Tax And Retirement

Tax and Retirement Planning in Client Investment Recommendations Why this matters on the exam: Tax and retirement planning is a core component of Section III (Client Investment Recommendations & Strategies), which accounts for 30% of the exam. Expect multiple questions requiring you to match the right account type or tax strategy to a specific client scenario. --- ## Overview: The Tax-Aware Adviser A central skill tested on the Series 65 is the ability to make suitable, tax-efficient recommendations tailored to a specific client's situation. This means understanding not just *what* accounts and strategies exist, but *when* each is appropriate — and how tax treatment affects real after-tax returns. --- ## Capital Gains: Short-Term vs. Long-Term Capital gains are profits from the sale of investment assets. The holding period determines the tax rate: | Holding Period | Classification | Tax Treatment | |---|---|---| | ≤ 12 months | Short-term capital gain | Taxed as ordinary income | | > 12 months | Long-term capital gain | Preferential (lower) tax rate | Capital losses can offset capital gains. If losses exceed gains, up to a limited amount of excess loss can offset ordinary income each year, with the remainder carried forward. > Exam implication: When a client is in a high tax bracket and considering selling a position held for 11 months, a tax-aware adviser would generally recommend waiting until the 12-month mark has passed to qualify for long-term treatment. --- ## Retirement Account Types The exam expects you to recognize each account type, who it's designed for, and its key features. ### Tax-Deferred vs. Tax-Free | Feature | Traditional IRA / 401(k) | Roth IRA / Roth 401(k) | |---|---|---|…