Tax Planning

Taxes are a part of our everyday life and an essential piece of a solid retirement plan, as we want to create portfolios that are as tax efficient as possible. Considering taxes while building your financial and retirement plan can make a massive difference in the future value of a portfolio and have a significant impact on your future.

The key to successful tax planning is knowing the current laws and applying them to the existing financial and estate plan in place. Because regulations can change annually, it’s crucial to have an experienced partner to help you navigate the choppy waters of the IRS tax code.

There are three common elements to tax planning to minimize your tax burden:

Reduce adjusted gross income
Increase the number of tax deductions
Appropriate use of tax credits

Tax Efficiency with Investments

Everyone wants their investments to perform well. But for many investors it’s their after-tax return that may make all the difference. One method that may increase tax efficiency is to simply minimize buying and selling in order to manage your capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions.

Another common tactic some investors use over the long run is placing tax-efficient investments into taxable accounts, while also placing less-tax-efficient investments in tax-advantaged accounts. This also depends heavily on how you have your investments allocated.

Remember, before making any financial decision speaking with a financial or tax professional is a great idea. At GCPA, we can help you formulate a strategy that incorporates your long-term goals and risk tolerance.

Will Taxes be lower in retirement?

That depends on your situation, but there is a chance you may continue to pay taxes in retirement. Some retirees could earn less in retirement, which may lower their tax bracket and reduce overall taxes.

Taxes are calculated on income each year, much like how it works while you’re employed and working. However, the income you receive in retirement will have different tax rules that apply depending on where it comes from, such as Social Security, IRAs, 401(k)s, investment income, annuity distributions, and pensions.

There are ways to structure your retirement income to help reduce the amount of taxes you will need to pay – for more insight on your tax situation, GCPA is here to help.

Protect your loved ones and leave a wealthy estate

Life insurance has long been a staple in essential estate planning, as it may provide an income tax-free death benefit far above the premiums paid. Federal and state governments may impose estate taxes on all the property that you own at your death, and this tax payment must come from your estate.

A life insurance policy that is owned by your heirs, or in an irrevocable trust, will avoid being included in your estate. It can then pay any estate taxes owed at the time of your death.

Life insurance offers one of the best returns on your investment dollar available in the market today. Other useful benefits include:

100% tax-free income

Guaranteed interest growth

Accelerated death benefits

Flexible premium plans