Rush to the Tax Planning Finish Line
Taxes. Nobody enjoys paying them, but it is something we are forced to live with. As we enter into the last quarter of the year, you may hear a lot of tax talk in your meetings and around our office. But why should we care and why does it matter?
Tax Planning is an integral part of our financial planning process, and for a good reason. We want to ensure that you get to keep and make the most of your hard-earned dollars. Throughout the year, we watch for tax planning opportunities for current and future years. We sometimes work closely with your tax preparer on each specific planning opportunity, when warranted. Each opportunity presents a chance for our clients to save taxes, perhaps even over their lifetimes.
So, what is a “Tax Planning opportunity”? Well, it depends, it can be different for each person depending on their stage of life and circumstances.
Are you in your accumulation years and saving? Tax Planning might mean maximizing your pre-tax 401(k) or 403(b) deferrals, switching from pre-tax savings to Roth savings, saving to a 529, or making Roth contributions. Building different types of tax buckets during your accumulation years creates tax flexibility for the future.
Are you retired and no longer accumulating? Tax Planning looks a little different. It might mean completing Roth Conversions (moving pre-tax IRA dollars to your Roth), completing your charitable giving from your Traditional IRA (if eligible), utilizing the various resources you have worked so hard to build to minimize a tax bill or try to avoid additional penalties that might occur at certain income levels.
Each client has a unique situation that evolves and changes as they move through life. Looking at each tax year to take advantage of what we know, while keeping future changes in circumstances and potential law changes in the back of our mind, makes Tax Planning an ongoing and important discussion in every stage of life.
As we wrap up the year, we will start asking for updates on income, withholdings, year-end giving goals and other details that help fine tune our tax projections. Please know that our goal with all these requests is to take advantage of as many tax-saving opportunities we come across as we can. Years of good Tax Planning helps you retain your wealth, rather than sent off to Uncle Sam.
It’s worth the effort!
Whitney Kelley, CFP®
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