Welcome to our series of blogs on Blind Spots! We all have Blind Spots, things that are potentially hazardous that we don’t even see. One of the most well-known Blind Spots is that area over your shoulder to the side of your car. But we also have Blind Spots in other areas of our life - things we should know, or have awareness of, but don’t. Blind Spots can exist around our health, our relationships with others, our work performance, and yes, our finances. This series of blogs will focus on the common financial Blind Spots that we see when working with our clients.
We get a lot of questions about how to save income taxes during the current tax year. The fact that our clients are thinking about this, tells us they know it’s important to think about not just how much they make, but how much they keep. This type of short term tax planning is important, and after reviewing our clients’ current tax situation, we ask them to check in with their CPA for their recommendations.
What we don’t get, though, are a lot of questions about how to minimize income taxes later in life - for the time period when clients need to turn their investments into income. Income can be subject to various taxes during retirement: ordinary income tax, short term capital gain tax, long term capital gain tax, no income tax and mixed tax treatment for some types of businesses, real estate and annuity products. With continuous improvements to medicine and life expectancy, it’s quite possible that some families will live 30 years in retirement. That equates to 30 years of income and 30 years of income taxes.
Therefore, shouldn’t we all be spending time trying to find the optimal mix of strategies that could help minimize income taxes during retirement? Of course! The first step is understanding the amount of income taxes that you are projected to pay in retirement - this is your Blind Spot! The second step is determining what steps you can take to reduce future income taxes. The third step is executing your plan, monitoring it and adjusting it when necessary.
At Second Half Strategies, we try to identify and help you see your various Blind Spots. Our Wealth Management process includes Planning, Guidance and Advice. By following our process, you should have the confidence to know that you are taking proactive steps to diminish your Future Tax Blind Spot!
What process are you using to develop your Second Half Strategies?