Broker Check

Know your "best" tax choices to improve your retirement

| February 21, 2014

Cut Off Harvard to Save America

Having graduated from Harvard's "big rival," I of course noticed and initially liked this headline.  (Little did I know it would apply to my schools, too!)  Some readers may feel the article is a stretch to connect it to retirement - but I disagree.


Change, I hope readers agree, is inevitable.  In a previous post, I referred to the transformation that WhatsApp is causing in the field of messaging.  I mention change because US Federal tax policy – I’ll reframe that as tax opportunities – change frequently.  Probably there is some change in most years.


It is also true that your own situation changes frequently.  The “best choice” for your retirement investments and / or retirement income will change over the course of time.  That best choice may also change based on the results of your retirement investment accounts.


Some readers may be familiar with Ed Slott, who calls himself a “recovering CPA” and who speaks widely on the subject of taxes and retirement accounts.  (I attended quarterly meetings of his IRA study group for two years.)  Ed has helped me understand for my clients – and he has helped many individuals – through his multiple appearances on Public Television – when to make smart tax moves with retirement accounts.


A real life example:  I was talking to a client very recently who expressed a very valid concern that his tax bill was going to go through the roof when he turns 70½ and must begin RMDs – Required Minimum Distributions.  He’s fortunate enough to have other sources of retirement income so doesn’t need the income from these distributions.


Doesn’t matter.  Uncle wants his tax piece that has never been paid on traditional IRA / 401(k) / TSP / etc. investments.


Does it make sense to convert some or all of these monies to a Roth IRA?  I don’t know.  Does it make sense to run the numbers?  Very probably.


If you are a non-technical pre-retiree or retiree who might see the wisdom of not being a “retirement do-it-yourselfer,” I’ll provide you a first draft written retirement analysis at no charge or obligation.  I will, of course, need the relevant info & documents, as well as an understanding of your goals & values.  I welcome your contact!


By the way, what does all this have to do with Harvard? . . . And the other schools with ginormous endowments (including both of mine!)  According to the author of the “Cut Off Harvard” post, “Five schools (Harvard, Yale, Princeton, Stanford University and one public institution, the University of Texas) had endowment increases last year of more than $1 billion, exceeding the total endowment of more than 90 percent of the schools.”


Here’s what’s more important.  According to the author, “The federal government subsidizes this academic aristocracy . . . in several ways. Big endowments such as Harvard’s probably often reap at least $1 billion annually from capital gains. They pay no income taxes on those gains; individuals pay 23.8 percent.”


I welcome your call or email with your views!