A comprehensive tax-sensitive plan can help reduce your tax burden
Fidelity has a number of ways to address taxes
Fidelity offers different ways that may help manage, defer, and reduce taxes on your investments
Although some taxes are unavoidable, there are things you can do to take control and potentially reduce their impact on your investments. At Fidelity, we help our clients evaluate their options and make investment choices that make sense for them.
When it comes to a client's actual investments, we offer professionally managed portfolios that apply a variety of tax-sensitive investment strategies to help our clients limit the impact of taxes on their investment returns.
The value of our tax-sensitive investment management over time
The impact of these tax savings cumulatively over a decade or more can be very significant, and it's evident that investing with a clear understanding of taxes matters. The above example shows that over 14 years, the potential additional value from tax-sensitive investment management was $310,444.3 To put this into context, a 2016 Fidelity study estimated that a couple retiring today at the age of 65 will need $260,000 to cover medical care costs throughout retirement.4
To create this value, our tax-sensitive investment management approach focuses on applying a variety of strategies throughout the investment process, including funding the account, ongoing management, and making withdrawals.
Tax-sensitive investment management techniques (including tax-loss harvesting) are applied on a limited basis, at the discretion of the portfolio manager, primarily with respect to determining when assets in a client’s account should be bought or sold. With this discretionary investment management service, any assets contributed to an investor’s account that the portfolio manager does not elect to retain may be sold at any time after contribution. An investor may have a gain or loss when assets are sold.
Past performance is no guarantee of future results. This data is for illustrative purposes only and does not represent actual or future performance of any investment option. Returns include the reinvestment of dividends and other earnings. Stocks are represented by the Ibbotson® Large Company Stock Index. Government bonds are represented by the 20- year U.S. government bond, cash by the 30-day U.S. Treasury bill, and inflation by the Consumer Price Index. The data assumes reinvestment of income and does not account for transaction costs. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2017 Morningstar, Inc. All rights reserved. 10/1/2017.
Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120,000 in 2015 dollars every year. This annual income is adjusted using the Consumer Price Index in order to obtain the corresponding income level for each year. Income is taxed at the appropriate federal income tax rate as it occurs. When realized, capital gains are calculated assuming the appropriate capital gains rates. The holding period for capital gains tax calculation is assumed to be five years for stocks, while government bonds are held until replaced in the index. No state income taxes are included. Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Generally, among asset classes, stocks are more volatile than bonds or short-term instruments. Government bonds and corporate bonds have more moderate short-term price fluctuations than stocks, but provide lower potential long-term returns. U.S. Treasury bills maintain a stable value if held to maturity, but returns are generally only slightly above the inflation rate. Although bonds generally present less short-term risk and volatility than stocks, bonds do entail interest rate risk (as interest rates rise, bond prices usually fall, and vice versa), issuer credit risk, and the risk of default, or the risk that an issuer will be unable to make income or principal payments. The effect of interest rate changes is usually more pronounced for longer-term securities. Additionally, bonds and short-term investments entail greater inflation risk, or the risk that the return of an investment will not keep up with increases in the prices of goods and services, than stocks.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.
Optional investment management services provided for a fee through Fidelity Personal and Workplace Advisors LLC (FPWA), a registered investment adviser and a Fidelity Investments company. Discretionary portfolio management provided by its affiliate, Strategic Advisers LLC, a registered investment adviser. These services are provided for a fee.
Brokerage services provided by Fidelity Brokerage Services LLC (FBS), and custodial and related services provided by National Financial Services LLC (NFS), each a member NYSE and SIPC. FPWA, Strategic Advisers, FPTC, FBS, and NFS are Fidelity Investments companies.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917