Advisers Ramp Up Efforts to Create Tax-Conscious Retirement Withdrawal Strategies

Tax considerations are becoming a larger piece of the retirement income puzzle for clients, requiring advisers to work with accountants to create tax-conscious withdrawal strategies. When President Barack Obama signed the American Taxpayer Relief Act into law at the beginning of 2013, a whole new set of rules came into play for high net-worth clients. Managing those taxes becomes a key concern in retirement, as clients generally have a limited pot of assets. Money saved on taxes can be reinvested and can go toward extending the life of the nest egg. “What people need to be aware of is managing their tax brackets,” Mackey McNeil, a certified public accountant and chief executive of Mackey Advisors. “Managing taxes looks into the future.” Advisers and accountants need to identify points in time at which it may make sense to do a Roth conversion or to take more money out of an individual retirement account (IRA). Whether it’s wise to do so will depend on the client’s tax situation at that point in time. A Roth conversion comes with an income tax bill at time the money is converted; clients have to pay income taxes on money that’s withdrawn from a traditional IRA. Another thing to bear in mind is the order in which a client taps accounts for withdrawals, and in which accounts a client should place an asset in order to maximize tax efficiency.
Source/more: Investment News

David Wingate is an elder law attorney practicing in Frederick and Montgomery Counties, Maryland. The elder law practice concentrates on wills, powers of attorney, trusts, asset protection and Medicaid.

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