Tax-Efficient Investment & Planning Strategies

Asset location is a tax-efficient investment strategy that takes advantage of different tax treatments across various account types. It helps determine which securities to hold in tax-deferred, tax-exempt, or taxable accounts to improve after-tax efficiency.

A client’s comfort level and understanding of total household allocation play a key role in implementing this strategy effectively.

For example:

• REITs (Real Estate Investment Trusts): Typically generate income, which may be more tax-efficient in tax-deferred or tax-exempt accounts, potentially reducing current tax impact.

• Capital Gain-Deferred U.S. Equity ETFs: Well-suited for taxable accounts, where their tax-efficient structure can help manage after-tax outcomes.

By aligning investments with the most advantageous account type, asset location can serve as a powerful tool for helping improve overall tax efficiency.

Decumulation sequencing is a strategy that intelligently structures the order of withdrawals to help preserve the benefits of tax deferrals while potentially reducing taxes throughout retirement. This approach provides flexibility to customize the liquidation order based on your unique financial and tax circumstances.

For Example:

• Taking withdrawals from tax-deferred accounts earlier in retirement may help you stay in a lower tax bracket when Required Minimum Distributions (RMDs) begin later.

• By proactively managing withdrawals, you can balance taxable income and help improve after-tax wealth preservation.

Proper decumulation sequencing supports tax-efficient retirement spending aligned with your long-term wealth goals.

Tax loss harvesting is a strategy used in taxable accounts to potentially reduce your tax liability by offsetting capital gains with capital losses. When implemented thoughtfully, it can also improve after-tax efficiency in your portfolio over time.

A systematic approach to tax loss harvesting ensures compliance with wash-sale rules while keeping your investments aligned with your long-term goals. By carefully managing this process, you can help manage taxable income and improve the overall tax efficiency of your portfolio.

The right combination of investments and account types can help you save for your goals while improving tax efficiency.

Tax-Efficient Investment Options:

Certain investments are well-suited for taxable accounts to help manage the impact of taxable events:

• Municipal Bonds: Generate tax-exempt income at the federal level, and potentially state level.

• ETFs (Exchange-Traded Funds): Tax-efficient due to their unique structure and low turnover.

• SMAs/Direct Indexes: Offer personalized portfolios with built-in tax management opportunities.

• Exchange Funds: Allow investors to diversify concentrated positions while deferring capital gains.

Tax-Advantaged Account Types:

Pairing the right account type with your goals can support tax-efficient planning:

• 529 Savings Plans: For tax-free growth and withdrawals when saving for education expenses.

• Traditional 401(k)/IRAs: Provide upfront tax benefits with tax-deferred growth.

• Roth 401(k)/IRAs: Offer tax-free growth and withdrawals, ideal for long-term planning.

• Donor-Advised Funds: Combine tax benefits with philanthropic giving by allowing charitable contributions to grow tax-free.

By aligning the right investments with the appropriate account types, you can help balance growth potential with tax efficiency while keeping your portfolio aligned with your goals.

Supporting the people and causes you care about is deeply personal. While taxes may not be your primary motivator, thoughtful planning can help your generosity go even farther.

By evaluating strategies like the annual gift tax exclusion, donor-advised funds, 529 plans, irrevocable trusts, and tax-efficient security selection for charitable giving, you can:

• Enhance Your Impact: Help ensure your wealth supports what matters most to you.

• Support Tax Efficiency: Help manage your tax liability while preserving more resources for your goals.

• Facilitate Wealth Transition: Help ensure a seamless transfer of assets in alignment with your legacy.

The right gifting and legacy strategies can align your giving with your financial goals, creating a meaningful, lasting impact.