Think Advisor

Hidden Value is a column in ThinkAdvisor where Joe Elsasser, CFP®, answers common questions with insights advisors and their clients may not have considered. This week he takes a closer look at the tax implications and the hidden tax-efficient planning opportunities created through interactions between various cash sources.

Many advisors have clients with multiple sources for cash in retirement. Retirees may have non-qualified investments in taxable accounts or after-tax Roth accounts that can provide tax-free distributions. A closer look at the tax implications of the client’s various assets and how they interact may reveal some unique opportunities to add additional value to the financial plan.

Here's an excerpt:

"Include conversions to a Roth IRA, where there are no lifetime RMDs and future distributions are tax-free. Current tax law prohibits recharacterization of a Roth IRA conversion, so money shifted to the Roth side generates an indelible tax bill. It’s often best to wait for a Roth IRA conversion until late in the year, when taxable income might be estimated accurately."

Advisors who look beyond the default method to plan for multiple income streams can create tax-efficient plans that help clients retire more comfortably. Take tax-efficient retirement planning one step further by subscribing to Tax Clarity®. The software will help you quickly identify sub-optimal situations and show clients how to make retirement decisions in the most tax-efficient way.

Read the ThinkAdvisor article in its entirety.

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