes could affect your financial picture.
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