Tax Planning

Tax PlanningThe idea that someone would pro-actively pay their taxes seems like an odd idea. But having a tax plan can help the saver have a better retirement and leave more assets to their children.

Typical users include wealth managers, financial planners, accountants, and individual savers with tax bracket flexibility.

Problem: There are eight forms of taxes that Americans may need to pay over their lifetime and afterward.  These are:

  1. Income Taxes
  2. Alternative Minimum Tax
  3. Declining Deductions on Schedule A
  4. Declining Exemptions
  5. Healthcare Surtax
  6. Medicare Premiums
  7. Taxability of Social Security
  8. Estate Taxes

By avoiding one type of tax, it is possible the tax payer may run into another tax and pay even more.  Deferring taxes may end up costing more than paying them immediately.

The United States allows individuals several options with regards to how they are able to invest their money.  They may open a standard taxable account.  This account offers flexibility, but all events have some sort of taxable consequence.  They may invest their money in an IRA, which reduces the current income taxes.  The consequences are that the money compounds over years or decades and is taxable upon withdrawal.  Finally, there is the Roth IRA, where the saver has already paid the taxes on the amount that went into the account, but will not have to pay taxes on the money when it comes out.

Solution: Optimized Financial System’s unique approach to tax planning helps savers determine how much they need to save and where and how much of an IRA to convert to a Roth in order to maximize their income in retirement and maximize the value of their estate.


Resources on Tax Planning:
Optimized Financial Systems Helps Customers Meet their Personal Finance Goals with Optimization
The Taxation of Retirement Saving: Choosing Between Front-Loaded and Back-Loaded Options
Retirement Investing: Analyzing the Roth Conversion Option
Publication 590 from the IRS