Building and preserving wealth requires more than a strong investment strategy. A thoughtful tax strategy can play an important role in helping individuals make more informed financial decisions, manage tax exposure, and keep more of what they earn over time.
As the saying goes, it isn’t about how much you make, it’s about how much you keep.
This insight was one of the key reasons we have LBMC wealth advisors. Our first-class wealth management team is able to service our clients’ every key financial need. Whether it’s navigating a complex business tax issue or preparing for retirement, the team at LBMC is committed to creating holistic, innovative solutions that help our clients build wealth.
By working with LBMC, our clients can create transformational wealth-building strategies that allow them to build a lasting legacy for generations to come. For high-net-worth families, that planning may also include strategies designed to transfer appreciating assets to future generations, including tools such as grantor retained annuity trusts (GRATs).
If you currently work with LBMC, and are curious about learning more about the benefits of working with our wealth advisors, we encourage you to read on.
Reviewing your tax and financial strategy regularly can uncover opportunities to strengthen your long-term financial plan. As your income, investments, business interests, and life goals evolve, there are several questions worth asking to ensure your wealth strategy continues to work effectively. By asking yourself these questions on an annual basis, you’ll be well-placed to optimize your retirement strategy, make wise investment decisions, and build wealth in a manner that’s consistent with your long-term goals.
Are The Taxes I Pay on My Investment Income Too High?
Investing in a tax-efficient manner is key to producing higher overall returns on any investment: particularly long-term investments such as retirement investments. One key component of that is being alert to the current market conditions and the opportunities those present.
Market downturns can create tax-planning opportunities for investors. One example is tax-loss harvesting, where investments that have declined in value are sold to realize capital losses. Those losses may be used to offset capital gains and, subject to applicable tax rules and limitations, may help reduce an investor’s overall tax liability.
Tax-loss harvesting is just one example of how investment and tax decisions can work together. A variety of tax-efficient investment strategies may help investors manage the taxes associated with investment income and improve after-tax outcomes over time. For higher-income investors, understanding how the net investment income tax may apply to investment earnings is another important part of evaluating a portfolio’s tax efficiency.
If you’re interested in evaluating the tax efficiency of your investment strategy, talk with an LBMC wealth advisor.
When Can I Retire? Will I Have Enough Money?
For those approaching retirement, it’s likely that these two questions are top of mind. Nobody wants to keep working longer than they need to, but equally, nobody wants to run out of money in retirement either.
Answering these questions can feel difficult: how can you look into the future? It might seem challenging, but at LBMC, we have sophisticated software that can make projections about when an individual will have enough money to sustain a comfortable retirement.
If you haven’t revisited your retirement strategy in a few years, it’s absolutely worth getting an assessment to understand when you’re on track to retire, and how much money you can expect to have each year. Reviewing your IRA and retirement savings strategy can also help identify opportunities to strengthen long-term savings and coordinate retirement decisions with your broader financial plan.
Is The Return On Investment On My Portfolio Reasonable In Relation To The Amount Of Risk I’m Taking?
Pretty much every investment decision involves some level of trade-off between risk and return. As a general rule, lower-risk investments deliver lower returns, while high-risk investments might deliver higher returns, but equally might not deliver any returns at all.
In reviewing this data, clients might learn one of two things:
- Their portfolio is invested in riskier assets than they’re comfortable with, and/or,
- Their portfolio is failing to generate the returns it should be based on its risk profile
If you’re interested in understanding the level of risk in your portfolio, as well as learning about how that correlates to your rate of return, the LBMC is available to provide guidance.
Is My Investment Strategy Appropriate For My Stage In Life?
The level of risk you take in your retirement strategy depends entirely on your individual goals and life stage.
The closer an individual is to retirement, the less risky their strategy tends to be. This focus on preserving capital at a conservative rate of return aims to ensure individuals avoid situations where their retirement savings decline significantly in the years immediately preceding their target retirement date.
On the other hand, younger individuals may adopt higher-risk strategies since they have decades to replenish any potential losses.
Of course, the decision isn’t as black-and-white as this. Your life stage is just one consideration in determining your wider investment strategy; many others exist. The LBMC team is available to discuss whether your investment strategy is appropriate given your targeted time horizon and other factors.
Investment strategy can also intersect with tax, estate, and charitable planning. For example, individuals holding highly appreciated assets may want to evaluate charitable giving strategies as part of their broader investment and tax plan. For individuals with significant appreciated assets and long-term charitable goals, a charitable remainder trust may also be worth considering.
Is Our Business’s 401(k) Plan Structured Appropriately? Are The Fees We’re Paying Reasonable?
LBMC isn’t solely equipped to serve the needs of private clients: the team is also available to help LBMC’s business clients establish whether their existing 401(k) plans are structured in an optimal way.
LBMC is well-equipped to help employers review and optimize their employee benefit plans. To learn whether you qualify for a complimentary review of your plan, get in touch today.
Coordinate Your Wealth and Tax Strategy
LBMC is equipped to serve the full spectrum of our clients’ financial needs, from tax planning and investment management to retirement and long-term wealth planning.
Individuals often have the best opportunity to achieve their financial goals when investment, tax, retirement, charitable, and estate-planning decisions are evaluated together rather than independently.
Talk with an LBMC wealth advisor about building a coordinated strategy around your financial goals.
LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.
