Here at Memorial Wealth Group, we believe it’s not just about what you make, it’s about what you keep. As we go into the end of the year, it’s a good time to review your tax plan and make sure you are optimizing your taxes. Failure to create a tax efficient strategy can hurt your savings efforts and even delay your retirement. Here are some things to consider:
1. Harvest losses / gains proactively for tax savings. Look at where you stand with regard to losses and gains. Maybe sell a loser in your portfolio to offset a large gain that you had. Also realize that markets are at an all-time high and capital gains are at an all-time low. It may be time to cash a highly appreciated stock while these conditions exist.
2. Employ tax-free gifting strategies. If you think taxes are going to be a problem next April, it may be time to gift to your favorite charity before the end of the year.
3. Invest in a college savings plan for the little ones. Instead of giving toys that they are going to play with one time, consider starting a state-sponsored 529 plan. In many cases, there are significant tax incentives for contributions to a state-sponsored 529 plan and with the cost of tuition going up by >5% a year, this is a must do for parents.
4. Lastly, maximize tax-advantaged savings accounts: 401K, IRA & Roth. Most people think once they’ve maxed out their 401K contributions or IRA contributions, they are no longer able to save on a tax-advantaged basis. This is often not the case and there are other options to consider, such as a Mega Roth/ Roth 401k.