Building wealth is often framed as a matter of earning more, investing wisely, and cutting unnecessary spending. But tax planning can be just as important, especially for households trying to preserve more of what they make and grow assets more efficiently over time. Despite that, many Americans still appear to be underprepared when it comes to shaping their financial plans around future tax exposure.
That gap is becoming more significant as investors think about retirement, rising tax concerns, and the role of workplace benefits in long term planning. A recent survey from the Nationwide Retirement Institute found that while 80% of Americans expect taxes to rise in the future, only 31% of that group are adjusting their financial plans in response. Another 17% of investors said uncertainty around the best tax strategies for their portfolio is one of their main retirement planning concerns.
The issue is not simply about filing taxes more efficiently once a year. It is about making smarter decisions throughout the year, from how income is sheltered to where investments are held and when gains, losses, or conversions are triggered. Used correctly, those moves can strengthen both near term cash flow and long range wealth preservation.
Workplace accounts can reduce taxable income
For many workers, the most accessible tax strategies begin with employer sponsored plans. In 2026, employees can contribute up to $24,500 on a pretax basis to a 401(k) or 403(b), reducing taxable income while building retirement savings. Workers age 50 and older can contribute another $8,000 in catch up contributions, while those between ages 60 and 63 can make a super catch up contribution of as much as $11,250.
These accounts provide tax deferral, meaning the money is generally taxed when withdrawn in retirement rather than when earned. That can help households reduce current taxable income and potentially keep more earnings from moving into higher brackets. There is, however, an important rule for higher earners. Employees who made more than $150,000 from their current employer in 2025 must place catch up contributions into an after tax Roth account, which changes the tax treatment by eliminating tax on qualified withdrawals later.
Health related workplace accounts can also play a meaningful role. Health savings accounts allow people with high deductible health plans to contribute money before taxes, invest those funds, and later use them for qualified medical expenses. That combination of pretax contributions, tax advantaged growth, and tax free withdrawals for eligible costs makes HSAs one of the more flexible planning tools available. Those who are not eligible for an HSA may still benefit from flexible spending accounts. For 2026, health care FSAs allow up to $3,400 in contributions, while dependent care FSAs have a household limit of $7,500.
Asset location can shape after tax returns
Tax planning is not only about how much gets contributed, but also about where investments are placed. That decision, often called asset location, can have a major impact on after tax returns. Investments that generate income taxed at ordinary income rates are often better suited to tax deferred retirement accounts such as IRAs, where those annual tax consequences are muted.
That matters because ordinary income rates are typically higher than capital gains rates. By contrast, investments that are generally more tax efficient, including stock exchange traded funds and municipal bonds, may be better suited for taxable accounts. These assets often produce less tax friction, making them more appropriate for accounts that do not have retirement tax sheltering.
Roth IRAs serve yet another purpose in this framework. Because Roth accounts are funded with money that has already been taxed, qualified withdrawals later are tax free. That makes them an attractive home for assets with strong growth potential. Over a long period, placing high growth investments in a Roth can create a pool of wealth that compounds without future tax drag, a feature that becomes especially valuable for younger investors or anyone with a lengthy time horizon.
Volatility can create tax opportunities
Market declines are often seen only as setbacks, but they can also create useful tax planning openings. Tax loss harvesting allows investors to sell investments that have declined in value in order to offset capital gains elsewhere in the portfolio. If losses exceed gains, up to $3,000 can be deducted against ordinary income.
While many investors think of tax loss harvesting as a year end tactic, volatile markets can make it relevant throughout the year. Pullbacks can create short term loss opportunities that help offset gains from appreciated holdings, particularly in portfolios with concentrated positions. Used carefully, the strategy can improve after tax outcomes without requiring a major change in long term investment direction.
Roth conversions are another timing based decision that can be especially useful in lower income years. Converting money from a traditional IRA into a Roth IRA creates a tax bill at the time of conversion, but future qualified withdrawals are tax free. For some investors, that trade off becomes more appealing after retirement, during a sabbatical, or in a year when income temporarily falls. High earners who have already maxed out their 401(k) may also look to a mega backdoor Roth strategy. In 2026, the total 401(k) contribution limit is $72,000, creating additional room for after tax contributions and possible Roth transfers when a plan allows it.
Giving strategies can also lower tax exposure
Charitable planning can be another effective tax tool, especially for investors holding assets with large unrealized gains. Donor advised funds allow people to make tax deductible charitable contributions using cash or appreciated assets, then distribute those donations over time. This approach can be especially appealing for people who want to support charitable causes while also reducing tax exposure.
Using appreciated shares instead of cash can be particularly powerful. When highly appreciated stock or mutual fund holdings are donated through a donor advised fund, the investor may receive a deduction while also avoiding the capital gains tax that would have applied if the asset had been sold first. That can be especially relevant for employees or executives who hold company stock that has risen sharply in value over time.
The broader lesson is that tax planning should not be treated as a side issue once investing decisions are already made. For many households, the most effective wealth strategy is not just about chasing returns, but about structuring income, accounts, and contributions in ways that reduce unnecessary tax costs over years and even decades. As more Americans say they expect taxes to rise, the divide may increasingly grow between those who plan for that future and those who simply react to it.
