Integrating Tax Planning into Your Overall Wealth Strategy
Why tax efficiency is a continuous process—not a once-a-year exercise—and how it intersects with investing, retirement, and estate decisions.
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Taxes are one of the largest frictions on wealth accumulation and distribution. Thoughtful tax planning, coordinated with investment and retirement decisions, can meaningfully improve after-tax outcomes over decades.
Key Elements of Tax-Aware Planning
Key elements include:
Account location: placing tax-inefficient assets (taxable bonds, REITs, actively traded strategies) preferentially in tax-deferred or tax-free accounts, while holding tax-efficient equity index funds in taxable accounts.
Contribution strategy: maximizing pre-tax or Roth contributions according to current versus expected future tax rates, and taking advantage of catch-up contributions when eligible.
Withdrawal sequencing in retirement: coordinating taxable account, traditional IRA/401(k), and Roth distributions to manage tax brackets and Medicare IRMAA surcharges.
Capital-gains management: harvesting losses, using specific-lot identification, and timing realizations around other income events.
Charitable giving: using donor-advised funds, qualified charitable distributions from IRAs (for those eligible), or gifting appreciated securities.
Estate and gift tax planning: annual exclusion gifts, lifetime exemption utilization, and appropriate trust structures when relevant.
An Ongoing Process
Tax rules change, and individual circumstances evolve. What is optimal in one year may not be in the next. An asset management firm that collaborates closely with the client’s tax professional can identify opportunities throughout the year rather than only at tax-filing season.
The objective is not aggressive tax avoidance but the legal minimization of tax drag so that more of the portfolio’s return compounds for the client’s benefit.
Investing risk disclosure
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Mahoney Asset Management for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
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