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Summer School in Session

Wade Phau, in his recent book, “Retirement Planning Guidebook – Navigating the Important Decisions For Retirement Success,” points out that strategic tax management of your portfolio can push out portfolio sustainability by over 5 years.

Five years.

Holy Toledo.

Because the impact of tax planning is so profound, for the next 6 weeks we will focus exclusively on the strategic tax management of your portfolio.

To start, I crunched some numbers to look at the potential savings when applying tax strategies to a portfolio. * 

To compare, the first investor had $2 million split evenly between a taxable and tax-deferred retirement account.

The second investor had a $2 million Roth IRA.

The first investor ran out of money at age 92, while the second investor with a Roth IRA had over $1 million more left in their portfolio.

Why the large difference? The first investor paid more than $250,000 in taxes over the 27-year period, missing out on tax-free growth and tax-free withdrawals.

Your financial plan’s strategic tax management might not amount to a savings of $1 million, but as Wade Phau points out, it will have a significant impact on your portfolio when you need it most.

Roth conversions are just a start. Next week we will review the importance of asset location in your portfolio and financial plan.

Start This Season

Building portfolios is only one part of becoming a successful investor. Managing your wealth in a tax-efficient manner will have a significant impact over the long term. If you have $1 million or more of investible assets and are in or close to retirement, let's connect and strategize a plan that fits your needs.

*I used the Apple store’s “Retire Plan” app for an investor with monthly expenses of $10,000, adjusted 2% for inflation, a portfolio growth rate of 5% and Social Security benefits of $40,000 annually, starting at age 65.