Tax-Managed Investing

Taxes Matter when Investing  

Unfortunately, the academic finance that many financial advisors base their investment portfolios on was created for large institutions and is not inclusive of taxes. This is great for billion dollar endowments and pensions, which are largely able to grow and compound untaxed, but the reality for tax-paying households and individual investors like you is something far different.  

Taxes matter and they have significant impact on both pre- and post-retirement cash flow and actual, net-of-tax realized investment returns. 

You know this. It’s intuitive.  So why work with a financial advisor who ignores this reality? 

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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 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 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.