How many of us have heard the saying “Don’t put all of your eggs in one basket”? I would imagine pretty much everyone. This saying has been reiterated countless times through the investing world to make sure investors do one thing: Diversify Their Investments.
However, when it comes to financial planning one of the key aspects is taxation. When you sell a security, should you pay in an estimated payment to the taxing authorities? What is the tax impact of doing a Roth IRA conversion? When should I do it? If you asked your current financial planner who is not your CPA the above questions, they will tell you to contact your CPA.
In my experience, when you have too many people involved in any situation things get lost in communication. So, my counter to “Don’t put all of your eggs in one basket” is to have all your utensils in one drawer. At Sherman Wealth Solutions LLC (SWS), we not only analyze their portfolios from an investment standpoint, but also from a tax standpoint.
At SWS, we advise clients on where they should hold their equity and fixed income (bonds) investments. In many cases, it is best to have your equity investments in your taxable accounts rather than you tax advantaged accounts (Traditional IRA/401(k) or Roth IRA/ 401(k)). This is primarily due to the dividends and long-term gains being taxed at more preferential rates while interest from fixed income (bonds) is taxed at ordinary rates.
Additionally, sometimes government debt and municipal bonds are not explained well to clients. Certain government debt is taxable at the federal level but is exempt from the state level. The same is true for certain municipal bonds that are tax free at the federal level but can be taxable at the state level. This generally happens if you hold a municipal bond from a state where you do not reside in. This is called intergovernmental immunity where the federal government can’t tax state debt and the states can’t tax federal debt. These are just some of the reasons having CPA as your financial planner makes a sense.
At Sherman Wealth Solutions LLC, we run the numbers to allow you to make educated decisions. If you want to have all your utensils in one drawer, please contact us if you have any questions regarding your current financial plan.
Michael Sherman, CPA, CFP®, CPFA, CDFA®
OWNER
Sherman Wealth Solutions LLC
Michael.Sherman@shermanws.com
O 980.350.0170
F 980.350.0180
www.shermanws.com
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.
The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
Generally, among asset classes, stocks are more volatile than bonds or short-term instruments. Government bonds and corporate bonds have more moderate short-term price fluctuations than stocks, but provide lower potential long-term returns. U.S. Treasury Bills maintain a stable value if held to maturity, but returns are generally only slightly above the inflation rate.
This information is general in nature and should not be considered tax advice. Investors should consult with a qualified tax consultant as to their particular situation
Sherman Wealth Solutions, LLC (“Sherman Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Sherman Wealth and its representatives are properly licensed or exempt from licensure.
