5 Ways a Tax-Efficient Financial Advisor Can Help You with Retirement

November 13, 2018

If you are about to retire, or maybe already have, you no doubt want to maximize your investments so that you can live the kind if life you envisioned. But smart retirement investing is more than putting your money in the right place. It’s also about making sure that taxes don’t undermine your lifestyle.

Retirees can find great value in hiring a financial advisor who also knows a lot about taxes. Here are five ways a tax-efficient financial advisor can help you navigate the retirement landscape.

  1. Managing investments

It makes perfect sense that a financial advisor would manage your investments. After all, that’s their job. But a financial advisor who also pays attention to your tax situation will invest your money as wisely as possible – and perhaps in different ways – than one who doesn’t consider the tax implications. When your financial advisor combines investing with tax planning and estate planning strategies, you’re sure to come out further ahead in the long run.

  1. Paying off debt

Shedding debt should be one of your first financial undertakings as you approach retirement. If you are still carrying debt, a financial advisor can help you set up a plan to pay it off. Such a plan may also include an overall budget that allows you to live within your means. A financial advisor with a high tax IQ can make sure you keep debt under control while softening any potential hit in taxes you might face.

  1. Optimizing Social Security

If you paid into Social Security during your working years, you are entitled to Social Security benefits. You may have questions, though, about when you should begin taking advantage of these benefits and what that means to your tax situation, especially if you continue to have other income. A financial planner knowledgeable about taxes can help you plot a course through the maze of decisions you need to make.

  1. Minimizing tax impact of gains

When you take profits from your investments, you will no doubt incur taxes on your gains. A tax-savvy financial advisor seeks to ensure that your resulting tax bill is not an unnecessary burden on you. Such efforts might include tax-loss harvesting – selling securities at a loss to offset a capital gains tax liability. Growing wealth and saving on taxes should go hand in hand.

  1. Saving taxes via retirement plan

The tax-astute financial advisor can help you determine the retirement plan that offers you maximum tax savings. Some plans offer larger tax-deductible contributions than others. Some plans have set-up deadlines, so if you miss the deadline, you’re out of a big tax deduction. What’s best for me? SEP? Simple IRA? Solo 401(k)? Roth 401(k)? Your expert advisor can help you decide.

Incidentally, the same investment-tax benefits can be found in a financially astute tax advisor. A knowledgeable accountant can help you to manage investments, pay off debt, optimize Social Security benefits, and minimize the tax impact of your gains. Your financial wellbeing in retirement can be greatly enhanced by a capable accountant.

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