JACKSON WEALTH MANAGEMENT • TAX PLANNING
You worked hard to build your wealth. Your decisions about investing it, drawing from it, and passing it on deserve the same attention.
Annual tax-bracket updates are a useful reminder to revisit your plan. But a tax table cannot tell you which account to draw from, whether a Roth conversion makes sense, or what selling an appreciated investment could mean for your future.
Are your investment decisions and tax planning working together?
◆ A portfolio decision can become a tax decision
Consider a couple approaching retirement with substantial retirement accounts, appreciated investments in a taxable advisory account, and cash at the bank. They want to fund their lifestyle, help their children, and preserve flexibility.
Each decision seems straightforward on its own:
- Sell investments to fund a major purchase.
- Convert part of a traditional IRA to a Roth IRA.
- Rebalance a portfolio that has become concentrated.
- Make a meaningful charitable gift.
Together, however, those decisions can produce a very different tax outcome.
An investment sale may realize capital gains. A Roth conversion generally adds taxable income to the extent it involves previously untaxed dollars. Combining them in the same year could change the tax cost of both decisions.
The goal is to understand the tradeoffs before committing your money.
◆ Your bracket is a starting point
Federal ordinary income tax brackets apply progressively. Moving into a higher bracket generally means that only the portion of ordinary taxable income falling within that bracket faces the higher rate.
Long-term capital gains and qualified dividends generally follow a separate rate structure, and their treatment depends in part on your total taxable income.
Knowing your bracket is useful. Understanding how your next financial decision affects your broader tax picture is far more useful.
◆ Five questions before your next major decision
❶ Which account should fund your spending?
Your traditional IRA, Roth IRA, taxable advisory account, and cash reserves have different tax characteristics. The source of a withdrawal can affect both today's tax bill and tomorrow's flexibility.
❷ Would a Roth conversion improve your long-term position?
A conversion deserves more analysis than simply filling a tax bracket. We consider the current tax cost, how that tax would be paid, future income needs, and the implications for your family.
The right recommendation may be a smaller conversion, a different year, or no conversion.
❸ What would an investment sale really cost?
Before selling, consider the embedded gain, available losses, portfolio concentration, and cash needs. Taxes matter, and so do diversification and investment risk.
❹ Could your charitable giving accomplish more?
The assets you give and the timing of your gift can matter. For some families, donating appreciated investments or making qualified charitable distributions from an IRA, when eligible, may deserve consideration alongside cash gifts.
❺ Are you planning beyond this year's return?
Retirement, future required distributions, a business sale, or the death of a spouse can materially change your tax picture. A decision that looks attractive this year should also be evaluated against what may come next.
✓ How Jackson Wealth Management connects the decisions
At Jackson Wealth Management, proactive tax planning is integrated into our ongoing investment management and advice.
Through our Chart Your Course™ planning process, we connect your portfolio with your retirement income, cash needs, tax considerations, and legacy priorities.
We examine your tax return, discuss what is changing in your life, and model relevant scenarios before recommending a course of action. We help you understand the choices, the tradeoffs, and the reasons behind our recommendations, coordinating with your tax professional as appropriate.
Proactive tax planning is included in our advisory relationship at no additional charge.
Our objective is to help you make informed decisions about the wealth you have built—and use it with greater clarity and confidence.
◆ Start with a question about your own wealth
If you have accumulated significant wealth, you deserve a clear explanation of how your investment strategy and tax planning fit together.
- Why are you drawing from a particular account?
- Has a Roth conversion been evaluated for your circumstances?
- How do upcoming investment sales fit into your tax plan?
If those answers are unclear, let's start there.
Jackson Wealth Management offers prospective clients a complimentary initial tax-planning opportunity to explore potential planning considerations and learn how we work.
Bring your questions. Gain a clearer perspective.
Tell us what you are considering, what concerns you, and what you want your wealth to accomplish. We will discuss whether a deeper planning conversation would be useful.
Schedule a 15-Minute Clarity Call →
A complimentary conversation. No obligation.
Educational information only. Tax treatment depends on individual circumstances and applicable law. Investing involves risk, including possible loss of principal. Consult your tax and legal professionals regarding your situation.