Tax-free Growth, Direct Indexing, and Proxy Votes

Nate Crosby |
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I typically avoid talking too much about investment products in our newsletter for the simple reason that not every investment is suitable for all investors. The investments any investor owns should be chosen to help them accomplish their individual goals. With that said, clients often ask what are the most common types of products or strategies that we are implementing right now? 

  1. Direct Indexing: Direct indexing has become a game changer for non-IRA accounts. If you have a non-qualified account (individual or joint) this may become your best friend. Direct indexing allows us to track the performance of the S&P 500 within a predetermined targeted tracking error that you can select, but you get the benefit of significant tax savings through continuous tax loss harvesting. The way it works is we buy approximately 80 individual S&P 500 stocks, and we use a combination of SEI software and human management to micro-harvest losses throughout the year. SEI reported that the average tax savings in 2025 was 4%. Direct indexing can provide performance similar to the S&P 500 but with potentially thousands of dollars in tax savings. It is also a great tool for unwinding large holdings with significant capital gains.

*The amount of tax savings is largely dependent on the size of the account. Direct indexing is best used as part of your diversified investment strategy. 

  1. Contractual Growth: For conservative investors it is still possible to get a 5% or greater return on a contractual basis. Axonic Insurance provides a 2-year annuity that is at 5% and Midland National has a 5-year options over 5%. Interest is tax deferred until money is withdrawn. 

*Similar to CDs, a 2-year annuity provides contractual growth, but the investor must keep the money in the annuity for at least two years. Exceptions are 10% free withdrawals after year one and required minimum distributions for IRAs. 

  1. Moderate Tax-Free Growth with a Benefit: Some of you may think I’m a broken record but I’m a huge fan of using Midland National's Indexed Universal Life structured for cash accumulation to replace bonds held outside of IRAs. By thinking outside the box, we get four benefits that taxable bonds can’t provide:
    • *Tax free growth of cash that over a 10- and 30-year period that has surpassed the performance of investment grade bonds
    • There are options for withdrawing cash tax-free
    • You leverage a tax-free death benefit that is multiple times higher than the cash value
    • You can use the death benefit to pay for long-term care costs, which is a concern for most middle-class families. Index Universal Life policies can provide answers for holes in many financial plans. 

*Historic returns and indexing options are printed on all Midland National illustrations and are updated each year. Availability based on health and age. 

  1. Competitive Retirement Income: Nationwide has one of the most popular income annuities. Their New Heights annuity currently provides a 30% bonus upon deposit and grows the income base by 9.5% for every year you delay taking income. Best of all you only need to delay taking income for one year and payouts are higher than what can safely be provided by a managed investment account. 

*Note this product is not designed to take single lump sum distributions, it is designed to provide high, lifetime income. 

If you want to learn more about any of these products, respond to this email and we can set up a time to connect. 

Mohican Adventure 

A year ago, I figured I had at least one more summer with my oldest daughter who will be attending college next year. Then… she went and got a boyfriend. Don't worry, he doesn't read our newsletter, so we are free to talk about him. Now, if she is not at school or work, she is spending time with her boyfriend. 

There are a few silver linings though:

  1. He is a former Eagle Scout and a really nice young man
  2. He loves to hike
  3. She seems to really like him (which means I do too)

On the Saturday before Easter the three of us hopped in my car and we drove to Mohican State Park. We hiked roughly 12 miles that day and by the end I was certainly feeling 48, but we had a great time, and I ended up bringing him back home. For anyone heading there in the future I highly recommend the Mohican Market Cafe. I’m not 100% sure if it was because I was starving but I had what I believe to be one of the best sandwiches I’ve had in a long time. You can check it out here: https://mohicancountrymarket.com/ 

Ugg. Proxy Votes 

As a shareholder of a fund or security you have the right, but not an obligation, to make proxy votes. If you are annoyed at the amount of proxy votes you receive by mail or phone, you are not alone (including me). While your advisor can’t stop proxy votes, here are a few options you have: 

  • Vote. If you vote, the mail and phone calls will stop. Most of the time these proxies are for things like electing board members that nobody knows. There is typically a choice to abstain from voting, which just tells them that you received the proxy but are not interested in voting.
  • Ignore proxies. If you have no interest in voting and do not want to complete the form letting them know you are abstaining from voting, you can ignore their requests. This won’t immediately stop the mailings, but eventually the voting time will pass. If you are getting phone solicitations, you may also try blocking the number or answering and telling them you do not want to vote.

Give our office a call anytime if you have questions or want to learn more about specific products and services. 

 

 

 

Disclaimer: Crosby Advisory Group, LLC is a registered investment advisor. This newsletter is for general knowledge and is not intended to be individual investment advice. Investing involves risk including potential for loss. Understand all risk and fees before investing. NMD Insurance is affiliated with Crosby Advisory Group, LLC.