It's All About Planning

When it comes to tax planning, many people don’t know all their options.

And therefore, I tell my clients that it is imperative that I work with their CPA to make sure that I can give my clients 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 70 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? There are so many options that can enhance your portfolio for the unknown; long-term care needs or sudden death and subsequent loss of income to the surviving spouse. And in doing so, when done correctly, 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 that my clients are doing 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, my 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 that will leave less money then perhaps 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 5 or 7-year period can either take care of the taxes or lessen the tax impact.

The point I want to drive home is that 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