1. Tax Control Triangle After Tax After Tax Before Tax
Tax Exempt Bonds/Funds
Education Savings Accounts
Life Insurance
Roth IRA
Roth Accounts in Qualified Plans
Potentially Tax-Free
Real Estate
Mutual Funds
Annuities
CDs
Money Markets
Qualified Plans
401(k)
TSA
IRA/SEP
Goal: Money with tax control
One of the things I do as your financial planner is look at where you are saving your money for retirement. I do this in order to plan how you the client are going to draw that money out when you retire.
Lower right-side circle of the triangle:
There are three places we save money. First we can save money in pre-tax investments. This is usually money our employer withholds from our paycheck before taxes or dollars that gets deducted from our annual taxable income. Some examples of this are the 401(k) plan, 403(b) plan or TSA, IRA and SEP IRA. We don’t pay the taxes on these dollars today, expecting to pay tax at the same or lower rate when we get to retirement. However, if we need to access this money prior to age 59 and ½, tax penalties may be incurred.
(Moving to the Lower left side circle of the triangle.)
Next we can save money in an after-tax environment. This is money we take home in our paycheck and can be saved in a number of places such as checking accounts, savings, CDs, Stocks, Bonds, Mutual Funds, Annuities. One advantage we can have in this area is that some of these investments have special tax treatment. Instead of having to pay your ordinary income tax rate (%), you could only have to pay a capital gains rate. The maximum capital gains rate is currently 20%. With annuities, there can again be a tax penalty for accessing funds early.
Top circle of the triangle:
The third place we can save money is in an after-tax environment where we can take advantage of potential tax-free growth on our money. These include Roth IRA and municipal bond investments. While these areas are potentially tax-free, some can impact taxation of social security benefits or have alternative minimum tax consequences. Of course, the primary reason to purchase a life insurance policy is for the death benefit. However, the potential cash value of a life insurance policy accumulates on a tax-deferred basis and can be used to supplement your income needs. Withdrawals and loans will reduce policy values and the death benefit and may have tax consequences.
What I try to do as your financial planner is to make sure you have balance in this tax control picture. What many of my clients find is that they have done a great job saving, but their planning for taxes had been poor.
What do you think taxes will do in the future, increase or decrease? It is very likely that taxes will both increase and decrease. The key to being prepared for future taxes is having the ability to respond to changes. By having money saved in all three areas, we can choose to draw from the most tax beneficial area in retirement.  Is this a strategy you would like to see applied to your situation?
Please keep in mind that the use of a financial planner does not replace the need for a CPA [tax adviser] or an attorney.
Taxable
After Tax
Before Tax

2. One of the things I do as your financial planner is look at where you are saving your money for retirement. I do this in order to plan how you the client are going to draw that money out when you retire.
Lower right-side circle of the triangle:
There are three places we save money. First we can save money in pre-tax investments. This is usually money our employer withholds from our paycheck before taxes or dollars that gets deducted from our annual taxable income. Some examples of this are the 401(k) plan, 403(b) plan or TSA, IRA and SEP IRA. We don’t pay the taxes on these dollars today, expecting to pay tax at the same or lower rate when we get to retirement. However, if we need to access this money prior to age 59 and ½, tax penalties may be incurred.
(Moving to the Lower left side circle of the triangle.)
Next we can save money in an after-tax environment. This is money we take home in our paycheck and can be saved in a number of places such as checking accounts, savings, CDs, Stocks, Bonds, Mutual Funds, Annuities. One advantage we can have in this area is that some of these investments have special tax treatment. Instead of having to pay your ordinary income tax rate (%), you could only have to pay a capital gains rate. The maximum capital gains rate is currently 20%. With annuities, there can again be a tax penalty for accessing funds early.
Top circle of the triangle:
The third place we can save money is in an after-tax environment where we can take advantage of potential tax-free growth on our money. These include Roth IRA and municipal bond investments. While these areas are potentially tax-free, some can impact taxation of social security benefits or have alternative minimum tax consequences. Of course, the primary reason to purchase a life insurance policy is for the death benefit. However, the potential cash value of a life insurance policy accumulates on a tax-deferred basis and can be used to supplement your income needs. Withdrawals and loans will reduce policy values and the death benefit and may have tax consequences.
What I try to do as your financial planner is to make sure you have balance in this tax control picture. What many of my clients find is that they have done a great job saving, but their planning for taxes had been poor.
What do you think taxes will do in the future, increase or decrease? It is very likely that taxes will both increase and decrease. The key to being prepared for future taxes is having the ability to respond to changes. By having money saved in all three areas, we can choose to draw from the most tax beneficial area in retirement.  Is this a strategy you would like to see applied to your situation?
Please keep in mind that the use of a financial planner does not replace the need for a CPA [tax adviser] or an attorney because we do not give tax or legal advice..
Offering financial planning and investment advisory services through Pruco Securities, LLC (Pruco), doing business as Prudential Financial Planning Services (PFPS), pursuant to separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies.