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| Early Stage Retirement Income Tax Planning (RMD Tax Planning) |
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As year-end financial planning season approaches, there
may be a window of opportunity with the lowered tax brackets of the Trump Tax
Reform Act sunsetting in 2025. One thing that Early Stage Retirees
generally do not prepare well for is Required Minimum Distributions (RMDs),
where the IRS forces you to take taxable distributions from your Retirement
Accounts at age 70.5. The RMD distribution along with social security, pension
income (if eligible), and any other forms of income may move you into a higher
tax bracket at that time with limited tax strategies available if not planned
for in advance.
Due to tax rates currently being at historically lower
levels, we believe now may be an ideal time to analyze if a systematic Roth
Conversion strategy makes sense for you. When you convert assets from a
Traditional IRA to a Roth IRA the conversion amount will be considered ordinary
income and subject to federal and state taxes. However if spread out over years
with a goal of “filling up” these lower tax brackets, it could lead to a future
reduced tax bracket in the ages of 70.5 and beyond, as Roth IRAs are not
subject to Required Minimum Distributions (RMDs).
This is a long term strategy and does not make sense for
everyone. For us to complete this analysis, we would need to know what you
anticipate your total taxable income will be for this year and we could then
put together a Monte Carlo back-tested projection to put data behind this
potential Roth Conversion decision. For our clients, this is an annual
exercise that does not come with any additional costs. Reach out if you believe
you might be a good candidate for this or would like to learn more (or if
there was anyone around you that is in the early years of retirement or close
approaching).
**$50 Bonus on a $500 Contribution made to MESP
529 Savings plans in September: Free 10% return on college savings: https://www.misaves.com/buzz/back-to-school-2019.php
See Investment News' coverage
on our creative uses of the 529 College Savings Plan in the top article below:
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Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by SGH Wealth Management, LLC ("SGH"), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from SGH. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SGH is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the SGH's current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a SGH client, please remember to contact SGH, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.
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