How Can You Plan Beyond Next Year's Tax Bill?

**Mark Riepe** (0:10)
I'm Mark Riepe, I head up the Schwab Center for Financial Research, and this is Financial Decoder, an original podcast from Charles Schwab. It's a show about financial decision-making and the cognitive and emotional biases that can cloud our judgment.
This podcast focuses on decisions because decisions are important. To paraphrase Albert Camus, life is the sum of all your decisions. I'm not sure that's entirely true, but it sounds good and is true enough. But problems arise when we go through life making one decision or one choice at a time and we make those decisions in isolation. Maybe they don't seem to be related, but if you believe what Camus said, they are. You can see this play out when you play a game of checkers with little kids. Once they learn the basic rules and start playing independently, they very much play one move at a time. Eventually, they learn to think ahead and play more strategically. They start to think about how their opponent will react to their move and how they in turn will react to the opponent's move. In other words, they start to appreciate that every move affects to some degree all other moves in the game. Your financial life is the same way. Don't make a decision as if it's independent of everything else going on in your life.
Stop and think a bit about where you are and where you want to get to, then put together a plan to get there, and then make decisions based on that plan.
This all seems obvious, but when it comes to taxes, which is what we are going to be talking about today, often we make decisions in isolation. A lot of us avoid thinking about taxes as much as we can, but that can't go on forever. We hit a deadline, like April 15th. Some of us who have a more advanced grip on our tax situation know we have to get our tax ducks in a row earlier, and we end up scrambling at the end of December. That's better, but still not great. In either case, we get really interested in make a bunch of rushed, stressed out decisions driven by our goal to minimize how much we pay in taxes. What's going on in many cases is we confuse filling out tax forms and hitting deadlines with tax planning. My guest today thinks we should approach taxes differently because nearly all financial decisions have tax implications, and if we keep taxes in mind when planning and investing, we're going to be better off. And as we'll hear, there's a lot you can do to help improve your tax situation. Hayden Adams is the Director of Tax Planning and Wealth Management Research at the Schwab Center for Financial Research. He's been with Schwab for more than a decade and provides insights on tax planning, tax-efficient investing, and many other tax-related topics. Hayden is a certified public accountant and a certified financial planner.
Hayden, a lot of times we tell people on the investing side to don't just buy one security at a time. You really need to think about what you're trying to accomplish. Think about your overall portfolio. And it occurs to me that when we start thinking about taxes, people often think about taxes as something that they just deal with once a year, and it's just kind of a pain and something they just want to get done. From a planning standpoint, what do you think about that mindset? I mean, is that a good way of approaching it, or is that overly limiting?

**Hayden Adams** (3:17)
It's definitely an overly limiting mindset. I mean, honestly, there's just not that much you can do during tax season to reduce your taxes and do any kind of significant tax planning. I mean, yes, you can contribute to, say, an IRA account or maybe a health savings account if you have that option available to you, but other than that, there's not really a lot of options for the vast majority of people. So my recommendation is to make tax planning a long-term focus.
Make it something that you do annually, not just during tax season. That's tax preparation. What we should be focused on is tax planning throughout the year. For example, right now we're in tax season, but you may want to be talking to your advisor right now about what can I do for 2026 to help reduce my taxes this year? Because you have a lot of options available to you right at this very moment. And that's something you should revisit annually and keep a longer-term focus, not making decisions just for today, but for your whole lifespan during that accumulation phase, during the phase where you make distributions. And then finally, if you plan to pass on assets to your heirs or to a charity.