In our Power Hour last week on August 15th, we had the tax talk here with Mark Brandenburg. And it was really great information that he shared, talking about how proactive tax planning really fits into the universal family office that we talked about, which is really not just about a single focus, but about encompassing iall areas of your financial life.
Tax planning is key. Most of our plans should not revolve around products and features and services, but really about cash flow, lifestyle management and taxes and all of those items are affected.
Mark shared a couple of great examples of why this is important and how taxes affect or are affected by all the other areas of financial management stategy. For example, he shared last year that a lot of people ended up paying high capital gains. He discussed how at tax time, they’re really upset at him because of all the high capital gains that they ending up paying on their investments from the year before, even though their investments were down at the time they were paying taxes.
Mistakes happed as a result of a lack of communication. Mark discussed the importance of having a CPA and Financial Planning team work together to forecast potential. Issues and resolve them before the ever happen. Instead, we see many clients managing the various parts of their financial portfolios in a very siloed approach -and paying more in taxes than they should have.
What you do in one area affects another and it comes to investments, how you do things in investments, especially in money that’s not in an IRA or Roth, those investment changes can very much impact your taxes. That’s why our portfolio management team is very concerned about tax efficient investments.
Mark also shared another story on the reverse side of planning where a client was looking at the tax plan only and looking at Roth conversions and didn’t think about how it might affect income or taxes in the future.
Roth conversions can be a great tool, but if they’re done at the wrong time, the wrong way, you could end up paying more tax than you would if you had it converted.
The take away – there’s not a one size fits all answer on whether a Roth conversion should or shouldn’t be done. It has to be looked at in conjunction with everything else.
Mark made a great point too; tax planning is not just about this year. It is about the years to come. It’s important to have a conversation about proactive planning. What can you do not just to reduce taxes now, but how to reduce your tax liability over your lifetime – while making sure to consider all areas of your financial life, to maintain your lifestyle, the way you want and not to give the government any more than their fair share.
We serve clients in Mineral Point WI, Dodgeville WI, Platteville WI, Lancaster WI, Fennimore WI, Boscobel WI, Richland Center WI, Muscoda WI, Spring Green WI, Mazomanie WI, Sauk City WI, Middleton WI, Madison WI, Fitchburg WI, Verona WI, Mount Horeb WI, Barneveld WI, New Glarus WI, Monroe WI, Belleville WI, Oregon WI, Stoughton WI, Darlington WI, Cuba City WI, Hazel Green WI, Belmont WI, Dubuque IA, Freeport IL
Want to share this blog post? Click the links below!