Tax Planning
Tax Planning for People Who Want to Stop Overpaying
Most people file their taxes every April, pay whatever they owe, and move on. That approach can be expensive.
The difference between reactive tax filing and proactive tax planning can be tens of thousands of dollars over the course of a working career, and far more in retirement. The strategies that actually reduce your lifetime tax bill require decisions made months or years in advance, not the week before your return is due.
At Oak Street Advisors, tax planning is built into everything we do. It is not a separate service or an add-on. When we build your financial plan, we model your current and future tax brackets, identify windows to reduce your exposure, and coordinate investment decisions with your tax situation at every step.
We are a fee-only, fiduciary firm, which means we do not sell products, and we don’t earn commissions for steering you toward any product, account type, or investment. Our only job is to help you keep more of what you earn.
Why Your CPA Alone Is Not Enough
CPAs are essential, and we work alongside them, not instead of them. But there is a meaningful difference between what a CPA does and what a financial advisor focused on tax planning does.
A CPA’s job is to file an accurate return based on the financial decisions you have already made. A financial advisor focused on tax planning is working with you before those decisions are made, looking ahead at what your tax picture will look like in 3, 10, and 20 years and helping you act on that now.
Most CPAs, especially at busy practices, don’t have a complete picture of a client’s finances. They may not know how your 401(k) is allocated, what your Social Security claiming strategy is, or how your investment accounts are structured. They are working from last year’s numbers, whereas we are building a plan for the next 20 years.
Tax Planning Strategies We Use
Tax-Efficient Savings and Account Strategy
Where you save matters as much as how much you save.
The tax treatment of your accounts (taxable, tax-deferred, or tax-free) determines how much of your investment growth you actually keep. Putting the wrong assets in the wrong accounts is a common and costly mistake, even among high earners who are otherwise financially disciplined.
When we build your financial plan, we evaluate your full picture: your income, your tax bracket now and in retirement, your savings timeline, your employer plan options, and your goals. Then we help you decide how much to put where and in what order.
The account types we commonly work with include:
- Traditional IRAs and Roth IRAs
- 401(k), Roth 401(k), 403(b), and 457(b) plans
- Solo 401(k) with profit-sharing and after-tax components
- Mega Backdoor Roth contributions
- Cash Balance and Defined Benefit Plans
- HSAs (used as an investment vehicle, not just for healthcare)
- 529 education savings plans
- Taxable brokerage accounts with tax-efficient ETFs and municipal bonds
The right combination depends on your situation. A high earner planning to retire at 55 has a very different set of considerations than someone still accumulating wealth in their 40s.
Asset Location: Putting the Right Investments in the Right Accounts
Asset location is the practice of matching specific investments to the account types where they will be taxed most favorably.
A bond fund generating ordinary income does not belong in a taxable brokerage account if you can help it. A high-growth stock position you plan to hold for decades may be better suited to a Roth account, where the gains will never be taxed. A real estate investment trust that throws off substantial dividends might belong in a tax-deferred IRA.
These decisions sound technical, but over 20 or 30 years, getting them right can have a significant impact on your after-tax wealth. We factor asset location into every portfolio we build and every financial plan we write.
Roth Conversion Planning
Roth conversions are one of the most powerful tax planning tools available to people approaching or in retirement, and they are among the most underused.
If you have a large traditional IRA or 401(k), every dollar you take out in retirement will be taxed as ordinary income. Required Minimum Distributions (RMDs) starting at age 73 (or 75 for those born in 1960 or after) can force withdrawals that push you into higher tax brackets, increase your Medicare IRMAA surcharges, and create a larger taxable estate for your heirs.
A Roth conversion strategy moves money from your tax-deferred accounts into a tax-free Roth account deliberately and on your schedule, usually during a window when your income is lower than it was during your working years or lower than it will be once RMDs kick in.
We model your current and projected future tax brackets, layer in Social Security, RMD projections, rental income, and any other income sources, and identify the years where conversions make sense and at what amounts.
We did this for a physician client with over $1,000,000 in a traditional IRA. We moved $530,000 into a Roth IRA at a 12% federal rate, a rate she hadn’t paid since early in her career. Without a plan, those same dollars may have been taxed at 22% or higher.
Dynamic Retirement Withdrawal Strategies
Once you retire, the order in which you draw down your accounts has a direct impact on your lifetime tax bill.
Most people default to spending their taxable accounts first and leaving their IRAs alone as long as possible. That approach often makes RMDs worse and creates unnecessarily high tax exposure later in retirement.
We build withdrawal strategies that account for all of your income sources: Social Security, pensions, rental income, RMDs, and investment accounts. We sequence distributions to keep your tax bracket as low as possible for as long as possible and account for IRMAA thresholds, which can add hundreds or thousands of dollars per year to Medicare premiums if your income crosses certain levels.
For charitably inclined clients, we also evaluate Qualified Charitable Distributions (QCDs), which allow IRA owners over age 70½ to donate directly from their IRA and satisfy RMD requirements without the distribution counting as taxable income.
The examples above are illustrative case studies based on actual client engagements. Details have been changed to protect client privacy. They are provided to show the type of work we do and are not representative of any particular client’s experience. Individual results depend on each client’s specific circumstances, and similar results are not guaranteed. Dollar figures reflect specific facts and assumptions and, where described as projections, are estimates that are not guaranteed.
Tax Planning in the Accumulation Years
Tax planning is not only for people near or in retirement. The decisions you make in your 30s, 40s, and 50s have a compounding effect on your tax situation decades from now.
For high earners and business owners, this often means:
- Maximizing contributions to pre-tax accounts to reduce current-year income
- Layering Mega Backdoor Roth contributions on top of standard 401(k) limits
- Using a Health Savings Account as a triple-tax-advantaged investment vehicle
- Building a taxable account with tax-loss harvesting discipline
- Structuring a business to reduce payroll taxes and maximize retirement contributions
- Timing equity compensation events (RSUs, stock options) to manage income spikes
The earlier the planning starts, the more options you have. We have seen clients who came to us at 45 with a straightforward situation and left with a 20-year tax reduction plan they never knew was possible.
What Sets Fee-Only Tax Planning Apart
Financial advisors who earn commissions have a built-in conflict when making tax-related recommendations. If converting your IRA to a Roth triggers income that makes a product they would otherwise recommend less attractive, there is pressure to skip that conversation. We have no such conflict. We are paid by you and only you. Every tax planning recommendation we make is evaluated solely on whether it puts your household in a better financial position.
We are also not CPAs, and we do not prepare tax returns. What we do is work alongside your CPA to build a forward-looking strategy and make sure the investment and account decisions you are making today are informed by a clear view of your tax situation for years to come.
Talk to Us About Your Tax Situation
In more than 20 years of working with clients on tax planning, the pattern we see most often is straightforward: people are overpaying, they have a general sense that something could be better, and they have never had anyone sit down and actually model it out. Usually, there is real money to be saved. Sometimes a lot of it. The only way to know is to look at your specific situation.
Call us at (843) 946 9868 or schedule a no-cost intro call below.
Oak Street Advisors is an SEC-registered investment advisory firm with offices in Mt. Pleasant, SC and Myrtle Beach, SC. Investment advisory services offered through Oak Street Advisors. Registration as an investment advisor does not imply a certain level of skill or training. The firm’s current ADV Part 2A discussing services and fees is available upon request or at adviserinfo.sec.gov. Content is for informational purposes only and does not constitute tax, legal, or investment advice.
