Long-term tax diversification strategy is a path to wealth building

Key takeaways:

• Consider a long-term tax diversification strategy according to tax rate exposure.
• Consider making changes now while TCJA provisions are still in effect.

KOLOA, Hawaii – “The agenda has been set that the President would like to see tax rates lowered for corporations and for individuals … but at some point in time we are going to have to pay the piper,” Carol C. Foos from the OJM Group said.

During a presentation at Hawaiian Eye 2025, Foos suggested that one should consider a long-term tax diversification strategy.

Many of the provisions of the Tax Cuts and Jobs Acts (TCJA) of 2017 were temporary and are slated to expire at the end of 2025.

“Quite frankly, none of us knows what is going to happen with President Trump being elected and both houses of Congress being Republican-controlled. We would expect some tax law changes to pass some time in 2025, and if so, some of these temporary provisions are probably going to be extended,” Foos said.

With the uncertainty of the expiring TCJA provisions as well as tax proposals by President Trump, Foos recommends tax diversification.

She suggested putting assets into three buckets:

• Assets subject to ordinary income tax rates upon distribution in retirement;
• assets subject to capital gains tax rates; and
• assets not subject to any tax upon distribution.

“As you are planning for retirement, look at while these rates are lower, and if lower rates are extended, think about putting some of those retirement savings into a Roth 401k or a Roth 403b,” Foos said. “Yes, you are losing the deduction today but two important things for high income earners and people who save a lot of money are that the growth is tax-free on those accounts, the distributions are tax-free and maybe, most importantly, for many … there are no required minimum distributions from that account.”

“You don’t have to put all of your retirement savings into a Roth, but some portion of it between you and your spouse,” she added.

Foos also encouraged physicians to pay attention to estate tax planning.

“If the estate tax exemption is going to drop, it is going to be important to think about making gifting to use up some of that exception this year while the exemption is still very high,” she said.

OJM has published the book, Wealth Strategies for Today’s Physician. It will be updated regularly. You can access the book by texting HE2025 to 844-418-1212.

You can find more wealth management content by reading Healio’s Residency to Retirement, of which OJM is a regular content contributor.

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Sources/Disclosures

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Source:

Foos CA. Enhancing financial wellness – Understanding the sunsetting provisions of the 2017 Tax Cuts and Jobs Act. Presented at: Hawaiian Eye and Retina 2025; Jan. 18-24, 2025; Koloa, Hawaii.

Disclosures:
Foos is an employee of the OJM Group.

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