It is not what you earn, but what you keep that matters. As a taxable investor you face the reality that state and federal governments lay claim to a portion of every dollar they earn.
We minimize the drag of taxes on portfolio performance by employing the following strategies:
Proactive use of tax-deferred accounts
Tax deferral is almost always your friend when trying to grow an investment portfolio. We look for creative ways to maximize the benefits of tax deferral through the use of traditional retirement accounts, non-qualified deferred compensation, private placement insurance, or low-cost annuities.
Asset location strategies
When it comes to delivering the highest after-tax returns, where you own your assets can be as important as what assets you own. The least tax-efficient assets should be allocated to the most tax-advantaged accounts, and likewise, the most tax-efficient assets should be held in taxable accounts.
If tax deferral is not available or has been maximized, then the focus must be placed on reducing the tax liability of taxable investments. Short-term gains and ordinary income should be avoided in taxable accounts. Long-term gains are better. Unrealized appreciation is best of all. Fund selection and investment choices are made specifically with after-tax return in mind.
Active tax management
On an ongoing basis, Century Wealth Management looks for opportunities to increase our clients' after-tax returns. We use full tax lot accounting to proactively manage realized gains and losses. We implement tax-loss selling when appropriate. We perform a yearly, client-by-client tax analysis to inform individual investment decisions. We help our clients with long-term coordination of charitable planning, investment decisions, and other tax strategies.