Four Wealth Management Tips to Help You Get Ready for Next Tax Season
1. Start Planning Earlier Than You Have Been
According to Associated Bank's Chicago Private Client Market Leader Doug Myers, he and his team start looking toward the annual April tax-filing deadline well before then. In fact, they typically start a conversation with their clients about a half-year in advance.
"When we talk to our clients, we talk to them in the fall, prior to the year end, which is the tax deadline for getting your tax strategies in order," Myers said. "And there are certain strategies which you can do, take certain deductions – such as charitable deductions – which come off your AGI (adjusted gross income)."
Talking through these strategies – and which ones make the most sense to implement – is important, he notes. That conversation might reveal a number of opportunities.
"And also, you might want to think about liquidating certain securities to make your charitable donations, if those securities have some gains in them … (it) might be a good time to sell," Myers said. "Or they might have some losses even, which would be a good time to sell, because there'd be no tax consequence and they'd further get the tax benefits of giving to the charitable deductions. So there are some things you can do."
2. Consult a Tax Professional
Not trying to DIY your taxes but rather relying on an expert is probably the best bet, Myers said.
"I mean, there are some great programs," Myers said. "For example Turbo Tax is a very user-friendly vehicle to prepare your own taxes, but that's typically for (a) person who's got W2 wages (and) might have a few deductions. But I think with the complexity of the tax structure now, you really need to go to an accountant, especially if you have deductions, such as school tuitions, medical deductions, interest in dividends, all that plays into it."
Not taking advantage of all possible deductions is one of the biggest mistakes Myers sees. That trained eye can help you spot those deductions more readily than you might be able to.
"There's so many small loopholes that Congress has passed over the years, and it's gotten so complex that you really feel like you have to go to an expert to do it now," Myers said. "It's very hard to do it yourself."
3. Make Sure You Have a 401k – And Take Advantage of Company Match
"The basic thing you have to look at – and especially for younger people starting out in their career – take advantage of that 401k," Myers said. "It's pretax, so anything that goes into your 401k is not taxed and it grows and it grows, tax deferred, and so it's not taxed until you take it out as income – which is 59½ (or later). So young people starting out their career … it's a good time to start taking advantage of that 401k."
Many organizations will even offer a matching amount, up to a certain percentage. Myers warns not to let this go to waste. "Where else can you get that kind of return on anything that you put in as an investment?" Myers asked. "So we always tell our younger clients, take advantage of the deductions and take advantage of that 401k as much as you can."
4. Don't Rely Too Heavily on Tech
"… There's so many applications and online platforms that help people with their investing, and there's some good ones on the market," Myers said. "But they seem to be a little basic, and wealth management is all about a relationship."
That relationship and that personalized advice is something one typically can't find with an online or mobile tool.
"It's all about our consultative process in managing people's finances, and I think without that personal relationship, and without the on-on-one expertise that we provide our clients, you're not going to get that online, you're not going to get that from one of these robo-financial planning modules that are out there," Myers said. "And they're becoming prevalent, but I think when you look at a true wealth management platform like we offer, it's looking at all aspects of someone's financial condition and some of these online platforms are not able to adequately do that."
"I think there's always going to be the technology aspect. I mean, I think it's going to be more and more enhanced as we go along, and hopefully we'll still have a need for people like me to talk to clients and to give them some expertise and financial advice."