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What financial planning basics should you consider to maintain a healthy financial life? Join the conversation on common financial planning strategies on education, retirement, taxes and estate planning.



Qualified Small Business Stock Is An Often Overlooked Tax Windfall

It’s no secret that small businesses have long been the growth engine of the US economy. With that in mind, over the years Congress has packed the tax code with lots of breaks for those investing in small business. One of the best breaks around — and no secret to experienced angel and venture capital investors in Silicon Valley — is qualified small business stock (QSBS). What Is QSBS? Like all things in tax, the IRS definition of qualified small business  can get complicated, and it changes depending on the section of the tax code in question. For our purposes, we’ll be focusing on Section 1202 of the Internal Revenue Code (IRC). To qualify as QSBS under Section 1202: The […]

Minimize Your Investment Taxes

Our Chief Investment Officer, Burt Malkiel, famed author of “A Random Walk Down Wall Street,” has spent the past 40 years explaining that investors can’t control the market, so they should focus their efforts on the three investment tactics within their control: Diversify and rebalance your portfolio Minimize fees Minimize taxes Previously, we published posts on the value of diversification and minimizing fees. However, too often the industry avoids talking about one of the most important aspects of maximizing your long-term investment results: minimizing taxes. The Seven Ways to Minimize Taxes There are seven ways Wealthfront can significantly reduce your investment taxes: Using Index Funds Rebalancing your portfolio with dividends Applying different asset allocations for taxable & retirement accounts Tax–loss […]

When Should You Exercise Your Stock Options?

Stock options have value precisely because they are an option. The fact that you have an extended amount of time to decide whether and when to buy your employer’s stock at a fixed price should have tremendous value. That’s why publicly-traded stock options are valued higher than the amount by which the price of the underlying stock exceeds the exercise price (please see Why Employee Stock Options are More Valuable than Exchange-Traded Stock Options for a more detailed explanation). Your stock option loses its option value the moment you exercise because you no longer have flexibility around when and if you should exercise. As a result many people wonder when does it make sense to exercise an option. Tax Rates […]

When Should You Consider a SEP-IRA?

If you are a self-employed contract worker or sole-proprietor, there’s a retirement account you may not have heard about that’s worth considering: the Simplified Employee Pension IRA or SEP-IRA for short. The key advantage of the SEP-IRA is the high annual maximum contribution limit, which at $53,000, is much higher than the $5,500 cap associated with a traditional IRA ($6,500 if you’re over 50). What Is a SEP-IRA? The SEP-IRA was created in 1978 to provide a tax-advantaged retirement plan for small businesses. Contributions to the SEP-IRA are made by a small business into an account for the benefit of an individual, typically the sole employee. SEP-IRA accounts are available to small businesses ranging from sole proprietorships, partnerships, LLCs, S-Corporations […]

Never Rollover If You Can Transfer

You might have heard the IRS is limiting the frequency with which you can rollover IRA accounts in 2015. Starting January 1st the IRS will limit you to only one IRA rollover per calendar year. You will now face steep penalties if you attempt more than one rollover  per year. However most people don’t realize there exists a superior alternative called an ACATS or electronic transfer. You will still be allowed unlimited transfers per year, but not all investment firms will accept an electronic transfer. A Rollover is Very Different From a Transfer Most investors think a rollover is the only way to transfer an IRA to another brokerage firm. When you request a retirement account rollover, your account’s current […]

14 Things to Consider for Your Year-End Financial Checklist

The last few weeks of the year are always a mad rush to wrap up loose ends, often in a frantic fashion. In the spirit of the season, we thought it a good time to share a checklist of important items to consider before the calendar year ends, all related to your investments and finances. We also wanted to reiterate some key topics we’ve already discussed, but that are especially important to review by end-of-year. Here are some brief pieces of financial advice on several fronts that could benefit you and yours in multiple ways, and that could ultimately add to your long-term bottom line, not to mention peace of mind. 1. Establish or Tune Up Your Emergency Fund If you […]

Optimizing Your MBA Financial Plan

In our recent post, “Should You Get an MBA,” we reviewed the main funding sources available to pay for a degree. With this post we present some ideas for you to optimize your finances after you have made the decision to get an MBA. There is no question that getting your MBA is an expensive proposition. You may have to forgo two years of salary, write large tuition checks, take on student loans, and incur significant expenses for job hunting and extracurricular activities. Fortunately there are some things you can do while in school (and just after) that can significantly reduce the overall cost of your MBA. The primary way to lower the cost of your MBA is to consider […]

New Research on the Efficacy of Tax-Loss Harvesting

Tax-loss harvesting isn’t something new. It’s actually been around for decades. It’s also one of the few ways you can intelligently lower your investment-related taxes. More than $100 billion has been invested with dedicated firms like Parametric Associates and Aperio, and with high-end private wealth managers like Goldman Sachs and Morgan Stanley — specifically  to access their tax-loss harvesting strategies. Unfortunately, until recently, tax-loss harvesting was only available to the ultra-wealthy. That changed two years ago when Wealthfront became the first automated investment service to offer tax-loss harvesting to its clients. Wealthfront now manages almost $1 Billion in accounts enabled with tax-loss harvesting. Tax-Loss Harvesting Helps You Defer Investment Related Taxes Tax-loss harvesting is a method to defer taxes, not […]

Happy Birthday, Tax-Loss Harvesting

Back in October 2012, Wealthfront became the first automated investment service to introduce tax-loss harvesting. While tax-loss harvesting has been around for a long time, it traditionally has only been offered to the ultra-wealthy and it was almost always done just once a year by hand. Wealthfront, of course, offered something different — a service watching your account continuously, every day, looking for opportunities to recognize tax losses while still keeping your portfolio properly diversified. Now two years later, Wealthfront has over $900M in client assets invested in tax-loss harvesting accounts, and in that time we’ve performed over 750,000 free tax-loss harvesting trades for our clients. For no extra charge, Wealthfront provides two different levels of sophisticated tax-loss harvesting for […]