👋 Welcome aboard!

You woke up one day after a decade-plus of hard work in the tech fast lane, where the financial growth and career highs meet higher taxes, and more wealth development and preservation tips than you know what to do with. 

Meet your new navigator: The Making Sense of Your Money newsletter. Every week, we distill financial best practices, groundbreaking tax code news, and stuff that actually matters for a new generation of tech leaders. 

It’s free, takes just minutes to read, and puts wealth planning’s latest and greatest at your fingertips. 

It’s written by me, Dan Pascone, Founder and CEO of Tailored Cents. I speak with twenty-plus high-earning tech leaders in the sweet spot of their careers every week:

• They’re growing professionally,

• Making more money,

• And, painfully, paying Uncle Sam his taxes. For example, the average SaaS employee making $225,000 per year is paying over $68,000 every year in a no-state income tax state like Florida or over $91,000 in a state like New York. 

The top question I get is, you guessed it…

“How can I reduce my taxes?”  

Well, each client tends to have unique strategies that would save them hundreds of thousands of dollars in taxes over their career, but unfortunately, get started too late. 

Today, we’re reviewing two strategies worth considering in 2024 to take advantage of historically low tax rates.

🔄 #1 Roth Conversions:

The basic idea is this: convert portions of pre-tax retirement funds (Traditional 401K/IRAs) to Roth 401K/IRAs. 

In English, pay taxes now and get tax-free growth and withdrawals in the future. Future you will give you today a pat on the back.

However, you must consider how much to convert and when which requires assessing your holistic financial plan and tax situation.

Life expectancy is on the rise. 

That’s good news for human beings in general. But, today’s retirees may spend more time getting income from retirement accounts than from paychecks.

💸 #2 Life Insurance as a Retirement Plan (LIRP)

Get this: contributing to life insurance policies structured like investment products gives you both a mix of growth potential, tax-free withdrawals, and a life insurance policy in case, you know, God forbid. 

However, you still have to consider which policy is right for you and the time frame before you need to access funds. 

A LIRP makes sense for:

1. Higher earners who are maxing out their retirement accounts and have additional savings

2. Individuals with at least 15 years before they plan to retire

💰 Making it Make Cents

We’re at historically low tax rates, but that may change sooner than you think.

Set to sunset in 2026, the Tax Cuts and Jobs Act (TCJA), which took effect in 2018, was the most significant overhaul of the U.S. tax code in decades, aiming to rev up the economy by cutting taxes across the board.

So, you’ve essentially got a two-year window to take advantage of historically low tax rates to plan for a lower tax rate in retirement.

What are you going to do with it?

There might be limited control over taxes paid on earned income from a job. 

But...

You still have plenty of control over taxes paid on income drawn from savings & investments. 

The strategic legwork you put in today can end up being an extra downpayment (or the whole kit and caboodle) on that beach house in a few decades. 

Just something to noodle on. 

If you’re a financial nerd like me, welcome to your new home. I’ve made it my career’s passion to help high-earners save money, lower their tax rate in retirement, and live the life of their dreams– whether they want to retire early or not.

If your interest is piqued about how to reduce taxes in your investment accounts, check out our guide on the “3 Bucket Tax Strategy.” 

The Power of Zero by David McKnight is also a great book on planning to lower your tax rate in retirement (yes, 0% can actually be attainable).

Now, I’d love to hear from you– what's your biggest information hurdle in optimizing tax strategies for yourself? Reply directly to this email, I’ll really read it. I’ll do my best to answer them with helpful tips and strategies in future newsletters (anonymized, of course, unless you prefer the shout-out). 

Until next week! 

Dan from Tailored Cents

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