Muni Equity
🚨 Muni-Equity? Yeah, it’s a thing… 🚨
Recently, we’ve shown how advanced planning techniques can help stock and real estate investors reduce—or even eliminate—capital gains taxes at liquidation. This applies whether you’re selling a growth stock, primary residence, or exiting a 1031 exchange.
But it can also apply to basic retirement planning.
📉 The Traditional Playbook Falls Short
For retirees that need to shift focus from growth to income, the traditional
playbook falls short (selling appreciated stock, paying capital gains taxes, reinvesting net proceeds into bonds). Consider a hypothetical investor whose stock account tripled over the last decade. Now ten-years older, they want to reposition into safer income-producing assets. But if they are subject to a 30% capital gains tax rate, they’d lose 20% of the account to taxes. Reinvesting net proceeds into a bond portfolio yielding ~2.5% after taxes provide a mere 2.0% return on the original investment.
Hardly a cushion against future inflation.
âś… The Alternative
With proper planning, capital gain offsets can accrue over time, allowing the
portfolio to be repositioned without the 20% tax drag—which allows 100% of the portfolio to be invested at 2.5% increasing take-home income by 25% (from 2.0% to 2.5%).
Better—but still modest.
đź”’ Enter Principal Protected ETFs
What if there were an asset with the safety of bonds but without the tax drag? Enter Principal Protected ETFs. These tax efficient investments provide a portion of the upside of the stock market in exchange for near zero downside.
By selling and sending home the annual appreciation when needed, investors control the timing of income (and taxes) while benefitting from more favorable capital gains rates. While not a great growth strategy, these ETFs are a solid bond replacement—especially given tax treatment.
đź’ˇ The hashtag#MuniEquity Strategy:
Adding one more step, with further planning, the realized gains on the withdrawals can also be systematically offset, creating a tax-free income stream drawn from equity growth. Assuming a 4% annual withdrawal rate, investors can potentially double retirement income (4% versus the original 2%). Any growth beyond 4% remains invested, compounding tax-deferred and hedging against future inflation.
🏆 The Bottom Line
Importantly, none of this requires chasing hot sectors, reaching for yield, or locking up capital in illiquid investments. It’s simply about restructuring the stocks and bonds you already own, maximizing tax efficiency, and unlocking hidden wealth.
If your wealth plan isn’t generating tax benefits, you are doing it wrong. Because a truly sophisticated wealth plan doesn’t just grow assets—it maximizes after-tax net worth. Anything less leaves money on the table.
Recently, we’ve shown how advanced planning techniques can help stock and real estate investors reduce—or even eliminate—capital gains taxes at liquidation. This applies whether you’re selling a growth stock, primary residence, or exiting a 1031 exchange.
But it can also apply to basic retirement planning.
📉 The Traditional Playbook Falls Short
For retirees that need to shift focus from growth to income, the traditional
playbook falls short (selling appreciated stock, paying capital gains taxes, reinvesting net proceeds into bonds). Consider a hypothetical investor whose stock account tripled over the last decade. Now ten-years older, they want to reposition into safer income-producing assets. But if they are subject to a 30% capital gains tax rate, they’d lose 20% of the account to taxes. Reinvesting net proceeds into a bond portfolio yielding ~2.5% after taxes provide a mere 2.0% return on the original investment.
Hardly a cushion against future inflation.
âś… The Alternative
With proper planning, capital gain offsets can accrue over time, allowing the
portfolio to be repositioned without the 20% tax drag—which allows 100% of the portfolio to be invested at 2.5% increasing take-home income by 25% (from 2.0% to 2.5%).
Better—but still modest.
đź”’ Enter Principal Protected ETFs
What if there were an asset with the safety of bonds but without the tax drag? Enter Principal Protected ETFs. These tax efficient investments provide a portion of the upside of the stock market in exchange for near zero downside.
By selling and sending home the annual appreciation when needed, investors control the timing of income (and taxes) while benefitting from more favorable capital gains rates. While not a great growth strategy, these ETFs are a solid bond replacement—especially given tax treatment.
đź’ˇ The hashtag#MuniEquity Strategy:
Adding one more step, with further planning, the realized gains on the withdrawals can also be systematically offset, creating a tax-free income stream drawn from equity growth. Assuming a 4% annual withdrawal rate, investors can potentially double retirement income (4% versus the original 2%). Any growth beyond 4% remains invested, compounding tax-deferred and hedging against future inflation.
🏆 The Bottom Line
Importantly, none of this requires chasing hot sectors, reaching for yield, or locking up capital in illiquid investments. It’s simply about restructuring the stocks and bonds you already own, maximizing tax efficiency, and unlocking hidden wealth.
If your wealth plan isn’t generating tax benefits, you are doing it wrong. Because a truly sophisticated wealth plan doesn’t just grow assets—it maximizes after-tax net worth. Anything less leaves money on the table.
