The Importance of Simultaneous Investment & Tax Planning

Planning for your future is a big deal. Whether you’re just starting out in your career, building your family and want to develop your retirement still years away or you’re at the age when retirement is finally coming closer, it’s always the right time to get serious about your finances.  We cannot stress enough the importance of working with an experienced and qualified team of financial experts to come up with a plan that works. 

Tax Planning

One thing we speak about often with our clients is the importance of tax planning while you’re assembling plans and establishing goals for the future. Doing this at the same time will help to ensure that you’re choosing accounts that will work for you and that won’t likely generate exorbitant tax bills when it’s time to retire. 

A wise investment plan will incorporate tax liability strategies alongside investment planning. 

When might your plans break down? This is a complicated question, but a common situation which can impact future financial gains may occur if a vast majority of your net worth is sitting in a 401(k) or IRA.  Suddenly when retirement comes, your distributions are treated as ordinary income on the tax return which means higher taxation, per-dollar.*

Tax Loss Harvesting

With assets in a taxable account, a qualified, tactful adviser may help you structure a plan to offset taxes you’ll face on both gains and income so you have optimal asset allocation and minimal surprises.

A better plan could be to contribute to a ROTH IRA and a taxable brokerage account. This may provide ample flexibility to source funds during retirement without a large tax burden. (* per current, general tax law)

This planning should also include a design for inheritance and passing on a financial legacy in a tax-efficient way. All of the parts of the puzzle are interconnected and should be treated that way when coming up with a solid financial plan that will work for you. 

Remember, having diversity across the tax registration of accounts is often overlooked and it’s something you should focus on now. 

If you want to talk to someone who can help you create a healthy financial plan for your future, call Toomey Investment Management, Inc., today.