Tax Efficient Income & Withdrawals

For many retirees, their biggest fear is outliving their savings and investments.

To help alleviate this fear, we compare our client’s sources of retirement income (pensions, Social Security, savings and investments, home equity, etc.) to their retirement spending.

After doing so, any risks that we uncover are discussed and solutions are proposed to arrive at a retirement spending rate that will be sustainable for many years.

Most retirees have assets in accounts that have different tax attributes, such as, taxable accounts, tax-deferred accounts (traditional IRA, 401k) and tax-free accounts (Roth IRA and Roth 401k).

Withdrawals from these accounts impact the amount of taxes owed. Therefore, it is important for retirees to determine the order withdrawals in order to minimize their tax bite.

For many years, “conventional wisdom” has stated that assets should be withdrawn in this order: first from taxable accounts, then from tax-deferred accounts and then from tax-free accounts.

However, conventional wisdom is often wrong!

We coordinate our client’s portfolio withdrawal sequence with their Social Security claiming strategy, Required Minimum Distributions, ROTH conversions and other retirement planning tools as appropriate.

Optimizing these decisions can easily increase the longevity of a retiree’s investment portfolio and lifetime retirement income.

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