When it comes to the decision to choose an IRA, the conventional wisdom indicates that a Roth IRA should be used if tax rates are expected to rise in retirement, and the traditional, tax-deductible IRA should be used if they are expected to fall in retirement. This conviction, however, may be flawed because it ignores the implications of having tax-free money available in retirement that can be used to reduce the client’s tax liability and the client’s annual Medicare premiums. The ability to select income payments from tax-diversified accounts will enable the planner to optimize retirement spending by using resources on budgetary needs instead of squandering them on avoidable tax obligations.
Author: Stephanie Wendling, CPA, is an associate with the Fairman Group Family Office, LLC. Stephanie provides tax services and financial planning advice to high-net-worth individuals. Stephanie received her bachelor’s degree in business administration with a concentration in accounting from Widener University in Chester, Pennsylvania, and is also working on her master’s in taxation and financial planning at Widener University.
Author: Kenn Beam Tacchino, JD, LLM, RICP, is a professor of taxation and financial planning at Widener University in Chester, Pennsylvania. Professor Tacchino has won awards for both his teaching and his scholarly writing. Among other consulting activates, he conducts retirement planning seminars for employee groups.