As a general rule, the more money you make, whether in work generated income or capital gains, the more you will pay in taxes. But rules are meant to be broken, and there are ways to mitigate tax losses with the right planning and advice.
The after-tax return vs. the pretax return. Everyone wants their investments to perform well. But for many investors it’s their after-tax return that may make all the difference. After all, even if your portfolio is earning double-digit returns, it may not matter if you’re also losing a percent of those earnings to taxes.1
Holding onto assets. One method that may increase tax efficiency is to simply minimize buying and selling in order to manage your capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions. In the words of Warren Buffett, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”2
Many people believe in giving back, but under the new tax laws, it may not be as tax advantageous as it used to be. With the steady appreciation in the stock market – the longest bull run in history – some folks have achieved a level of wealth they never imagined. Our Charitable Strategies work is focused on smarter, tax-efficient ways to help people give back a bit of that wealth to various philanthropic causes. But we are often surprised to find even large, well-established, donors who are still not familiar with the benefits of donating appreciated stock and how to use Donor Advised Funds (DAFs).
On December 20th, 2019, new legislation was signed into law as part of a larger government spending package that promises to have wide ranging and lasting effect on saving for retirement. Called the Setting Every Community Up for Retirement Enhancement (SECURE) Act, the legislation includes many long-sought common-sense reforms that could make retirement saving both easier and more attainable for many Americans.
According to recent statistics, there are now more than 44 million unique borrowers who collectively owe $1.6 trillion in student loan debt—making student loans the second largest consumer debt category after mortgages. Those are staggering numbers.
For the considerable Millennials and massive Gen Z workforce to follow, student loan debt is a primary economic concern, often before mortgages and retirement savings can even be considered. Smart businesses have taken notice in a growing trend toward creating student loan repayment assistance programs as a necessary company benefit to attract and retain younger talent.
As 2019 closes and a new year starts with a fair amount of uncertainty, it is a good idea to take stock of your financial situation. While markets have been going strong and the economy seems largely sound, upheaval in both domestic and world politics, an increasingly fragile interaction with the environment, and uncertainty in global trade policies will continue throughout the immediate future. We’d like to ask all of our clients, both individual and as part of an organization—how is your money working for you and do you have a cohesive plan to maintain and grow your wealth?
There is growing interest in a design strategy known as the Mega Backdoor Roth Conversion (the Conversion). The Conversion allows 401(k) or 403(b) Plan participants who are already deferring the maximum allowed to contribute After-Tax funds to the plan. The participant may then convert the money from After-Tax funds to Designated Roth funds. This two-step process has the effect of allowing plan participants to contribute additional Roth money to the plan and shelter the gains from taxes.