Tax Strategy for Retirement Planning

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Think Twice About CPA Advice for Tax Strategies

Did you know that the IRS tax code is estimated to contain over 80,000 pages?

Most CPA’s and tax advisors become experts in the specific areas of tax law that are most relevant to their clients. There’s a tremendous difference between a CPA and a Tax Strategist.  Although some CPA’s might offer some tips to marginally reduce taxes near the end of the year, most are not Tax Strategists.

Tax strategists [Financial Advisor/Retirement Strategist] are more proactive, studying case law and pending legislation to develop strategies that are meant to be implemented before the creation of income. In essence, your tax strategist creates a strategic roadmap to lower taxes at retirement while the CPA is used to tactically process tax returns after the strategies have been implemented. As such, it is important that your Tax Strategist and Tax Advisor work together.

Ringo Financial has it’s very own Certified Education trainer for CPA’s who has provided CE credited education for CPA’s nationwide. We are happy to work with and provide education on tax code for your CPA or Tax Advisor.

As President of the National Association of Insurance and Financial Advisors – Inland Empire, I’m dedicated to keeping Client, Brokers, Agents, and Advisors up to date with the most current legislation and news that affects us.

The following article is provided with permission from NAIFA:

Key Senator Proposes Retirement Savings Plan Changes

On September 8, the Democrats’ leader on the Senate Finance Committee, Sen. Ron Wyden (D-OR), released a discussion draft proposal that would change IRA and tax-favored retirement savings plans rules. Specifically impacted would be mega IRAs, stretch IRAs, minimum required distribution (MRD) rules, and 401(k) matching contribution rules.

The Retirement Improvements and Savings Enhancements (RISE) Act would:

  • Make the Saver’s Credit refundable, but require that the credit be deposited into a
    retirement savings plan (thus making the credit act like a matching contribution)
  • Allow employer matching contributions tied to student loan payments
  • Repeal the age limit (70 1/2) after which individuals cannot contribute to traditional and Roth IRAs
  • Expand the rules for rollovers of inherited IRA and tax-favored savings plan money—non-spousal heirs would have the standard 60 days in which to make a qualified rollover
  • Prohibit further contributions to Roth IRAs if the total value of an individual Roth IRA exceeds $5 million. Amounts over the cap would have to be withdrawn. (This is the mega IRA proposal.)
  • Prohibit conversions of both traditional IRA and employer-sponsored plan amounts into Roth IRAs
  • Eliminate stretch IRAs (which the discussion draft refers to as an estate planning tool)—the proposal is the familiar one: inherited IRA and 401(k) (and 401(k) type) amounts would have to be distributed (and thus taxed) within five years of the decedent’s death unless the heir is within 10 years of the decedent’s age, an individual with special needs, a minor (child) or the decedent’s spouse. The rule also applies to qualified annuities and to defined benefit plan pension benefits.
  • Eliminate MRDs from retirement savings plans when total (aggregate) retirement savings are less than $150,000
  • Increase the age after which MRDs must be taken from the current 70 1/2 to 71 in 2018, 72 in 2023, 73 in 2028. After that, the MRD age would automatically adjust based on life expectancy. This rule would also apply to Roth IRAs.
  • Prohibit IRA fund investment in assets acquired for less than fair market value
  • Expand the time (statute of limitations) during which the Internal Revenue Service (IRS) can challenge valuation-related misreporting and prohibited transactions–the time limit on challenges will go from three years to six years
  • Modify the prohibited transaction rules to prevent IRA owners from investing IRA assets in a corporation, partnership, trust or estate in which the IRA owner has a 10 percent or greater interest.

Sen. Wyden has requested comments, within 90 days, on this discussion draft. He said he would welcome all comments on all issues raised by the discussion draft, but he also identified a number of issues on which he specifically would like comments. Among these issues are how to deal with plan administration MRD responsibilities when the administrator does not know “the aggregate” of an individual’s retirement savings; whether to phase out the elimination of the MRD requirement, rather than create the $150,000 “cliff;” how to treat lifetime annuity payments and defined benefit plan payments in the context of the new stretch IRA rules; other ways to simplify MRD rules; and issues surrounding IRA asset valuation rules.

Prospects: It is clear that this proposal is not intended for action this year—the comment deadline of December 8 virtually guarantees that this 114th Congress cannot act on it. However, if Democrats win control of the Senate after the November 8 elections, Sen. Wyden will likely be chairman of the Senate Finance Committee, the committee with jurisdiction over this issue. If that happens, expect action on this proposal relatively early in 2017.

NAIFA Staff Contact: Judi Carsrud, Director—Government Relations.

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