Why Investment and Tax Advice Must Work Together
Written by Mark Sipos, LFG Tax Director
One of the most common breakdowns in financial planning happens quietly when investment strategy and tax strategy operate in silos.
You can receive solid advice from both your financial advisor and your tax professional. However, if those two sides are not coordinated, the outcome is often far less efficient than many people realize.
True planning happens when investments and taxes are aligned in real time, not after the fact.
Tax-Loss Harvesting: Simple in Theory, Complex in Practice
Take tax-loss harvesting as an example. On paper, it sounds straightforward. Realize losses to offset gains. In practice, execution and timing matter greatly.
If investment trades are not coordinated with the broader tax plan, you can inadvertently trigger wash sales, mistime losses, or generate deductions that do not get fully utilized. What appears to be a tax-saving strategy can lose much of its benefit without proper coordination.
Roth Conversions and Income Planning
Roth conversions are another area where integration is critical. Deciding how much income to recognize in a given year affects more than just the current tax bill. It influences portfolio positioning, capital gains exposure, Medicare premiums, and overall risk management.
If tax planning and investment management are not aligned, it is possible to unintentionally push someone into a higher tax bracket or create avoidable tax consequences. The strategy may be sound in isolation but suboptimal when viewed within the context of the entire financial picture.
Net Unrealized Appreciation (NUA): A Timing-Sensitive Opportunity
Net Unrealized Appreciation, or NUA, strategies inside employer retirement plans are particularly sensitive to timing.
If the tax advisor is not involved before a distribution takes place, or if the investment side does not fully understand the tax rules, the opportunity is typically lost. Once lost, it cannot be corrected.
In some cases, a missed NUA opportunity can significantly increase the amount of taxes paid over time and potentially double the tax burden on highly appreciated employer stock held inside a retirement plan.
This is not a strategy that can be fixed retroactively. It requires foresight and coordination.
Integration Reduces Risk and Stress
Effective planning is not just about knowing tax rules or selecting investments. It is about ensuring that decisions are coordinated, communicated, and executed together.
When advice is integrated, the overall strategy tends to be clearer. Opportunities are less likely to be missed, and tax outcomes are more predictable.
Financial planning works best when investments and taxes are part of the same conversation rather than separate ones.
If you are unsure whether your advisors are truly working together, or if you would like a second opinion on how your tax strategy and investment plan fit into your broader financial goals, we would be glad to provide a thoughtful review.
Coordinated advice often makes a meaningful difference, not only in numbers but also in confidence.
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