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Taxes & Investing

Taxes & Investing

October 18, 2022
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Investing is a rewarding and necessary component of your financial plan. Unfortunately, the cost of taxes is also a necessary component of your financial plan. Paying taxes is not, from my perspective, the most exciting part of investing but having to pay taxes is not a bad thing (when you realize the blessing of income.)

When it comes to investing and earnings, you will have a tax bill.  The key then is being tax efficient with your investments. Not all investments are taxed the same. Taxes on investments vary depending on the holding period (short- or long-term gains) as well as on the account type.

Some investments can create significant tax burdens when utilized in an account that does not have tax advantaged features. Generally, tax advantaged account types include employer retirement plans like pensions, 401k, 403b, 457, etc. as well as Individual Retirement Accounts (IRAs) and Roth IRAs. Some employer plans have Roth options in the account. Basically, these types of accounts allow taxes to be deferred when there are earnings from the investments held in the account. This means, you do not have to pay any taxes until you take money out of the account. Over time, this can be a significant benefit to wealth creation.

Roth accounts are unique. If you satisfy all the rules for Roth accounts, you never have to pay taxes on any growth and earnings. This can be quite a significant detail for your investment plan.  Being tax efficient with your investments and account types can help you increase your bottom line when it comes time for your tax bill.

We recognize that you have many responsibilities in life and managing your investments may not be one of your areas of expertise.  It is what we do for a living.  We understand the importance of managing taxes and we can help analyze your current holdings to see if you can improve your current or future tax situation.  There is no cost or obligation for a review of your investments.  We do ask for some basic information and to see your current statements, so that we can make an accurate assessment.  But you are not obligated in any way by asking for a review.  Call us today!