The Importance of a Tax-Efficient Withdrawal Strategy in Retirement

Retirees often rely on conventional wisdom in choosing a withdrawal strategy in retirement. Conventional wisdom essentially says to withdraw from your most taxable accounts first. Accordingly, conventional wisdom says to first withdraw from taxable accounts, then from tax-deferred accounts (such as 401(k)s and regular IRAs), and then finally to withdraw from tax exempt accounts (such as Roth IRAs).

While conventional wisdom may be the appropriate strategy in some cases, the failure to consider the strategic and possibly simultaneous withdrawal from a mixture of  account types can have a tremendously negative impact on your retirement longevity and lifetime portfolio value. By considering alternative strategies that focus of tax-efficiency over the long term, retirees can possibly increase their retirement longevity by five to ten years, and increase their lifetime portfolio value by hundreds of thousands of dollars. This can mean longer retirement, the freedom to spend more in retirement, and/or leaving a greater inheritance for your loved ones.

Perhaps the conventional wisdom on withdrawal strategies became conventional because of its simplicity. In contrast, crafting the optimal withdrawal strategy is complex. It involves balancing income tax brackets, social security strategies, cost basis of taxable accounts, the effect of increased income of the taxation of Social Security benefits and Medicare premiums, and other considerations. But the reward for engaging in the more complex analysis can be dramatic.

Please feel free to contact us for a further discussion on how we can provide you with a cost-effective and customized tax efficient withdrawal strategy that can greatly increase the longevity and value of your lifetime retirement portfolio.

Protecting your Assets and Interests upon Remarriage

Visitors to this site are no doubt aware of many of the financial and healthcare-related issues that are raised upon remarriage. An article published by, entitled “Getting remarried? Protect your assets and your interests” touches upon many of these issues, including the new spouse’s right: (1) claim an elective share; (2) to claim certain personal property; (3) to survivorship benefits from qualified retirement plans; and (4) to make healthcare decisions on your behalf in the event of your incapacity.

The article also identifies some common estate planning mistakes incident to divorce and/or remarriage, such as failing to update beneficiaries, failing to update an estate plan, failing to enter into a prenuptial agreement, and failing to plan for the possibility of nursing home care.

You can review the entire article by clicking here.

Is it time to update your Estate Plan?

It is a good idea to periodically update your Estate Plan to account for changes that may have occurred since it was placed into effect. Some of the changes that should be accounted for are identified in a recent article on Fidelity’s website entitled “Dust Off Your Estate Plan: 10 Common Pitfalls To Avoid.” Some of the identified changes that should prompt a review of your estate plan are if: (1) The fiduciaries named in your estate plan are no longer appropriate; (2)  Your children’s status has changed, such that they now may be adults and/or are married or divorced; (3) Your wealth has increased or decreased in any significant manner; (4) You have changed your state residency; or (5) Your estate plan was placed into effect before 2011, as tax laws have changed since then, and you now may be able to develop a better estate plan. You can read about the remaining pitfalls, and the entire article, by clicking here.

Year-End Tax Planning Strategies from the WSJ

On November 10, 2015, the Wall Street Journal published an insightful article by Bill Bischoff that discussed some year-end tax planning strategies that may be applicable to you. Included in the strategies are:

  1. Prepaying 2016 deductible expenses, such as your January 2016 mortgage payment, in 2015, if you expect your 2015 earnings to be greater than your 2016 earnings;
  2. Donating appreciated stock to charity without first selling it, which enables you to deduct the full value of the stock without the capital gains being included in your income;
  3. Selling stocks that have depreciated in value before donating the proceeds to charity, which enables you to claim the loss on your tax returns;
  4. Donating money from your retirement account directly to a charity, which allows those funds to bypass your income altogether, and which counts towards any required minimum distribution; and
  5. Updating your estate planning to account for any changes that have occurred and to take advantage of the current generous exemptions.

You can read the entire article by clicking here.

Whoopi Goldberg encourages the use of a prenuptial agreement

Whoopi Goldberg appeared on The Tonight Show Starring Jimmy Fallon on October 9, 2015. Although she was characteristically humorous, she gave some serious advice about the use of prenuptial agreements, as follows:

“[I]f you get the prenup there is no argument. If you don’t get divorced then it’s not a problem. If you are going to get divorced then it’s not a problem because the prenup is there…Just do it and shut-up and get happy.”

You can watch the hilarious clip by clicking here.

Cost of Long-Term Care Insurance Premiums Continue Upward Trend

The Journal of Financial Planning reported an 8.5% increase in the cost of Long-Term Care Insurance Premiums from last year. This upward trend will likely continue in light of increased patient longevity and the low interest-rate climate. Those who are contemplating Long-Term Care Insurance should consider locking in their rates sooner rather than later. A link to the full article can be found here.