by Michael Evans, Founder & Wealth Manager Cogent Strategic Wealth
Are your earnings considerably higher than you’d planned for? Are you selling a thriving business, cashing in on a winning investment, or otherwise receiving substantial income? If you feel you’ve lost control of current or future tax bills as a result, this can detract from your ability to fully enjoy your growing wealth.
Unfortunately, a lot of the tax-saving advice out there isn’t aimed at high-income earners like you. Nearly any reputable tax service can help you file accurate annual returns, and avoid obvious overpayments. But what about minimizing your lifetime tax burden? How do you build tax planning into your greater wealth—such as preparing for a tax-friendly wealth transfer to your heirs, or engaging in lifelong, tax-efficient charitable giving?
Once you’ve reached this level of planning, basic advice will no longer suffice. In today’s video, we share three strategies we use to help high-earning families like yours establish a lifetime tax strategy.
Strategy #1 – Plan for How and When To Defer Taxable Income: Lacking a crystal ball, we typically advise funding a mixed bag of tax-advantaged accounts across your higher- and lower-income years. These may include IRAs, 401(k)s, profit-sharing, cash balance, and other nonqualified plans, as well as Roth accounts, Health Savings Accounts (HSAs) and other qualified accounts. The mix of different tax treatments gives you and your financial planner more “ammunition” for targeting life-long, tax-efficient spending and investing—no matter what the future holds.
Strategy #2 – Asset Location, Location, Location: Another sensible, often-overlooked strategy for minimizing overall taxes involves being careful about where you hold various asset types across your taxable, traditional, and Roth accounts. The goal is to hold relatively tax-efficient stocks in taxable accounts, and relatively tax-inefficient bonds and alternatives in tax-advantaged accounts. This calls for upfront and ongoing portfolio management.
Strategy #3 – Saving on Taxes with a Charitable Giving Plan: If you are charitably inclined, there are myriad ways to give abundantly during your lifetime and beyond, while making best use of the tax benefits available through basic giving as well as higher-end endowments.
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We hope you find our video informative. However, we urge you to consult with a tax professional and/or financial advisor to clarify whether and how these suggestions may apply to you. Tax laws change over time. For example, the recently enacted SECURE 2.0 Act adds new opportunities across all three of our tax-saving strategies. Plus, there are almost always critical personal details to consider as you proceed.
When your goals revolve around spending time with family and enjoying the wealth you’ve worked hard to build, it’s important to work with a fiduciary wealth advisor who has the knowledge and experience to implement all the new and existing possibilities. Having someone in your corner to help you plan appropriately AND mitigate taxes can be the best financial decision you ever make.
At Cogent, we have what it takes to set you on a stronger, more tax-efficient path toward the future.
This and every year, uncontrollable events impact our lives and our financial well-being. We can’t stop the world from spinning. But we can learn from experience, and have a plan in place to help us make smart decisions as the future unfolds.
Instead of worrying about your future, why not take positive steps to protect it? Set up a Cogent Conversation with us today. We’ll show you how to transform your hard work into durable wealth.
As a fiduciary wealth manager, we’ll seek to understand you, and develop a plan tailored to match your exact needs and aspirations. Our Design | Build | Protect Life on Your Terms strategic approach guides high-achieving families every day, come what may.
The opinions expressed by featured authors are their own and may not accurately reflect those of Cogent Strategic Wealth®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.
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