Death is unavoidable, and taxes can be … less.
That’s right, there is a way to consistently and legally pay less taxes over your lifetime.
That means earlier retirements, more trips, more fun, and less stress.
First, nobody (perhaps only politicians) likes taxes. Most people tolerate them and end the conversation there.
Let me tell you what most people do – I call it the status quo strategy.
Here’s what it looks like.
Just pay the IRS – year after year after year – and hope it works out.
The status quo done over your lifetime will lead to less money and more stress.
I’ve never met somebody who wanted to pay more taxes.
People want to minimize what they owe while standing well within the guidelines of the IRS.
No more or no less – just fair.
And before I go further, I need to give you one quick mindset that will frame your next few minutes reading this: paying taxes is a good thing.
Paying them means something went right in your financial life, and because of that, you have more income, which triggers more tax.
More income is good.
Paying more taxes than you should is bad – that’s what the status quo strategy leads to.
Paying taxes is a good thing. It means something went right in your financial life.
No one wants that.
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Paying taxes is a good thing. It means something went right in your financial life.
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The Alternative to the Status Quo
So, let’s discuss the alternative.
A way that grows assets faster while paying less in taxes.
Taxes will be one of, if not the largest, single-expense over your life.
There are not a lot of things that, every year, consume 25% of your income.
Housing – sure – but many of those payments go back into the home you own.
Other than that, nothing comes close to the tax bill.
So here is what I want to nail home today.
Actual tax efficiency is built over decades.
Every year, a thought-out plan should be developed for what assets are purchased and held on the balance sheet.
Furthermore, you need to be strategic about where those assets are located (e.g., 401k vs. IRA vs. Brokerage vs. Real Estate).
I work with business owners, real estate investors, RSU-rich tech employees, and many retirees who have amassed sizable assets.
I’ve seen the output of many different types of assets over long periods located in different places (think stocks in an IRA vs stocks in a brokerage account).
And what I said above is true.
The more time and effort you put into this, the more tax efficiency works.
This has a compounding effect.
Here’s why.
The IRS tax code is thousands of pages long and unbelievably complex, so rather than read it, I’ll tell you there are essentially two tax codes, one for people who own businesses and the other one.
The Two Tax Codes
People who are owners of businesses pay lower taxes because they have different forms of income.
The government likes businesses because businesses create money, and when money is made, taxes are too.
Thriving businesses create a lot of tax revenue.
But if you don’t own a business, don’t check out.
If you own an ETF, a portfolio of stocks, or a mutual fund, this is you, too.
Owning a share of Apple is indeed a form of business ownership.
And with that comes tax advantages.
Here’s how this plays out in real life: as balance sheets grow, your income shifts towards the “owner” side of the code.
Where that income is collective matters immensely for you.
So, a $2m Roth IRA will generate more income than a similarly invested $200k brokerage by a factor of 10, yet yield no tax.
All of this is obvious, but here’s where the real money is.
If you strategically place assets on your balance sheet consistently in the correct places over time, you can have much control over how much you pay and when you pay.
If you’ve never experienced this, it’s hard to understand, but it is a potent wealth-building tool.
I’ve spent a decade creating a balance sheet with great assets in favorable locations, and I have a lot of flexibility to create tax savings every year.
I haven’t pigeonholed myself into my 401k, real estate, brokerage account, or even Fjell—why? I understand the value of flexibility from a tax perspective, and when combined with my tax advisor’s skill, we’ve built a high-performing, tax-efficient machine.
But it wasn’t always this way – I was straight W2 for the first seven years of my career, and even then, I strongly emphasized what and where I was buying assets to give me long-term flexibility from a tax perspective.
Flexibility Creates Tax Efficiency.
If you recall the piece I wrote a month ago on how markets work, you’ll remember the fictitious couple getting a free million-dollar home in Florida because of their tax planning.
Can you imagine that one day, you’d get a free million-dollar home by simply implementing what I’m talking about?
It’s wild, but this stuff happens all the time.
The most recent public example is Amazon founder Jeff Bezos, who saved $600m by moving to Florida in 2023.
Here’s how this played out.
He wanted to sell $8b in Amazon stock, but with the recent changes in Washington law, it made sense for him to redomicile to Florida, where there is no state tax on capital gains.
So he did.
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Flexibility, intentional purchase, and placement of assets drive tax savings.
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And he sold his stock after he moved and saved $600m.
He used a combination of time (when he did the transaction), physical location (no state income tax on gains), tax code (capital gain on sale of the asset), and location of his AMZN shares (taxable account) to save $600m.
That, friends, is how this works.
Flexibility, intentional purchase, and placement of said assets drive tax savings.
This level of work is best done with a competent financial advisor and CPA. The longer you do this, the more you save, and the more it compounds in your favor.
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Building Tax Efficiency Over Decades
Death and taxes are inevitable.
I don’t have an answer for death.
But taxes – yes, and it’s not the status quo.
It’s the long game.
And the end results of doing this well?
Freedom – to do what you want, with who you want, when you want.
See you next week.
In summary
- Build a thoughtful tax strategy over decades, not days.
- Enlist a competent team to help you.
- Aim for flexibility.
