Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Lower tax rates under the new tax law creates a tax-saving opportunity for clients to transfer some of their pre-tax contributions in retirement accounts to a Roth or life insurance, an expert on Kiplinger writes. If clients keep the funds in tax-deferred accounts, they are expected to face a bigger tax bill when they start taking mandatory distributions at age 70 1/2, the expert explains. With this strategy, "today’s relatively low tax brackets can help greatly reduce, and could possibly eliminate, future income tax payments and the effects of future tax bracket increases."
One solution for the federal government to fix Social Security's financial woes is to boost revenue by subjecting all wages to payroll taxes, according to this article on CBS Moneywatch. In addition, the government may reduce retirement benefits to close the program's actuarial deficit, as well as combine both revenue enhancements and benefit adjustments as a way to solve Social Security's looming insolvency.
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Only 17 states permit these trusts, which can play an important role in planning for income taxes and estate taxes.
April 3 -
Advisors and their clients may not yet realize how much the new regulations dramatically change their strategies.
February 14 -
“Your risk of being audited goes up,” says RIA powerhouse Ron Carson.
November 15
A life insurance policy offers investors tax-free loan when they need cash, creating a source of liquidity and tax-free income by the time they retire, according to this article on CNBC. "I don't see it as a primary investment that you should put all of your funds into," says an expert. "Rather it's a complement, whether it's retirement or emergency funding."
Although clients that live in high-tax states lost valuable tax deductions under the new tax law, the same law also creates opportunities to help boost tax savings, a columnist at The Washington Post writes. For example, they can opt for a standard deduction and take deductions for charitable donations through qualified charitable distributions, the expert writes. "Because I’m older than 70 1/2, I’m required to take distributions, which are fully taxable, from my retirement accounts. But if I ask Vanguard to make out distribution checks to charities … I get to exclude those amounts from my federally taxable income."
A majority of affluent Americans are likely to adjust their financial plans under the new law, according to the AICPA. Here's how advisors can help.
Selling appreciated investments before moving to a lower tax bracket is one costly mistake clients should avoid, according to this Motley Fool article. Other tax missteps that investors usually take are using non-tax-advantaged investment accounts, picking the wrong investment options for a particular account and not paying the required estimated taxes. Many also make the mistake of not maximizing the benefits of their tax- deferred retirement accounts, not filing a tax return and not keeping a complete file of their tax and other financial documents.
