It has been sold to the public that this act is a benefit to the public. Instead it is an assault on the Wealthy and Middle Class who have accumulated substantial money in their IRA or qualified plan. The client, their family and the advisor agent all lose. Everybody that ignores this can face significant monetary pain. THE SECURE ACT HURT SENIORS Qualified money is the most expensive money to take to the lord. Why, it has never been taxed Federal and State income taxed, and it is fully includable in one’s estate (There is a credit IRD but it still hurts).Many times the surviving spouse of the deceased that had the qualified plan is now in a much higher tax bracket as a single than as a double. That tax bracket could be 90% Higher than before death.Since RMD is like amortizing a loan, the higher the value the plan attains and the older the client gets, the client must take out an ever increasing amount as they age.If your client is part of the 7 out of 10 that will need care the client may have to take substantial money out that is taxable and yes they may get some relief on their taxes for care costs, but it still costs.If your client is 1 out of the 43% who will go to heaven before their 87th birthday. Their beneficiaries may face a significantly higher marginal tax rate.THE SECURE ACT HURTS ADVISORS Many advisors are blind-sided by the AUM and its growth. The largest killer of a book of assets is the client dying, needing care, or losing their account.The advisor cannot look a client in the eye and guarantee that they will not die or need care from age 70-87.Holding one out as an advisor can creates potential liability to the client and their family if they do not plan for death, care, or taxes.There are much greater opportunities to keep the families business and to expand their AUM by protecting their book when their client was prepared for death or care.There is no more rewarding feeling than being the best liked person at a funeral when the family knows who helped them with the IRA holder in time of need.Let’s look at the numbers:We prepared comparisons of a 70 year old who has $500,000 in an IRA Account.We outlined four scenarios of possible actions the IRA holder could take:Live a long time Need Care Go to the Lord Need money later in life We look at three options:Taking 10% each year using our solution.Taking the same 10% out and reinvesting at 5% in Roth IRA.Waiting till RMD age and taking distributions and reinvesting at 5% (for my optimistic planners even though safe money rates are lot less) ( If client or planner wants to plan at lower rate, it accentuates solving problem now).We compared what would happen if the client:Lived, Needed care, Or Cashes Out Your failure to review will cost you:If your client is 1 of the 43% that will go to heaven before age 87. And/or they are 1 of the 7 out of the 10 people who will need some type of care during their life.If the client or their beneficiaries realize that taxes may never be any lower than they are right now, and you have not protected them from future tax liabilities.We can show you how to WIN We concluded from the numbers:In all Scenarios The client has more after tax income while living to life expectancy (age 86). It takes years of catching up after taking substantially equal distributions at an earlier age as opposed to deferring.One DOES NOT HAVE TO EVER WORRY that the income tax brackets will go higher.One DOES NOT HAVE TO EVER WORRY that if they were the one of the 43% of the age 70 population that would have left the world between ages 80 and 87.One DOES NOT HAVE TO EVER WORRY that they were one of the 7 of 10 people who would have needed some type of extended care during their lifetime.One DOES NOT HAVE TO EVER WORRY that their so called gift to their beneficiary becomes their 10 year curse of HIGHER MARGINAL TAX BRACKETS on all income due to their generous gift to heirs.One knows THEY HAVE PROACTIVELY lived off of more income and left more tax free to their heirs upon their passing.One knows THEY HAVE PROACTIVELY reduced their taxable estate and transferred it to their completely tax free estate. |