Taxes Matter when Investing  

Here's a fun fact for you: Most academic finance ignores taxation because it was largely written for large endowments, pensions, and foundations that do not pay taxes. Here's another fun fact: You do pay taxes. 

We believe taxes are wholly unappreciated by most financial advisers, leading to sub-optimal investment decisions. Every investment decision you make must be filtered through a tax planning lens to minimize the taxes you pay. Questions we ask when customizing an investment portfolio for a client include:

  • How can we make this portfolio as tax-efficient as possible to reduce current taxes?
  • Which investments should be held in which types of accounts to ensure tax-aware investing?
  • What actions can we take now to reduce taxes in retirement?

Less taxes paid means more money for you, your family, your enjoyment, and the causes you care about.  You know this. It’s intuitive.  So why work with a financial advisor who ignores this reality? 

Tax Planning strategies we consider when helping our clinets

Tax-Efficient Investing 

We believe smart investing is tax-efficient investing.  More, the management of your investment portfolio must connect and interact with the rest of your personal finances making an all-inclusive approach, like our Trailhead Guided Wealth Management service, the best path forward. 

In pursuit of minimizing the taxes you pay over your investment time horizon, a timeline that may span decades, we consider many of the following tax-management strategies when creating our client's investment portfolios:  

  • Contribution Strategies: Should you contribute to a tax-deferred account (like a 401k or 403b), a Roth account, a Health Savings Account (HSA), or a taxable account? 
  • Asset Location: Which account should hold which assets to maximize tax-efficiency over the long-run? 
  • Withdrawal Strategies: How you withdraw money and from which investment accounts, respectively, can have a significant impact on retirement cash flow. 
  • Roth Conversions: Strategically moving tax-deferred assets to a Roth IRA is a great tool for managing retirement cash flow. 
  • Tax-Loss Harvesting: Investment losses should be harvested to offset capital gains and up to $3,000 of taxable income. 
  • Direct Indexing: For individuals or families with larger taxable investment accounts, direct indexing often beats ETFs and mutual funds for tax-efficiency. 
  • Strategic Giving:  Individuals with embedded capital gains in their stock portfolio may want to consider donating the asset to avoid both long-term capital gains and to reduce overall taxable income.