Tax Series Review

Managing your wealth in a tax-efficient manner will have a significant impact over the long term. As we wrap up our series on taxes and shift gears toward bonds, let’s recap what I’ve shared over the last few weeks.

Remember Roth Conversions
Leveraging tax-deferred and tax-free accounts can significantly extend the life of your portfolio. Determining whether a Roth conversion makes sense starts with a careful analysis of your legacy planning combined with a thorough understanding of the conversion’s potential impact on tax brackets.  

Maximize After-Tax Returns
Minimizing taxes throughout retirement starts by strategically investing before retirement. Different investments (i.e., stocks and bonds) have different taxable characteristics, and should be placed in either taxable, tax-deferred or tax-free accounts to maximize tax-efficient portfolio withdrawals and your legacy wishes.

Keep Your Tax Bracket Low
Once you have established a tax-smart asset allocation and location strategy, it is time to look ahead and manage your tax bracket. Integrating your tax plan with your various income streams including Social Security, pensions, RMDs, and your investment decisions allows you to minimize your lifetime taxes. I list a few considerations here.

Control Your IRMAA
As you integrate your tax plan with income streams, keep an eye on your Income-Related Monthly Adjustment Amount (IRMAA). IRMAA surcharges can affect high-income retirees enrolled in Medicare. The best way to control your IRMAA is to reduce your Modified Adjusted Gross Income (MAGI) through leveraging charitable giving, tax-deductible accounts, tax-free income, and tax-efficient withdrawals.

What’s Ahead
With bond yields at levels not seen in years, investors are contemplating a larger allocation to bonds. In the weeks ahead I will explore the nuances of this decision as it relates to your portfolio and financial plan.

And if you have questions about the tax implications of your portfolio, let’s connect and create a strategy that maximizes your returns while minimizing the taxes you pay over your lifetime.