2022 Montgomery-Warschauer Award-Winning Research: A Comparison of the Tax Efficiency of Decumulation Strategies
Monday, December 12, 2022
10:00 AM – 11:00 AM PDT
Location: SCC: 611-614
CE: 1 CFP CE Credit(s)
Level of Complexity: Intermediate
This presentation examines several decumulation strategies for a client approaching retirement with a mix of tax-favored retirement accounts and taxable accounts, each holding appreciated stocks and taxable bonds.
The analysis applies these strategies to three “nest egg” scenarios to determine their resulting portfolio lives while examining tax consequences.
The more tax-efficient decumulation strategies last from 1% to over 11% longer than both the Conventional Wisdom and Schwab’s decumulation strategies.
The results provide insights that financial planning professionals can use to tailor tax-efficient decumulation recommendations that better fit a client’s particular situation, increasing how long their wealth lasts during retirement.
Learning Objectives:
Describe to clients why conventional wisdom about the order for withdrawing (i.e., decumulating) to support spending in retirement is not tax-efficient.
Determine the proper mix of the three types of investment accounts--taxable, tax-deferred traditional retirement, and tax-free Roth retirement—for annual retirement withdrawals to last as long as possible and leave as large of a legacy as possible.
Apply the principles behind a tax-efficient retirement decumulation strategy.
