When preparing or reviewing a retirement plan, a FEE-ONLY financial adviser will take taxes into consideration as an important factor.
The adviser will consider how different types of investments, contributions, and distributions will be taxed, and will make recommendations that minimize the overall tax burden for the client.
Here are three examples of how:
Investment choices: The adviser will consider the tax implications of different types of investments, such as stocks, bonds, and mutual funds. For example, they may recommend investing in tax-free municipal bonds or tax-efficient index funds.
Contributions and distributions: The adviser will consider the tax implications of different types of contributions and distributions, such as traditional and Roth IRA contributions. They may recommend that the client make contributions to a Roth IRA, which allows for tax-free withdrawals in retirement. They will also consider the tax implications of taking distributions from retirement accounts.
Tax planning strategies: The adviser will consider the use of tax-planning strategies to minimize the overall tax burden for the client. For example, they may recommend that the client take advantage of tax-loss harvesting, which involves selling losing investments to offset gains from other investments, or recommend the use of charitable giving strategies to lower the client's overall tax bill.
In summary, a FEE-ONLY financial adviser will consider taxes as an important factor when preparing or reviewing a retirement plan. They will make recommendations that minimize the overall tax burden for the client and ensure that the client's retirement savings are maximized. They will also keep the client informed of any tax changes or laws that may affect their retirement plan.
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