You made the right moves to realize tax savings by creating tax-sheltered retirement plans and implementing a 401(k), Profit Sharing Plan, or SEP. Those with bigger needs might have used a more sophisticated strategy to help clinch bigger deductions by stacking a Cash Balance Plan or a Defined Benefit Plan on top of those traditional plans. You know who you are— business owners, partners, or executives whose choices to shelter assets have helped you realize deductions and tax free growth for a long time. You kept money that would have gone to the IRS, and put it to work for you by investing it.
Good job; you have much more in those accounts today than would be there because you still have the money you didn’t send to the IRS and the tax free earnings on those extra dollars. However, that was the first part of your life while you were accumulating… but you are now at “Life’s Halftime” when reaping the benefits of your retirement plans takes precedence. In this second half of your life when you will be taking money out, it will be taxable. Even if you do not need or want the money, you are forced to start taking taxable distributions at age 70-1/2… and if you die, your beneficiaries will pay income tax on the money or assets they get from these plans. Sounds like you are down 3 touchdowns going into the second half of the game. So, now is the time to adjust your game plan, and yes there are ways to soften the IRS bite. Remember the best defense is a good offense and that means being proactive NOW while you can still do something about it. The game plan is to reduce risk, maintain and improve value, maximize your net after-tax dollars, and not give back those taxes for as long as possible. Additionally, for you to be in control of those assets, with available liquidity at all times. A word you don’t want to hear for your upcoming retirement is “fixed” because things will undoubtedly change and you will need the flexibility to be able to pivot and adjust. Our strategies utilizing the Capsule Plan(TM) are malleable, giving you the ability to make the game plan adjustments you need. You make your own investment choices in consort with your Advisor. Take charge now so you don’t wind up at the end of your life’s game needing a Hail Mary.
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