Create Financial Independence
Take control of your financial future. Download the road map and schedule a meeting with us and your CPA.
Wealth Accumulation For The High Income Investor
We understand how hard you have worked to become successful. You have spent years getting an education and learning the skills required for your career, in addition to working many long hours in your profession. Our mission is to help you gain greater control of your financial planning, investments, and taxes. We will help you improve your chances of creating a high net worth so you will not always have to work so hard.
It is a fact of life that everyone has a limited window of opportunity for peak earnings. Making a high income, you become accustomed to a certain standard of living and the pressure to maintain that standard is ever present. This can create its own kind of stress.
Stress For High Income
Individuals/Families May Include:
- You have a limited number of earning years.
- There are always multiple financial priorities competing for your income.
- Taxes gnaw away at your earnings.
- You are extremely busy and have no time for financial planning.
- You worry about unforeseen circumstances reducing your earning ability.
Are You Doing Everything In Your Power To Create Financial Independence For Your Future?
Financially you are doing well now, but there may be much more you can do to ensure that you will have the opportunity to continue enjoying the wealth you have accumulated.
There is a major difference between having high income and a high net worth. An individual or couple can earn a great deal of income and yet struggle to build a high net worth. We will help you build a high net worth, understanding that taxes are probably your highest expense if you make more than $200,000 per year. Your Leading Edge team works with your tax professional to help you deal with one of the largest expenses in your life.
Can You Answer The Following Three Questions With a YES?
- Do I have a written financial plan?
- Do I engage in annual tax planning?
- Do I structure my investments to create the largest after tax return possible?
Think about it…taxes are likely your largest expense! Income, earned and unearned, is the focus of taxation in America. When you earn a high income and you invest your dollars in a taxable account, you must hand over a much greater share of the income or profits from those investments to the IRS, and possibly the state, than someone who with a lower salary. In other words, due to the progressivity of our tax code, individuals with higher earned income may put the same dollars into an investment, but will receive a smaller portion of after tax returns than those individuals with a lower income. However, one can have a higher net worth and a lower income tax rate. Warren Buffett, one of America’s wealthiest individuals, was said to have a lower tax rate than his secretary since his income was derived from selling stock rather than from earning a salary.
At Leading Edge Financial Planning, we have a process to ensure that all of your accounts, investments, and financial plans will be reviewed with a full understanding of the high income client’s issues. We want to work with your CPA or other tax professional, as they are an extremely important part of this team.
Six Key Strategies
The first step is to understand which investments produce different types of income and how that income is taxed. We determine which investments are “tax preferenced” by law, and which investments get penalized with the highest tax rates. We will also consider the new 3.8% investment income tax, and state income taxes (such as Tennessee’s Hall tax), which penalizes investment income.
We will then decide if we want to put money in tax-deferred accounts, or keep money in taxable accounts. There are many tax-deferred accounts available, such as Traditional IRAs, Roth IRAs, 529 plans, and some new very low-cost variable annuities.
At the intersection of the types of income and the types of accounts is what we call “asset location”; this means putting “tax ugly assets” into tax deferred or tax free accounts and tax preferenced investments into taxable accounts.
We will ensure that low turnover strategies are being used in taxable accounts. You may own a fabulous mutual fund or ETF with a 30, 40, or even 50% turnover rate per year and still receive a decent return, but you will owe the government more tax. Passively managed index funds and ETFs make much more sense in taxable accounts.
We may consider certain tax preferenced investments such as master limited partnerships, non-traded REITS, municipal bonds, and rental real estate, where income is offset by the tax depreciation shield.
Charitable contributions will be leveraged by determining the best way to give so that you will get the greatest deduction while allowing the charity to receive a larger donation at the same time.
Your Successful Future
Financial planning is all about controlling the items in our lives that can be controlled; how much we save, how we diversify our portfolios, and how we set up our affairs to best minimize current and future taxation. There are reasons you are so successful with your income, and these very same reasons may leave you feeling overworked and starved for time. Understandably, you may not feel like planning consistently. We can assist you in this process.
Take control of your financial future. Download the white paper. Schedule a meeting with us and your CPA.