E*TRADE Examines the Tactics of Tax-Conscious Investors
March 31 2015 - 4:05PM
Business Wire
Despite heavy trading in retirement accounts to
manage tax liabilities, most do not employ all the tactics at their
disposal
E*TRADE Financial Corporation (NASDAQ:ETFC) today announced
results from the most recent wave of StreetWise, E*TRADE’s
quarterly tracking study of experienced investors. Results reveal
that while many investors are tax conscious, most do not use all
the tools available as they plan for taxes each year.
Trading more frequently in tax-advantaged accounts is the top
tactic — more than twice as popular as selling losing positions, at
second place. According to the survey, the most popular tax tactics
in order are:
1. Investing in tax-advantaged accounts, such as 401(k)s,
403(b)s, IRAs and Health Savings Accounts (45 percent).
2. Selling positions that have lost value in order to offset
capital gains (18 percent).
3. Holding investments for at least one year to reap lower tax
rates on gains (17 percent).
4. Investing in tax-free municipal bonds (10 percent).
5. Investing in tax-advantaged deferred annuities (6
percent).
6. Investing in funds with low portfolio turnover (4
percent).
“To prepare for retirement, it is critical to invest with
discipline,” said Lena Haas, SVP of Retirement, Investing and
Savings at E*TRADE Financial. “Understanding tax implications is
key to successfully executing an investment plan and, if
overlooked, can hinder overall returns. Like contributions and
investment choices, tax implications deserve considerable attention
and thoughtfulness.”
Ms. Haas also observed the following additional insights from
the survey:
- Account diversity is in. Nearly
nine out of 10 experienced investors agree that to have a
successful retirement, you need more than just a 401(k). Holding
assets within varying tax-advantaged accounts — those that are
tax-deferred like 401(k)s and Traditional IRAs, and those with
pre-tax treatment like Roth IRAs — allows for more control over tax
bills. For example, investors with Roth IRAs pay taxes at the point
of each contribution and no taxes upon receiving qualified
distributions. With tax-deferred accounts, investors pay no taxes
with each contribution but pay upon receiving qualified
distributions, which may be taxed at a lower capital gains
rate.
- Allocation matters. Account type
is key for tax-conscious investors, as the survey shows that nearly
half of all trades occur in a tax-preferred retirement account. Yet
a key component of any successful investment plan is asset
allocation, wherein disciplined contributions are made and
rebalanced regularly to align with long-term goals.
- Only a few investors focus on
tax-wise investments. The survey shows that only 20 percent of
experienced investors focus on tax-conscious securities. But these
vehicles can play a key role in helping investors allocate in a way
that aligns with long-term goals. Other tax-conscious securities
include tax-efficient ETFs, as well as index equity funds and
individual stocks. The former can mitigate taxable capital gains
distributions, while the latter allows investors to choose when to
realize a capital gain. There are also tax-efficient managed
accounts for investors who would like someone to help do the
work.
E*TRADE is a partner in helping investors balance today’s needs
with tomorrow’s goals, through pioneering digital tools and
personalized, smart guidance online and from seasoned financial
consultants. To learn more about E*TRADE’s trading and investing
platforms and tools, visit etrade.com.
For useful insights from E*TRADE and third-party investment
professionals, follow the Company on Twitter, @ETRADE.
About E*TRADE Financial
E*TRADE Financial and its subsidiaries provide financial
services including online brokerage and banking products and
services to retail customers. Specific business segments include
Trading and Investing and Balance Sheet Management. Securities
products and services, including stocks, bonds, mutual funds, ETFs,
retirement accounts, education and online tools are offered by
E*TRADE Securities LLC (Member FINRA/SIPC). Managed Account
Solutions are offered through E*TRADE Capital Management, LLC, an
investment adviser registered with the Securities and Exchange
Commission. Bank products and services are offered by E*TRADE Bank,
a Federal savings bank, Member FDIC, or its subsidiaries and
affiliates. E*TRADE Financial Corporation and its affiliates do not
provide tax advice, and you always should consult your own tax
advisor regarding your personal circumstances before taking any
action that may have tax consequences. More information is
available at www.etrade.com. ETFC-G
About ResearchNow
ResearchNow, a leading digital data collection provider, powers
market research insights. They enable companies to listen to and
interact with the world’s consumers and business professionals
through online panels, as well as mobile, digital and social media
technologies. Their team operates in over 20 offices globally and
is recognized as the market research industry’s leader in client
satisfaction. They foster a socially responsible culture by
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a conversation, visit www.researchnow.com.
About the Survey
This wave of the survey was conducted from Jan. 8 to Jan. 16 of
2015 among an online U.S. sample of 945 self-directed active
investors who manage at least $10,000 in an online brokerage
account. The survey has a margin of error of ±3.2 percent at the 95
percent confidence level. It was fielded and administered by
ResearchNow. The panel is 65 percent male and 35 percent female
with an even distribution across online brokerages, geographic
regions and age bands.
Important Notices
E*TRADE Financial, E*TRADE and the E*TRADE logo are trademarks
or registered trademarks of E*TRADE Financial Corporation.
© 2015 E*TRADE Financial Corporation. All rights reserved.
E*TRADE Financial Corporation and ResearchNow are separate
companies that are not affiliated. E*TRADE Financial Corporation
engages ResearchNow to program, field and tabulate the study.
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20150331005136/en/
E*TRADE Media
RelationsThayer Fox,
646-521-4418thayer.fox@etrade.comorE*TRADE
Investor RelationsBrett Goodman,
646-521-4406brett.goodman@etrade.com
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