Team photo
Centuria Financial Group

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David P. McCabe,

WMCP®, ChFC®, CLU®

Financial Planner

david.mccabe@prudential.com

 

Nathaniel D. High, RICP®

Financial Planner

nathaniel.high@prudential.com

 

Nicholas J. Over, CFP®

Financial Planner

nicholas.over@prudential.com

 

Sara E. Martin

Client Relations Manager

sara.martin@prudential.com

 

Jennifer A. McCabe

Client Relations Specialist

jennifer.mccabe@prudential.com

 

Centuria Financial Group

2333 Baltimore Blvd Suite B

Finksburg, MD 21048

 

Phone:  443-952-7232

January/February 2022

Invest with Taxes in Mind

Invest with Taxes in Mind

There’s no getting around it: At some point, you’ll pay taxes on your investment earnings. While taxes alone should never drive your investment decisions, minimizing their impact is worthwhile.


What Goes Where
Holding tax-efficient investments in taxable accounts and taxable investments in tax-advantaged accounts is a useful strategy. Generally, when individual stocks, tax-managed stock funds and ETFs, dividend-paying stocks and mutual funds* are in a brokerage account, you’ll pay taxes annually on dividends and any realized investment gain.



Alternatively, assets invested in tax-advantaged accounts, such as 401(k) plans and traditional individual retirement accounts (IRAs),** taxes are deferred until you make withdrawals, when the money is taxed as ordinary income. Certain actively managed stock funds, taxable bond funds and REITs are also candidates for tax-deferred accounts.


Another Option
If you expect to be in a higher tax bracket in the future, converting a traditional IRA to a Roth IRA*** may be a good option. You’ll pay taxes on your savings in the year of the conversion, but all future earnings will be tax free once certain conditions are met. Consult your financial and tax professionals for guidance.


*Investors should consider the investment objectives, risks, charges, and expenses of the fund carefully before investing. Contact the issuing firm to obtain a prospectus which should be read carefully before investing or sending money. Because mutual fund values fluctuate, redeemed shares may be worth more or less than their original value. Past performance won’t guarantee future results. An investment in mutual funds may result in the loss of principal.


**Distributions from traditional IRAs and employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.


***Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax-free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Roth IRA distributions may be subject to state taxes.

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Centuria Financial Group is not affiliated with Prudential Financial. Centuria Financial Group sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Centuria Financial Group is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Centuria Financial Group and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Sara E. Martin and Jennifer McCabe are employed by David McCabe and not The Prudential Insurance Company of America or its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
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