Taxes and Your Long-Term Planning

Video Transcript

Hi folks. Dave Piatkowski here with Dickinson Investments. I just want to talk briefly about short-term versus long-term planning. Typically during tax season, I meet with clients and if it’s shortly after their tax meeting with their CPA, in most cases they talk about how they got a larger refund or at least didn’t have to pay in as much because they made a Traditional IRA contribution – either individually or both spouses or whatever makes sense for their tax situation.

Everyone likes to feel good, and CPAs are there to help you on your specific tax return. But what we look at – and I specifically within our group doing the long-term financial planning in our software for people – is this: we try to focus on the big picture and the long term, not just that specific year’s tax return.

So in that line of thinking, here’s what we would like you to do as you have your taxes done, or if you have already had them done, you can always amend them. We’re not saying you have to do this not only this year but in years to come, but we recommend for you to please think about making a Roth IRA contribution instead of the Traditional IRA contribution if you’re eligible. Here are two main things to consider:

First, those contributions to a Roth IRA, they don’t help you during that tax year on your tax return. They don’t give you a bigger tax refund, and they don’t make you have to pay in less if you’re having to pay out. There’s no ramification for that year’s tax return. But thinking big picture and long term – which is what we’re all about – those funds you make for that contribution, whether they’re a partial contribution or a full year’s contribution, are going to forever grow not tax-deferred but tax-free.

Second, in addition to that, this money in a Roth IRA will not be subject to required minimum distributions, meaning after age 70 and a half, you will not be forced to take money out of that Roth IRA unless you choose to do so.

Additionally, those funds in a Roth IRA transfer on more tax favorably to the beneficiaries of the next generation.

There are many advantages to a Roth IRA. The only disadvantage really is that it doesn’t help you on this particular year’s tax return.

In our workaday, fast-paced world we’re in, everyone wants everything right now. Technology is changing all the time. Everyone seems to want that benefit right now and that’s understandable.

All we’re saying is when you sit down with us and we do long-term planning with you, we prefer to think long term and we wish that you would too. Thank you.


[Financial Planning and Investment Management Services offered through Dickinson Investment Advisors, Registered Investment Advisor.  Statistics and market information provided by Litman Gregory Advisor Intelligence.]

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