U.S. tax laws are complex. Spending my time and energy thinking about complicated tax schemes ranks right up there with having dental work done. . . without novocaine.
However, mistakes I made early in my career made me realize that totally ignoring tax planning is an expensive mistake. Taxes are a major detriment to building wealth. Tax planning is a necessity for those looking to quickly build wealth to enable early retirement.
It’s easy to be overwhelmed by stories like this one, reporting that the tax code has doubled since 1955 and is approximately 6,550 pages long. Fortunately, tax planning doesn’t need to be complicated.
Each of us needs to find the portions of the tax code that apply to our individual situation. We can then learn to control the things we can control while ignoring the vast majority of the law which doesn’t apply to us.
One of the easiest and most effective things you can do when saving and investing for retirement is to use tax advantaged accounts. It’s important to develop a framework for how to use these accounts to build up and then spend down wealth in the most tax efficient way possible.
