Financial Planning Fridays #94: Lifetime Tax Savings

We wanted to share the top three planning strategies we use at Presilium to save taxes for our clients. We have found that having a written plan that incorporates all of these is crucial to maximizing your wealth and lifetime net income.

Depending on the client’s situation, many of the financial plans that we have prepared improved by millions of dollars by incorporating these tax saving strategies into our client’s long-term plan.

The first are Roth conversions. Eventually, we will all be forced to take required minimum distributions from our regular pre-tax 401k and IRAs and pay income tax on them . We analyze how these distributions will likely be taxed in the future to see if we have an opportunity to convert retirement funds today to a Roth IRA at a lower tax rate. For example, if we determine that your future required minimum distributions will be taxed at 35%, then anything we can convert at a lower rate today will not only shrink your lifetime tax bill but will then compound tax-free going forward for you and your beneficiaries.

This is an example of one of the pages that we include in our client’s financial plans. The green shows the additional wealth gained during this client’s lifetime just by completing Roth Conversions. In this client’s case, it was almost $3M extra.

Next, we look at the optimal order of your accounts to take withdrawals from. Many of our clients have a combination of pre-tax, post-tax, and Roth accounts going into retirement. We look at the best combination of withdrawals from these accounts to meet their spending goals while minimizing tax during their lifetime.

Finally, if you are interested in gifting to loved ones or charity, we evaluate all of the possible ways you can make the gift to minimize current or future taxes.

For example, three things you may want to consider are:

  • Should you give cash or stock to your charity?
  • Or is using a donor advised fund a better way to maximize your gift? 
  • Will it be more beneficial to gift loved ones, cash or stock? And if stock, should it be at a gain, loss, or newly purchased? 

As mentioned, these are all tax savings strategies that we have successfully used with our clients in the past.

However, one key aspect in many of those situations, is that we planned for this much earlier, often well before retirement. Having a written plan that incorporates all of these strategies allowed us, and them, to maximize their tax saving effectiveness.

If you don’t have a plan to save taxes during your lifetime, please call us today, we are happy to help.

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.