"Don't simply retire from something; have something to retire to."
- Harry Emerson Fosdick

Distribution Planning

Distribution planning is not talked about enough in the financial community. There were many stories in 2008 of people that were retired and had to go back to work because they lost too much of their savings in the market crash. This is where proper distribution planning plays a big roll. Whereas market volatility is a benefit for an individual in the accumulation phase as one buys more shares when the market corrects, it has a negative effect for individuals in the distribution phase. 

As the market corrects during the distribution phase, an investor may need to sell more shares to meet their income goals and therefore reduce their portfolio much quicker than planned. That is why it’s critical to be allocated correctly with resilience in any market during the distributions phase.   The strategy is to incorporate tax planning along with the proper allocation. In distribution planning one tries to keep as much of the distribution dollar as possible to win over time. Tax planning plays a big part in distribution planning as the less you have to pay for taxes the less you may have to distribute to meet your cash flow needs. We analyze both taxable and nontaxable accounts along with social security to put together a tax efficient distribution strategy.

Social security plays a big part in tax efficient distribution planning as it gets taxed differently than long term capital gains and IRA distributions. If properly positioned one can pay 0% on their long term capital gains. They can pay 0% on their social security income and possibly distribute more from their IRA’s to take advantage of the increased standard deduction or lowered tax bracket. It’s critical to look at all the income to make sure no mistakes are made. You can think of distribution planning as a big spiderweb of variables. Touching one part of a spiderweb will create movement in other parts of the web. Everything is interconnected and just looking at one law can offset the benefits of others and create a big tax mess. We can help you navigate and make sure you take advantage of the distribution opportunities that may be present for you. 


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