Justin Hartman - Financial Planner

If early retirement is a goal of yours – pay close attention.

What comes to mind when you hear the term – diversification?

Most people think of diversification only in terms of investments:
▪️ Stocks vs. bonds
▪️ U.S. vs. international
▪️Growth vs. value

One area that’s often overlooked is tax diversification.

Why it matters:
We don’t know what future tax rates will be.
We don’t know what will pop up in retirement

But we do know that taxes can significantly impact how much you actually get to spend.

That’s why I view assets through three different tax buckets:
🟦 Taxable
(Brokerage accounts, savings)
– Flexible access, no contribution limits
– Capital gains and dividends may be taxed
🟧 Tax-deferred
(401(k), Traditional IRA)
– Tax break today
– Taxes owed later when withdrawals are taken
🟩 Tax-free
(Roth IRA, Roth 401(k))
– Taxes paid upfront
– Qualified withdrawals are tax-free

Having money spread across these buckets creates flexibility.

Flexibility means more control over taxes, income, and withdrawal strategy.

💠 Investment diversification helps manage market risk.
💠 Tax diversification helps manage tax risk.

Both are essential to building a plan that supports your long-term goals.

When was the last time you reviewed your portfolio? If you would like a complimentary review of yours, please reach out with the link below!

https://go.oncehub.com/JustinHartman

Investing is only part of the story—what you keep after taxes really matters. That’s why I feel it is necessary to spend so much time helping clients understand capital gains and build more tax-efficient portfolios that align with their withdrawal and income goals.

Today's question posed to Financial Planner Justin Hartman: What are capital gains, and how do they affect my taxes? 💰

Capital gains are essentially the profits you make from your initial investment. They can be broken down into two categories.

1. Short-Term (ST) Capital Gain – These apply to assets held 1 year or less. ST capital gains get a less favorable tax treatment. These are taxed at ordinary income rates.
2. Long-Term (LT) Capital Gain – These apply to assets held more than 1 year. LT capital gains get preferential tax treatment. These are taxed at either 0%, 15%, or 20%, depending on your income.

Some mutual funds will also kick out capital gain distributions at the end of the year. You can not directly control this, and it is typically an unnecessary tax. By investing in tax-efficient products and doing periodic tax-loss harvesting, you can make sure you are investing in the most tax-efficient way.

If you would like a free portfolio review, please reach out to Justin at [email protected]!