Weekend Reading: The Case for Tax Adjusting a Portfolio

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

From the moment you enter the workforce and into retirement, you’ll find that all of your earned dollars are in fact not all yours. One way or another, Uncle Sam wants his share, so it’s crucial to consider the different values of your money based on tax implications.


Tax complexities: Unfortunately, not all dollars are equal. While some money can be used without incurring taxes, others are subject to capital gains or ordinary income taxes. Further, various unknowns add to your tax complexity, such as future tax rates, changes in tax laws and the possibility of a consumption tax. However, all of these aspects should be analyzed when making tax adjustments to your portfolio.

Account tiers: Author Allan Roth suggests that Roth dollars are the most valuable to your retirement income, followed by taxable money, with traditional tax-deferred dollars being the least valuable. Additionally, he emphasizes the importance of considering future tax liabilities and applying safe withdrawal rates when assessing portfolio withdrawals after taxes. However, this can come with challenges in accurately tax-adjusting holdings, so it’s equally important to avoid unnecessary complexities that can cause confusion.

Your personalized tax strategy should consider your present financial situation, as well as your potential future situation. This requires a multi-mindset approach, and oftentimes, that’s where a professional can step in and do the leg work.