Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Investors can reduce the tax bill on their portfolio if they boost their investment in exchange-traded funds, which are more tax-efficient than mutual funds and individual stock holdings, according to MarketWatch. While stocks and funds may yield steady dividends over time, selling them could be a difficult decision to make as it would trigger hefty taxes on capital gains. By holding a strong portfolio of ETFs with asset classes that can help achieve investment goals, there will be no need for clients to sell securities except to rebalance the portfolio when they see fit. -- MarketWatch
The seven-year bull market means steady capital gains distributions, but this could mean hefty tax bills for investors, unless their funds invested in tax-sheltered accounts, according to Morningstar. Instead of selling a performing fund, investors may consider selling an average fund that is expected to make big capital gains payouts. They also need to turn off automatic reinvesting for a taxable account that is poised to yield a big payout, and to invest in funds that are tax-efficient. -- Morningstar
Taxpayers need to develop tax-efficient strategies for making distributions from their retirement accounts to ensure they will not outlive their nest egg, writes Mike Cice, chief investment officer of Newtown, Pa.-based Allied Financial Consultants. Many financial advisers offer guidance to clients on how to grow their investments but miss on creating retirement distribution plans that will minimize the impact of taxation, Cice writes. "Perhaps the single most important thing for advisers to know about developing these plans is the critical importance of timing. The sooner you develop these plans, the better." -- The Wall Street Journal
Retirees can minimize the taxes they pay on their nest egg by putting their savings in a Roth 401(k), according to The Motley Fool. Another strategy for retirement savers to reduce the tax burden on their savings is by claiming the Retirement Savings Contributions Credit for up to 50% of their retirement contributions. Clients also need to determine the tax rate they face before and after they retire when making contributions, so they can develop a tax-efficient way of building their nest egg. -- The Motley Fool
- Are Stocks More Efficient Than Funds?: Tax Strategy Scan
- How to Avoid the Surtax on Investment Income: Tax Strategy Scan
- What's Next After Your Client Files: Tax Strategies Scan