Work Save Retire

A whole new world has opened to me and I don’t like it one bit. As I recently turned 65, the nature of my mail, Facebook feed and email have changed. I have suddenly become the target of every financial planner, investment product, tax savings event, webinar and free meal on the planet.

All of these promotions want to help me solve my retirement issues, not that I had any to begin with but then again, I am just not ready to retire. They know the secret to not paying taxes on my IRAs and retirement plans, so I can live the good life, as long as I have at least $500,000 they can help me.

All this new information got me to thinking; as a tax guy that is a bit of a nerd and spends way too much time studying the tax code, tax strategies, retirement planning and wealth building, what could they possibly know that I missed? So lately I have been spending a lot of time at Webinars, Free Meals and speaking with many of these people whose sole goal in life is to help me. Here’s what I found, so that you won’t have to waste your time.

What I have found is that they do not have a magic way to make my retirement (if I ever do retire) worry free. When they say they can show me how to take money out of my IRA or pension tax free, what they really mean is that I can pay the tax using money I borrow from an insurance company. I “should” move my money, what I need to pay the tax, and that I will then owe the insurance company who will take payment from the death benefit — unless I choose to liquidate the policy, at which time I will have to pay back the insurance company with interest for borrowing my own money. These salespeople are long on ideas but short on details, in most cases, until I commit my money.

In the end most are nothing more than sales people looking to close a deal. Yes, they do care about retirement, but not my retirement. What they care about is theirs. Over the years I have had many clients come to me with asset protection plans that while they may have made it harder for others to sue and take their assets, required thousands of dollars in accounting and tax services, complicated accounting and money be set aside for legal defense should something happen, and they need this heavy-duty protection. In almost every case the cost outweighed the benefit.

This is not to say that you can’t do anything about the amount of taxes you pay in retirement. But this is the kind of planning that well informed tax pros have been using for years. This includes timing IRA and pension distributions into low tax rate years, planning for capital gains and capital losses, using tax favored investments, like municipal bonds, where appropriate and even the appropriate use of annuities when deferral and asset protection is required.

We are hearing a lot about tax changes from the White House and Congress. The proposals include tax increases for families with income over $400,000 (but what will really happen in the end no one knows). Be careful about making moves based on tax changes that are not yet known. Make sure you have the facts and you understand the consequences of any actions you take as well as how those advising you are compensated for what they are advising you.

In the over 30 years we have been helping clients, tax rates have gone up and down, and the tax laws have changed many time, but no matter what the changes we have been able to assist clients in charting a course that makes sense and helps them to do better.