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Tax planning is an indispensable element for C-suite executives who play pivotal roles in steering the directions of their respective companies. Leadership, strategy formulation, and team management demands often relegate tax planning to the background. However, efficient tax planning is crucial, as it helps minimize tax liability and optimize wealth. 

Understanding tax brackets is vital for C-suite executives. They impact wealth accumulation and preservation strategies. Efficiently utilizing tax deductions and credits becomes a significant factor in reducing taxable income and maximizing savings.

Moreover, giving due consideration to tax-advantaged retirement accounts not only assists in safeguarding one’s financial future but offers current tax relief. Capital gains tax planning, too, plays a crucial role, allowing executives to manage investment sales in a manner that can mitigate tax liabilities. Lastly, engaging with financial advisors is pivotal, ensuring executives navigate the intricate landscape of taxation with informed, strategic decisions that uphold and enhance their financial standing.

Taxes Are a Liability 

Leadership figures in the C-suite must thoroughly understand their respective tax brackets. This plays a pivotal role in making financially savvy decisions. Being in a higher tax bracket correlates with a more significant tax burden. Possessing in-depth insights into these brackets facilitates strategic choices, such as income deferral to a subsequent tax year, potentially minimizing tax obligations when a lower bracket is applicable.

Additionally, executives stand to gain substantially by identifying and taking advantage of appropriate tax deductions and credits. This encompasses deductions on business-associated expenses—like traveling, dining, entertainment, and home office expenditures—and applying credits for earned income and child tax. Proactively managing these deductions and credits allows executives to lower their taxable income, securing notable tax savings.

Strategic Planning and Consultation

Beyond understanding, strategic planning around tax-advantaged retirement accounts and capital gains taxes is pivotal. Contributing to tax-advantaged retirement accounts like 401(k)s and IRAs can reduce current taxable income. They also allow contributions to grow— tax-deferred—until retirement. Planning for capital gains tax is also essential when selling assets like stocks, bonds, or real estate.

Engagement with qualified tax advisors is equally crucial. Advisors can provide valuable insights into structuring executive compensations efficiently, estate planning to ensure assets are transferred according to one’s wishes while minimizing tax liabilities, and guiding charitable giving in a fulfilling and tax-efficient manner.

For C-suite executives, diligent tax planning is not just a necessity but an integral part of intelligent wealth management and preservation. It is the foundation upon which sustainable financial growth and stability are built. It allows executives to navigate the multifaceted world of taxes efficiently and effectively.

Worth Advisors, LLC

Worth Advisors, LLC, located in Charlotte, North Carolina, provides individualized financial planning services, focusing on each client’s unique needs and goals. We offer various services, including tax planning, investment management, retirement planning, and estate planning. Our approach is client-centric, contacting clients yearly to ensure optimal service delivery and helping clients and the community create sustainable wealth for generations.

If you are a C-suite executive looking for individualized, high-touch financial and tax planning advice to optimize your wealth, consider scheduling a consultation with Worth Advisors, LLC today. Discover how tailored financial planning can help you accumulate wealth and preserve the future.

Disclaimer: Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, which, when sold, may be worth less or more than their original cost.

The world of finance and wealth management is vast and intricate. Yet, at its core lies a universal truth: genuine prosperity is about being prepared for the future, embracing long-term planning, and leaving behind a legacy. This art of crafting enduring wealth extends beyond fleeting means—it encapsulates values, education, foresight, and an innate understanding of the ever-changing financial landscape. Although we accept that wealth management can be overwhelming, remember that this is why firms like ours exist. Worth Advisors remains committed to supporting and guiding you with your financial goals. 

Foundations of Enduring Wealth

Understanding what we mean when using terms such as sustainable wealth requires you to look beyond the amount of money you have in the bank. Wealth isn’t just about the numbers; it’s about the strategic orchestration of those numbers over time. This strategy isn’t isolated to the accumulation phase but extends across growth, management, preservation, and the eventual, often overlooked, transition to the next generation. 

That isn’t to say that savings are not essential but one component of the equation. The power of compound interest can work toward your benefit, especially if you are wise enough to begin putting money aside early and turning even the most modest savings into substantial sums if given adequate time. Yet, while saving remains foundational, the landscape of investments is equally vital. Diversifying one’s investment portfolio is not merely a best practice; it’s a shield against the unpredictabilities of financial markets. It’s about not putting all one’s eggs in a singular basket but ensuring that resources are spread across various avenues like stocks, bonds, real estate, and emerging sectors.

The Nuances of Generational Wealth Creation

One such nuance is the discipline of spending prudently. In an age of consumerism, the ability to discern needs from wants can set the stage for accumulating more substantial savings. Every dollar saved is a dollar available for investment. Although we help our clients with investing, it is equally important to have an established budget. Some say they don’t have enough money to have a financial advisor. The irony is that these people need one, and we are privileged to serve them. Budgeting, or having a cash flow plan, is essential. It may be the first step toward amassing financial wealth. 

We will assist you with knowledge and education, which are also part of the overall picture. The ability to understand financial terminologies, market trends, and investment opportunities can empower individuals to make informed decisions. Worth Advisors, LLC recognizes this and emphasizes the importance of not just guiding but educating our clients. 

Lastly, shift your perspective. You don’t need to time the market to accumulate wealth. We have published blogs that speak directly against this strategy. Accept that this is a long-term venture. The world of finance can often be turbulent, with market fluctuations and economic downturns. Yet, a long-term vision and resilience can weather these storms, ensuring consistent growth over time.

Leaving a Legacy: Beyond Immediate Gains

This is wider reaching than monetary returns; it is a broader vision encompassing positive environmental and societal impacts. As individuals traverse their financial journey, they must recognize their wealth’s power—not just for personal gains but in crafting a better, more sustainable world for future generations. Many people simply want their children to have a better life than them, and that is a worthy goal. It’s why creating enough wealth to pass down isn’t rooted in greed or selfishness. 

And as this journey evolves, the emphasis shifts from wealth creation to wealth transition. Ensuring that the next generation is equipped with the assets and the wisdom to manage those assets becomes paramount.

Embarking on the Journey with Worth Advisors, LLC

With Worth Advisors, LLC, our clients aren’t accessing a single service; they are entering into a partnership. Worth Advisors, LLC is here to serve you and help you achieve your financial goals—whether it is taking a step toward investing, asking for assistance with your taxes, or establishing a budget. Let us be your greatest ally. Schedule a consultation, and together, let’s craft a narrative of wealth, wisdom, and legacy.

Disclaimer: Always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any rates of return are historical or hypothetical in nature and are not a guarantee of future returns, which may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions and security positions, when sold, may be worth less or more than their original cost.

Those who have chosen to work with Worth Advisors, LLC understand the answer to the title’s questions. To better understand what we are talking about, consider the following choice: You meet with a team of financial advisors who guarantee that if you invest with them, they will get you a 12% return. Before you commit to anything, you hear about another team, say Worth Advisors, LLC, who have earned their past clients a 10% return on their investment. What decision are you inclined to make?

Even though we used ourselves as people who will generate a smaller return, most people will read the previous hypothetical question and answer that the only obvious answer is to go with the more considerable return. If you arrive at the same conclusion, you are not alone. People are inclined to go with the 12% because they assume it is the best way to accumulate wealth. However, they aren’t seeing the whole picture. 

Let Us Explain

Investing is merely one component of the overall whole. Even if another firm can generate a more significant return, it may not be able to increase your wealth in the way that Worth Advisors, LLC can. Look at it another way: Would you rather get a 12% return on your investment or save $400,000? When you look at it that way, the answer is more apparent. And it is also the mindset that our financial advisors have adopted. 

Net worth is your most important metric. The person who jumped at the 12% over the 10% return doesn’t realize there are several ways to increase your net worth significantly. There are ways to save money in every facet of your life, extending well beyond investing. It equates to how you have financed your home and how much you can save in taxes, estate planning, and accountability. We look at all these elements, which are unique to the client, and find ways they can increase their net worth. Though it may not sound as fancy or lucrative as investing (which we will assist you with), you can save money simply by choosing the right credit card type. If you and your family decide to enhance your life by traveling, finding an appropriate credit card with travel rewards could save you tens of thousands of dollars a year. 

Look at the Larger Picture

Most people will elaborate on the safety of diversifying your portfolio, but you also must consider expanding how you build overall wealth. Our advisors look at the entirety of your life and the goals you have set and work with you in myriad ways. 

• Budgeting & saving
• Investing over the long term rather than “timing the market.”
• Increasing your income 
• Reducing debt 
• Owning real estate as part of a reliable investment strategy
• Finding ways to maximize your retirement contributions
• Helping you shape and build the business you want to begin

Increase Your Net Worth
Getting the most out of your investments is only one of the ways we assist our clients. Getting a 12% return on your investment may be eradicated if you pay more taxes than you should. This is why you should speak with Sherise Jones, a CPA who assists clients with minimizing their tax burden—which is likely your largest liability. We aim to empower you to make better, wiser, and more effective financial decisions. By working with us, find new and innovative ways to increase your net worth. Contact our office today and set up a consultation.

One of our core beliefs is that everyone should have access to a financial advisor who meets them where they are. Anyone who has visited our website and viewed our two investment approaches will see how there is an appropriate strategy for them, regardless of their current assets and liabilities. These two approaches encapsulate our range of services because the first one—the Core Satellite Portfolio—has a minimum investment of $500,000. This is a significant amount of money, but that is no reason to be deterred from investing. The Model ETF Portfolio shows how different strategies can be applied to meet people’s current financial position. Those living primarily on a fixed income and with relatively low equity can still benefit from a low-risk, low-reward investment model. On the opposite side, there are higher-risk, higher-return strategies. 

Three factors play into where you land on this spectrum:

• Tactical asset allocation
• Strategic asset allocation
• Dynamic asset allocation

These terms can be applied to households and discussed in a business context. Tactical assets are used primarily for day-to-day activities. Strategic assets are used for long-term planning. Dynamic assets can be used on demand for sudden needs or opportunities. For most people, tactical assets could be groceries, strategic assets can be your physical home, and your dynamic assets can be used to add an addition to your home as your family grows. Depending on the home or business, these terms will be applied differently, but that is the general concept. 

How ETFs Factor In

Though our two investment approaches differ, ETFs are common to both. These are a type of investment that is traded on stock exchanges. They are similar to individual stocks and mutual funds but also have key differences. Like a mutual fund, they track a specific index such as the S&P 500 or NASDAQ. However, it is extremely important to highlight that an ETF can be traded like an individual stock on an exchange, which is something you cannot do with a mutual fund. 

That is also why people may pursue an EFT over a mutual fund. Because EFTs can be traded, this gives them an additional layer of flexibility and is considered more of a liquid investment option when compared to a traditional mutual fund. Additionally, having lower expense ratios than mutual funds makes them a desirable investment option for various people with varying assets and liabilities. 

Choose to Work Alongside a Financial AdvisorSome people may choose a mutual fund because it is relatively hands-off. You can put money into a basic mutual fund, which can be an excellent vehicle for long-term growth. However, due to how they are traded in real-time, you can work with an investor who can take advantage of opportunities and adjust their portfolios as required. Still, they are relatively easy to use, have low costs, and are liquid assets. If you have additional questions about our investment strategies or ETFs, contact Worth Advisors, LLC, to discuss the right path for you.

People in their early twenties are quick to dismiss planning for the future because they have ample time to do so in the future. Typically, this can be witnessed by their lack of estate and retirement planning. However, when someone gets older and realizes the importance of having both, they may contact an estate planning attorney and a financial advisor. After they have created an estate plan, they may have a will, a trust, or both. When these documents are in place, they are covered in the event of incapacity or death. Though they waited to establish their estate plan, they still reap the benefits of their efforts. 

The same cannot be said for retirement planning. Anyone with experience with it will explain that young people have the massive advantage of time. Financial planners and your friends and family will tell you to make your money work for you and use compound interest to your advantage. Our purpose today is to explain these expressions and how accurate they are. 

The Importance of Compounding Interest 

Before we show you how vital compound interest is, we will address one of the most common reasons why many young people avoid creating a retirement plan: They don’t have enough money. There are too many bills, and any money that comes in goes out just as quickly. As a young person, you are less likely to have a family and a mortgage. You won’t have many liabilities besides your student loans and car payments. Although we understand that the pressure of paying your bills and building your assets is essential, don’t overlook the gift of time. 

Whatever you do have, put it toward your retirement. To show you how feasible this is, we will use the following numbers:

• $500
• $50
• 5%

The first number ($500) is your initial investment. It’s likely slightly higher than your car payment (hopefully). Our point still stands even if you can’t afford to invest $500 right now. The next number ($50) is your monthly contribution. You can get an extra $50 simply by eating out one less time a month. When you see what this $50 can do for you, you will quickly see that the benefits significantly outweigh your sacrifices. The last number (5%) is your annual interest rate. (A typical 401(k) usually has a 5-8% return.) If you put in $500 initially and contribute only $50 a month at a rate of 5%, how much money will you have in 45 years? $100,312.60. (At 8%, the amount jumps to $247,863.60!)

Begin Planning Alongside Worth Advisors, LLC
Get started today. Our financial advisors will meet you where you are because we believe that our services are for everyone, regardless of your assets and liabilities. Tomorrow can be better than today, and we want to help guide you. Use the time to your advantage and begin for the future. Contact our office to schedule a meeting with one of the experienced and compassionate financial advisors committed to serving you.

After spending time with our firm or our advisors, you will discover that we believe investing is for everyone. You may have even looked through our website and watched our videos. Though you may agree with our message and advice regarding long-term investments, you may be quick to point out that you don’t have the money to do so. You’re juggling a mortgage, student loans, and even the dreaded credit card debt. After you factor in utilities, car payments, and cell phone bills, there’s nothing left for retirement. 

You Can Still Make Progress

One of the things Glen Wright, our CEO, advocates is that you should pay yourself first. The idea behind this is that you should never spend all your money. Whatever item you want, it’s not more important than having twelve months of living expenses. Two of those twelve can be in the bank, and the rest should be invested. 

What if you don’t even have that? Can you still invest? Yes, and you can do so by having multiple goals. For instance, you work on paying your debts, building your emergency savings, and putting money aside for retirement. Is it going to be a lot? No, but it is better than what you are doing right now. Secondly, not all debts are created equal, and you need to tackle the ones with the highest interest rates, i.e., your credit cards. 

Remember the rule of 72. If the interest rate on your credit card is 20%, divide it by 72. If you do that, you will come up with 3.6. That’s how many years it will take for your credit card debt to double. Get your credit card debt down to zero while making small but incremental deposits to your retirement and savings accounts. 

The Benefits of Debt Stacking

Let’s pretend that you put $100 toward your credit card bill, retirement account, and savings ($300 in total). If you are disciplined enough to avoid using your card, you will eventually pay it off. When you do, you now have an extra $100. Instead of treating this as additional spending money, pay yourself first! Now, you can put more money into your retirement and savings. After you have 12 months of living expenses, that money can be parlayed into retirement. 

Remember that paying off your debts is critical, but it should not eliminate your need to invest for your retirement and future. Compounding interest benefits those who start investing at a young age. Even though you may feel like you are doing the right thing by focusing entirely on your debts, you may be doing yourself and your future self a disservice. 
Regardless of your financial position or concerns, everyone can benefit from investing. You aren’t in this alone, and our qualified team of financial advisors is here to support you and your financial goals. If you’re ready to get started, then we are too. Contact Worth Advisors, LLC, to schedule a time to meet us.

A SUCCESSFUL RENTAL PROPERTY INVESTMENT

Nicolas Deboeuf, CFP^®

Financial Planner

Worth Advisors

If you are looking to achieve financial freedom, there’s a good chance that you have considered buying an investment property. After all, owning an income-producing asset that appreciates over time seems like a good vehicle to build wealth and a fun way to learn valuable skills.

While this is true, it is far too common to hear people say that things did not go as planned. In this article I provide a short overview of things to keep in mind when considering getting into real estate.

An investment property is not for everyone.

You will need time and a solid financial foundation to get started. Whether it is looking for contractors, tracking expenses, filing taxes, dealing with tenants or unexpected repairs, your investment property will keep you busy too often at a time that is not convenient. Hiring a property management company can save you some time but will come at a cost.

In addition to finding time, you will also need a strong financial foundation. Replacing a central air conditioner, fixing a leaking roof, could cost you thousands of dollars. Not being able to make mortgage payments because your tenant does not pay the rent could have dire consequences. We recommend having at least 12 months’ worth of living expenses in liquid assets, after making the down payment.

You will also want to have a good credit score (720+) to secure a low interest loan. A $300,000, 30-year term loan with a 4% interest rate will cost you $215,607 in interest over the term of the loan. In comparison, that same loan with a 6% interest rate will cost you $347,515 in interest, 61% more (1).

Looking for your first property.

Just like any investment, there are good and bad apples. We recommend focusing on finding a place that meets the following criteria:

• Located in a currently growing area
• Low maintenance
• Good overall condition
• Attractive household amenities
• Low gross rent multiplier relative to other properties (see below)

A large backyard, a high-end kitchen or a pool can be attractive, but remember that you are not looking for your dream home. The end goal is to make a profit, stick to the numbers and do not let your emotions cloud your real estate judgment.

The cash flow vs. capital appreciation dilemma.

Understanding how your investment will make you money is key. 

The main way a rental property can make money is through cash flow. It is the difference between the rent collected and all operating expenses. That form of income is very important because it is liquid, meaning it is readily available, can be reinvested or used to cover upcoming expenses. 

Another way to make money is through capital appreciation, a rise in your investment’s market price.    While home prices have skyrocketed in recent years, they have historically appreciated at a rate of 5.3% per year over the past 20 years (2)

First-time investors and investors with a relatively low cash reserve should stick with properties that offer positive cash flow at the end of the month, rather than speculate on high projected appreciation properties. 

Crunching the numbers

The Gross Rate Multiplier (GRM) functions as the ratio of the property’s market value over its annual gross rental income. While you should not rely solely on that ratio, it is a quick and simple way to compare and screen properties. A lower value is best. 

The Net Operating Income (NOI) is a calculation used to analyze the profitability of income-generating investment. The formula is straightforward, subtract all operating expenses from gross operating income.

Do not forget about taxes.

You are responsible for reporting rental income to the IRS, even if it is paid in cash. A tax specialist can help you reduce your income tax liability by taking the appropriate deductions, such as interest, property taxes, depreciation, travel expenses, advertising, utilities for instance, etc. Tracking your expenses will be key.

You will also be responsible to report capital gains at the disposition of the property. Failing to do so could lead to large tax penalties from the IRS. Once again, your tax specialist will be able to give you options to minimize or defer capital gains tax. A 1031 exchange for instance, will let you swap your investment property for another “like-kind” property without recognizing a gain. 

Playing the Long Game.

Finally, you will have to play the long game. Sellers must pay their own closing costs and those costs can add up to 8% –10% (3) of your home’s final sales price. You will incur closing costs at the time you decide to sell the property. If your home sells for $300,000, then, you can expect to pay from $24,000 – $30,000 in closing costs.

We highly recommend discussing this with your advisor prior to making any financial decisions. 

References

1 – https://www.zillow.com/mortgage-calculator/

2 – https://www.ceicdata.com/en/indicator/united-states/house-prices-growth 

3 – https://www.rocketmortgage.com/learn/closing-costs-for-seller