In the Presence of Taxes: Applications of After-tax Asset Valuations,
|
|
- Walter Spencer
- 8 years ago
- Views:
Transcription
1 Taxes Exist! Implications for Asset Allocation, Location, and Withdrawal Strategies es in Retirement e e Thornburg Asset Management September 19, 2011 William Reichenstein, PhD, CFA Powers Professor of Investments Baylor University Principal, Retiree, Inc. and Social Security Solutions, Inc. 1 Presentation based on William Reichenstein, In the Presence of Taxes: Applications of After-tax Asset Valuations, FPA Press, September
2 Outline: 1. Key Concept: $1 of pre-tax funds in 401(k) is like (1- t n ) dollar of after-tax funds in Roth IRA, where t n is the tax rate in retirement 2. Choice of savings vehicles 3. Implications for calculating asset allocation 4. Effective tax rates on bonds and stocks held in Roth, 401(k), and taxable account 5. Implications for asset location 6. Implications for withdrawal strategies in retirement 7. Roth conversions in withdrawal strategies 3 1. Key Concept 1. $1 of pre-tax funds in 401(k) is like (1- t n ) dollar of after-tax funds in Roth IRA, where t n is the tax rate in retirement. --Henceforth, tax-deferred account (TDA) represents 401(k), 403(b), traditional IRA, Keogh, etc. --Henceforth, Roth represents Roth IRA, Roth 401(k) and Roth 403(b). 4 2
3 Comparing After-tax Future Values Of $1 of pretax funds in TDA to $1 of aftertax funds in Roth Assume today s $1 market value earns pre-tax return of r per year for n years. Funds will be withdrawn n years hence when the individual will have a 28% marginal tax rate, i.e., t n = 28% Tax-deferred account:$1(1+r) n (1-0.28) Roth: $1(1+r) n If invested in the same asset, the after- tax value of the tax-deferred account will be worth (1-t n ) or 72% of the Roth s after-tax value. 5 Examples $0.72 in a Roth has the same purchasing power as $1 in a TDA. If the cumulative pre-tax return before withdrawal is 100% then the Roth will double and buy $1.44 of goods and services, while the TDA will be worth $2 before e taxes but $1.44 after taxes. They have the same purchasing power. 6 3
4 Conclusion and Concepts Conclusion: $1 of pre-tax funds in tax-deferred account is like (1-t n ) of after-tax funds in Roth. It is useful to conceptually separate each pre-tax $1 in tax-deferred account into (1-t n ) of the investor s after-tax funds plus t n, where t n is the government s share of the current principal. A tax-deferred account is like a partnership with the government being a silent partner that owns t n of this partnership Choice of Savings Vehicles -Should your client save in a 401(k) or Roth 401(k) or, similarly, in a traditional IRA or Roth IRA? 8 4
5 What if marginal tax rates are the same today and in retirement? Original Investment Ending Wealth 401(k) $1,000 pretax $ 280 tax saved $ 720 after tax $2,000 pretax $ 560 taxes $1,440 after tax Roth 401(k) $ 720 after tax $1,440 after tax 9 What if marginal tax rates are lower in retirement? t = 35%, t n = 28% Original Investment Ending Wealth 401(k) $1,000 pretax $ 350 tax saved $ 650 after tax $2,000 pretax $ 560 taxes $1,440 after tax Roth IRA $ 650 after tax $1,300 after tax 10 5
6 Lessons If you expect a lower marginal tax rate in retirement then save in the TDA, and vice versa. If you expect the same marginal tax rate today and in retirement then there may be a slight preference for the Roth. --Why? 1. Tax diversification. 2. $16,000 saving in a Roth is larger than $16,000 saving in a TDA 3. Roth distributions do not affect taxation of Social Security or Medicare Part B premiums. 11 Lessons continued Slide 10: Your client invests $1,000 in a 401(k) in a year when she is in a 35% tax bracket. If she expects to be in 28% tax bracket in retirement, when calculating her current asset allocation, how large should she view this $1,000 pretax balance? Answer: As $720 after taxes because it has the purchasing power of $720 in a Roth. Lesson: Convert today s balances in TDAs to after-tax dollars by multiplying by (1-t n ). Today s marginal tax rate is irrelevant when calculating the current asset allocation. 12 6
7 3. Implications for calculation of asset allocation 13 What is Peggy s Asset Allocation? Market Value Asset Savings Vehicle $500,000 Bonds Tax-def Acct $500,000 Stocks Roth Assume she will have a 28% marginal tax rate in retirement. 14 7
8 What is her Asset Allocation? According to the after-tax approach, it contains $360, or $500, (1-.28) after taxes in bonds and $500,000 after taxes in stocks for a 42% bonds and 58% stocks after-tax asset allocation. According to the traditional approach, it is 50% bonds and 50% stocks. The traditional approach exaggerates the allocation to the dominant asset held in 401(k). 15 But Peggy does not know t n! Since the traditional approach ignores taxes, it implicitly assumes t n will be zero. It is better to estimate t n and calculate an asset allocation that is approximately right than to assume t n is zero. 16 8
9 4. Effective tax rates on bonds and stocks held in Roth, TDA, and taxable account 17 After-tax Future Values of Bonds and Stocks Held in Roth, Tax-deferred Account, and Taxable Account Beginning investment value: $1 market value Bonds Stocks Roth (1+r) n (1+r) n Tax-def Account (1+r) n (1-.28) (1+r) n (1-.28) Taxable Account (1+r(1-.28)) n Day Trader: (1+r(1-.28)) n Active Investor: (1+r(1-.15)) n Passive Investor: (1+r) n (1-.15)+.15 Exempt Investor: (1+r) n r=pre-tax return, n = investment horizon in years Assume t = t n = 28% and long-term capital gain tax rate, t c = 15%. For simplicity assume all stock returns are capital gains. 18 9
10 Principal, Risk and Returns Sharing for Tax-deferred Accounts For someone who will be in the 28% tax bracket in retirement, the aftertax value of a dollar of pre-tax funds in a tax-deferred account grows from $0.72 today to $0.72(1+r) n in n years. The investor effectively owns (1- t n ) of principal, but the after-tax value grows tax exempt. 19 Effective tax rates on bonds and stocks held in Roth, TDA, and taxable account Beginning investment value: $1 market value Bonds Stocks Roth 0% 0% Tax-def Account 0% 0% Taxable Account 28% Day Trader: 28% Active Investor: 15% Passive Investor:< 15% Exempt Investor: 0% r=pre-tax return, n = investment horizon in years Assume t = t n = 28% and long-term capital gain tax rate, t c = 15%. For simplicity assume all stock returns are capital gains
11 Government bears some risk as well as taking some return Assume stocks pretax returns are -8%, 8%, and 24% in a three-year period. The pretax expected return is 8% and standard deviation is 16%. For an active investor, the after-tax returns are about -6.8%, 6.8%, and 20.4%. The after-tax expected return is 6.8% and standard deviation is 13.6%. Conclusion: The government bears some of the risk and takes some of the return on assets held in taxable accounts Implications for asset location Conclusion: Bonds should be held in retirement accounts (i.e., tax-deferred accounts and Roths) and stocks in taxable accounts, while maintaining the target asset allocation? 22 11
12 Logic of Asset Location Asset Location 1. Stocks in taxable accounts Bonds in tax-def accounts and Roths 2. Bonds in taxable accounts Stocks in tax-def accounts and Roths Active stock mgmt style Effective Tax Rates 15% tax rate 0% 28% tax rate 0% 23 Concept It is better to let the government take 15% of stocks returns and risk than 28% of bonds returns and risk. So, locate stocks in taxable accounts and bonds in retirement accounts including tax-deferred accounts and Roths
13 Spread For this active investor, the spread between effective tax rates on interest income and stock returns is (28% - 15%). For wealthy client who will await the step-up in basis at death, this spread may be (40% - 0%). Asset location should be most important to high net worth clients who will passively manage stocks. 25 Why not put highest returning asset in Roth? Answer: Investors care about risk and return. This argument just looks at return. In a mean-variance optimization, you can always find a portfolio will a better risk-return tradeoff by holding stocks instead of bonds in taxable accounts, while attaining target asset allocation
14 Target Asset Allocations After-Tax Values Asset Allocation 30% Stocks 50% Stocks 70% Stocks Bonds ret acct $500,000 $500,000 $300,000 Stocks ret acct $0 $0 $200,000 Bonds tax acct $200,000 $0 $0 Stocks tax acct $300,000 $500,000 $500,000 Total $1,000,000 $1,000,000 $1,000,000 Assume $1 million after-tax portfolio, 50% in retirement accounts and 50% in taxable accounts. Bonds and stocks should not be held in both retirement and taxable accounts except liquidity reserves must be held in taxable account. 27 Generalized Advice on Asset Location Place bonds, REITs, and other assets with returns subject to ordinary income tax rate in taxdeferred accounts and Roths. Place stocks, especially passively held stocks, in taxable accounts
15 6. Implications for withdrawal strategies in retirement 29 Rule of Thumb Recall that the effective tax rate on funds held in Roths and tax-deferred accounts is 0%, while effective tax rates on assets held in taxable accounts are generally positive. Rule of Thumb: Withdraw funds from taxable accounts before retirement accounts
16 Exceptions to Rule of Thumb Key idea: The government effectively owns t n of principal in tax-deferred accounts, where t n is the tax rate at withdrawal. Look for situations when t n is low! Before RMDs begin after 70.5, your client s taxable income may be low. If so, consider withdrawing funds from tax-deferred accounts (or convert funds from traditional IRA to Roth IRA) to use low tax brackets. 31 Exceptions to Rule of Thumb If your client s tax bracket will rise after 2012 then withdraw funds from TDAs to top of low tax bracket the next two years. When tax rate is low perhaps due to large contribution or deductible medical expenses withdraw funds from tax- deferred accounts. If your client is terminally ill, don t realize capital gains even if this means dipping into tax-deferred accounts or Roths
17 Withdrawal Strategy from Tax-deferred Account and Roth no Bequest Motive After withdrawals from taxable accounts, should you withdraw from TDA or Roth next? Objective: maximize portfolio s longevity Withdraw funds from tax-deferred account to top of low tax bracket and then withdraw additional funds from Roth. 33 Summary of Importance of Withdrawal Strategy Table 1. Summary of Portfolio Longevities with Three Withdrawal Strategies Withdrawal Strategy t Longevity of Financial i Portfolio Strategy 1: 401(k) then Roth IRA then taxable 30 years account Strategy 2: Taxable account then 401(k) then years Roth IRA Strategy 3: Withdrawals each year from 37.5 years taxable account and 401(k) and then Roth IRA and 401(k) 34 17
18 Withdrawal Strategy from Tax-deferred Account and Roth Bequest Motive After withdrawals from taxable accounts, should you withdraw from TDA or Roth next? Objective: maximize after-tax value of accounts for retiree and beneficiary Retiree s tax rate is higher than her child beneficiary s tax rate. She should withdraw funds from Roth and save TDA for child. If retiree s tax rate is lower than her child s, she should withdraw funds from TDA and save Roth for child. 35 Non-Qualified Tax-Def Annuities What is it? Invest after-tax $$, grow tax def, returns taxed as ord. income Asset location preference: bonds With some exceptions, most have high costs and thus low returns Withdrawal recommendation: withdraw maximum amount each year that is not subject to surrender penalty (unless embedded options are deep in money) 36 18
19 Mike & Jen, Age 62 with $1,500,000 of assets They began retirement in January They are wondering how long their financial portfolio may last if they spend $107,800 after taxes in 2010 and an inflation-adjusted equivalent amount each year thereafter while both spouses are alive, but 75% of that amount after the death of the first spouse at 78. They begin Social Security benefits at age 66 getting $2,500 and $1,500 each month in today s dollars. They have $1,000,000 in 401(k)s and $500,000 in regular taxable accounts. Strategy 1: Withdraw funds from the 401(k)s first and then the taxable accounts. Strategy 2: Each year, withdraw funds tax efficiently from their 401(k)s and taxable accounts in a fashion that is designed to increase the longevity of their portfolio, and use a partial Roth conversion when appropriate. 37 In Strategy 1, the portfolio runs out of money at the end of In Strategy 2, the portfolio runs out of money in By withdrawing funds tax efficiently, they were able to extend the portfolio s longevity by more than seven years. See retireeinc.com then Learning Library then Case Studies
20 Cyrus Age 62 with $3,000,000 of Financial Assets He plans to retire from work this year. He has $3,000,000 in financial assets including $1,900,000 in a 401(k),$100,000 in Roth IRA, $100,000 in a non-qualified annuity, and $900,000 in regular taxable accounts. He wants to know how long his financial portfolio may last if he spends $131,000 after taxes in the first year and an inflation-adjusted equivalent amount each year thereafter. 39 Three Withdrawal Strategies Strategy 1: He begins Social Security at age 62 and withdraws funds tax inefficiently. Strategy 2: He begins Social Security at age 70 and withdraws funds tax inefficiently. Strategy 3: He begins Social Security at age 70 and withdraws funds in a tax-efficient manner from his financial portfolio. Each year, he will withdraw funds from his 401(k), Roth IRA, non-qualified annuity and taxable accounts in a fashion that is designed to increase the longevity of his portfolio. We assume he maintains a 50% stocks-50% bonds after-tax asset allocation with stocks earning 7% per year and bonds earning 3%. Primary Insurance Amount is $2,000. See then Learning Library then Case Studies for more details
21 In Strategy 1, his portfolio runs out of money at the end of In Strategy 2, his portfolio runs out of money near the end of In Strategy 3, it runs out of money part way through The taxefficient withdrawal strategy added more than four years to his portfolio's longevity Roth conversions in withdrawal strategies 42 21
22 Roth Conversions Objective: Convert funds from TDA to Roth if it will be taxed at low tax rate. Convert funds to raise taxable income to the top of a low tax bracket. With Roth conversions, it is seldom a matter of converting all or none 43 Roth Conversions Continued Suggestion: Convert more than sufficient funds in a year to fully use top of low tax bracket. Next year recharacterize whatever is necessary to take income to top of low tax bracket. For example, you might convert $50,000 in 2011 and in 2012 recharacterized $12,213 to take your client s 2011 taxable income to top of low bracket
23 Key Concepts Taxes exist and they matter! A tax-deferred account is like a partnership with the government being a silent partner that owns t n of the partnership s principal. For asset allocation: Pretax dollars in TDAs are smaller than after-tax dollars in Roths. Effective tax rate for TDA is 0%. For asset location: hold stocks in taxable accounts and bonds in retirement accounts, while maintaining target asset allocation. 45 Key Ideas for Withdrawal Strategies Rule of Thumb: Withdraw funds from taxable accounts before retirement t accounts like TDAs and Roths. Exceptions: Look for opportunities to withdraw funds from TDAs when tax rate will be unusually low. These may occur before RMDs begin, before tax rate hike, when medical costs are high, and when contributions are high
24 Key Ideas for Withdrawal Strategies Concerning withdrawals from TDA and Roth, try to minimize average tax rate on the TDA withdrawals. Withdraw from TDA (or convert to Roth) up to top of low bracket. If beneficiary is in lower tax bracket, save the TDA for him and have retiree use the Roth, and vice versa
Withdrawal Strategies to Make Your Nest Egg Last Longer
Withdrawal Strategies to Make Your Nest Egg Last Longer Ibbotson Associates/IFID Centre Retirement Income Products Executive Symposium William Reichenstein, PhD, CFA Baylor University 1 Presentation based
More informationTRENDS AND ISSUES Tax-Efficient Sequencing Of Accounts to Tap in Retirement
Tax-Efficient Sequencing Of Accounts to Tap in Retirement By William Reichenstein, Ph.D., TIAA-CREF Institute Fellow, Baylor University October 2006 EXECUTIVE SUMMARY This study discusses strategies for
More informationTRENDS AND ISSUES TAX-EFFICIENT SAVING AND INVESTING. By William Reichenstein, Ph.D., TIAA-CREF Institute Fellow, Baylor University
TAX-EFFICIENT SAVING AND INVESTING By William Reichenstein, Ph.D., TIAA-CREF Institute Fellow, Baylor University February 2006 EXECUTIVE SUMMARY A central component of investment advice in recent decades
More informationNon-qualified Annuities in After-tax Optimizations
May 11, 2005 Non-qualified Annuities in After-tax Optimizations By William Reichenstein Abstract This study first explains why individuals should calculate an after-tax asset allocation. This asset allocation
More informationThe Investment Implications of Tax-Deferred vs. Taxable Accounts
FEATURE While asset allocation is the most important decision an investor can make, allocating a given mix among accounts with different tax structures can be a taxing question. The Investment Implications
More informationIn this article, we go back to basics, but
Asset Allocation and Asset Location Decisions Revisited WILLIAM REICHENSTEIN WILLIAM REICHENSTEIN holds the Pat and Thomas R. Powers Chair in Investment Management at the Hankamer School of Business at
More informationLIQUIDATING RETIREMENT ASSETS
LIQUIDATING RETIREMENT ASSETS IN A TAX-EFFICIENT MANNER By William A. Raabe and Richard B. Toolson When you enter retirement, you retire from work, not from decision-making. Among the more important decisions
More informationRetirement Plans: Evaluating the New Roth IRA Conversion Opportunity
Retirement Plans: Evaluating the New Roth IRA Conversion Opportunity By Christine Fahlund Starting next year, investors will have the option of converting all or part of their money in a traditional IRA
More informationNEW ROTH CONVERSION OPPORTUNITIES: IS CONVERTING A TRADITIONAL IRA, 403(B) OR 401(K) A SMART MOVE, UNWISE OR MUCH ADO ABOUT NOTHING?
TRENDS AND ISSUES SEPTEMBER 2009 NEW ROTH CONVERSION OPPORTUNITIES: IS CONVERTING A TRADITIONAL IRA, 403(B) OR 401(K) A SMART MOVE, UNWISE OR MUCH ADO ABOUT NOTHING? William Reichenstein Baylor University
More informationTax-Advantaged Savings Accounts and Tax Efficient Wealth Accumulation
Tax-Advantaged Savings Accounts and Tax Efficient Wealth Accumulation FPA Retreat 2006 Scottsdale, AZ May 5, 2006 Stephen M. Horan, Ph.D., CFA St. Bonaventure University Alesco Advisors, LLC Overview Foundational
More informationDraft. This article challenges two features of. Calculating Asset Allocation WILLIAM REICHENSTEIN
Calculating Asset Allocation WILLIAM REICHENSTEIN WILLIAM REICHENSTEIN holds the Pat and thomas R. Powers Chair in investment management at Baylor University, Waco, Texas. This article challenges two features
More informationRESEARCH FOUNDATION OF CFA INSTITUTE MONOGRAPH. Tax-Advantaged Savings Accounts and Tax-Efficient Wealth Accumulation
Research Foundation of CFA Institute Monograph 69 RESEARCH FOUNDATION OF CFA INSTITUTE MONOGRAPH Tax-Advantaged Savings Accounts and Tax-Efficient Wealth Accumulation Stephen M. Horan, CFA Research Foundation
More informationRetirement Investing: Analyzing the Roth Conversion Option*
Retirement Investing: Analyzing the Roth Conversion Option* Robert M. Dammon Tepper School of Bsiness Carnegie Mellon University 12/3/2009 * The author thanks Chester Spatt for valuable discussions. The
More informationTax-Free Income for You and Your Heirs: What You Need to Know About Roth Conversions Right Now. Bryan M. Totri, CFP
Tax-Free Income for You and Your Heirs: What You Need to Know About Roth Conversions Right Now Bryan M. Totri, CFP 1 Saving for Retirement: Tax-deferred vs. Tax-free Traditional IRA Tax-deferred retirement
More informationMaking Retirement Assets Last a Lifetime PART 1
Making Retirement Assets Last a Lifetime PART 1 The importance of a solid exit strategy During the working years, accumulating assets for retirement is one of the primary goals of the investing population.
More informationDuke. Faculty and Staff Retirement Plan: Consider the advantages of Roth 403(b) contributions
Duke HUMAN RESOURCES Faculty and Staff Retirement Plan: Consider the advantages of Roth 403(b) contributions The Faculty and Staff Retirement Plan offers a way of saving for retirement known as the Roth
More informationA New Look at Cash Value as an Asset
A New Look at Cash Value as an Asset Brought to you by: Pinney Insurance Center, Inc. 2266 Lava Ridge Court Roseville, CA 95661 www.pinneyinsurance.com Cash Value Life Insurance Advantages of cash value
More informationQuestions and Answers about the Roth 401(k)
THE RETIREMENT GROUP AT MERRILL LYNCH Q A Questions and Answers about the Roth 401(k) How the Roth 401(k) Works Q. What is the Roth 401(k) contribution option? A. The Roth 401(k) contribution option allows
More informationThe IRA opportunity: To Roth or not to Roth?
The IRA opportunity: To Roth or not to Roth? Vanguard research July 2011 Executive summary. The year 2010, which may well go down in IRA history as the year of the Roth, saw three notable legislative changes
More informationVariable Annuities. Introduction. Settlement Options. Methods of Buying Annuities. Tracking Separate Accounts. Suitability. Tax Deferred Annuities
Variable Annuities Introduction Settlement Options Methods of Buying Annuities Tracking Separate Accounts Suitability Tax Deferred Annuities Using this study guide. This study guide is intended for use
More informationChapter 19 Retirement Products: Annuities and Individual Retirement Accounts
Chapter 19 Retirement Products: Annuities and Individual Retirement Accounts Overview Thus far we have examined life insurance in great detail. Life insurance companies also market a product that addresses
More informationTaxes and Transitions
Taxes and Transitions THE NEW FRONTIER FOR RETIREMENT PLANNING Wealthy individuals have been hit with their first major tax increase in more than 20 years, with tax hikes on ordinary income, dividends
More informationYour Payroll Roth IRA. For Flexible, Tax-Free Savings
For Flexible, Tax-Free Savings A Roth IRA is a savings vehicle that complements your employer retirement plans by allowing for tax-free earnings and, if needed, flexible withdrawals. ICMA-RC s Payroll
More informationRoth IRA Conversion. (Frequently Asked Questions) #17666 05/10
Roth IRA Conversion (Frequently Asked Questions) #17666 05/10 The following material is for informational purposes only. It represents a summary of the most common questions asked about Roth IRAs and the
More informationWealth Strategies. www.rfawealth.com. Saving For Retirement: Tax Deductible vs Roth Contributions. www.rfawealth.com
www.rfawealth.com Wealth Strategies Saving For Retirement: Tax Deductible vs Roth Contributions Part 2 of 12 Your Guide to Saving for Retirement WEALTH STRATEGIES Page 1 Saving For Retirement: Tax Deductible
More informationTHE POWER OF AN IRA.
THE POWER OF AN IRA. Put the Power of an IRA to Work For You Whether retirement seems like a lifetime away or is just around the corner, getting started on your retirement savings plan is one of the smartest
More information8 Years Later, Same Old Questions: Evaluating Roth IRAs
8 Years Later, Same Old Questions: Evaluating Roth IRAs By Mark H. Gaudet, CPA, CFP The Taxpayer Relief Act of 1997 introduced a new type of IRA for taxpayers and investors the Roth IRA. Eight years have
More informationAre you satisfied with the progress you ve made toward your retirement?
Are you satisfied with the progress you ve made toward your retirement? Neither New York Life Insurance Company nor its agents provides tax, legal, or accounting advice. Please consult your own tax, legal,
More informationUnderstanding annuities
ab Wealth Management Americas Understanding annuities Rethinking the role they play in retirement income planning Protecting your retirement income security from life s uncertainties. The retirement landscape
More informationadvisory & Brokerage consulting services Make Your Retirement Savings Last a Lifetime
advisory & Brokerage consulting services Make Your Retirement Savings Last a Lifetime Member FINRA/SIPC ADVISORY & Brokerage consulting SERVICES Three Things to Consider When Planning for Retirement Today,
More informationTo Roth Or Not To Roth?
To Roth Or Not To Roth? 05.07.2015 FPA Rhode Island Michael E. Kitces MSFS, MTAX, CFP, CLU, ChFC, RHU, REBC, CASL Partner. Director of Research, Pinnacle Advisory Group Publisher. The Kitces Report, www.kitces.com
More informationInvestment Products: If It Has to Be Sold, Don t Buy It!
Portfolio Strategies Investment Products: If It Has to Be Sold, Don t Buy It! By William Reichenstein and Larry Swedroe Non-financial firms can make consistent profits by combining parts into a whole.
More informationEstate planning opportunities with Roth IRA conversions
Estate planning opportunities with Roth IRA conversions Vanguard research March 2010 Executive summary. Beginning January 1, 2010, as part of the Tax Increase Prevention and Reconciliation Act of 2005,
More informationTake Another Step for Your Financial Future ICMA-RC s Payroll Roth IRA
Take Another Step for Your Financial Future ICMA-RC s Payroll Roth IRA Open an ICMA-RC Payroll Roth IRA It s quick and easy to open a Payroll Roth IRA. It takes two easy steps: Send ICMA-RC the completed
More informationChoosing tax-efficient investments
Choosing tax-efficient investments Managing your portfolio to help control your tax bill Investors need to consider many factors in the process of choosing investments. One at the top of many investors
More informationHistorically, investors managing retirement
August 2011 By Robert S. Keebler Tax Management of Retirement Savings Vehicles Historically, investors managing retirement savings vehicles focused solely on pre-tax returns. Taxes were not a consideration
More informationPreparing for Your Retirement: A Tax-Deferred Annuity (TDA) Review
Preparing for Your Retirement: A Tax-Deferred Annuity (TDA) Review How much of your earning power will be available for your use when you retire? What will happen to your standard of living when your income
More informationRoth Recharacterizations
Private Wealth Management Products & Services Roth Recharacterizations Factors to Consider When Unwinding a Roth Conversion A Roth Recharacterization is the process of unwinding a Roth contribution, conversion
More informationRoth IRAs and Conversions
Roth IRAs and Conversions When the law that created Roth IRAs was originally enacted there were two eligibility limits placed on them. The first affected an individual s ability to contribute to the Roth-
More informationAnnuities Why NOT? 062308 by Monica Haven, E.A.
Annuities Why NOT? 062308 by Monica Haven, E.A. Once considered the panacea for the ailing investment portfolio, annuities have been hobbled by the galloping changes of the Tax Code. Fixed, variable, index,
More informationLITTLE KNOWN SECRETS OF ROTH IRAs HARNESSING TRULY TAX FREE GROWTH. Scott Schuster, CFP, CPA, Managing Partner, Dashboard Wealth Advisors, RJFS
LITTLE KNOWN SECRETS OF ROTH IRAs HARNESSING TRULY TAX FREE GROWTH Scott Schuster, CFP, CPA, Managing Partner, Dashboard Wealth Advisors, RJFS Little Known Secrets of Roth IRAs Harnessing Truly Tax Free
More informationREADING 11: TAXES AND PRIVATE WEALTH MANAGEMENT IN A GLOBAL CONTEXT
READING 11: TAXES AND PRIVATE WEALTH MANAGEMENT IN A GLOBAL CONTEXT Introduction Taxes have a significant impact on net performance and affect an adviser s understanding of risk for the taxable investor.
More informationConsider the advantages of the Roth 403(b)
Consider the advantages of the Roth 403(b) Your plan offers a way of saving for retirement known as the Roth 403(b) What is it? It s a way to get your money tax-free in retirement. You can make tax-free
More informationIRAs: Four Facts You Should Know
IRAs: Four Facts You Should Know Overview: The decision between contributing to a traditional 2007 IRA and a Roth IRA depends on many factors. The following discusses some of the key concepts to consider
More informationFuture Value if $200,000 invested in 60% stock/40% bond account
Endnotes #1 Advice Regarding Cash Reserves: Future Value if all remains in bank account Future Value if $200,000 invested in 60% stock/40% bond account plus $50,000 remaining in bank account ($250,000.00)
More informationUnderstanding annuities
Wealth Management Americas Understanding annuities Rethinking the role they play in retirement income planning Helping to protect your retirement income security from life s uncertainties. The retirement
More informationImportant Information about your Annuity Investment
Robert W. Baird & Co. Incorporated Important Information about your Annuity Investment What is an Annuity Contract? An annuity is a contract between you and an insurance company, under which you make a
More informationThe Basics of Annuities: Income Beyond the Paycheck
The Basics of Annuities: PLANNING FOR INCOME NEEDS TABLE OF CONTENTS Income Beyond the Paycheck...1 The Facts of Retirement...2 What Is an Annuity?...2 What Type of Annuity Is Right for Me?...2 Payment
More informationHow To Convert An Ira To A Roth Ira
Roth Conversion Frequently Asked Questions Brian Dobbis QPA, QKA, QPFC Retirement Analyst, Private Wealth Group 888-522-2388 A Roth individual retirement account (IRA) is a tax-deferred and potentially
More informationChapter 14. Agenda. Individual Annuities. Annuities and Individual Retirement Accounts
Chapter 14 Annuities and Individual Retirement Accounts Agenda 2 Individual Annuities Types of Annuities Taxation of Individual Annuities Individual Retirement Accounts Individual Annuities 3 An annuity
More informationTraditional and Roth IRAs. Invest for retirement with tax-advantaged accounts
Traditional and s Invest for retirement with tax-advantaged accounts Your Retirement It is your ultimate reward for a lifetime of hard work and dedication. It is a time when you should have the financial
More informationTraditional and Roth IRAs. Invest for retirement with tax-advantaged accounts
Traditional and Roth IRAs Invest for retirement with tax-advantaged accounts Your Retirement It is your ultimate reward for a lifetime of hard work and dedication. It is a time when you should have the
More informationAN ANALYSIS OF ROTH CONVERSIONS 1
AN ANALYSIS OF ROTH CONVERSIONS In 1997, Congress introduced the Roth IRA, giving investors a new product for retirement savings. The Roth IRA is essentially a mirror image of the Traditional IRA, but
More informationPersonal Retirement Analysis. Jim Sample. for. New Scenario (5/26/2014 4:04:47 AM) Prepared By Neal Frankle Sample Financial Plan
Personal Retirement Analysis for Jim Sample Prepared By Neal Frankle Sample Financial Plan IMPORTANT: The illustrations or other information generated by this report regarding the likelihood of various
More informationEXPLORING YOUR IRA OPTIONS. Whichever you choose traditional or Roth investing in an IRA is a good step toward saving for retirement.
EXPLORING YOUR IRA OPTIONS Whichever you choose traditional or Roth investing in an IRA is a good step toward saving for retirement. 2 EXPLORING YOUR IRA OPTIONS Planning for retirement can be a challenging
More informationCould a Health Savings Account Be Better than an Employer- Matched 401(k)?
Could a Health Savings Account Be Better than an Employer- Matched 401(k)? by Greg, Ph.D. Greg, Ph.D., is an associate professor of accounting at the University of Missouri St. Louis. He teaches a graduate
More informationExplorer. Client Guide. A Deferred Fixed Annuity for a Confident Retirement 60002-11A 9/11
Explorer A Deferred Fixed Annuity for a Confident Retirement 60002-11A 9/11 Client Guide The Power to Help You Succeed Pacific Life has more than 140 years of experience, and we remain committed to providing
More informationWHICH TYPE OF IRA MAKES THE MOST SENSE FOR YOU?
WHICH TYPE OF IRA MAKES THE MOST SENSE FOR YOU? In 1974, when IRAs were first created, they were rather simple and straightforward. Now, 35 years later, it s challenging to know the best way to save more
More informationMFS Retirement Strategies Stretch IRA and distribution options READY, SET, RETIRE. Taking income distributions during retirement
MFS Retirement Strategies Stretch IRA and distribution options READY, SET, RETIRE Taking income distributions during retirement ASSESS YOUR NEEDS INCOME WHEN YOU NEED IT Choosing the right income distribution
More informationIncome Plus Variable Annuity
Just the facts about New York Life... Income Plus Variable Annuity What is the New York Life Income Plus Variable Annuity? 1 Why should I consider Income Plus with the Guaranteed Future Income Benefit
More informationDecember 2014. Tax-Efficient Investing Through Asset Location. John Wyckoff, CPA/PFS, CFP
John Wyckoff, CPA/PFS, CFP Your investment priorities are likely to evolve over time, but one goal will remain constant: to maximize your investment returns. Not all returns are created equal, however.
More informationTaxpayers using the Cash Method of Accounting
Taxpayers using the Cash Method of Accounting Only assets actually received during the calendar year are taxable If you have a business expense that will provide services for years to come, the deduction
More informationWhy Advisors Should Use Deferred-Income Annuities
Why Advisors Should Use Deferred-Income Annuities November 24, 2015 by Michael Finke Retirement income planning is a mathematical problem in which an investor begins with a lump sum of wealth and withdraws
More informationIRA Opportunities. Traditional IRA vs. Roth IRA: Which is right for you? What kind of retirement funding vehicle is right for you?
IRA Opportunities. Traditional IRA vs. Roth IRA: Which is right for you? What kind of retirement funding vehicle is right for you? Now more than ever, an Individual Retirement Account (IRA) may help provide
More informationIs Your Financial Portfolio an Unfinished Work? Color It with a Life Insurance Retirement Plan Protection Now, Income Later
Life Insurance Client Guide The Art of Retirement Is Your Financial Portfolio an Unfinished Work? Color It with a Life Insurance Retirement Plan Protection Now, Income Later AD-OC-770D 1 Picture Your Future
More informationThe Basics of Annuities: Planning for Income Needs
March 2013 The Basics of Annuities: Planning for Income Needs summary the facts of retirement Earning income once your paychecks stop that is, after your retirement requires preparing for what s to come
More information457(b) Deferred Compensation Overview for Governmental and Public School entities
457(b) Deferred Compensation Overview for Governmental and Public School entities Retirement experts agree...having the money you want in your later years requires careful planning now. Plan ahead. How
More informationTraditional and Roth IRAs
october 2012 Understanding Traditional and Roth IRAs summary An Individual Retirement Account (IRA) is a powerful savings vehicle that can help you meet your financial goals. As shown in the chart on page
More informationAn IRA can put you in control of your retirement, whether you
IRAs: Powering Your Retirement One of the most effective ways to build and manage funds to help you meet your financial goals is through an Individual Retirement Account (IRA). An IRA can put you in control
More informationStocks and Taxes Ordinary Income Versus Capital Gains Jobs & Growth Tax Relief Reconciliation Act of 2003
Stocks and Taxes Unlike death, taxation can at least be minimized. In this article, we will examine the basic framework of individual taxation in the United States as it relates to stock investing and
More informationSusan & David Example
Personal Retirement Analysis for Susan & David Example Asset Advisors Example, LLC A Registered Investment Advisor 2430 NW Professional Drive Corvallis, OR 97330 877-421-9815 www.moneytree.com IMPORTANT:
More informationUnderstanding Annuities: A Lesson in Annuities
Understanding Annuities: A Lesson in Annuities Did you know that an annuity can be used to systematically accumulate money for retirement purposes, as well as to guarantee a retirement income that you
More informationFederal Tax and Capital Gains: Rates Over Time
Preparing for a World of Higher Taxes Are You Ready? Presented by: Matt Sommer, CFP, CPWA, AIF Director and Senior Retirement Specialist, Retirement Strategy Group C-0610-114 4-30-11 Federal Tax and Capital
More informationBLUE PAPER. Roth 401(k): Creating a Tax-Advantaged Strategy for Retirement IN BRIEF. January 2016
BLUE PAPER Roth 401(k): Creating a Tax-Advantaged Strategy for Retirement Roth 401(k) Helps Investors Take Diversification * to the Next Level. IN BRIEF January 2016 Just as a well-diversified portfolio
More informationRetirement. A Guide to Roth IRAs
Retirement A Guide to Roth IRAs A Roth IRA is an individual retirement account named for the late Senate Finance Committee Chairman, William Roth, Jr. who championed the creation of this new type of IRA.
More informationTax Strategies From a Financial Planning Perspective
Tax Strategies From a Financial Planning Perspective Spectrum Advisors Don Goerner offers securities through Purshe Kaplan Sterling Investments Member FINRA/ SIPC Headquartered at 18 Corporate Woods Blvd.,
More informationVertex Wealth Management LLC 10/22/2013
Vertex Wealth Management LLC Michael J. Aluotto, CRPC President Private Wealth Manager 1325 Franklin Ave., Ste. 335 Garden City, NY 11530 516-294-8200 mjaluotto@1stallied.com Retirement Basics 10/22/2013
More informationRoth IRA. Explore the Opportunity. 2 RBC Wealth Management
Roth IRA Explore the Opportunity 2 RBC Wealth Management N o w Y o u H a v e E v e n M o r e F l e x i b i l i t y i n H o w Y o u I n v e s t f o r Y o u r F u t u r e Retirement a time that you work
More informationMedicare Tax On Married Couples Filing Joint Returns
Medicare taxes for higher-income taxpayers Many changes from the 2010 Affordable Care Act are now in effect Begin planning now You ll especially want to discuss these tax provisions with your Financial
More informationPRIVATE WEALTH MANAGEMENT
CFA LEVEL 3 STUDY SESSION 4 PRIVATE WEALTH MANAGEMENT a. Risk tolerance affected by Sources of wealth Active wealth creation (by entrepreneurial activity) Passive wealth creation, acquired Through inheritance
More informationchart retirement plans 8 Retirement plans available to self-employed individuals include:
retirement plans Contributing to retirement plans can provide you with financial security as well as reducing and/or deferring your taxes. However, there are complex rules that govern the type of plans
More informationPreparing for Your Retirement: An IRA Review
Preparing for Your Retirement: An IRA Review How much of your earning power will be available for your use when you retire? What will happen to your standard of living when your income ceases at retirement?
More informationAnnuities. Introduction 2. What is an Annuity?... 2. How do they work?... 3. Types of Annuities... 4. Fixed vs. Variable annuities...
An Insider s Guide to Annuities Whatever your picture of retirement, the best way to get there and enjoy it once you ve arrived is with a focused, thoughtful plan. Introduction 2 What is an Annuity?...
More informationRoth IRA Conversions
educational Series Roth IRA Conversions Executive Summary Until now, high-income earners have been effectively prevented from using Roth IRAs. Beginning in 2010, the income limits for Roth conversions
More informationProtection Now. Income Later.
Protection Now. Income Later. Life Insurance Retirement Plan for Women AD-OC-749C What are two problems facing today s woman? 1 2 The Family s Financial Vulnerability. Whether you are part of a two-income
More informationTO ROTH OR NOT TO ROTH, THAT IS THE QUESTION
TO ROTH OR NOT TO ROTH, THAT IS THE QUESTION J. Scott Dillon Carruthers & Roth, P.A. 235 N. Edgeworth Street Greensboro, NC 27401 336.478.1119 jsd@crlaw.com OVERVIEW The Rules Roth IRA Roth 401(k) Roth
More informationRETIREMENT ACCOUNTS (c) Gary R. Evans, 2006-2011, September 24, 2011. Alternative Retirement Financial Plans and Their Features
RETIREMENT ACCOUNTS (c) Gary R. Evans, 2006-2011, September 24, 2011. The various retirement investment accounts discussed in this document all offer the potential for healthy longterm returns with substantial
More informationTax Alpha. Robert S. Keebler, CPA, M.S.T., AEP. Keebler & Associates, LLP 420 South Washington Street Green Bay, WI 54301.
Tax Alpha Presented by Robert S. Keebler, CPA, M.S.T., AEP Keebler & Associates, LLP 420 South Washington Street Green Bay, WI 54301 Agenda 1. Five Dimensional Tax System Ordinary Income Rates Capital
More informationBUYER S GUIDE TO FIXED DEFERRED ANNUITIES. The face page of the Fixed Deferred Annuity Buyer s Guide shall read as follows:
BUYER S GUIDE TO FIXED DEFERRED ANNUITIES The face page of the Fixed Deferred Annuity Buyer s Guide shall read as follows: Prepared by the National Association of Insurance Commissioners The National Association
More informationRoth IRA Conversion... Does Taking Action Get You to Point A or Point B
Roth IRA Conversion... Does Taking Action Get You to Point A or Point B If only it were that simple. There is no black and white here. Everything has its risks and is based on assumptions. Upfront, this
More informationUNDERSTANDING ROTH IRA. conversion opportunities. in 4 steps. Compliments of Jim Lee Financial
UNDERSTANDING ROTH IRA conversion opportunities in 4 steps Compliments of Jim Lee Financial Planning for a Comfortable Retirement Determining when, or if, you should convert to a Roth IRA is an individual
More informationRETIREMENT ACCOUNTS. Alternative Retirement Financial Plans and Their Features
RETIREMENT ACCOUNTS The various retirement investment accounts discussed in this document all offer the potential for healthy longterm returns with substantial tax advantages that will typically have the
More informationKEY FACTORS WHEN CONSIDERING A ROTH IRA CONVERSION
KEY FACTORS WHEN CONSIDERING A ROTH IRA CONVERSION PERTINENT INFORMATION Mr. Kugler has accumulated $1,000,000 in a traditional IRA. Mrs. Kugler is the designated beneficiary (DB) and their daughter is
More informationBeginning in 2010, the Tax Increase Prevention and ROTH IRA CONVERSION
ROTH IRA CONVERSION Assessing Suitability of the Strategy for Individuals and their Heirs Executive Summary A Roth IRA conversion may benefit individuals during their retirement years by potentially reducing
More informationSample. Table of Contents. Introduction... 1. What is the difference between a regular 401(k) deferral (pre-tax) and a Roth 401(k) deferral?...
Table of Contents Introduction... 1 What is the difference between a regular 401(k) deferral (pre-tax) and a Roth 401(k) deferral?... 2 Who is eligible to make a Roth 401(k) deferral?... 3 Roth IRAs have
More informationWITHDRAWING FROM YOUR IRA: A GUIDE TO THE BASIC DISTRIBUTION RULES
WITHDRAWING FROM YOUR IRA: A GUIDE TO THE BASIC DISTRIBUTION RULES Since IRAs are vehicles to encourage saving for retirement, penaltyfree regular distributions cannot start until after the account owner
More informationTax-Efficient Investing for Tax-Deferred and Taxable Accounts
Tax-Efficient Investing for Tax-Deferred and Taxle Accounts Terry Sylvester Charron, Investment Strategist Both the popular financial press and the academic literature have discussed the optimal way to
More informationShould You Convert To A Roth IRA? It Depends on Your Circumstances
Delaying your decision to late in 1998 is probably prudent. But preliminary planning now could increase your options next year. Should You Convert To A Roth IRA? It Depends on Your Circumstances By Peter
More informationIRA / Retirement Plan Accounts
IRA / Retirement Plan Accounts Retirement plans are tax advantaged savings plans that have been created by the US government to encourage investors to save for their retirement. Some investments selected
More informationUnderstanding the taxability of investments
Understanding the taxability of investments Managing your portfolio to help control your tax bill Investors need to consider many factors in the process of choosing investments. One at the top of many
More information