• Geoff Wells

Tax Planning – The Next Focus in Financial Planning

The buzz words “financial planning” have become a ubiquitous part of receiving investment advice.  Unfortunately, financial planning can be completed at many different levels and the term “holistic” can drastically differ between advisory firms and advisor knowledge.

The Tax Cuts and Jobs Act (TCJA) passed in December 2017 is the first time in many years where individual tax rates have changed.  This creates additional tax planning opportunities to enhance after-tax returns.  Below are a few areas that BPC considers when looking at a client’s tax planning situation:

  1. Traditional to Roth IRA conversions in low-tax bracket years to lower future Required Minimum Distributions (RMDs)

  2. Delaying Social Security to complete additional Roth IRA conversions or 0% capital gains sales in a brokerage account

  3. Reducing taxable income between retirement and age 65 to possibly receive lower-cost healthcare premiums

  4. Increase current pre-tax savings if future tax brackets are projected to be lower in retirement

Bottom Line The integration of taxes and your optimal financial plan cannot be separated.  Managing the taxes you pay can be as important as managing the investment costs you pay.  If you are not considering multi-year tax projections, you may be leaving money on the table.