Thinking about investment strategy may conjure thoughts of stock trading, ticker symbols, brokerage accounts, and investment theses. But one of the most important factors in developing an investment strategy is the tax aspect.
There are several tax-efficient investing strategies that individuals can use to help grow their retirement savings while minimizing the impact of taxes. Here are a few such strategies:
One of these tax-efficient strategies for retirement investing is to contribute to tax-advantaged retirement accounts such as 401(k)s, Traditional IRAs, and Roth IRAs.
Contributions to these accounts may be tax-deductible or tax-free, depending on the type of account and the individual’s tax situation. This can help to reduce the overall tax burden on retirement savings and potentially increase the amount of money available for investment.
Tax-loss harvesting is another strategy that can be used to save on your tax bill. It involves selling investments that have lost value to offset capital gains from other investments. By doing this, individuals can reduce their overall capital gains tax liability and potentially increase the net return on their investments. This strategy can be particularly useful for those with a high net worth or a large sum of investments, but keep in mind that it is a complex maneuver and there is always a chance that you missed something when your tax bill rolls around.
Certain mutual funds and exchange-traded funds may have tax-efficient holdings such as municipal bonds. In addition, these types of funds can sometimes carry very low management fees. When you owe less in fees on a regular basis, there is more left over in your wallet to reinvest and take advantage of the power of compounding gains.
Overall, there are many tax-efficient strategies that individuals can use to help grow their retirement savings. By considering the tax implications of their investment decisions and taking advantage of tax-advantaged accounts and tax-efficient investment options, individuals can potentially increase the net return on their retirement savings and improve their financial security in retirement.
Tax strategizing is a crucial aspect in the construction of your investment portfolio. In fact, it’s an important consideration for nearly every aspect of your financial strategy. So if you have questions about how to tax-optimize your finances, contact us at (540) 720-5656 to get started with a financial professional.
Sources:
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Chase Lopez joined the ILG Financial team in 2020 as an advisor. Chase is a 2016 James Madison University graduate with a degree in management. Chase has been trained under the tutelage of Dave Lopez, who is not only the founder and managing member of ILG Financial, but also is Chase’s uncle and godfather. He also enjoys working alongside his cousin, Megan, who is Dave’s daughter. Chase, as a fiduciary, believes in putting his clients interests first, and building out plans for his clients where they can have a happy and fruitful retirement. He married his beautiful wife in February 2022 and both use most of their free time chasing around their little pup, Aurora.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.