Keeping taxes at bay while
You are work optional . Financially independent . You have made it . Now what ?
Going Work
Optional
What are some of the strategic ways one can think outside of the box to minimize taxes and protect your assets ? Remember , it ’ s not about what you make , it ’ s about what you keep .
Mark Vivian
CFP ®, AAMS ®, RICP ®
FOUNDER / PRINCIPAL FINANCIAL ADVISOR , RJFS
For more information :
Visit our website : vip-rj . com Call us : 408-713-2020 Email us : mark @ vip-rj . com 60 4th Street , Suite 209 Gilroy , CA 95020
Let ’ s take an avatar couple named Pat and Emily . This couple happens to be in their late 50s , both have comfortably sized IRAs , significant concentrated stock positions , and own a home . After working with their retirement income planner and reviewing their entire wealth , they officially become work optional . Woohoo ! Their planner carefully maps out the distribution stage of their accumulated assets that best fit their lifestyle . What else could be looked at ?
In the event of an accident or significant long term health costs ( think stroke , Alzheimer ’ s , etc .), to protect the surviving partner and their way of life , life insurance with a long-term care rider could be integrated into the overall work optional framework . From a tax standpoint , the deployment of this strategy may protect the accelerated liquidation and taxation of the IRA and / or concentrated stock position . This could protect the assets from tax shrinkage and preserve retirement income for the surviving partner .
Since the couple is in their late 50 ’ s , the planner could work with them to determine if they might tap into their IRA early without penalties by exploring Rule 72T . Or does it make sense to utilize the concentrated stock position ? The planner might work carefully with the couple ’ s accountant to determine what is more advantageous .
To stay work optional , the hypothetical couple also thinks it is prudent to better position their assets by diversifying the concentrated stock position ( which has a low cost basis ). The couple is also mindful of unleashing capital gains tax on the position should diversification occur . To potentially diversify the concentrated stock position and not trigger unnecessary taxes , their advisor could work with them and their accountant to integrate an exchange fund strategy . This may diversify the position and keep at bay any capital gains taxes .
As part of their work optional lifestyle , Pat and Emily want to purchase an Airstream trailer to visit every National Park with and visit friends and family on this epic journey . However , by purchasing the trailer , they would have to liquidate some of their stock positions . Again , they are not in love with paying additional taxes . To purchase the trailer and keep taxes at bay , their advisor might suggest strategic borrowing techniques that are available .
The strategies mentioned above are simply a handful of options Pat and Emily could consider to help them maintain a work optional lifestyle , protect their assets , and minimize taxes . There are a myriad of factors to take into consideration . Please work carefully with your retirement income planner and accountant when considering all strategies that are relevant to you . Are you there yet ?
Every investor ’ s situation is unique and you should consider your investment goals , risk tolerance and time horizon before making any investment . Prior to making an investment decision , please consult with your fi nancial advisor about your individual situation . Investing involves risk and you may incur a profi t or loss regardless of strategy selected , including diversifi cation and asset allocation . This material is being provided for information purposes only and is not a complete description , nor is it a recommendation . Any opinions are those of Vivian Investment Partners LLC and not necessarily those of Raymond James . This is a hypothetical example for illustration purposes only . Actual investor strategies will vary . Please be aware that the early distribution penalty tax exception , substantially equal periodic payments , available via Section 72 ( t ) of the Internal Revenue Code , is subject to very specifi c guidelines , and thus , various factors should be carefully considered . Investors should understand the account value ( net equity and / or principal balance ) could potentially be exhausted if the distributions exceed the earnings and growth of the investment ( s ) in the account . Also , the ability to sustain substantially equal payments can be compromised if the account is exposed to higher volatility through higher risk or growth-oriented products . Always consult the advice of an independent tax professional prior to initiating 72 ( t ) substantially equal periodic payments . Securities offered through Raymond James Financial Services , Inc ., member FINRA / SIPC . Investment advisory services are offered through Raymond James Financial Services Advisors , Inc . Vivian Investment Partners is not a registered broker / dealer and is independent of Raymond James Financial Services .
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