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Tax Focused Financial Planning

The worlds of income tax and investing significantly overlap in their effect on your financial objectives. Tax-optimized investing, estate tax planning, and tax burden reduction are highly sought services among the middle-class millionaire and the wealthy alike. A tax-focused financial planner not only provides these services but also brings a higher level of oversight to a client’s overall financial picture. A level that is typically not seen in either the financial or tax industry alone. Without planning done prior to year-end, few ways remain at tax-filing time for the taxpayer to reduce their tax liability. Proper tax planning attempts to provide the best outcome given the clients’ unique situation.

Taxes Are A Drag on Returns

Most investors don’t fully appreciate the drag on returns taxes cause. Fortunately, there are many effective strategies for maximizing long-term wealth accumulation and conservation.

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A comprehensive tax-focused financial planning firm like ours can help you avoid making the mistake of overpaying taxes. We frequently write about tax focused investing on our blog, and also provide income tax planning and ways to identify the tax-saving approaches that apply to your situation.

Our Tax Focused Services Include

  • Tax Bracket Management
  • Contributions To Traditional Iras In High-Income Years 
  • Contributing To Roth Iras In Low-Income Years
  • Roth Ira Conversions
  • Gain And Loss Harvesting
  • Deferring Gain Recognition
  • Tax-Sensitive Asset Allocation
  • Managing Holding Periods
  • Tax-Sensitive Management Of The Retirement Portfolio

Tax Preparation vs Tax Planning

There are significant advantages to consider when comparing routine tax preparation with truly tax-optimized tax planning. 

Tax Preparation

Tax preparation happens after the fact and involves sometimes painstaking data-gathering efforts. 

The ultimate objective of this annual ritual is to meet the April 15 filing deadline. It is centered around compliance with the tax code in a backward-looking reactionary process. Many tax preparation professionals view their role as one of filing hundreds or even thousands of returns for clients in a short window of time. They have to make the best of the past year’s information their client has provided to them. They simply don’t have the time to develop a tax strategy for all of their clients' investments. This is not to minimize the importance of tax return preparation, or the skill and education necessary to do it correctly. Proper return preparation typically involves many more professional judgment calls than the taxpayer may imagine.

Tax Planning

Tax planning, on the other hand, is forward-looking and proactive. 

Decisions about what investments to sell and when, planning distributions from various retirement accounts, converting tax-deferred investment accounts into tax-free accounts, planning for required minimum distributions, and choosing which investments are best in which types of accounts.

These are all decisions that are part of a well thought out comprehensive tax and financial planning strategy. The comprehensive planning process uniquely positions a tax-focused financial planner, with a deeper client relationship than that of the typical tax preparer, for providing ongoing tax planning.

There are many benefits beyond ongoing tax planning and preparation that can help clients keep more of their hard-earned money. Fiduciary Fee-Only Financial Planners can play an active role in investment decisions, estate planning, insurance, retirement planning, goal setting, and education planning, but it is an even more powerful combination when tax planning and tax preparation are incorporated into the financial planning process.