In the accumulation phase of life, you were saving. But, if you’re at the distribution phase now, you are drawing down your retirement assets.
“How you spend your retirement dollars in retirement IS JUST AS IMPORTANT as when you were accumulating them.”
If you don’t have a plan for maximizing your withdrawal strategies, then you will potentially be paying more in taxes in retirement than you think. Required Minimum Distributions (RMD) and Social Security can drive up taxable income starting at age 70 (increases for this coming).
For more on this topic, “How to Pay Fewer Taxes in Retirement” can be read here https://www.commonfinancialsense.com/2018/01/09/pay-fewer-taxes-retirement/
Has your CPA or advisor shown you what a Tax Efficient Distribution Strategy looks like? If not, why?
The complexity of this topic has made it difficult for the average advisor to effectively deliver the message to their clients or potential clients.
The problem is that a lot of firms are handling this situation poorly. Not all retirement savings assets are equal from a taxability standpoint:
- Taxable
- Tax Deferred
- Tax Free
A comprehensive retirement plan should illustrate:
- Which Accounts Money Should Be Taken From
- In What Order
- What Conversion Opportunities Exist to Maximize Efficiency
There are 3 drawdown strategies to consider.
- Pro Rata Strategy – Withdraw from taxable, tax deferred, and tax-free accounts proportionally. (Not optimal in most cases)
- Sequential Strategy – Withdraw from taxable accounts first; then tax deferred accounts; lastly tax free. The classic approach.
- Sequential with Roth Conversion Strategy – Withdraw from taxable accounts first; then tax deferred accounts; lastly tax free. Roth conversions are executed to take advantage of periods of lower tax brackets. *
For More Details About This Chart Schedule a Phone Call at info@commonfinancialsense.com
As “baby boomers” transition to retirement, executing a smart tax efficient distribution strategy will potentially help so you can grow your retirement assets faster by allowing them to remain invested rather than used to pay unnecessary taxes in retirement.
If you don’t want to face the future alone and would like to make changes with your retirement strategy and NOT pay extra taxes in retirement, please call us at 630-810-9100.
Quote: “The Right Price for Anything You Value Would Never Be Zero.”
Thank you for reading and sharing.
Scott Krase
P.S. The video on Tax Efficient Distribution Strategies can be viewed here commonlinancialsense.com/videos
This material is intended for internal educational purposes only and is not meant for general distribution. The information in this publication is general in nature and subject to change. RCM Wealth Advisors do not provide legal and tax advice. Applicable laws and regulations are complex and subject to change.
Investment advisory services offered through RCM Wealth Advisors, an SEC Registered Investment Adviser. SEC registration does not imply any level of skill or training. CrossPoint Wealth, LLC.
