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At The Money: Tax Management for Investors · Masters in Business

• 0:08
  Speaker 1: Me tell you, hey, it's early to be thinking about taxes.
• 0:31
  Speaker 1: April is only a few months away. But you have
• 0:34
  Speaker 1: questions and we have answers. Let's discuss how you can
• 0:39
  Speaker 1: reduce or defer your taxes over the long haul. I'm
• 0:43
  Speaker 1: Barry Riddolts, and on today's edition of At the Money,
• 0:46
  Speaker 1: we're going to discuss important issues for all investors about
• 0:51
  Speaker 1: understanding how to lower their tax bill. To help us
• 0:54
  Speaker 1: unpack all of this and what it means for your money,
• 0:57
  Speaker 1: let's bring in Bill Artsimoronian full discs closure. Bill is
• 1:01
  Speaker 1: a director of tax services at Retults Wealth Management, where
• 1:05
  Speaker 1: I also happen to coincidentally work and have my name
• 1:08
  Speaker 1: on the door. So Bill, let's start with the basics.
• 1:12
  Speaker 1: Where does tax management sit in the hierarchy of priorities
• 1:17
  Speaker 1: for investors? How does this look relative to things like
• 1:21
  Speaker 1: asset allocation or security selection, or even asset location and
• 1:27
  Speaker 1: their own behavior?
• 1:28
  Speaker 2: Well, thanks for having me back, Barry. I'm biased. I'm
• 1:31
  Speaker 2: a CPA. I've run the tax practice here, Like I
• 1:34
  Speaker 2: think about taxes all day, but I'm both in life
• 1:38
  Speaker 2: and in working with clients. I'm a proponent of control
• 1:42
  Speaker 2: what you can control. We can't control the market. Asset
• 1:44
  Speaker 2: allocation gives us you know, we can run back test,
• 1:46
  Speaker 2: we can look at historical data. That's very useful. Even
• 1:49
  Speaker 2: security selection. That's you know, individual stocks are more vulneratile
• 1:52
  Speaker 2: than say an index fund. But taxes, we have a
• 1:56
  Speaker 2: set of rules and we can we can define our
• 1:59
  Speaker 2: behave if you're based on those rules, at least in
• 2:01
  Speaker 2: the short term. We don't know what tax level will
• 2:03
  Speaker 2: look like twenty years from now, but we have a
• 2:04
  Speaker 2: set of rules for the foreseeable future. We have to
• 2:07
  Speaker 2: act within those rules, but it gives us guidelines, and
• 2:10
  Speaker 2: that's where we can actually make a difference because we
• 2:12
  Speaker 2: don't know what the market's going to do tomorrow, next week,
• 2:14
  Speaker 2: next month, next year, but we do know what the
• 2:16
  Speaker 2: tax code will look like at least until probably twenty
• 2:19
  Speaker 2: twenty eight.
• 2:20
  Speaker 1: So let's talk about tax aware portfolios. What are the
• 2:24
  Speaker 1: core issues that investors can pull the right levers on.
• 2:28
  Speaker 1: What moves the needle the most.
• 2:31
  Speaker 2: It's very basics. We have different buckets of tax assets.
• 2:34
  Speaker 2: We have pre tax money like a traditional form o K.
• 2:37
  Speaker 2: We have after tax money, which is say a broker's account,
• 2:41
  Speaker 2: and then we have tax free money, which is your
• 2:43
  Speaker 2: Wroth account. Asset location can be huge, and we're big
• 2:47
  Speaker 2: fans of asset diversification. With clients come to us, they're
• 2:50
  Speaker 2: well versed in sorry, asset diversification, but not necessarily tax diversification.
• 2:55
  Speaker 2: Tax diversification to me means you have different levels of
• 2:58
  Speaker 2: assets in each of these buckets, and that gives you
• 3:00
  Speaker 2: a lot of flexibility when you need it. A lot
• 3:03
  Speaker 2: of times this comes up in retirement. We have folks
• 3:06
  Speaker 2: come to us and they socked away money in a
• 3:07
  Speaker 2: four oh one K their whole career. They have a
• 3:09
  Speaker 2: couple million bucks, They feel great about it, and then
• 3:11
  Speaker 2: we have to break the news like, hey, you're going
• 3:12
  Speaker 2: to pay tax on every single dollar here, and there's
• 3:15
  Speaker 2: no flexibility in their plan. Every dollar that they distribute,
• 3:17
  Speaker 2: every dollar that they need for the rest of their lives,
• 3:20
  Speaker 2: is going to be taxable. Whereas if you plan ahead
• 3:22
  Speaker 2: and you can diversify those different buckets of tax money,
• 3:25
  Speaker 2: that's where that's where you provide a lot of flexibility
• 3:28
  Speaker 2: for yourself in the future.
• 3:29
  Speaker 1: So let's talk about planning ahead. And perhaps the thing
• 3:33
  Speaker 1: that I find most fascinating and I've been reading the
• 3:35
  Speaker 1: most about and I still feel like I don't have
• 3:38
  Speaker 1: a solid handle on it. Is the super Wroth backdoor conversion?
• 3:43
  Speaker 1: Tell us what that is, What are the advantages of it?
• 3:46
  Speaker 1: How do you make sure you're doing that both correctly
• 3:50
  Speaker 1: and legally according to the IRS.
• 3:52
  Speaker 2: Sure we can call it super Wroth, we can call
• 3:55
  Speaker 2: it mega Roth. It's just a juiced up Wroth option
• 3:59
  Speaker 2: in your employee retirement plan. Let's just use Let's just
• 4:02
  Speaker 2: use four oh one k's as an example. There are
• 4:04
  Speaker 2: other employer retirement vehicles, but let's use four oh one k's.
• 4:07
  Speaker 2: The limit in twenty twenty five for total four oh
• 4:10
  Speaker 2: one K contributions is seventy grand. Now that can be
• 4:13
  Speaker 2: employee myself contributing to a to contributing to a four
• 4:17
  Speaker 2: oh one K, or that can come from the employer. Normally,
• 4:20
  Speaker 2: for a lot of plans, it's a combination of the two.
• 4:22
  Speaker 2: So let's say I'm fifty years old, I'm contributing thirty
• 4:25
  Speaker 2: K to my pre tax four oh one K in
• 4:28
  Speaker 2: twenty twenty five. Next year, that's going to change slightly.
• 4:30
  Speaker 2: We talked about that last time. But then my employer
• 4:33
  Speaker 2: is going to kick in let's say ten grand. That's
• 4:35
  Speaker 2: their match. So total we're at forty K, the remaining
• 4:38
  Speaker 2: thirty if the if the four to one K plan
• 4:40
  Speaker 2: allows it, that remaining thirty seventy K maximum minus forty
• 4:44
  Speaker 2: K already contributed that can be made on an after
• 4:47
  Speaker 2: tax basis, and then you have money that's already been
• 4:49
  Speaker 2: taxed in the four oh one K, you convert that
• 4:52
  Speaker 2: to ROTH. So now we have we have forty K
• 4:54
  Speaker 2: that went in pre tax between employer and employee, and
• 4:57
  Speaker 2: now we have thirty K that's now in a tax
• 4:59
  Speaker 2: free row bucket. So we started our discussion talking about
• 5:03
  Speaker 2: tax diversification. This is a great way to do it.
• 5:05
  Speaker 2: Now you have pre tax money growing and you have
• 5:08
  Speaker 2: tax free money growing, and again that's going to give
• 5:10
  Speaker 2: you a ton of flexibility down the line. And even
• 5:12
  Speaker 2: inside of those plans, you might want to structure the
• 5:15
  Speaker 2: WROTH money a little bit more aggressively because you know
• 5:18
  Speaker 2: WROTH money, in perfect financial theory, is gonna be the
• 5:21
  Speaker 2: last money you touched, so you might want to be
• 5:23
  Speaker 2: more aggressive in the WROTH. If you have a bond allocation,
• 5:26
  Speaker 2: you might want that in the traditional or the pre
• 5:28
  Speaker 2: tax sleep, but the megabackdoor WROTH allows for these higher contributions.
• 5:33
  Speaker 2: It's a kind of an unlock for a lot of
• 5:34
  Speaker 2: folks who are earning a lot of money, they want
• 5:37
  Speaker 2: tax efficiency. A lot of plans are starting to pick
• 5:40
  Speaker 2: this up. So if you're listening and you're a high
• 5:42
  Speaker 2: earner and you have some sway at your company, go
• 5:45
  Speaker 2: ask your CFO, go ask HR and see if you
• 5:47
  Speaker 2: can implement the megabackdoor Roth strategy.
• 5:51
  Speaker 1: And then what about the full on mega roth conversion?
• 5:55
  Speaker 1: Do you take the traditional four O one K, what
• 5:58
  Speaker 1: does that look like when you convert that to a ROTH.
• 6:01
  Speaker 2: The extra thirty K that I alluded to, that goes
• 6:05
  Speaker 2: in as in quote unquote after tax contribution. When you
• 6:08
  Speaker 2: convert after tax money, you don't pay tax on it.
• 6:10
  Speaker 2: You don't pay tax twice. That's kind of a foundation
• 6:13
  Speaker 2: of the US tax code. You don't pay tax twice. Now,
• 6:16
  Speaker 2: if you're talking about taking money you took a deduction on,
• 6:20
  Speaker 2: that's considered pre tax money. So if that forty K
• 6:23
  Speaker 2: of pre tax money, if I wanted to convert that
• 6:25
  Speaker 2: to ROTH, that's going to be a ROTH conversion, and
• 6:28
  Speaker 2: that on that one's going to be taxable. That may
• 6:31
  Speaker 2: make sense. If you're as an investor, maybe you're in
• 6:34
  Speaker 2: your twenties, and thirties and you have a long runway
• 6:37
  Speaker 2: to retirement and you want full WROTH money. That's that's
• 6:40
  Speaker 2: a great case to convert pre tax money to ROTH
• 6:42
  Speaker 2: now and benefit from long term tax free growth in
• 6:45
  Speaker 2: the WROTH for decades to come.
• 6:47
  Speaker 1: What are some of the more common tax traps that
• 6:49
  Speaker 1: you see around equity comp walk us through rsu's ISOs, NSOs,
• 6:56
  Speaker 1: employee stock purchase plans, et cetera.
• 6:59
  Speaker 2: We call that aquity comp alphabet soup berry is. It's
• 7:02
  Speaker 2: really confusing a lot of folks out in the Bay
• 7:05
  Speaker 2: Area or in other tech companies. They get employed by
• 7:09
  Speaker 2: these companies, They're like, here's your package, and they have
• 7:11
  Speaker 2: no idea what it means. So I think the first
• 7:13
  Speaker 2: thing is just an understanding of what you own and
• 7:15
  Speaker 2: then an understanding of how it's taxed. Ursus are a
• 7:19
  Speaker 2: little simple. These are restricted stock restricted stock. It's going
• 7:22
  Speaker 2: to be paid on a state investing schedule, and it's
• 7:25
  Speaker 2: almost like a cash bonus. You're just receiving stock instead
• 7:28
  Speaker 2: of cash. Once you receive it, it's yours to do
• 7:30
  Speaker 2: what you want with. Options are a little bit more tricky.
• 7:32
  Speaker 2: There's two types of options, non qualified and incentive stock. Options.
• 7:36
  Speaker 2: The tax treatment is different. But the way to think
• 7:39
  Speaker 2: about it is you don't get anything for free. The
• 7:41
  Speaker 2: IRS says, no, you don't get anything for free. So
• 7:43
  Speaker 2: if there's a difference in your option between what you
• 7:46
  Speaker 2: pay for the share or your strike price and what
• 7:48
  Speaker 2: the share is worth, there's going to be a tax
• 7:50
  Speaker 2: component on that difference. We call it a spread or
• 7:52
  Speaker 2: a bargain element, but that's the big difference. I think
• 7:55
  Speaker 2: what at the very basics, what folks that are paid
• 7:59
  Speaker 2: in equity need to do is be proactive with a
• 8:02
  Speaker 2: tax planner. I've seen far too often folks with RSUs
• 8:06
  Speaker 2: or they exercise options, and they have a big tax
• 8:09
  Speaker 2: bill in April and they have no idea where it
• 8:11
  Speaker 2: came from, because, in my experience, folks don't feel stock.
• 8:15
  Speaker 2: They feel cash. They know when they're paid in cash,
• 8:17
  Speaker 2: they don't know when they're paid in stock. So if
• 8:19
  Speaker 2: you're paid in stock and you recognize that as income,
• 8:21
  Speaker 2: you're not thinking about it, and then you're left with
• 8:23
  Speaker 2: a big tax bill down the road and you're like,
• 8:25
  Speaker 2: I didn't make a million dollars, I made five hundred k.
• 8:28
  Speaker 2: But then you realize, oh, that extra five hundred k
• 8:30
  Speaker 2: was stock. Not cash. Therefore I didn't feel it.
• 8:32
  Speaker 1: What about some of the clients we have at some
• 8:34
  Speaker 1: really high growth companies, Apple, Google, Palentier, and Video, they're
• 8:40
  Speaker 1: seeing their stockholdings go through the roof. What are best
• 8:44
  Speaker 1: practices for those folks. How soon do they need to
• 8:48
  Speaker 1: start thinking about managing capital gains?
• 8:52
  Speaker 2: Well, that depends. It depends how comfortable they are with
• 8:54
  Speaker 2: the stock, both in the short term and long term.
• 8:57
  Speaker 2: And there's a bias here, right If you work for
• 9:00
  Speaker 2: a company, in theory, you're bought into what that company
• 9:03
  Speaker 2: is doing. Therefore you don't really want to sell the shares.
• 9:06
  Speaker 2: But then you create some concentration risk when when you're
• 9:09
  Speaker 2: paid in equity, it accumulates. And if that accumulates to
• 9:12
  Speaker 2: a point where a small move in the stock is
• 9:14
  Speaker 2: keeping you up at night because on paper you're worth x,
• 9:17
  Speaker 2: and then the next day you're worth X minus whatever,
• 9:20
  Speaker 2: you might want to diversify a little bit. And that's
• 9:23
  Speaker 2: where effective tax planning is going to be crucial, because
• 9:26
  Speaker 2: you don't just want to rip a band aid off.
• 9:28
  Speaker 2: You want to strategically plan for capital gains based on
• 9:31
  Speaker 2: certain limits. It could be it could be capital gain brackets,
• 9:34
  Speaker 2: it could be We talked about salt limits last time
• 9:37
  Speaker 2: on deductions Bury, So there's a there's a very structured
• 9:40
  Speaker 2: way to do this, but ultimately it's going to depend
• 9:42
  Speaker 2: on how comfortable you are with concentrated positions in your
• 9:46
  Speaker 2: portfolio and how much are you willing to pay tax
• 9:48
  Speaker 2: to get rid of their concentration.
• 9:50
  Speaker 1: What happens with someone who not only is getting their
• 9:54
  Speaker 1: income from a company, but they just have so much
• 9:57
  Speaker 1: concentrated risk in that equity. What sort of advice do
• 10:01
  Speaker 1: we give folks like that?
• 10:02
  Speaker 2: There's a couple options. Number One, you could just pay
• 10:05
  Speaker 2: tax on it. That's a win, you know, especially at
• 10:08
  Speaker 2: long term gain rates. You know, our clients are a
• 10:10
  Speaker 2: lot of our clients are pushing thirty five, thirty seven
• 10:12
  Speaker 2: percent on their ordinary income, but their long term capital
• 10:15
  Speaker 2: gain rate is going to be twenty percent. They'll probably
• 10:17
  Speaker 2: pay three point eight percent, which is net investment income tax.
• 10:20
  Speaker 2: But that's a reasonable rate to pay for all this
• 10:22
  Speaker 2: growth you've won. Now create some tax, sell the capital gain,
• 10:26
  Speaker 2: and help yourself sleep at night, because again, if that
• 10:29
  Speaker 2: stock moves ten percent, it's going to be material to
• 10:32
  Speaker 2: your overall net worth. There are some other mechanisms we
• 10:34
  Speaker 2: are we're heavy with direct indexing here at Adults. We've
• 10:38
  Speaker 2: had a lot of success with the O'Shaughnessy team on
• 10:40
  Speaker 2: direct indexing and creating tax losses to use against concentrated positions,
• 10:46
  Speaker 2: or maybe use tax losses against real estate holdings or
• 10:49
  Speaker 2: other stuff. There are some newer things. Bill Sweet calls
• 10:52
  Speaker 2: this late stage capitalism, where there's this there's this slew
• 10:55
  Speaker 2: of new products to either avoid or defer taxes. Three
• 10:59
  Speaker 2: point fifty one exchanges come into mind. Where you take
• 11:03
  Speaker 2: a concentrated position, you find a group of investors, you
• 11:06
  Speaker 2: bundle it into an ETF, and you have a diversified
• 11:09
  Speaker 2: basket now rather than a concentrated position. It doesn't necessarily
• 11:12
  Speaker 2: solve the tax problem because your basis is your basis.
• 11:16
  Speaker 2: You can't change that. So if I have a million
• 11:19
  Speaker 2: dollars of stock with a five thousand dollars basis, even
• 11:22
  Speaker 2: if I exchange that for a diversified ETF, my basis
• 11:26
  Speaker 2: is still five grand. So whenever I want to sell
• 11:28
  Speaker 2: some shares of that new ETF, I'm still going to
• 11:30
  Speaker 2: have a pretty big capital gainspill. But it does solve
• 11:32
  Speaker 2: the diversification issue.
• 11:34
  Speaker 1: I know there was an exchange act recently. This traces
• 11:37
  Speaker 1: back to real estate. If you sold an investment property
• 11:41
  Speaker 1: and rolled into another one, you got to roll over
• 11:43
  Speaker 1: the tax obligation. So it sounds like the SEC is
• 11:48
  Speaker 1: finally caught up with real estate investors. Tell us more
• 11:52
  Speaker 1: about how that operates. If you're sitting in a highly
• 11:55
  Speaker 1: appreciated stock and let's be blunt, this is late stage
• 11:59
  Speaker 1: of a bull market. People are sitting on giant, low
• 12:03
  Speaker 1: cost basis positions. How do these exchange works? Does it work?
• 12:07
  Speaker 1: Is it just ETFs? What else can you do this with?
• 12:10
  Speaker 2: Yeah, there's again there's a slew of products on the
• 12:13
  Speaker 2: market to solve these quote unquote problems. They're not problems
• 12:16
  Speaker 2: at all. They're they're these are these are Champagne problems.
• 12:19
  Speaker 2: But just like in real estate, where a ten thirty
• 12:22
  Speaker 2: one exchange looks like you have a piece of property
• 12:24
  Speaker 2: real estate, for example, you find a bigger piece of
• 12:27
  Speaker 2: real estate, you have a capital gain in the existing
• 12:31
  Speaker 2: property and you roll it into the new property. Again,
• 12:34
  Speaker 2: this is tax deferral, It is not tax avoidance. Your
• 12:37
  Speaker 2: basis stays low, and so what you end up with
• 12:40
  Speaker 2: is you push the capital gain down the line. Now,
• 12:43
  Speaker 2: in real estate, and what you could do with liquid
• 12:46
  Speaker 2: assets and securities is if you exchange and exchange and
• 12:50
  Speaker 2: exchange your whole life, then you pass it. Let's say,
• 12:53
  Speaker 2: let's say you die. My favorite thing to say is
• 12:56
  Speaker 2: nothing solves tax problems like death. But if you die.
• 12:59
  Speaker 2: If if you die, you pass on the assets to
• 13:02
  Speaker 2: your kids. And what you've effectively done is you've deferred
• 13:04
  Speaker 2: capital gains until you die, and then your error is
• 13:07
  Speaker 2: going to step up in basis. So there are more
• 13:09
  Speaker 2: mechanisms now to replicate what's happened in real estate with
• 13:12
  Speaker 2: liquid securities and other assets, and that's that's allowed folks
• 13:16
  Speaker 2: to defer, defer, and then you know, eventually we'll inevitably
• 13:20
  Speaker 2: we'll see a bear market and this will solve itself.
• 13:23
  Speaker 2: But right now we're seeing a lot of folks explore
• 13:25
  Speaker 2: these options because we've had a hell of a run
• 13:27
  Speaker 2: for fifteen years now and a lot of folks are
• 13:29
  Speaker 2: sitting on big capital gains.
• 13:30
  Speaker 1: Yeah, to say the very least. So there's been a
• 13:32
  Speaker 1: whole new set of rules passed last year in twenty
• 13:35
  Speaker 1: twenty five. Tell us what the most significant tax law
• 13:39
  Speaker 1: changes were. What should investors be aware of?
• 13:42
  Speaker 2: The biggest change is what didn't change at all, and
• 13:44
  Speaker 2: that was actually tax rates. If if the tax bill
• 13:48
  Speaker 2: that was signed into law, we call it OBI III,
• 13:50
  Speaker 2: one Big beautiful, one big Beautiful Act, if that was
• 13:53
  Speaker 2: not signed into law by December thirty first, or if
• 13:56
  Speaker 2: there were no tax changes, tax rates were set to
• 13:58
  Speaker 2: increase by about eight to five percent across the board,
• 14:01
  Speaker 2: and for folks earning the highest incomes that would have
• 14:05
  Speaker 2: gone from thirty seven to thirty nine point six percent,
• 14:08
  Speaker 2: and that two point six percent difference that is unlimited
• 14:12
  Speaker 2: in theory, that could be up to six six figures,
• 14:15
  Speaker 2: seven figures, eight figures, nine figures, and that two point
• 14:17
  Speaker 2: six percent is now kicked into every dollar that exceeds
• 14:21
  Speaker 2: that amount. And so the biggest thing that change is
• 14:23
  Speaker 2: what didn't change, and that's tax rates. The other changes
• 14:26
  Speaker 2: that we're seeing come into a factor a lot. On
• 14:29
  Speaker 2: the deduction side, there's more strategy around tax deductions. Charitable giving,
• 14:34
  Speaker 2: State and local taxes had a bump from ten k
• 14:36
  Speaker 2: up to forty k for certain taxpayers. For most taxpayers,
• 14:40
  Speaker 2: we talk about charitable giving quite a bit, and those
• 14:43
  Speaker 2: are what we're focused on, is controlling the timing of
• 14:46
  Speaker 2: deductions to time with income. Right your deductions are worth
• 14:49
  Speaker 2: more when your tax rate is at its highest than
• 14:51
  Speaker 2: when your tax rate is lower. So we're trying to
• 14:53
  Speaker 2: time charitable gifts, We're trying to time salt deductions to
• 14:57
  Speaker 2: coincide with our client's highest income year.
• 15:00
  Speaker 1: You mentioned earlier death solves a lot of tax problems.
• 15:04
  Speaker 1: Turns out it solves a lot of problems. But how
• 15:06
  Speaker 1: do you integrate tax planning into a state planning? Are
• 15:11
  Speaker 1: they really one and the same? Tell us what the
• 15:13
  Speaker 1: thought process is there?
• 15:14
  Speaker 2: They are one and the same with totally different rules.
• 15:18
  Speaker 2: A state tax as a whole doesn't come up outside
• 15:21
  Speaker 2: of the most wealthy individuals, right because right now the
• 15:24
  Speaker 2: estate exemption is going to be like thirty million bucks
• 15:27
  Speaker 2: for a joint family. But income tax plays a role
• 15:30
  Speaker 2: throughout life, right and so if we can, if we
• 15:33
  Speaker 2: can integrate income tax planning with estate planning, it's a
• 15:36
  Speaker 2: win for these families because at those levels of wealth,
• 15:39
  Speaker 2: those are going to be the folks that are most
• 15:41
  Speaker 2: sensitive to big, you know, big tax bills. Now, one
• 15:44
  Speaker 2: thing we like to do that combines the two is
• 15:48
  Speaker 2: strategic roth conversions. A lot of folks that we meet
• 15:51
  Speaker 2: with they have enough assets to live on they're thinking
• 15:54
  Speaker 2: about generationally, how do we take care of our kids
• 15:57
  Speaker 2: within the bounds of the tax code, And so can
• 16:00
  Speaker 2: versions will allow let's say, parents to pay tax now
• 16:04
  Speaker 2: rather than leave tax pre tax money to their kids.
• 16:08
  Speaker 2: So under Biden's secure AC two point zero, there's now
• 16:12
  Speaker 2: a ten year rule for inherited diarrays. These are both
• 16:16
  Speaker 2: pre tax diarrays and WROTH diarrays. And so if I
• 16:19
  Speaker 2: have a kid, let's pretend I'm eighty years old. I
• 16:22
  Speaker 2: have a fifty year old daughter who's a doctor in
• 16:26
  Speaker 2: New York. Right, her tax rate is going to be
• 16:27
  Speaker 2: very very high. When I pass away, She's going to
• 16:29
  Speaker 2: have ten years to deplete my retirement accounts. If that's
• 16:33
  Speaker 2: in pre tax money, she's going to pay tax at
• 16:35
  Speaker 2: the highest possible rate on that money. Whereas if I
• 16:38
  Speaker 2: convert my assets, my pre tax assets to ROTH, maybe
• 16:41
  Speaker 2: I pay tax at twenty four percent instead of her
• 16:44
  Speaker 2: thirty seven percent rate. I do that on her behalf,
• 16:47
  Speaker 2: and now she has a lot more tax efficiency when
• 16:50
  Speaker 2: she inherits my money.
• 16:51
  Speaker 1: So last question, what should people be thinking about as
• 16:56
  Speaker 1: they start to organize their taxes, not just twenty twenty six,
• 17:01
  Speaker 1: but looking ahead to twenty twenty seven.
• 17:03
  Speaker 2: It's about timing income, right. It's again think about this
• 17:07
  Speaker 2: over the course of your lifetime, or if you have kids,
• 17:09
  Speaker 2: over over the course of their lifetime, when can we
• 17:12
  Speaker 2: pay tax at a lower rate than we might pay
• 17:14
  Speaker 2: in the future. Rights, that's a lot of our work
• 17:16
  Speaker 2: is just timing income, timing deductions to take advantage of
• 17:20
  Speaker 2: fluctuations and in tax rates and in lifetime income. And
• 17:26
  Speaker 2: that's where that's where you have to look forward again,
• 17:28
  Speaker 2: look forward rather than backwards. Is if you can time
• 17:31
  Speaker 2: these things. These are going to be marginal differences over
• 17:33
  Speaker 2: the course of your lifetime, but marginal differences that can
• 17:36
  Speaker 2: then compound. They're really going to add up over decades.
• 17:39
  Speaker 1: So to wrap up, there are a lot of steps
• 17:42
  Speaker 1: investors can take to minimize what they pay in taxes,
• 17:47
  Speaker 1: not only on capital gains, but what they're doing with
• 17:51
  Speaker 1: their qualified accounts where they locate their assets, and changes
• 17:56
  Speaker 1: they can make to make sure their kids aren't saddled
• 17:59
  Speaker 1: with the tax burden. Speak to your financial planner, speak
• 18:03
  Speaker 1: to your tax professional. Make sure they're working together so
• 18:06
  Speaker 1: that you check every box that's available to you to
• 18:10
  Speaker 1: legitimately reduce and defer your taxes by as much as possible.
• 18:15
  Speaker 1: I'm Barry Ritolts. You're listening to Bloombergs at the Money