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April 2022

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How Taxes Impact Investment Planning

Too often, we think of taxes from a very specific perspective: looking backwards. For example,
during the first quarter of each year, we all start to receive our various tax documents in order
so that we can look back and begin the process of filing our taxes based on the previous year.
It’s a typical routine. The year is done, and we are now subject to respond to whatever
happened that year (how much taxable income vs. deductions, etc.).

This way of viewing taxes doesn’t translate well to investment and/or retirement planning.

A complete financial plan needs to address the effect of taxes looking forward. How will
current events (i.e. government stimulus packages, pandemic relief, increasing national debt,
social security funding shortfalls, etc.) influence tax rates ten or twenty years from now? Will
tax rates be the same? Higher? Often, even when attempting to look forward and plan, many
assume that they’ll be in a lower tax bracket when they are retired because they won’t have
their current income. Is that a safe assumption?


The good news is, there are several strategies that can be used to take these risks into
consideration now and plan accordingly.

  • Can you prevent your Security benefit from being taxed?
  • Does a ROTH conversion make sense?
  • Should your investment portfolio be managed with taxes in mind?
  • What other strategies might make sense for you?

Remember, it’s not just what you earn/save that’s important, it’s what you keep.

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