A Tale Of Two Strategies

MINNEAPOLIS – The changes included in the Tax Cuts and Jobs Act of 2017 restructured the existing tax brackets, and changed the percentage of taxed income within those brackets. Because of this, attendees of the 2019 FPA conference will want to attend William Reichenstein’s presentation on tax efficient withdraw strategies for five groups.

Reichenstein is head of research with Retiree Inc. and Social Security Solutions Inc. Both companies have developed software to help advisors calculate the most efficient retirement income strategy for their clients.

Reichenstein’s presentation will focus on two main ways advisors can achieve maximum tax efficiency for their clients:

1. When individuals in each tax bracket should begin collecting Social Security benefits.
2. What is the most tax-efficient withdraw strategy for their specific needs.

Reichenstein’s presentation will look at the pre-tax and after tax dollars with five specific groups and how different strategies can better help them in retirement. His recommendations are as follows:

Group 1 Middle –income Households: This group should consider delaying Social Security until age 70, decreasing the taxable portion of their income.

Group 2 Middle-income Households With Incomes Near Or Beyond The End Of The Tax Torpedo: Nearing the age for required minimum distributions, this group should take advantage of Roth conversions to avoid the higher tax rate (tax torpedo) that would hit their savings should RMDs bump them into the next tax bracket.

Group 3 Higher-income Households Younger Than 70.5: Roth conversions before age 70.5 and before higher tax rates are scheduled to return in 2026 when the TCJA is scheduled to expire. This should allow them to reduce lifetime taxes and reduce Medicare premiums

Group 4 Households That Are Years From Retirement: This group should consider shifting pretax dollars from tax-deferred accounts to Roth IRAs by filing in the lower tax brackets. They should also consider contributing after tax money to a Roth 401(k) instead of pretax money to a 401(k).

Group 5 Married Couples Of All Ages: Reichenstein says this group should utilize Roth conversions while both partners are alive reducing both lifetime taxes and Medicare premiums.

Reichenstein said advisors should review their client’s strategy before and during retirement and even if an advisor only works with high-net-worth clients. He said, “Every few years go back and look at it. There’s a lot of value to be added here.”

AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.

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