With 2022 in the books, the question I want to pose right now is: how many of your clients are upset about their portfolio’s performance last year… and the fact they may have to pay taxes on capital gains anyway?
My next question is: do you want to avoid having those kinds of uncomfortable conversations going forward?
Now is the time to not just consider those questions but to take action to align your clients’ portfolios for a better after-tax outcome. Implementing tax-smart strategies as early as possible in the new year will help set your clients on an improved tax-management pathfor the rest of 2023, and better align their investments to meet their retirement goals. Moreover, by doing so, you can show your clients the value of working with a tax-smart advisor: they are likely to have more money remain in their portfolio to continue to grow and compound.
Being a tax-smart advisor isn’t just about reducing the tax drag on your clients’ taxable accounts, it’s about aligning their total investment plan for a more optimal outcome. It’s about both saving and investing, and the strategies that can help them on to a smoother path for their future. With everything that we have going on in our lives and daily workloads, it’s easy to take some or even all of these things for granted. As their advisor, much of the value you can bring to your relationship with your clients is to guide them along their path to a financially healthy retirement.
Here are some ideas to get the conversation started:
1. 2022 and 2023 IRA contributions
Investors should take advantage of these tax-advantaged accounts to grow their retirement assets. Traditional IRAs allow investors to contribute pre-tax dollars, which lowers their current year tax liabilities. And the assets in the IRA grow tax-free, which is a big benefit of these accounts. While the annual contribution limit is not large, these accounts are a good complement to other components of an investor’s total savings and investment picture.