Make Your Money Work as Hard as You: Smart Tax Moves for Women
Maximize Your Investment Returns and Keep More of What You Earn
We know you’re already doing it all. No idea how you do it, but we see you. When it comes to money though, we think you should work smarter, not harder. Here are five tax strategies to optimize your investment returns while keeping more of what you’ve earned.
1. Choose Your Investment Settings Wisely: Strategic Asset Allocation
Think of your investment strategy as curating a collection of fine jewelry–each diamond needs the perfect setting to truly shine. And where you keep your investments matters just as much as what you invest in.
• Tax-Deferred Accounts - Traditional IRAs and 401(k)s are like having a private vault where your money can grow undisturbed. You won’t pay taxes until you take the money out in retirement. This is perfect for those “high-maintenance” investments like bonds and REITs that generate regular income. Here, they can grow without annual tax interruptions.
• Taxable Accounts - Think of regular brokerage accounts like your everyday jewelry–accessible but requiring thoughtful handling. While you’ll pay taxes on what these accounts earn, they shine brightest when filled with investments like growth stocks and ETFs that benefit from lower long-term capital gains rates.
• Tax-Free Accounts - Roth IRAs and Roth 401(k)s are the real gems in your collection. Yes, you pay taxes upfront, but everything after that is completely tax-free. These accounts are ideal for investments with high growth potential, and the beauty is, that when it’s time to take your money out, you can do it without paying a dime in taxes.
For more sophisticated investors, alternative investments like private equity or hedge funds can also offer some unique tax advantages—but they can be tricky, so make sure you know what you’re getting into before you take the plunge.
2. Choose Tax-Efficient Investments
Let’s talk about investments that are designed with minimizing your tax burden in mind:
• Municipal Bonds - Tax-free income? Yes, please! If you’re in a higher tax bracket, municipal bonds are your best friend. The interest income from these bonds is often exempt from federal taxes and sometimes even state and local taxes.
• Exchange-Traded Funds (ETFs) - ETFs bring fewer tax headaches than traditional mutual funds because they let you control when you pay. You typically won’t owe taxes until you sell, giving you more flexibility and better tax control.
• Tax-Efficient Mutual Funds - Some mutual funds are specifically designed to minimize taxable distributions. If you’re looking to keep your taxes low while still having someone else manage your portfolio, these funds could be a game changer.
3. Master the Art of Capital Gains
Timing is everything when it comes to capital gains (the profits you earn from selling). Being strategic about when you sell can help you lower your tax burden. Hold investments for over a year when possible to qualify for lower long-term capital gains rates. And if you’re having a lower-income year? That might be the perfect time to sell some winners.
4. Be Smart About Distributions
Dividends and interest income are sweet, but require careful handling:
• If you're used to looking at a high tax bill because your portfolio generates considerable dividend and interest income, consider qualified dividends for better tax treatment.
• Consider investments that grow in value over time rather than paying out regular distributions.
• Structure complex investments to spread income over time.
5. Turn Losses into Opportunities
Tax-loss harvesting is like turning lemons into lemonade. The idea is simple: you sell investments that have lost value to offset your capital gains. This can reduce your taxable capital gains and, in some cases, even offset up to $3,000 of ordinary income. Just don’t buy back the same investment within 30 days–that’s illegal.
Your Next Move
Building wealth isn’t just about making money – it’s about keeping it and watching it grow. Investing doesn’t have to be complicated, and at AdviseHer, we’re here to make it easy, clear, and most importantly, smart.
You’ve worked hard for your money. Now it’s time to put your money to work for you. Whether you’re just starting out or looking to take your strategy to the next level, we’re here to help. Let’s create a tax-savvy plan that works for you. Ready to get started? Contact us today, and let’s make your money work harder and smarter for you!
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
The return and principal value of stocks fluctuate with changes in market conditions. Shares when sold may be worth more or less than their original cost.
The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value.
Alternative investments are suitable only for qualified, long-term investors who can tolerate a lack of liquidity and are prepared to invest their capital for an indefinite period.
These investments may be highly illiquid and can involve leverage and speculative strategies that could lead to greater volatility and risk of loss.
REITs are subject to various risks such as illiquidity and property devaluations based on adverse economic and real estate market conditions and may not be suitable for all investors. A prospectus that discloses all risks, fees and expenses may be obtained from your Financial Professional. Read the prospectus carefully before investing. This is not a solicitation or offering which can only be made ironjunction with a copy of the prospectus.
Investing in mutual funds and Exchange Traded Funds (ETFs) are subject to risk and loss of principal. There is no assurance or certainty that any investment strategy will be successful in meeting its objectives.
Investors should consider the investment objectives, risks and charges and expenses of the funds carefully before investing. The prospectus contains this and other information about the funds. Contact your Financial Professional to obtain a prospectus, which should be read carefully before investing or sending money.
Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
The hypothetical investment results are for illustrative purposes only and should not be deemed a representation of past or future results. Actual investment results may be more or less than those shown. This does not represent any specific product (and/or service).
The opinions contained in this material are those of the author, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Wealth Services, LLC cannot guarantee or represent that it is accurate or complete.
