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RL144 — How to Reduce Taxes on Mutual Funds

On the Retirement Lifestyle Show, Roshan Loungani, Eric Olson, and Adrian Nicholson go through how, why, and when mutual funds are taxed. They discuss how mutual fund gains are taxed and how you can improve your total portfolio returns by reducing and even eliminating taxes on your funds. Listen now to learn How to Reduce Taxes on Mutual Funds.

[01:31] Basics of How Mutual Funds are Taxed

[04:00] How to Ensure Your Holdings are Tax Efficient

[06:55] Why Mutual Funds Are Mostly Not Tax Efficient

[08:14] What is Portfolio Turnover?

[12:08] Mutual Fund Fees and Expenses

[13:12] Types of Mutual Funds and How They Work

[16:33] Income-Generating Components of a Mutual Fund

[18:12] Real-Life Cost Figures

[24:20] How the Top Mutual Funds Performed

[28:25] How Your Circumstances Affect Your Investment Strategy

[29:50] Parting Thoughts

To read the Full Show Notes scroll down or click here.

  • Roshan Loungani can be reached at roshan.loungani@aretewealth.com or at 202-536-4468.
  • Erik Olson can be reached at erik.olson@aretewealth.com or 815-940-4652.
  • Adrian Nicholson can be reached at adrian.nicholson@aretewealth.com or at 703-915-8905

Listen now to learn How to Reduce Taxes on Mutual Funds.

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How to Reduce Taxes on Mutual Funds

Full Show Notes:

Basics of How Mutual Funds Are Taxed

Taxes on mutual funds can be a complicated beast. For example, when you buy a mutual fund in a taxable investment account, you will have to pay taxes every year you own that long-term mutual fund. The good news is that mutual funds have a fairly predictable tax structure. The bad news is that interest and dividends are both taxed as ordinary income. So gains acquired within a year will be taxed at the investor’s top marginal tax bracket. This is a major contributing factor most investors look out for before investing in mutual funds. 

If you’d like to get into mutual funds, you need to understand that the way your mutual fund is taxed has a lot to do with the type of investments in the fund’s portfolio. For example, when filing yearly taxes, almost all distributions you receive from a mutual fund must be declared as investment income. However, the type of investment, duration of the investment holding, and the type of distribution received are all essential factors determining the amount of income tax you pay on each dollar of a distribution. For the most part, distributions are subject to your ordinary income tax rate. But in some special cases, you may be eligible to pay the lower capital gains tax rate, while other distributions may be completely tax-free.

Disclaimer Welcome, you are now listening to the retirement lifestyle show with Roshan Loungani Erik Olson and Adrian Nicholson. This show is an exploration of ideas to help you work towards your ideal retirement. Roshan Loungani and Erik Olson serve clients across the US. They offer financial planning and investment advice through Arete Wealth Advisors, LLC, an SEC registered investment advisor and securities through Arete Wealth Management LLC, member FINRA, SIPC, and NFA. Get ready for the financial independence of your dreams. All opinions expressed by podcast hosts and guests are solely their own are based on information they believe is reliable. Neither Arete Wealth nor its affiliates, warrants its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only and should not be regarded as specific advice or recommendations for any individual. Before making any decisions consult a professional. Finally, our music is the chance by Jason Shaw and Audionautix. It’s part of the YouTube Audio Library and it’s licensed under a Creative Commons license.

Thank you for listening.

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