NOVEMBER 2020 • LONGISLANDPRESS.COM 7
FIVE STRATEGIES FOR TAX-EFFICIENT INVESTING
After factoring in federal income and capital gains
taxes, the alternative minimum tax, and possible state
and local taxes, your investments’ returns in any given
year may be reduced by 40% or more. Here are five ways
to potentially lower your tax bill.
Consider Tax-Deferred and Tax-Free Accounts
Tax-deferred accounts include employer-sponsored
retirement accounts such as traditional 401(k)s and
403(b) plans, individual retirement accounts (IRAs),
and annuities. In some cases, contributions may be
made on a pretax basis or may be tax deductible. More
important, investment earnings compound tax deferred
until withdrawal, typically in retirement, when you may
be in a lower tax bracket. Contributions to nonqualified
annuities, Roth IRAs and Roth-style employersponsored
savings plans are not deductible. Earnings
that accumulate in Roth accounts may be withdrawn
tax free if you have had the account for at least five years
and meet the requirements for a qualified distribution.
Withdrawals prior to age 59½ from a qualified
retirement plan, IRA, Roth IRA or annuity may be
subject to ordinary income taxes and an additional
10% federal tax. In addition, early withdrawals from
annuities may be subject to additional charges by the
issuing insurance company.2
Note that, in general, annual withdrawals from
traditional IRAs and employer-sponsored retirement
plans must begin by April 1 of the year after you reach
age 70½. The penalty for not taking the required
minimum distribution (RMD) can be steep: 50% of
what you should have withdrawn. Withdrawals from
Roth IRAs, however, are not required during the owner’s
lifetime.
Consider Government and Municipal Bonds
Interest on U.S. government issues is subject to
federal taxes but is exempt from state taxes. Municipal
bond income is generally exempt from federal taxes,
and municipal bonds issued in-state may be free of
state and local taxes as well. Sold prior to maturity,
government and municipal bonds are subject to market
fluctuations and may be worth less than the original
cost upon redemption.
Look for Tax-Efficient Investments
Tax-managed or tax-efficient investment accounts
are managed in ways that can help reduce their taxable
distributions. Investment managers can potentially
minimize portfolio turnover, invest in stocks that
do not pay dividends and selectively sell stocks at a
loss to counterbalance taxable gains elsewhere in the
portfolio. Put Losses to Work You may be able to use
losses within your investment portfolio to help offset
realized gains. If your losses exceed your gains, you can
typically offset up to $3,000 per year of the difference
against ordinary income. Any remainder can be carried
forward to offset capital gains or income in future years.
Keep Good Records Maintain records of purchases,
Paul Celentano, Wealth Management Advisor/
Portfolio Manager
sales, distributions, and dividend reinvestments so that
you can properly calculate how much you paid for the
shares you own and choose the most preferential tax
treatment for shares you sell. Keeping an eye on how
taxes can affect your investments is one of the easiest
ways you can enhance your returns over time. As always,
if you have any questions or would like further insight,
don’t hesitate to reach out via phone at 516-634-1301
or by email at paul.celentano@owmanagement.com
Disclaimer 1 This information is general in nature and is not meant as tax advice. Always consult a qualified tax advisor for information as to how taxes may affect your particular situation. 2 Before investing,
investors should consider the investment objectives, risks, charges, and expenses of an annuity and its underlying investment options. Guarantees are based on the claims-paying ability of the issuer and do not apply
to a variable annuity’s separate account or its underlying benefits. Past performance is not a guarantee of future performance. All investing involves risk including loss of principal. No strategy assures success or
protects against loss. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All Performance referenced is historical
and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
At OWM we strive to empower our clients with
dynamic and objective strategies that help
them build, enhance and importantly protect
their wealth. We work to get our clients to think
outside the box, set clear goals, and have realistic
expectations.
• Concentrated Equity Strategies
• Stock option/Executive Compensation Planning
• Tactical Portfolio Management
• Fixed Income/Debt Securities Solutions
Dynamic
Strategies,
Objective
Advice
50 Merrick Rd. STE 202
Rockville Centre, NY 11570
516-634-1300 • www.owmanagement.com
Paul.Celentano@owmanagement.com
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buy or sell a security or to provide investment advice.
Advisory services are offered through LPL Financial, which is registered as an investment adviser with the SEC. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an
investment adviser does not constitute an endorsement of the firm by securities regulators nor does indicate that the adviser has attained a particular level of skill or ability. The firm is not engaged in the practice of law or accounting.
All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client’s investment portfolio. There
are also no assurances that an investor’s portfolio will match or outperform any particular benchmark. Asset allocation and diversification do not ensure or guarantee better performance and can not eliminate the risk of investment losses.
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