Tax Strategy Scan: Imitating 401(k)s

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Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

Clients might be able to beat a 401(k) by investing on their own: Advisers can help clients tweak their outside investments so they return some of the same or better results, commonly associated with 401(k) plans, according to USA Today. This approach relies on imitating the savings habits of these retirement plan participants. -- USA Today

Don't get spooked by taxes; look now to municipal bonds instead: Clients seeking better after-tax yield are better off with municipal bonds that provide offer tax-free interest income, according to The Street. For example, a 2.2 percent muni yield is equivalent to 3.9 percent in taxable yield for investors in the 39.6 percent tax bracket and paying a 3.8 percent Medicare surcharge. Muni yields are also exempt from state taxes in several states. -- The Street

The secret upside to donating to charity directly from an IRA: Making a direct transfer from an IRA to a charity will count the money toward your client's required minimum distributions, according to Money. But because it’s not directly distributed to the client, their adjusted gross income won’t increase. This also makes fewer Social Security dollars taxable. -- Money

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