Jay Peroni offers the following royalty-free article for you to publish online or in print. Feel free to use this article in your newsletter, website, ezine, blog, or forum. ----------- PUBLICATION GUIDELINES - You have permission to publish this article for free providing the "About the Author" box is included in its entirety. - Do not post/reprint this article in any site or publication that contains hate, violence, porn, warez, or supports illegal activity. - Do not use this article in violation of the US CAN-SPAM Act. If sent by email, this article must be delivered to opt-in subscribers only. - If you publish this article in a format that supports linking, please ensure that all URLs and email addresses are active links. - Please send a copy of the publication, or an email indicating the URL to [email protected] - Article Marketer (www.ArticleMarketer.com) has distributed this article on behalf of the author. Article Marketer does not own this article, please respect the author's copyright and publication guidelines. If you do not agree to these terms, please do not use this article. ----------- Article Title: It Is Not What You Earn; It Is What You Keep Author: Jay Peroni Category: Personal Finance, Wealth Building, Investing Word Count: 760 Keywords: financial planning, certified financial planner, faith-based values, investments, financial investme Author's Email Address: [email protected] Article Source: http://www.articlemarketer.com ------------------ ARTICLE START ------------------
How many times have you heard, "it's not you earn, it's what you keep"? I sure wished my grandfather had paid attention to this principle. However, if he had I may not be a financial advisor today. You see, I got into this industry because of my grandfather, who was quite possibly, the hardest working guy I ever knew. Willis worked three jobs to put food on the table for his wife and seven children. He retired with nearly $500,000 and a pension. He put his life savings into CDs and then inflation, taxes, and eventually the nursing home took everything he worked for. I saw this as a teenager and got into the financial services industry to make a difference. Today, I treat each client like a part of my family and give advice based on the best available information and options available. It breaks my heart to see so many people allow the "three great enemies" to attack their life savings. What are those three enemies? * Time: will we have too little or possible too much time (outliving our money)? * Taxes: will we pay too much in taxes to Uncle Sam? * Inflation: will our purchasing power be eroded? Today, let's look at an enemy that is almost guaranteed to get worse for most of us. With the out of control deficit, our government spending like drunken sailors, and the President determined to pass the greatest welfare program in history (healthcare overhaul), one thing is for certain: taxes will have to go up! And not just for the wealthiest Americans, it will hit the middle class the hardest. Most of the wealthy have very good tax advisors, know how to play the game, and have ways to absorb a tax increase. Most of us aren't so fortunate! One of the most overlooked areas of our financial life is tax planning. When you read about investing and other financial topics, you occasionally see the phrase "tax efficiency" or a reference to a "tax-sensitive" way of investing. What does that really mean? The after-tax return vs. the pre-tax return: Everyone wants their investment portfolio to perform well. But it is your after-tax return that really matters. If your portfolio earns you double-digit returns, those returns really aren't so great if you end up losing 20% or 30% of them to taxes. In periods when the return on your investments is low, tax efficiency takes on even greater importance. Tax-sensitive tactics: Some methods have emerged that are designed to improve after-tax returns. Money managers commonly consider these strategies when determining whether assets in an investor's account should be bought or sold. Holding onto assets: One possible method for realizing greater tax efficiency is simply to minimize buying and selling to reduce capital gains taxes. The idea is to pursue long-term gains, instead of seeking short-term gains through a series of steady transactions. Tax-loss harvesting: This means selling certain securities at a loss to counterbalance capital gains. In this scenario, the capital losses you incur are applied against your capital gains to lower your personal tax liability. Basically, you're making lemonade out of the lemons in your portfolio. Assigning investments selectively to tax-deferred and taxable accounts is another tactic. Here's a rather basic tactic intended to work over the long run: tax-efficient investments are placed in taxable accounts, and less tax-efficient investments are held in tax-advantaged accounts. Of course, if you have 100% of your investment money in tax-deferred accounts such as 401(k)s or IRAs, then this isn't a consideration. How tax-efficient is your portfolio? It's an excellent question, one you should consider. But this brief article shouldn't be interpreted as tax or investment advice. If you'd like to find out more about tax-sensitive ways to invest, be sure to talk with a qualified financial advisor who can help you explore your options today. What you learn could be eye-opening. How to control your taxes? Instead of using tax inefficient vehicles like mutual funds where we have no control over how much or when our clients pay taxes, we use Exchange Traded Funds (ETFs) and individual securities. This allows us to have better control as to when and how our clients pay taxes. We also help determine asset location (not to be confused with asset allocation of which we help with too). Asset location is setting up the proper amounts of taxable, tax-deferred, and tax-free accounts. As you are probably overlooking many tax saving opportunities, I encourage you to seek a professional who specializes in tax efficiency. Jay Peroni, CFP, and author of The Faith-Based Millionaire and The Faith-Based Investor. Jay is also the founder of http://www.FaithBasedInvestor.com, a faith-based investing newsletter and the founder of http://www.ValuesFirstAdvisors.com a firm dedicated to faith-based financial planning. ------------------ ARTICLE END ------------------ [Non-text portions of this message have been removed]
