BUIldING YOUR RETIREmENT PlAN FROm ThE FOUNdATION UPmoney is left to them. Money that is currently in tax deferred
accounts like 401k’s or IRA’s are especially vulnerable to in-
come taxation since no taxes have ever been taken out of these
accounts. These dollars will be taxed at the beneficiaries high-
est tax rate when they distribute it from these types of accounts.
The main question to know the answer to here is: What types of
taxes are your savings exposed to once you pass them on and at
what tax rates? Once we are clear on that we can begin to devise
strategies to offset the tax burden on your loved ones. A good
vehicle to do this with is life insurance. You can pay a relatively
small premium and leverage the money many times over as a
tax free benefit to your heirs.- Tax Planning: We know that taxes will probably be going up in
the future. In fact, as of the writing of this book, they are slated
to go way up very soon. Income tax rates, capital gains tax rates,
taxes on qualified dividends, the whole shebang! If you’re read-
ing this and that has happened then we have to take a fresh look
at how we structure withdrawals from our savings and invest-
ments. It may become more important than ever to find ways to
defer our taxes or structure things in tax-free accounts like Roth
IRA’s or using investments like municipal bonds. Tax planning
is an area that is constantly changing, so the most important
thing is to work with an advisor that employs forward-looking
tax reduction strategies.
Ultimately, the goal of retirement planning is to protect your golden
years so that you have the lifestyle and a sense of security that you’ve
always dreamed of. What this needs to look like for you personally will
be dictated by your unique circumstances. That’s why it is so important
to have a defined decision-making process that uncovers the must know
facts for your situation. We must take the time up front to do this right
so you are as protected as possible from the many risks that may (and
probably will) try to get in your way. The good news is that when done
correctly, this process can give you a tremendous sense of security in
knowing that you’ve planned and have a strategy for anything that may
come your way.