Wealth InFormation: Seeking to Retire Early and Lower Lifetime Taxes

Wealth is always in formation, whether one chooses to actively manage their formation or let finances, retirement goals and taxes play out as they may without deliberate direction. 

I met with a delightful couple recently who have done all the right things:  they both excelled at their careers and have been financially rewarded with strong income and pensions, they aggressively saved into their 401(k)s and essentially have no debt.  With some simple calculations, they could have determined that their pensions, social security and modest retirement account withdrawals would have funded their goals to retire in 5 years.  They were smart in pursuing a more detailed long-term financial plan though, and what we found was exciting to us all. 

With sophisticated cash flow modeling, we were able to determine that even with 30 more years of life expectancy, this couple had more options that they thought.  For example, they could retire in five years and double the spending that they originally planned, or they can retire as early as next year and increase their planned spending by 1.5 times.  With early retirement comes additional opportunity, as we will then be able to structure their taxable income to decrease.  For their years prior to receiving social security and with the current tax rates, we can take advantage of conversions from their pre-tax retirement account dollars to Roth IRAs which can grow tax free for the rest of their lives, and will be inherited tax-free.  This strategy results in paying taxes earlier but will in turn significantly decrease their lifetime taxes as well as potentially, that of their heirs. 

We were also able to articulate the formation of other goals such as a second home in the warm south, financially helping children and grandchildren, and assess the financial risks long term care, premature death, and how to sell a rental property. 

Wealth is always in formation and with the proper information, this couple will have the blessings of retiring early AND lowering their lifetime taxes.

LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com  SchulferAndAssociates.com , or louann.biz

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.   

This is a hypothetical example based on real life examples.  Names and circumstances have been changed.  The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.