Tax-Efficient Strategies

tax Planning Services in Phoenix, AriZona

Tax-Efficient Strategies

When many Phoenix investors and retirement savers think of the services retirement planners and investment managers provide, they often envision equities, bonds and other investment vehicles like real estate and annuities. You may not realize just how much we incorporate tax strategies when developing and implementing effective financial plans.

At Fullerton Financial Planning in Phoenix, our goal is to help you navigate your financial journey effectively, and tax planning plays a crucial role in that journey. Although we can't guarantee specific investment performance results, we can explain the purpose and benefits of various strategies that aim to reduce your tax burden and enhance your financial health.

Making Full Use of Tax-Advantaged Retirement Savings Accounts

Traditional IRAs, Roth IRAs and 401(k)s play a vital role in many retirement savers investment strategies. The main thing that differentiates these accounts from regular brokerage accounts are the tax-advantaged features they possess.

Contributions to a 401(k) or a traditional IRA can lower your taxable income and save you money now. You will be taxed on those dollars in retirement, but at that point your income might be lower, meaning those dollars may be taxed at a lower rate.

Roth IRAs and Roth 401(k)s are after-tax retirement savings accounts, meaning you put income you’ve already paid taxes on in those accounts. The qualified distributions in retirement from those accounts won’t be taxed. Which is best often depends on your tax bracket before and after retirement and whether your income qualifies you for a Roth IRA. There are also stricter limitations imposed by contribution caps on after-tax retirement savings options.

Strategically Locating Your Assets in Phoenix

Asset location is about deciding which investments to hold in which type of account based on their tax efficiency. The ideal setup is to store tax-inefficient assets that are earning taxable income in various tax-advantaged retirement savings accounts. Clever financial structuring is often necessary to develop beneficial strategic location plans, and we’re ready to assist.

Harvesting Tax Losses

Tax-loss harvesting is the process of selling investments at a loss to offset capital gains you’re earning from the sale of assets that have gone up in value. It may seem like a counterintuitive process, but it can be an effective way to reduce your capital gains and income tax liability in certain circumstances.

Converting Traditional Retirement Savings to Roth Accounts

In an ideal world, retirement savers could benefit from traditional retirement savings accounts in their working years (reducing their tax burden when they have income from employment) while then making use of after-tax Roth retirement savings accounts when they retire (with qualified tax-free withdrawals) – but we don’t live in a perfect world, right?

The answer is complicated. You can convert a traditional IRA into a Roth IRA so long as you pay taxes on the converted amount. This tax strategy doesn’t make sense for every retirement saver, but it may be the best course of action if you’ll be in a higher tax bracket in retirement when those Roth IRA withdrawals are tax free. The conversion process, and determining whether it’s the best course of action for you, can be complicated. Our team can help you understand the considerations and make an informed decision.

Charitable Contributions

Itemizers have a host of potential deductions available, but one of the most powerful for retirees is the charitable contribution deduction. They are an incredibly effective way to reduce your taxable income. Contributions also don’t have to be in cash, meaning you can donate appreciated securities and dodge the capital gains you would have paid on the sale of those securities.

Tax laws are not static, meaning these charitable contribution deductions and other tax-efficient strategies may not be available forever, and new deductions may arise in the future. Working with a team of experienced investment managers and tax professionals in Phoenix is one of the most effective ways to ensure you’re always maximizing tax savings where legally possible with the latest deductions and credits.

Find Out Where You Can Reduce Your Tax Liability

Phoenix retirees and retirement savers who want to maximize their tax savings, retirement income and investment growth should consider scheduling a consultation with the team the Fullerton Financial Planning. We would be happy to discuss your current situation and explain the ways in which we can help you develop a strategy that grows your wealth while minimizing your tax liabilities. Call us in Phoenix at (623) 974-0300 to learn more.