It's All About Planning

Many people don’t know all their options when it comes to tax planning.

And therefore, I tell my clients that I must work with their CPAs to ensure that I can give them the highest income possible while paying the least amount of taxes.

I see different areas of tax planning that my clients need to know about:

Required Minimum Distribution (RMD). For those who are 72 ½ or older, any qualified money (meaning accounts that have never had taxes paid – IRA, 401k, 403(b), or any defined contribution plan), you must take a distribution even if you don’t need the money. If you have an IRA and a 401k, an RMD must be taken from both accounts. Now what to do with that money you don’t need? Many options can enhance your portfolio for the unknown; long-term care needs or sudden death and subsequent loss of income to the surviving spouse. And doing so, when done correctly, they can lower their taxes with a write-off.

Taking more income out of your IRA without paying more taxes. This method is called “Tax Bracketing”; working alongside your CPA, we can see how much more income we can pull out for you without increasing your tax base.

Roth Conversion. This is something many are considering with their IRAs. With the increase of taxes on the horizon, many of my clients are looking to pay taxes now instead of waiting later when taxes most likely will be higher. Better to pay the tax now than risk paying higher taxes later.

Beneficiary tax planning. Typically, clients have three buckets of money; one for income, one for emergencies or travel, and one for leaving behind to their children or charities. The problem with the 3rd bucket is that if it is qualified money (again, never been taxed), those who inherit the money must pay the taxes. Still, with the likelihood of taxes increasing,t will leave less money than originally intended. With proper planning, we can alleviate that. Using a tax-deferred annuity that offers either a 30% enhanced death benefit or the option to take the inheritance over a five or 7-year period can take care of the taxes or lessen the tax impact.

I want to drive home because, just like everything in life, planning is the key.

“Whether you are just entering the workforce or nearing retirement age, planning for the future is critical.” Ron Lewis

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