Wealth Management

Wealth Management

Five Tax Saving Strategies for the Affluent

By Echo Huang, CFA, CFP®, CPA

When I worked as a tax CPA for KPMG in the late 90s, I served many corporate executives and wealthy families as their senior tax specialist and prepared many individual income tax returns, trust returns, and gift tax returns.  Now I use that knowledge and expertise to help my affluent and high-income clients plan ahead to keep more money in their pockets by using some smart tax savings strategies.  

Looking at this Historical Tax Rate Chart 1913 - 2019, the current top income rate is relatively low.   Similar to the importance of diversification in investing, I think the thought of tax diversification is relevant as we help people plan for their financial future.  I want to share five tax savings strategies here with some examples:

  1. Diversify Your Taxable Income.  Investors should consider owning investments in all three tax buckets: tax-deferred (such as 401(k), IRA), tax-free (Roth IRA, HSA) and taxable (individual, joint, revocable living trust).  The tax treatments are different in each of the three buckets before withdrawal: you can sell investments with gains or losses inside the tax-deferred bucket and tax-free bucket without reporting them to IRS; you must watch for short-term or long-term capital gains, interest income or dividend income each year inside the taxable bucket.  

When it’s time to withdraw, you’ll pay the ordinary tax rate (normally higher than long-term capital gain rate) on the distributions from the tax-deferred bucket.  You won’t need to pay any taxes on distributions from your Roth IRA after age 59.5 or having met the five-year rule after converting some IRA money to Roth IRA.  You use after-tax dollars to fund a Roth IRA, but any distributions including earnings after age 59.5 will be tax-free.  IRS determines the income limit each year for making contributions to a Roth IRA.

Since you cannot predict your future income tax rates, owning investments in all three tax buckets allows you to have the maximum tax planning flexibility during retirement in order to reduce taxes.  For example, if our government’s deficit continues to be large, and during your retirement the tax rates may go up for people earning over $200,000 annual taxable income, you may be able to withdraw some money from your Roth IRA instead of IRA to keep your taxable income below $200,000, therefore paying taxes at a lower rate.  When tax rates go down because of the change of the president or congress, then you can switch to withdrawing from your IRA and taxable account.

Echo Huang is Featured by Winona State University News Center Today

 

We are pleased to announce that Echo Huang, CFA, CFP®, CPA was interviewed by Maddie Swenson from Winona State University recently and is featured today in the “This is WSU” campaign:

https://news.winona.edu/11418/this-is-wsu-echo-huang/

Winona State University: A Community of Learners Improving Our World

Are Investment Advisory Fees Tax Deductible?

It’s tax season again, and a question we get from a number of clients after receiving their year end statements is, “Are my investment advisory fees tax deductible?” And the answer is an equivocal, “It depends.”

Congress did grant a tax deduction for certain investment expenses, but with anything to do with the tax code, the devil’s is in the details. Not to worry though, we’ll use this opportunity to settle the issue no matter your situation.

Happy 2nd Birthday Echo Wealth Management!

By Echo Huang, CPA, CFP®, CFA

With thankfulness and appreciation for my friends, family, team and clients, I am excited to celebrate the 2nd birthday of Echo Wealth Management today! It has been a satisfying journey over the past two years of building a strong foundation for the business that focuses on taking the complexity out of wealth management. We have been blessed with amazing client experiences and the supportive efforts from our centers of influence, including attorneys, CPAs, insurance agents, business operations and technology partners. 

Echo and Steve Passed the CFA Level III Exam

By Echo Huang on August 30, 2016

When I founded Echo Wealth Management in early 2015, I had a vision in mind for my new company: take complexity out of wealth management while helping clients gain the confidence to follow their dreams.  And over the past 18 months, through investing in cutting edge technology, and bringing Steve Drost and Tyler Lodahl aboard as associate wealth managers, I am thrilled by what we have achieved together: over $59 million in assets under management and 50 clients.  In addition, I continue to invest in education and technology to enhance the services to clients.

The big news this month:  Both Steve and I passed Level III of the CFA (Chartered Financial Analyst) exam!  I am in the process of submitting the professional references to the CFA Institute in order to be awarded the charter.  Steve passed all three levels of the exam in his first attempts and will apply for the CFA charter in June of 2017 when he meets the required four years of qualified work experience. 

2016 Could Be a Bumpy Ride

The Start-of-the Year Selloff Reflected Fear More than Fundamentals

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In 2016, greater risks on a number of fronts are likely to increase the frequency and magnitude of volatility spikes for investors. 

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