Looking Ahead Can Bring Benefits Sooner and Later
It’s March, and tax filing is looming just ahead. Make sure you are aware of the deadlines (and the possible penalties for not paying or submitting on time). Due to quirks of the calendar, individual tax returns and tax payments are due April 18 this year.
Many people, as they prepare their tax returns – or gather information to provide to their accountant – are inevitably think not only about last year, but about next year, and the years that will follow. Retirement planning tends to drift down our to-do lists, but now is a great time to consider the future, even if you’re consumed by present challenges.
Planning ahead can not only bring benefits years from now, but it can also bring more immediate benefits. Developing an overall asset location strategy in your portfolio, for example, has the potential to significantly reduce your taxes. Keep in mind, while there are many strategies that help lower your taxes this year, you may end up paying more overall because of them. Maxing out an annual 401(k) contribution or accelerated property depreciation may have negative effects on your tax burden if you do not combine these tools with a greater tax strategy.
Consider which assets should be in which accounts and align each with your specific investing goals. The tax structure varies per account – some are subject to taxes every year, while others have tax advantages. These distinctions can make a difference.
Taxable accounts are traditional brokerage accounts (mutual funds, stocks, bonds) that are taxed when you earn dividends or on capital gains, the increased value from when you initially make the purchase. Tax-deferred accounts refer to traditional 401(k)’s and IRA’s which tax your money when it is withdrawn as ordinary income. And tax-exempt accounts like Roth IRA’s require income taxes to be paid on the contributions initially, but then further taxes are avoided if certain rules are met.
Your priorities – or your financial situation – may have changed in recent years. Your investments should reflect where you are, and what you’re thinking about as you look ahead.
If retirement is on your more immediate horizon, and even if it is not, there is good reason to take a close look at your assets and how they are invested. Because choices you make today can bring you and your family closer to the future you’re hoping for.
Investment Advisory Services offered through Alphastar Capital Management, LLC, an SEC registered Investment Adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.