How to Live up to Five Years or More For “Free” by implementing our customized, investing and tax-efficient withdrawal strategies

When you are retired, every year you have the same decisions to make: how much money you should withdraw from your investment accounts, and from which type of account you should make the withdrawals. These decisions are every bit as important as selecting the right investments in the first place and every bit as important as how your investments perform. At Trusted Advisor, we utilize a unique strategy to address these issues.

Question: I’m concerned about running out of money, and I’m unsure how much I can spend each year.  Does this strategy address my concerns?

Answer: It does.  It begins with a personalized spending plan and a financial life plan.  It also includes income tax concepts and retirement investment principles addressed to your individual situation.  Used together, most portfolios will last longer.

Q: How does it last longer?

A: Before retirement, your investing goal is to accumulate assets. But, during retirement, your investing goal is to continue being able to make sustained withdrawals throughout your retirement years.  IRAs, for example, are terrific accumulation vehicles, but they are poor distribution vehicles.  You don’t want to run out of money, and you don’t want to do without the things that you need for a satisfying lifestyle.  So, we create a balance that is updated annually.

Q: Why do you call IRAs poor distribution vehicles?

A: Because 100% of the distribution is taxable income. Long-term capital gains, on the other hand, are taxed less.

Q: I have always heard that tax-deferred investments like IRAs are good.

A: They are good.  But they’re not the only place for your investments.  Pulling $30,000 to spend from an IRA may cause you a $45,000 withdrawal.

Q: So, my investments will last longer because I’ll be paying less in income tax?

A: It’s not that simple.  As an extreme example, it is possible to have net spendable income of $80,000, yet pay income taxes of less than $1,000 by using tax and investing principals working in unison.  So by taking from both taxable and tax-deferred accounts, most portfolios will last longer.  But that is only part of the strategy.

Q: Is that why your concept is called “How to live up to five years or more for ‘free’”?

A: Using our tools, we can make a portfolio that, in most cases, would have lasted 25 years now last 30 years.  This is accomplished in part by using the tax laws to pay less income tax over your retirement years.

Q: And still have the same spendable income?

A: Yes, and still have the same spendable income.

Q: Couldn’t I pay less tax by re-financing my house, paying more mortgage interest, and using the equity for living costs and investments?

A: Yes, you could pay less tax.  But it’s not just about paying less tax; it’s about maximizing your after-tax cash flow, that is, how much you have available to spend after paying taxes. Paying a higher mortgage payment would reduce your taxes, but you would also have less left at the end of the month for your living costs, travel and other personal spending.

Q: Can you advise on my investments also?

A: Yes.  That is a large part of the overall strategy. 

Q: What if I already have a financial advisor and a tax preparer?

A: If you want to retain your current working relationships, we can provide a one-time consultation on an income distribution strategy.  This is a specialized service.  Other advisors may not have studied how the financial aspects plus the income tax aspects work together to your advantage, as they often specialize in tax OR investments.

Q: Can I hire you to prepare my tax return if I don’t work with you on the rest of my financial life questions?

A: No. This is where our firm is unique.  We combine both tax and investment strategies to better serve our clients’ needs.  In our firm, one hand does know what the other hand is doing. For most clients we prepare tax returns for free because we manage their investment portfolio.  We cannot be hired just to prepare a tax return.

Q: For free?

A: The way we work is that we bundle our services and receive our fees from the investment account rather than charging you for each individual service. One of these services is the preparation of your tax return.  A bonus to us of doing your taxes is that it helps us stay current with your financial life and allows us to provide better overall planning.

Q: Do your strategies work for all income levels?

A: To some extent, the strategies would help most people, but they work best for people who live on $45,000 to $125,000 per year.

Q: How much money in investments do I need, and what period of time should I have available, in order to best utilize these strategies?

A: The strategies work best for people who have between three hundred thousand and one and a half million in investments, including IRAs, and who plan to live at least ten years.

Q: I’m interested in exploring this further. What is my next step?

A: If you are interested, make an appointment for a 45-minute no cost or obligation consultation.  We will see if your situation fits, since our strategies are not ideal for everyone. Call us in Albuquerque at (505) 345-6611 or email us at smargulin@cfiemail.com.

Income tax preparation and planning is provided by Steven P. Margulin CPA PC.

Securities and advisory services is offered through CENTAURUS FINANCIAL INC., MEMBER FINRA/SIPC, a Registered Investment Advisor. Steven P. Margulin, Registered Principal. 7301 Jefferson Street NE, Suite D, Albuquerque, NM 87109