Stop Paying Unnecessary Taxes | Zach Miller
See the full episode notes HERE
In last week’s AWM Insights, Brandon Averill, Erik Averill and Justin Dyer discuss the rising stock market even in a global pandemic, and long-term investing with a plan for whatever may come your way. Here is a breakdown of the 5 key takeaways from the episode:
The reality is that many advisors do not have any experience with tax planning. These advisors only ever deal with tax-deferred accounts like IRAs so they never care to expand their knowledge on taxes. This is harmful to athletes and high net worth individuals with most of their assets in taxable accounts. Brandon relays a recent conversation that highlights the failure of coordinated tax planning: “I had a conversation with another financial planner this week and we were talking about individual 401ks and the differences between SEPs and the comment back was ‘well, that's the CPAs job.’ Unfortunately, in our world you can’t look at it that way. It's something that, as financial planners - as experts - it's what we have to be well versed on. If you’re not getting that from your advisor, I’d question that. And try to find a planner that's well versed in end-of-year tax planning .”
With effective tax rates at well over 50% for many professional athletes, your advisor should be implementing and recommending sophisticated tax strategies to lower your tax bill throughout your lifetime. Minimizing tax liabilities incorporates smart tax deferral, well-timed conversions, income shifting, asset location, tax loss harvesting, running tax projections and evaluating investments on expected after-tax return.
“Instead of waiting until the end of the year we’re going to control when we tax-loss harvest, where we put tax inefficient assets. We have a plan in place.” Justin as a CFP and CFA understands how the investments must be balanced with the taxes to produce high after-tax returns. Expert portfolio management allowed for significant tax-loss harvesting in March that will save money on future tax liabilities. It is why financial structure is so important because attaining desired outcomes is a product of the financial structure and the portfolio is only one factor of that.
“Demand more out of your professional team, if you are in the highest tax bracket, if you have 1099 income and you don’t have an individual 401k set up or no one is talking to you about a backdoor Roth IRA strategy. It’s a sign that you’re not capturing the after-tax return you deserve.” Erik delivers advice I could have used as a player.
I know from my personal experience in the NFL the cost of not utilizing these strategies to save on taxes. Or missed opportunity and overpaying for things like jock taxes. I have gone back and calculated the missed opportunities that arise from not having an integrated investment and tax planning team of expert professionals. The past and future tax bills that I will unnecessarily pay will be in the millions. Demand better from your advisors and hold them accountable. If your advisor is not offering advice on these strategies, then begin interviewing a team with better expertise.
