A Guide to Year-End Tax Planning

While protecting clients’ wealth should be a top priority all year long, it becomes especially important at year-end.  As deadlines approach, it is not too late to take measures that can reduce the taxes clients will owe on income and investment gains. 

Taxes can be the single biggest investment hurdle for clients, especially those with a high net worth.  Because of changes to the tax code in 2013, some clients are paying even more.  Furthermore, some states have also increased their tax rates.  Thus, it is important to take the right proactive measures, otherwise, clients could pay more than expected to the IRS come April 2015. 

An important step in the tax planning process is to help clients diversify between tax rates and different types of taxes, as well as diversify between taxable investments and tax-deferred vehicles.  To achieve “tax diversification,” effectively manage the timing of taxes, and generate more wealth, experts recognize the power of tax deferral.  With tax deferral, clients keep more of what they earn by deferring taxes during peak earning years, when they are taxed at a higher rate.  Consequently, clients accumulate more through tax-deferred compounded growth, and when they withdraw income in retirement, they are likely to be in a lower tax bracket and pay less in taxes. 

 See Laurence Greenberg, ABCs of Year-End Tax Planning, Bank Investment Consultant, Dec. 12, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.