Spring 2020|volume 13|Issue 3

    Your Finances

    Taxes Are Helping You to Retire Comfortably
    Robert Fragasso

    Robert Fragasso

    The federal tax code exists to collect funds to fuel our federal government. It also exists to spur taxpayers to save, invest, and spend in ways that benefit our society economically. That is why mortgage interest is tax deductible, for example. So, we may conclude that by using the tax code for maximum advantage to ourselves, we are also furthering our national interests as we redirect tax dollars for our own beneficial use. Pause for a moment and candidly ask yourself if you believe that you are maximizing this opportunity.

    We attempt to assist our clients in doing this and are stepping up our efforts and resources to assist even more. To clarify, we do not do tax returns and we do not strive to be our clients’ sole source of tax-saving ideas. We work collaboratively with a client’s CPA and attorney to spur and implement a variety of income and estate-tax saving strategies. Here are some of the more obvious, but often overlooked or underutilized, tactics. None of these are meant to be universal recommendations, as that must be fashioned within a client’s unique circumstances.

    Tax-Free Education Saving with 529 Plans. The IRS code section 529 plans to fund education expense can turn a taxable account into one that is completely tax-free during accumulation and distribution stages, if properly implemented. Often, we see parents and grandparents investing for children’s education expense in the full light of taxation instead of using this basic, workhorse technique. Grandparents may also fashion an estate-tax savings if this is done properly.

    Tax-Free Bond Income for Taxpayers in the Upper Tax Brackets. Bonds must be as actively managed as stocks and deriving a tax-free income stream can add measurably to the net return in cases where that is warranted.

    Matching Capital Gains with Capital Losses Where Available. And you don’t have to do that at the same time, as capital losses can be harvested at any time and remain available for future matching with gains. This too requires management, and that is what we can accomplish for our clients.

    Utilizing Individual Securities Rather Than Mutual Funds, Where Appropriate. This allows for greater control over capital-gain distributions vs. the routine gains that may be distributed at year’s end by mutual funds.

    Those are straightforward and usually easy to implement when called for, and there are more examples. Beyond that, there are many and varied income, inheritance, and estate tax-saving techniques that can be employed for a client’s betterment. This is what we strive to do and have done so for almost a half century.

    Determining which to utilize is accomplished only through comprehensive financial analysis. Planning often starts with our client and the client’s financial advisor here, and in collaboration with the client’s CPA and attorney.

    Investment Advice offered through Fragasso Financial Advisors, a registered investment advisor.