Now that tax season is over and returns have been filed, many clients may follow up with questions about what to do with their tax refund. We’ve put together a quick fact sheet outlining three potential avenues clients can use to put that money to work.
Here are three options for refund allocation.
1. Show clients the benefits of funding a retirement plan in a tax-efficient manner.
For individuals and business owners, we highly recommend turning refund checks into a more robust long-term savings account as part of an ongoing commitment to retirement funding.
- Solo or Group 401(k) (Traditional or Roth): Ideal for employees or business owners — either through their employer or by setting up a solo plan.
- SEP IRA: Perfect for self-employed clients or small business owners without employees.
- Cash Balance Plans: Cash Balance Plans offer a powerful solution for high-income business owners who are ready to contribute $100,000 or more annually, providing significant tax deferral benefits.
Now, each of these options can be tailored to your client’s business and income. Give us a call, and we’ll work together to get them started.
2. Recommend short-term investment opportunities.
For clients with more immediate goals or liquidity needs, consider the following investment strategies.
- Ai Core 40 Portfolio: A balanced, diversified strategy designed for both preservation and moderate growth. The portfolio will rebalance every 1-4 weeks based on AI signals, with a target volatility of 40% of the S&P 500.
- Direct Lending: An alternative income-generating solution with low market correlation. These middle-market loans have produced high income with limited downside risk during periods of volatility.
Business owners may need cash unexpectedly, so they are typically risk-averse, but also want their money to be working for them. We recommend bringing these options to your clients as the best of both worlds.
3. Bring long-term investments with room for growth to all clients.
Clients with an appetite for growth, regardless of their age, can use their refund to enter the market and potentially achieve excellent returns. Here are two strategies we use:
- AI Strategy: Uses two AI models to determine risk on/risk off and what ETFs perform best each week, given the current market conditions.
- HCM Buy Line Strategy: Designed to capitalize on market momentum, this approach utilizes an algorithm based on trends and data-driven signals.
Strategies and portfolios can be tailored to match the risk profiles of your clients. With active management, your clients can focus on their business instead of worrying about their investments.
Partner with Baker Wealth Strategies.
CPAs are their clients’ number one trusted source for financial advice, extending beyond advising on how to use their tax refund. Your clients come to you for more than just tax prep; they want strategic advice on what comes next. So, in a partnership with us, we make sure you’re the star of the show.
Here are a few ways we can help:
- Guide your clients through pre-tax vs. post-tax decisions
- Align investment strategies with their tax situation and goals
- Help you strengthen relationships and add more value without adding more hours
If you’re fielding questions like: “Should I invest my refund?” or “What’s the smartest tax-advantaged move right now?” Let’s get together. Schedule a call with us today to learn more about investment strategies or signature cash balance plans.
