Tax Management


The Need for Tax Management


History has shown that taxes can have a significant effect on clients’ efforts to reach their savings goals.

  • $1 invested in stocks in 1926 would have grown to almost $5,400 by 2016, an average annual return of about 10%
  • Add taxes to the equation, and that same dollar would have been worth just over $1,000, an average annual return of 8.0%
Returns Before and After Taxes

Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $110,000 in 2010 dollars every year. This annual income is adjusted using the Consumer Price Index in order to obtain the corresponding income level for each year. Income is taxed at the appropriate federal income tax rate as it occurs. When realized, capital gains are calculated assuming the appropriate capital gains rates. The holding period for capital gains tax calculation is assumed to be five years for stocks, while government bonds are held until replaced in the index. No capital gains taxes on municipal bonds are assumed. No state income taxes are included. Stocks in this example are represented by the Standard & Poor’s 90 index from 1926 through February 1957 and the S&P 500® index thereafter, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. Government bonds are represented by the 20-year U.S. government bond, and inflation by the Consumer Price Index. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for transaction costs. © 2017 Morningstar. All Rights Reserved. March 1, 2017. Used with permission.


Where Clients Retire Makes a Difference


Knowing how taxes and the cost of living will impact you by state can help you better prepare and save for retirement.

Top 5: Highest Cost of Living in the United States

Managing taxes can be a particularly important goal if your clients plan to retire in an area that is less tax-friendly. Knowing how taxes and the cost of living will impact your clients by state can help them better prepare and save for retirement.


States with the Highest Cost of Living in 2020

  1. Hawaii
  2. District of Columbia
  3. New York
  4. California
  5. Oregon
Source for taxes:—The 2020 Tax Resource. Map shows highest tax bracket. It represents the statutory tax rate on the last dollar of income earned for the highest-income individuals in the state. This is not an effective marginal tax rate. Local income taxes not included. Top tax friendly (<1%), Tax friendly (1%–5%), Less tax friendly (5.1%–8%), Not tax friendly (>8%).
Source for cost of living: Missouri Economic Research and Information Center. Cost of Living Data Series First Quarter 2020.
Tax-Management Topics
For Use With Clients

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The Retirement Strategies Group, subject-matter specialists with advanced degrees and designations such as CFA®, CFP®, ChFC®, CLU®, and JD, are ready to help.

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