Bringing Order to Your Investment Universe

Part 3: Optimizing Your Organized Investments

 

 

In Part 2 of our four-part series on bringing order to your investment universe, we looked at “Transitions and Taxes,” or how to balance sensible tax management with effective investment planning.

 

Today, we’ll continue our series with additional ways to ease your transition from chaotic to more orderly investing. Some steps are purely practical. Others help you remain calm and confident along the way. We can work with you to mix and match them as needed to contribute to your investment success.

 

Taxes, Taxes, Taxes

Just as location, location, location often dictates where you’ll buy your next home, tax-efficiency is usually integral to your move toward more organized investing. Especially if your plans call for a multiyear shift toward your ideal investment portfolio, there are a number of tax-planning strategies we can pursue within your taxable accounts to minimize the damage done.

 

Mind Your Annual Income: Be mindful of your total annual income as you proceed. For example, you might experience a low-income year if you’re between jobs or shifting into retirement. Other years, you might receive a big pay raise, sell your business, or otherwise take on extra taxable income. You may be able to speed up your transition by deliberately incurring extra taxable gains in lower-income years and move more cautiously in higher-income ones.  If you have a Wealth Advisor make sure to let them know when you expect income changes so they can provide you with the best possible advice.

 

Watch for Those Tax Thresholds: Try to avoid the “gotchas” that can be triggered when realized taxable gains add to your overall annual income. For example, if the extra income pushes you into a higher tax bracket, your overall marginal tax rate may increase.[1] In Canada, access to other government benefits can also be affected by your reportable income, such as Old Age Security, Guaranteed Income Supplement, Canada Dental Benefit, and the age amount tax credit.

 

Harvest Some Losses: Even if your investment plans don’t call for selling particular investments in your taxable accounts, you may still be able to tap them for tax-loss harvesting. By selling any positions in your taxable portfolio at a loss - and promptly reinvesting the proceeds in a similar (but not identical) asset - you can generate realized losses to offset realized taxable gains, without altering your overall portfolio mix. This may free you to realize more taxable gains among the positions you do want to permanently sell.

 

There are many things to consider as you bring order to your investments.  A qualified Investment and Wealth Advisor can help create and implement a plan that is specific to your needs. As everyone's financial story is different please remember that all tax strategies should be discussed with a qualified tax professional to make sure the solutions you choose are right for your unique situation.

 

Here at Mejlholm Wealth Management we have the experience and knowledge to identify and implement the strategies that are right for your unique situation.  We are happy to meet with you and start the conversation.

 

 Next we look at things to consider as you move through your plan and encounter unexpected changes.