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Lessons of Successful Entrepreneurs; How Bobbi Brown Built Her Business; Investing in Women

Worth’s Greatest Hits; Your Portfolio in 2042; Tony Robbins Takes Aim at Wealth Management

Five Fantastic New SUVs; Warming to Spring Fashion; 25 Things You Can Do to Live Longer

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FEATURED ADVISORJustin Charise, CFP®, Founding Partner

Alfred Schor, Founding Partner

Colin Thomas, Associate Wealth Management Advisor

COMPENSATION METHODAsset-based fees, commissions (investment and insurance products)

MINIMUM FEE FOR INITIAL MEETINGNone required

PROFESSIONAL SERVICES PROVIDED Planning; investment-advisory services; insurance products; money-management services; investment products

EMAILjustin.charise@nm.comal.schor@nm.com c.thomas@nm.com

WEBSITEwww.saugatuck-financial.com

SAUGATUCK FINANCIAL AT NORTHWESTERN MUTUAL

274 Riverside Avenue, 4th Floor, Westport, CT 06880

203.221.5275 (Justin’s office)

203.221.5229 (Alfred’s office)

203.221.5272 (Colin’s office)

L E A D I N G W E A L T H A D V I S O R | W E S T P O R T , C T

I L L U S T R A T I O N B Y N A N C Y J A N U Z Z I

Which tax-efficient investing strategies should your advisor be considering? B Y J U S T I N C H A R I S E , C F P ®

Left to right: Colin Thomas,

Alfred Schor, Justin Charise

B Y J U S T I N C H A R I S E , C F P ®

Left to right: Colin Thomas,

Alfred Schor, Justin Charise

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ost financial advisors, myself in-cluded, are not tax professionals. There are, however, numerous tax- related investment strategies that can help maximize an investor’s after-tax returns. In this article, we’ll look at two of the most com-monly used strategies where advisor awareness and prudence may as-sist in optimizing after-tax returns: tracking capital gains distributions and tax-loss harvesting.

TRACKING CAPITAL GAINS DISTRI-BUTIONS. Paying attention to capital gains distributions for funds held in tax-able accounts is one way to enhance af-ter-tax returns.

Under the Investment Company Act of 1940, mutual fund companies must dis-tribute all or substantially all of their net investment income from dividends, inter-est and realized capital gains to their shareholders each year in the form of capital gains distributions.

Many mutual funds carried forward losses from 2008 to offset several years of realized gains as the market re-bounded. However, most funds have de-pleted their tax loss carry forwards and the topic has become salient again as capital gains distributions have increased in recent years.

Tracking capital gains distributions for funds held in taxable accounts enables inves-tors to weigh the pros and cons of moving out of a fund before the record date to avoid a significant capital gains distribution. Simi-larly, investors should be cognizant of upcom-ing capital gains distributions for funds they are contemplating purchasing.

Such awareness posititons investors to appropriately consider the pros and cons of buying a fund before or on the record date and becoming subject to taxes on gains ex-perienced before they owned the fund.

TAX-LOSS HARVESTING. While in an ideal world all asset classes would only appreciate, that’s not reality. Tax-loss harvesting enables an investor to make lemonade out of lemons by realizing losses to help offset gains in a taxable account; such action ultimately re-duces the investor’s tax liability. If that investor realizes more losses than gains in one particu-lar year, he or she can use up to $3,000 of losses to offset ordinary income and carry forward any remaining losses to future years.

Proper execution of tax-loss harvesting in-volves avoiding wash sales, which result from buying the same (or a substantially identical) security within 30 days before or after selling the security. Since some mutual fund companies have short-term trading pol-icies that can be more restrictive than 30 days or impose additional fees, it’s also im-portant that investors review the fund com-pany prospectus.

To maintain their target asset allocation and avoid being without exposure during a

potential market run, prudent investors will replace the security being sold with one with a high correlation.

For example, when our firm used the sig-nificant underperformance of commodities in 2015 as a tax-loss harvesting opportunity to offset gains in other areas of our portfolios, we replaced the actively managed commod-ity fund we sold out of with a passive com-modities fund. This prevented a “wash sale,” yet kept portfolio risk and exposure consistent.

This strategy helped us reduce our clients’ tax liabilities and, at the same time, ensure

that they’d be positioned to take advantage of a recovery within commodities.

While proper tax strategies can enhance af-ter-tax returns, it’s important to note that taxes are just one factor to consider when you’re in-vesting. Having a well-thought-out financial plan, maintaining an appropriate asset alloca-tion and keeping emotions and short-term re-actions out of investing decisions are all critical moves for long-term investing success.

Working with an advisor who can imple-ment the strategies outlined above, within the context of a broader financial plan, will help an investor realize the full benefits of tax-effi-cient investment management. l

Financial representatives do not give, and this article is not intended as, legal or tax advice. All investments carry some level of risk, including the potential loss of principal invested. No investment strategy can guarantee a profit or protect against loss. Saugatuck Financial is a marketing name for Justin Charise, Alfred Schor, and Colin Thomas and is not a broker-dealer, registered investment advisor, federal savings bank, subsidiary or other corporate affiliate of The Northwestern Mutual Life Insurance Company including its subsidiaries, nor is it a legal partnership or entity. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee,WI (NM), and its subsidiaries. Charise, Schor, and Thomas are Representatives of Northwestern Mutual Wealth Management Company®, NMWMC Milwaukee, WI, a subsidiary of NM and limited purpose federal savings bank, and registered representatives of Northwestern Mutual Investment Services, LLC (securities), a subsidiary of NM, registered investment adviser, broker-dealer and member FINRA and SIPC. All NMWMC products and services are offered only by properly credentialed representatives who operate from agency offices of NMWMC.

S A U G A T U C K F I N A N C I A L A T N O R T H W E S T E R N M U T U A L

SAUGATUCK FINANCIAL AT NORTHWESTERN MUTUAL PROVIDES

COMPREHENSIVE FINANCIAL PLANNING AND STRATEGY IMPLEMENTATION

FOR HIGH NET WORTH AND EMERGING HIGH NET WORTH INDIVIDUALS,

FAMILIES, BUSINESSES AND INSTITUTIONS. SF partners with each client to create

and implement a tailor-made financial plan integrating risk management, wealth

management, tax strategies, estate planning and retirement income distribution

planning–all under one roof. SF’s advisors have been consistently recognized as being

among the top advisors within the industry; and their "team of 10" takes

pride in providing world-class strategies and platinum-level service to each client. l

A B O U T U S

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Tax-loss harvesting enables an investor to make lemonade out of lemons.

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Saugatuck Financial at Northwestern Mutual is featured in Worth® 2017 Leading Wealth Advisors™, a special section in every edition of Worth® magazine. All persons and firms appearing in this section have completed questionnaires, have been vetted by an advisory group following submission by Worth®, and thereafter paid the standard fees to Worth® to be featured in this section. The information contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®, and Worth® will not be responsible for the performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future performance. Worth®, a publication of the Worth Group LLC, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular investments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth® is a registered trademark of the Worth Group LLC.

Justin Charise, CFP® Founding Partner

Alfred Schor Founding Partner

Colin Thomas Associate Wealth Management Advisor

Saugatuck Financial at Northwestern Mutual274 Riverside Avenue, 4th Floor

Westport, CT 06880 203.221.5275 (Justin’s office)203.221.5229 (Alfred’s office)203.221.5272 (Colin’s office)

justin.charise@nm.comal.schor@nm.com

c.thomas@nm.comwww.saugatuck-financial.com

R E P R I N T E D F R O M

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