How Your Financial Advisor Can Help You Prepare During Tax Season

Man using calculator to file taxes.

Investments and taxes are inextricably intertwined, each one affecting the other. Taxes are just one of many components to your financial situation. While CPAs and tax preparers can help with filing and navigating tax changes or deductions, having a financial advisor—who is viewing your whole financial setup—can be an invaluable resource.

How Do Investments Impact Taxes?

Investment strategy varies depending on how many more years you have to invest. Your financial advisor will help you identify tax-efficient investments based on your age and the kinds of investments you already have.

Here’s how a financial advisor can help you prepare for tax season.

When You’re Early in Investing

When you’re in the workforce, a financial advisor can help you determine how to minimize the amount of money you pay in taxes in the long run and can articulate the trade-off between investments that tax you now versus when you’re withdrawing. For instance, if you’re contributing to a 401(k), they may advise you to contribute the maximum amount, since those are pre-tax.

Because you still have years of investing left, your advisor will also be able to give advice on how to reinvest your tax savings to maximize your long-term wealth.

When You’re Retired

If you’re in retirement age, having a financial advisor is just as important, if not more so, than it was when you were in the workforce. A financial advisor at this stage can manage a withdrawal strategy that keeps you in a beneficial tax bracket by utilizing some of the same techniques as before – like charitable distributions and gifts – as well as ones like deferring required minimum distributions.

They can help you think about your health, too. A good financial advisor will recognize how tax brackets can affect benefits like Medicare, and they can help you think about long-term care planning solutions.

Ultimately, having a good withdrawal strategy can keep more money available to you over the course of retirement.

Other Benefits of a Financial Advisor

There are many other benefits to utilizing a financial advisor for tax-efficient investments. Your financial advisor will keep track of capital gains and losses, saving you a lot of legwork, and will send that information to your CPA. They can help you strategize when and how much to give to family, such as for 529 plans or other gifts, as well as note what a good amount would be to spend on charitable donations.

A good financial advisor knows the ins-and-outs of your entire financial landscape, giving them a holistic view of how one change could affect your tax situation. At Focus Financial, our advisors know how your taxes will adjust based on decisions you make, and they’ll be able to clearly identify these for you.

Find an advisor today to create a plan that will save you money on taxes and allow you to invest in your future.

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