Capital Advisory Group February 2018


119 Old State Rd, Ellisville, MO 63021

FEB 2018



into and don’t pay taxes on right away. Instead, you’ll pay taxes on this account when you withdraw the money. While it may sound nice to not pay taxes right now, you could end up paying more during retirement when tax-deferred accounts are your driving strategy. We’ll talk more about that after we review the last tier. TAX EFFICIENT This tier can be a sweet spot when it comes to your accounts. One example of a tax-efficient account is the Roth IRA. In this account, you’ll pay your taxes up front when you put money into it. When you withdraw money from the Roth IRA, you will have already paid taxes on it. When you look at these three tiers, you want to see three healthy categories for your taxes. Like a runner, you don’t want to overdevelop your quads and neglect your hamstrings. For example, if you pile money into your 401(k) right now, you might save on taxes for this year, but when it comes time for retirement, every nickel that you spend is taxable. If you’re in a higher tax bracket than you were 20 years ago, you might end up paying higher taxes.That doesn’t sound very efficient, does it?

BEGINNING HEAT RIGHT NOW. While we are still in the planning stage, we are also warming up for the next heat, the preparation.That’s when you’ll finish up your planning and turn the baton to us so we can reach the finish line in April. With any race, you can’t just show up the day of and think you’ll be ready to go. You have to train year-round with daily exercises.Think of tax planning the same way. Look at the full season of taxes to determine your training schedule. If you haven’t thought about what type of tax shape you’re in, it’s time to get to it. When it comes to taxes, you can think of your accounts as being divided into three tiers.This perspective might shift your training schedule. TAXABLE This first tier is made up of your taxable accounts.This is everything that you’ll pay current taxes on.This might include your CD and brokerage accounts. TAX DEFERRED Tax-deferred accounts are accounts like your IRA that you will put money

No surprise here — this goes back to tax planning. As you think about your tiers, you may be able to make changes that are customized to your situation. Depending on your tax brackets, it could be helpful to convert your 401(k) or IRA to a Roth account, making it so you’re contributing to your tax-efficient tier. Whether this is tax efficient for you will depend on your current brackets and an assessment of your retirement goals. Working with you, our team at Capital Advisory Group can assess options and help you get into better tax shape. We are here to help. If tax season is a relay, financial planning is a marathon, and we’re in it for the long run. See you at the finish line.

John and Jeff Zufall

(636) 394-5524 1

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