October 17, 2025 • 11 mins
"Hey Mike, which is more important, portfolio growth or tax minimization?"
Discover how tax minimization could get in the way of growing your wealth and why you may need to find the right balance for your specific situation.
Text your questions to 913-363-1234.
Request Your Wealth Analysis by going to www.retireontime.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to How to Retire On Time, a show that answers
your retirement questions. We'rehere to move past that
oversimplified advice and getinto the nitty gritty. As
always, text your questions to(913) 363-1234. Again, (913)
363-1234. And remember, thisshow is just a show.
It's not financial advice, somake sure you do your research.
David, what do we got today?
David (00:27):
Hey, Mike. Which is more important, portfolio growth or
tax minimization?
Mike (00:33):
Notice the paradoxical balance. Finance is very
paradoxical.
David (00:38):
Okay. Yeah. What do you mean by that?
Mike (00:40):
You can have two seemingly contradictory objectives, when
brought together, can create agenuine strength.
David (00:46):
Okay.
Mike (00:46):
So if you want lower taxes, don't spend money, take
the lowest income possible inyour retirement, and just kick
that tax can down the road aslong as you can. Right. That
doesn't sound very fun. Yeah.And then growth, when I first
started in the business, whetherit was a qualified account or if
it was a nonqualified account,like a brokerage account, It
(01:09):
was, hey, we're gonna trade thisand grow it as much as you can,
and forget about the taxramifications, because the
reality is you should bethanking us for paying taxes
because you've grown your money.
Very, very ignorant. So let'sbreak this down a little bit.
Okay? And I wanna I wanna do alittle bit of a confession. This
isn't like a hidden secret here,at least in our office with
(01:29):
people we talk about, but it's aconfession because it goes
against everything I was taughtto believe as I was brought up
in the industry.
David (01:37):
Okay.
Mike (01:39):
The confession is the amount of work, in my opinion,
it takes to run a properportfolio is a lot less work
than I think people realize. Andlet me explain that.
David (01:52):
Okay.
Mike (01:53):
Let's say we've got a 100 clients versus a thousand
clients. So there's a differentvolume. It's the same amount of
work to manage the portfolio.Whether it's one person, whether
it's a team of people, it's thesame amount of work to manage
the portfolio, because it'sinfinitely applicable to all of
the different clients. A 100clients versus a thousand
clients.
David (02:11):
Okay.
Mike (02:12):
With me so far?
David (02:12):
Okay. Yes. Same amount of work to maintain the portfolio
for either Because they're
Mike (02:16):
all in the same portfolio or portfolios.
David (02:19):
Okay.
Mike (02:20):
Now every single client has a different tax situation.
So in my opinion, as I'veevolved over my career and had
this enlightenment or awakening,it was a very rude awakening,
most of our job, most of ourtime here at least at Kedrick
Wealth is spent on tax planning,not growth. Notice how that's
(02:43):
like people think they're payingus, paying the adviser to grow
your assets. And most people arepaying a percentage of assets,
this participation award, 1% ofyour assets, because that's but
it's the same amount of work forthem. They're probably not doing
a custom portfolio for everysingle client.
There's no way that could bedone well.
David (03:03):
Right.
Mike (03:03):
No way.
David (03:04):
Well, there's not enough time in the day to research each
person's preferences or riskYeah.
Mike (03:11):
Average portfolio for someone today, not just in
retirement, but in general, itmight be like 150,000.
David (03:18):
Okay.
Mike (03:19):
So not much money every year. A $151,500 to, like, what,
manage someone's portfolio fulltime with a custom? Either
you're you're not doing theappropriate amount of research,
and you're just winging it, oryou're losing money, and you
can't sustain a life. You can'tearn enough money for a living.
(03:42):
So everyone has to go intocertain portfolios.
Growth is very, very important.But when people come to the year
and they say, well, hey. What'sthe fee really get me? Usually,
it's, okay. What's the net offee performance?
And that's an important metric.If you were to do a buy and hold
portfolio that you manageyourself versus an adviser who's
managing it for you, could theadviser get a better
(04:05):
performance? We don't wannapromise performance, but do you
believe their time, their duediligence, their systems, their
algorithms, their models,whatever they're doing, could
that do better for you Netafizthan on your own? That is a fair
question.
David (04:18):
Yeah.
Mike (04:19):
But in my mind, the performance is such an
insignificant comparisoncompared to the amount of money
they're able to save in taxes,or in the growth of tax
efficiency in making sure you'reputting the right investments
for tax efficiency or inretirement, how to take your
money out tax efficiently. Mhmm.So for example, it might be
(04:40):
like, let's have our portfoliosor our you know, you're gonna
take a little bit from here,little bit there, a little bit
there. And when you're takingyour income and you pay taxes,
you have to pay taxes. That'sjust what it is.
Yeah. Well, for us, it's like,okay. Next year, based on the
growth of the portfolio, we'regonna take x amount of money
from here. We're gonna delayyour Social Security one more
year, and we're only gonna takeit from these positions. They've
(05:00):
grown a lot, but you need abouta 100,000, a 150,000 or so.
If we take it out just fromthese two positions, that's
gonna help better diversify yourportfolio, because you had some
inherited stocks. When I sayinherited stocks, I mean like
your pet stocks, your Amazon,you work for Amazon, your
Microsoft, you work forMicrosoft. So you've got, you're
distorted into one position or acouple of positions. Right.
(05:20):
We're gonna take all your incomefrom these two sources, and you
basically have tax free incomenext year.
So we're gonna delay your SocialSecurity one more year. We're
gonna delay your IRA to Rothconversions one more year, and
they're all gonna be able tocontinue to grow, and now you
don't pay any more taxes. Theripple effect of just that one
year, you didn't pay any taxes.You've got more assets that are
(05:41):
staying in your IRA. It's easierto grow more money when there's
more dollars in the account,because let's say 6% of a
million dollars has more dollarsthan in your account than 6% of
800,000.
Your Social Security continuesto grow. That doesn't get in the
way of the tax efficiency oflong term capital gains. Tax
planning is the biggest part offinancial management, in my
(06:02):
opinion. When you're paying youradviser, that money you're
paying, whether it's, I don'tknow, 1%, well, it's $10,000 a
year. Yeah.
If you're not getting theextensive tax plan on how to get
more of your money throughtaxes, what are you paying them
for? Sure. Because at the end ofthe day, there's kind of a fixed
cost of managing a portfolio inmy opinion based on what I've
seen other advisers do.
David (06:23):
That fixed cost is what just how much does it cost to
research what positions this
Mike (06:28):
team is with? Their salary? And maybe they're
commission based. Okay. Well,how much money do you really
need to do the job?
Uh-huh. Could you find a quantto pay them a fixed salary and
do the same amount of work?Here's an example. Let's say
you've got a million dollars,and you're currently paying your
adviser $10,000 a year.
David (06:43):
Okay.
Mike (06:44):
So $10,000 a year. What if you had you and nine other
friends, so there's 10 of you,and you all got together and
say, well, what if we just paidsomeone a $100,000 a year, and
they just did research, and weall just took their research and
did it ourselves? What if youtook your $10,000 a year, and
you just paid a couple ofsubscriptions at $2,000 a year,
and you took that research tomanage it on your own? You could
(07:06):
easily cut out advisers with theamount of research that's
available to you. The realityis, in my opinion, yes, I'm very
proud of our models.
I'm very proud of the researchwe do internally and
independently on how to managemoney. Very proud of that. But
when I look at the fee thatpeople pay us, I think it's more
about the tax planning, the taxmanagement, the tax filing, the
(07:28):
tax minimization. It's theunderstanding of bringing the
investment advice, the insuranceadvice, and the tax advice under
one umbrella. Taxes, I think, isthe biggest part of the
conversation.
And when people say, well, we'regonna pay you, you know, x
amount of money a month at theflat subscription rate that we
do to get more of your money.Usually, it's like it's less
(07:50):
money than their 1%, whichthat's a good situation. But
it's like, okay. Well, this fee,great. You paid x amount of
money a year for it, and we justsaved you $10.20, $30,000 at
least in taxes.
Everyone's situation is gonna bedifferent. Some people might not
have as much savings. Somepeople might be more. But I
think the taxes, if you're gonnapay for a service, if you're
(08:14):
gonna pay for an adviser, thatis what you should be paying for
and more focused on thananything else, is the tax
efficiency. Yeah.
And the problem is many CPAs arereally just glorified tax
preparers. Uh-huh. They're notgiving you investment advice
because they can't. Right.They're not like you.
David (08:34):
So to the answer to the question, we might lean towards
tax minimization being moreimportant than just portfolio
growth.
Mike (08:41):
Yeah. I mean, Warren Buffett's model is the most
honest model I think that's outthere. They're not an ETF.
They're not a mutual fund,really. They're a holding
company.
Warren Buff and his research,he's had a flat salary every
year. They're just trying togrow their wealth. Uh-huh. It's
a very different fee structureif you really dive into it.
Right.
So I think there needs to be achange in how financial advisers
(09:05):
that work with individuals arecharging fees. That's my
personal belief. I understandexpense ratios because the
volume they have to move assets.That that is complicated.
Expense ratios on a percentage,that makes all the sense in the
world.
When you were talking to anadviser, you've got an
independent practice, and thenthey got their models. You just
(09:25):
have to kind of ask themquestions. Yeah. I think it's
very good. I'm biased in this towork with a professional who's
gonna ask questions you may notknow to ask as long as they have
the additional scope of not justinvestments, not just growing
your wealth, not just trying tocreate more money, not trying to
help you get rich, but also theinsurance and the taxes.
(09:46):
If it's not that cohesiveconversation, then I would ask
questions. Mhmm. We'll leave itat that. I don't wanna disparage
anyone. We'll just leave it atthat.
So if you're not getting thiskind of tax advice, if you're
not getting in-depthconversations on how to pull
your money out each year taxefficiently, if you're not able
(10:07):
to dynamically adjust thingsbased on the tax consequences as
well as the investment growth.You wanna grow your money. You
wanna grow your assets. You wantthat flexibility. You want that
all makes sense.
But if you're not having thatkind of conversation, and it
should be in my opinion at leasttwice a year, I would encourage
you to explore other options andlet Kedrick Wealth be one of
(10:27):
them. That's all the time we'vegot for the show today. If you
enjoyed the show, considersubscribing to it wherever you
get your podcasts. Just searchfor how to retire on time.
Discover if your portfolio isbuilt to weather flat market
cycles or if you're missing taxminimization opportunities that
you may not even know exist.
Explore strategies that may beable to help you lower your
(10:48):
overall risk while potentiallyincreasing your overall growth
and lifestyle flexibility. Thisis not your ordinary financial
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date, go towww.yourwealthanalysis.com today
to learn more and get started.
Welcome to How to Retire On Time, a show that answers
your retirement questions. We'rehere to move past that
oversimplified advice and getinto the nitty gritty. As
always, text your questions to(913) 363-1234. Again, (913)
363-1234. And remember, thisshow is just a show.
It's not financial advice, somake sure you do your research.
David, what do we got today?
David (00:27):
Hey, Mike. Which is more important, portfolio growth or
tax minimization?
Mike (00:33):
Notice the paradoxical balance. Finance is very
paradoxical.
David (00:38):
Okay. Yeah. What do you mean by that?
Mike (00:40):
You can have two seemingly contradictory objectives, when
brought together, can create agenuine strength.
David (00:46):
Okay.
Mike (00:46):
So if you want lower taxes, don't spend money, take
the lowest income possible inyour retirement, and just kick
that tax can down the road aslong as you can. Right. That
doesn't sound very fun. Yeah.And then growth, when I first
started in the business, whetherit was a qualified account or if
it was a nonqualified account,like a brokerage account, It
(01:09):
was, hey, we're gonna trade thisand grow it as much as you can,
and forget about the taxramifications, because the
reality is you should bethanking us for paying taxes
because you've grown your money.
Very, very ignorant. So let'sbreak this down a little bit.
Okay? And I wanna I wanna do alittle bit of a confession. This
isn't like a hidden secret here,at least in our office with
(01:29):
people we talk about, but it's aconfession because it goes
against everything I was taughtto believe as I was brought up
in the industry.
David (01:37):
Okay.
Mike (01:39):
The confession is the amount of work, in my opinion,
it takes to run a properportfolio is a lot less work
than I think people realize. Andlet me explain that.
David (01:52):
Okay.
Mike (01:53):
Let's say we've got a 100 clients versus a thousand
clients. So there's a differentvolume. It's the same amount of
work to manage the portfolio.Whether it's one person, whether
it's a team of people, it's thesame amount of work to manage
the portfolio, because it'sinfinitely applicable to all of
the different clients. A 100clients versus a thousand
clients.
David (02:11):
Okay.
Mike (02:12):
With me so far?
David (02:12):
Okay. Yes. Same amount of work to maintain the portfolio
for either Because they're
Mike (02:16):
all in the same portfolio or portfolios.
David (02:19):
Okay.
Mike (02:20):
Now every single client has a different tax situation.
So in my opinion, as I'veevolved over my career and had
this enlightenment or awakening,it was a very rude awakening,
most of our job, most of ourtime here at least at Kedrick
Wealth is spent on tax planning,not growth. Notice how that's
(02:43):
like people think they're payingus, paying the adviser to grow
your assets. And most people arepaying a percentage of assets,
this participation award, 1% ofyour assets, because that's but
it's the same amount of work forthem. They're probably not doing
a custom portfolio for everysingle client.
There's no way that could bedone well.
David (03:03):
Right.
Mike (03:03):
No way.
David (03:04):
Well, there's not enough time in the day to research each
person's preferences or riskYeah.
Mike (03:11):
Average portfolio for someone today, not just in
retirement, but in general, itmight be like 150,000.
David (03:18):
Okay.
Mike (03:19):
So not much money every year. A $151,500 to, like, what,
manage someone's portfolio fulltime with a custom? Either
you're you're not doing theappropriate amount of research,
and you're just winging it, oryou're losing money, and you
can't sustain a life. You can'tearn enough money for a living.
(03:42):
So everyone has to go intocertain portfolios.
Growth is very, very important.But when people come to the year
and they say, well, hey. What'sthe fee really get me? Usually,
it's, okay. What's the net offee performance?
And that's an important metric.If you were to do a buy and hold
portfolio that you manageyourself versus an adviser who's
managing it for you, could theadviser get a better
(04:05):
performance? We don't wannapromise performance, but do you
believe their time, their duediligence, their systems, their
algorithms, their models,whatever they're doing, could
that do better for you Netafizthan on your own? That is a fair
question.
David (04:18):
Yeah.
Mike (04:19):
But in my mind, the performance is such an
insignificant comparisoncompared to the amount of money
they're able to save in taxes,or in the growth of tax
efficiency in making sure you'reputting the right investments
for tax efficiency or inretirement, how to take your
money out tax efficiently. Mhmm.So for example, it might be
(04:40):
like, let's have our portfoliosor our you know, you're gonna
take a little bit from here,little bit there, a little bit
there. And when you're takingyour income and you pay taxes,
you have to pay taxes. That'sjust what it is.
Yeah. Well, for us, it's like,okay. Next year, based on the
growth of the portfolio, we'regonna take x amount of money
from here. We're gonna delayyour Social Security one more
year, and we're only gonna takeit from these positions. They've
(05:00):
grown a lot, but you need abouta 100,000, a 150,000 or so.
If we take it out just fromthese two positions, that's
gonna help better diversify yourportfolio, because you had some
inherited stocks. When I sayinherited stocks, I mean like
your pet stocks, your Amazon,you work for Amazon, your
Microsoft, you work forMicrosoft. So you've got, you're
distorted into one position or acouple of positions. Right.
(05:20):
We're gonna take all your incomefrom these two sources, and you
basically have tax free incomenext year.
So we're gonna delay your SocialSecurity one more year. We're
gonna delay your IRA to Rothconversions one more year, and
they're all gonna be able tocontinue to grow, and now you
don't pay any more taxes. Theripple effect of just that one
year, you didn't pay any taxes.You've got more assets that are
(05:41):
staying in your IRA. It's easierto grow more money when there's
more dollars in the account,because let's say 6% of a
million dollars has more dollarsthan in your account than 6% of
800,000.
Your Social Security continuesto grow. That doesn't get in the
way of the tax efficiency oflong term capital gains. Tax
planning is the biggest part offinancial management, in my
(06:02):
opinion. When you're paying youradviser, that money you're
paying, whether it's, I don'tknow, 1%, well, it's $10,000 a
year. Yeah.
If you're not getting theextensive tax plan on how to get
more of your money throughtaxes, what are you paying them
for? Sure. Because at the end ofthe day, there's kind of a fixed
cost of managing a portfolio inmy opinion based on what I've
seen other advisers do.
David (06:23):
That fixed cost is what just how much does it cost to
research what positions this
Mike (06:28):
team is with? Their salary? And maybe they're
commission based. Okay. Well,how much money do you really
need to do the job?
Uh-huh. Could you find a quantto pay them a fixed salary and
do the same amount of work?Here's an example. Let's say
you've got a million dollars,and you're currently paying your
adviser $10,000 a year.
David (06:43):
Okay.
Mike (06:44):
So $10,000 a year. What if you had you and nine other
friends, so there's 10 of you,and you all got together and
say, well, what if we just paidsomeone a $100,000 a year, and
they just did research, and weall just took their research and
did it ourselves? What if youtook your $10,000 a year, and
you just paid a couple ofsubscriptions at $2,000 a year,
and you took that research tomanage it on your own? You could
(07:06):
easily cut out advisers with theamount of research that's
available to you. The realityis, in my opinion, yes, I'm very
proud of our models.
I'm very proud of the researchwe do internally and
independently on how to managemoney. Very proud of that. But
when I look at the fee thatpeople pay us, I think it's more
about the tax planning, the taxmanagement, the tax filing, the
(07:28):
tax minimization. It's theunderstanding of bringing the
investment advice, the insuranceadvice, and the tax advice under
one umbrella. Taxes, I think, isthe biggest part of the
conversation.
And when people say, well, we'regonna pay you, you know, x
amount of money a month at theflat subscription rate that we
do to get more of your money.Usually, it's like it's less
(07:50):
money than their 1%, whichthat's a good situation. But
it's like, okay. Well, this fee,great. You paid x amount of
money a year for it, and we justsaved you $10.20, $30,000 at
least in taxes.
Everyone's situation is gonna bedifferent. Some people might not
have as much savings. Somepeople might be more. But I
think the taxes, if you're gonnapay for a service, if you're
(08:14):
gonna pay for an adviser, thatis what you should be paying for
and more focused on thananything else, is the tax
efficiency. Yeah.
And the problem is many CPAs arereally just glorified tax
preparers. Uh-huh. They're notgiving you investment advice
because they can't. Right.They're not like you.
David (08:34):
So to the answer to the question, we might lean towards
tax minimization being moreimportant than just portfolio
growth.
Mike (08:41):
Yeah. I mean, Warren Buffett's model is the most
honest model I think that's outthere. They're not an ETF.
They're not a mutual fund,really. They're a holding
company.
Warren Buff and his research,he's had a flat salary every
year. They're just trying togrow their wealth. Uh-huh. It's
a very different fee structureif you really dive into it.
Right.
So I think there needs to be achange in how financial advisers
(09:05):
that work with individuals arecharging fees. That's my
personal belief. I understandexpense ratios because the
volume they have to move assets.That that is complicated.
Expense ratios on a percentage,that makes all the sense in the
world.
When you were talking to anadviser, you've got an
independent practice, and thenthey got their models. You just
(09:25):
have to kind of ask themquestions. Yeah. I think it's
very good. I'm biased in this towork with a professional who's
gonna ask questions you may notknow to ask as long as they have
the additional scope of not justinvestments, not just growing
your wealth, not just trying tocreate more money, not trying to
help you get rich, but also theinsurance and the taxes.
(09:46):
If it's not that cohesiveconversation, then I would ask
questions. Mhmm. We'll leave itat that. I don't wanna disparage
anyone. We'll just leave it atthat.
So if you're not getting thiskind of tax advice, if you're
not getting in-depthconversations on how to pull
your money out each year taxefficiently, if you're not able
(10:07):
to dynamically adjust thingsbased on the tax consequences as
well as the investment growth.You wanna grow your money. You
wanna grow your assets. You wantthat flexibility. You want that
all makes sense.
But if you're not having thatkind of conversation, and it
should be in my opinion at leasttwice a year, I would encourage
you to explore other options andlet Kedrick Wealth be one of
(10:27):
them. That's all the time we'vegot for the show today. If you
enjoyed the show, considersubscribing to it wherever you
get your podcasts. Just searchfor how to retire on time.
Discover if your portfolio isbuilt to weather flat market
cycles or if you're missing taxminimization opportunities that
you may not even know exist.
Explore strategies that may beable to help you lower your
(10:48):
overall risk while potentiallyincreasing your overall growth
and lifestyle flexibility. Thisis not your ordinary financial
analysis. Learn more about YourWealth Analysis and what it
could do for you regardless ofyour age, asset, or target
retirement date, go towww.yourwealthanalysis.com today
to learn more and get started.
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