The financial services industry devotes tremendous energy to identifying and promoting investments that can offer retirement account holders the best combination of risk, return, and diversification. Often lost in this asset allocation push, however, is the drag taxes can take on wealth creation.
“In a world where alpha is so hard to generate and advisors spend hours looking for ways to save a few basis points, it is surprising how little attention is paid to the issue of how various components of investment income are taxed,’’ says Alexey Bulankov, a certified financial planner with McCarthy Asset Management in Redwood Shores, Calif. “No investment plan is complete without a tax angle.”
To increase the likelihood of their clients reaching retirement with ample savings, Bulankov and other advisors advocate asset location—the process of assigning investments to taxable or tax-deferred accounts, such as 401(k)s and IRAs , based on the types of taxable distributions they generate.
“Strategic asset location is a source of tax alpha for investors, because it’s designed to minimize taxes and maximize after-tax wealth,’’ says Glenn Freed, CEO of Los Angeles-based Vericimetry Advisors.
Source: Metis GroupPage 1 of 5 | Next Page