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Bradford Financial Center, a national wealth management company, delivers a financial advisor's simple approach to making small changes that can result in big results for your financial future. From budgeting, tax planning, and saving for retirement to college planning, smarter insurance solutions, and building wealth, the practical advice is easy to apply for investors at any level.
All episodes include a "Five in Five" segment where we break down quick-hit financial trends for their listeners.
Shallon:
Welcome back to the Your Wealth Journey podcast, produced by Bradford Financial Center. I’m
Shallon Weis, a financial advisor with Bradford.
With offices in Clarion and Garner, Iowa, we’re proud to serve the heart of America and help
people make confident, informed financial decisions.
Jim:
And I’m Jim Tausz, president of Bradford, with over 50 years of financial planning experience.
We’re so glad you’re with us today to join in on the conversation…it’s all about how to invest
smarter by understanding how taxes affect your returns.
Shallon:
That’s right. Whether you’re just starting out or already deep into your investment journey,
understanding how taxes influence your portfolio can make a huge difference over time.
Jim:
Because it’s not just about what you earn…it’s about what you keep.
Part 1: Why Tax-Smart Investing Matters
Shallon:
Let’s start with why this topic matters so much. Don’t you think every investor, regardless of
income, can benefit from reducing their tax drag? “Tax drag,” for our listener, is the portion of
your returns lost to taxes each year.
Jim:
I do think that! It’s like considering two investors who are earning the same return, but one pays
more in taxes because of where and how they invest. Over 10 or 20 years, that difference can
add up to tens of thousands of dollars.
Shallon:
We should be clear, the goal isn’t to avoid taxes…it’s to plan wisely. By using different account
types, timing your withdrawals, and understanding which investments belong where, you can
create a more efficient portfolio. So let’s dive into matching your investments to your tax bracket.
Part 2: Matching Investments to Tax Brackets
Jim:
Ok, this is about how planning happens across income levels. For those in lower or middle-
income brackets, using Roth accounts can be a big advantage. You pay taxes now, while your
rate is lower, and enjoy tax-free withdrawals later.
Shallon:
On the other hand, if you’re in a higher bracket today, you might favor traditional retirement
accounts (like a 401(k) or traditional IRA) to defer taxes until you retire, when your income may
be lower.
Jim:
Yes, this is where you’re matching your investment strategy to your tax reality. The right mix of
taxable, tax-deferred, and tax-free accounts gives you flexibility later when drawing income in
retirement.
Part 3: Everyday Strategies for Reducing Tax Liability
Shallon:
Let’s get practical and give our listeners a few ways people can start building tax efficiency into
their investments.
Jim:
Sure…first, let’s talk about asset location. That’s just a fancy way of saying where you hold
certain investments. Not all accounts are taxed the same, so being intentional about what you
put in each can really improve your after-tax returns. For example, tax-inefficient investments
such as bonds, REITs, or mutual funds that trade frequently …they are going to tend to
generate regular income or capital gains each year. Well, now that income is taxed as it’s
earned, which can create a higher annual tax bill if you hold them in a regular brokerage
account.
Shallon:
I love that, asset location is like organizing your toolbox. Some tools belong in one drawer,
others in another, depending on how you use them.
Jim:
Right, but if you keep those same types of investments inside a tax-deferred account, like your
401(k), traditional IRA, or SEP IRA…if you’re self-employed, you don’t pay taxes on that income
every year. Instead, your money grows tax-deferred until you withdraw it in retirement. That
means you can reinvest the earnings along the way and potentially grow your balance faster.
Shallon:
That’s a great point. On the flip side, tax-efficient investments like index funds, ETFs, or stocks
you plan to hold long-term are better suited for taxable accounts. They don’t produce as much
taxable income each year, and when you eventually sell, you’re likely paying long-term capital
gains tax, which is typically lower than ordinary income tax rates.
So, asset location doesn’t change what you invest in; it just helps you decide where to hold
those investments for the best tax outcome.
A smart move is when your financial plan gets big enough that you have a mix of accounts,
such as a 401(k), Roth IRA, and brokerage account, you should review it with your advisor
every few years to make sure each piece of your portfolio is sitting in the right “home” so to
speak, for tax efficiency.
Ok, next, let’s talk about capital gains. Because this is an area where a little planning can go a
long way in reducing your tax bill.
Jim:
Right. Just to define this for the listener…Capital gains are the profits you make when you sell
an investment for more than you paid for it.
The key difference comes down to timing. If you sell an investment you’ve held for less than a
year, that profit is taxed as ordinary income, which can be a much higher rate. If you hold it for
more than a year, it qualifies for long-term capital gains treatment, which usually means a lower
tax rate.
Shallon:
So what’s important here is - let’s say you’re planning to sell an investment that’s performed well
- you should check when you bought it. Because waiting just a few more weeks to cross that
one-year mark could make a noticeable difference in what you owe.
Jim:
Yes, and here’s an example. Let’s say you invested in a stock 10 months ago for $5,000 and
today it’s worth $7,000. If you sell it now, less than a year later, that $2,000 gain could be taxed
at your regular income rate. If you wait until after the one-year mark, it might be taxed at a long-
term capital gains rate, which could be quite a bit lower depending on your income level. This is
a small example, but consider this on larger investments and larger gains - it’s going to make a
difference on your taxes for sure.
Shallon:
Another important strategy is how you manage gains and losses together. If you sold one
investment for a profit and another at a loss, you can use that loss to offset the gain. This is
called tax-loss harvesting, and it can be a useful strategy to keep your overall tax bill in check.
Jim:
This is where having a relationship with a tax advisor and a financial planner working together is
so important. They are going to work hand in hand, and they’ll also advise you on the IRS rules.
In this example, Shallon mentioned, your financial team is going to know about the wash-sale
rule that says you can’t sell a stock, take the loss, and then immediately buy it back within 30
days. I’m repeating this important point - consult your financial team on these moves to protect
yourself and your tax strategies.
Another powerful tool for managing taxes while doing some good in the world is charitable
giving. It is one of those strategies that can benefit both your community and your tax situation.
Shallon:
Exactly. There are many ways to approach charitable giving, and it does not have to be
complicated or only for large estates. Even modest, consistent giving can make a meaningful
difference when you plan it wisely.
Let’s start with one of the simplest methods: donating appreciated stock instead of cash. If you
have an investment that has grown in value, you can gift those shares directly to a qualified
charity. You get credit for the full market value as a charitable deduction, and you avoid paying
capital gains tax on the appreciation.
Jim:
Here’s a quick example. Suppose you bought stock for $2,000 a few years ago, and now it is
worth $5,000. If you sell it first and then donate the cash, you might owe capital gains tax on
that $3,000 profit. But if you transfer the shares directly to a charity, you skip that tax and still
receive the charitable deduction. That is a win for you and the organization you are supporting.
Shallon:
Another option is to give through a donor-advised fund, or DAF. It is like setting up your own
mini-foundation. You can contribute money or investments when it makes the most sense for
your tax year, and then recommend grants to your favorite charities over time. This can be
helpful in a high-income year when you want a larger deduction but plan to spread your giving
out in the future.
Jim:
For retirees, Qualified Charitable Distributions, or QCDs, are another great strategy. If you are
over age 70½, you can give directly from your IRA to a charity, up to $100,000 per year. That
money counts toward your Required Minimum Distribution but is not counted as taxable income.
Shallon:
That can be a great way to reduce taxable income and make a positive impact. A lot of clients
like this approach because it helps them give more intentionally and also manage their
retirement income more efficiently.
Jim:
The key takeaway is that charitable giving is not only about generosity. It is also a smart part of
a well-rounded financial plan. When you give in a tax-efficient way, you are effectively choosing
to support causes you care about rather than sending those dollars to the IRS.
Part 4: Building a Tax-Smart Portfolio Over Time
Shallon:
A big part of investing with taxes in mind is consistency. Even small, steady moves like
increasing contributions, reviewing your asset mix annually, or using automatic rebalancing can
make your portfolio more tax-efficient over time.
I know the approach we take with clients is to think of your plan as a living document. You
adjust as life changes: with changes in income, or family structure,
or even changes in your retirement goals, and that means you make sure your tax strategy
evolves, too.
Jim:
Yes, and don’t try to do it alone. Your financial advisor and your tax professional can help you
look at the big picture to see how your investments, retirement plan, and taxes all work together.
[Transition Music Cue]
Five in Five: Five Ways to Make Your Portfolio More Tax-Efficient
Shallon:
Alright, it’s time for our Five in Five. That’s where we cover five quick insights in five minutes or
less. Today, we’re going to focus on five ways to make your portfolio more tax-efficient. Jim,
why don’t you kick us off with the first way?
Jim:
Sure…we’ll start with number one: Review your account types. Make sure you’re balancing
taxable, tax-deferred, and Roth accounts to give yourself flexibility later. It’s really about
understanding where your money lives. Not all accounts are treated the same by the IRS, and
the type of account you use can have as much impact on your long-term wealth as the actual
investments you choose.
Think of it as having three different “buckets”:
● Taxable accounts – like regular brokerage accounts. You’ll pay taxes on dividends,
interest, and capital gains each year.
● Tax-deferred accounts – such as traditional IRAs and 401(k)s. These give you a tax
break now, but you’ll pay taxes later when you withdraw the money.
● Tax-free accounts – like Roth IRAs and Roth 401(k)s. You pay taxes upfront, but your
withdrawals later are completely tax-free.
Balancing these buckets gives you something incredibly important: flexibility. And flexibility is
the cornerstone of tax-efficient retirement planning.
Shallon:
Nice. Number two: Mind your holding periods. Another simple but powerful way to improve tax
efficiency is to pay attention to how long you hold your investments. When you keep an asset
for more than one year, any profit you make is typically taxed at the long-term capital gains rate,
which is significantly lower than the short-term rate applied to investments sold within a year.
That difference can save you thousands over time, especially if you’re regularly rebalancing or
making strategic shifts in your portfolio. It also encourages a more disciplined, long-term
mindset that helps avoid emotional, knee-jerk selling. So before you make a trade, it’s worth
checking the calendar, because even a few extra weeks of patience may reduce your tax bill.
Jim:
Number three: Using tax-advantaged accounts is one of the smartest ways to boost the
efficiency of your investment dollars. It could mean Health Savings Accounts, 529 plans, or
employer retirement plans…each offers its own tax benefits.
These kinds of accounts can help you grow your money tax deferred, or even allow tax-free
withdrawals when used for qualified expenses. They also help you earmark funds for future
goals such as health costs, education, or retirement, which keeps your overall financial plan
more organized. The key is to understand how each account works so you can match the right
tool to the right purpose and maximize those tax advantages.
Shallon:
Number four: Make charitable giving part of your investment plan.
Incorporating charitable giving into your investment strategy can be a meaningful way to support
causes you care about while also improving your tax efficiency. Tools like donor-advised funds
allow you to contribute appreciated assets, avoid capital gains taxes, and take an immediate
deduction, giving you both impact and flexibility. For those over age 70.5, qualified charitable
distributions from IRAs let you send money directly to a charity, which can reduce your taxable
income and help satisfy required minimum distributions.
These strategies can be especially powerful in high-income years when deductions matter most.
By planning your giving intentionally, you can align your financial goals with your personal
values and create a bigger overall benefit.
Jim:
And number five: Revisit your plan regularly.
Tax efficiency isn’t something you set once and forget, because both your personal situation
and the tax landscape will evolve.
Changes in income, retirement timing, family needs, or major purchases can all affect which
strategies make the most sense for you. At the same time, tax laws and market conditions shift,
so a plan that worked well three years ago might not be the best fit today.
Checking in regularly helps you adjust your accounts, withdrawals, and investment choices
before small issues turn into bigger tax consequences. Staying proactive keeps your portfolio
healthier and your tax bill more manageable as life moves forward.
Shallon:
So that’s our look at investing with taxes in mind. With the right plan, you can keep more of what
you earn and stay focused on your long-term goals.
Jim:
If you’d like to talk more about your own investment strategy, our team at Bradford Financial
Center would be happy to help you make sure your portfolio is as tax-efficient as it can be.
Shallon:
Thanks for joining us on Your Wealth Journey. We’ll be back soon with more insights to help
guide your financial path.
Jim: Until then—take care, and enjoy the journey.
Securities are offered through United Planners Financial Services, Member
FINRA/SIPC. Advisory Services are offered through Bradford Financial Center, a Registered
Investment Advisor. Insurance Services offered through Bradford Insurance. Tax and
Accounting Services offered through Bradford Tax & Accounting Network. Bradford Financial
Center, Bradford Insurance, and Bradford Tax & Accounting Network are not affiliated with
United Planners. Neither Bradford Financial Center nor United Planners provides tax or legal
advice.
This podcast is for general information and educational purposes only and is not intended to be
specific advice for any individual. Consult your financial professional regarding your personal
situation. All investing involves risk, and there is no guarantee that any strategy will be
successful.