Acquire New Clients with a Conversation on Tax Efficient Distributions

Shuang Chen

Our guest blog comes from Shuang Chen, Co-founder and CEO of RightCapital, has more than 15 years of experience in the financial services industry. Prior to co-founding RightCapital, Shuang was a Senior Vice President at Prudential Financial where he was responsible for product development of saving and retirement products for Prudential’s annuity business. Shuang has developed specific retirement income product solutions with patents pending with the U.S. Patent and Trademark Office. Shuang has earned the prestigious Chartered Financial Analyst (CFA) designation. He is also a Fellow of the Society of Actuaries (FSA), and a Professional Risk Manager (PRM). Shuang graduated from Columbia University with a Master of Business Administration (MBA) degree.  Outside of work, Shuang enjoys spending time with his wife and three kids hiking and biking. His (rather young) kids constantly mention Shark Tank and provide free advice on what he should tell the Sharks should he ever decide to go that route.

Are you capturing new clients with tax-efficient drawdown strategy conversations? Is your practice not growing as fast as you would like?  Are you missing that unique story that captures prospects’ attention?

We might have an answer for you.

What if you could provide your prospects who are approaching retirement or already retired a new view on how different retirement distribution strategies could save them $1 million or more in taxes?

What is a Retirement Drawdown Strategy?

Most investors think they have crossed the finish line once they cross over their retirement savings goal, but without an effective retirement distribution strategy in place, these investors may not be leveraging their retirement assets optimally.

Few clients today have enough income from defined benefit pensions and Social Security to cover their expenses.  Today, nearly all retirees must tap into their savings to fund retirement expenses. Your client will have assets in the following categories of accounts:

  • Taxable account
  • Tax-deferred account
  • Tax-free account

The key question is which accounts your client should take money from, in what order, to minimize tax liabilities in retirement?  After all, fewer taxes on retirement income mean greater financial security by allowing retirement savings to last longer — the crucial goal for retirees!

Three typical drawdown options explained

Here are the three typical drawdown strategies.

Pro-Rata strategy

  • Withdraw from taxable, tax-deferred and tax-free accounts proportionally
  • Not optimal in most cases

Sequential strategy

  • Withdraw from taxable accounts first; then tax-deferred accounts; lastly tax-free
  • The classic approach

Sequential with Roth Conversion strategy

  • Withdraw from taxable accounts first; then tax-deferred accounts; lastly tax-free
  • Roth conversions are executed to take advantage of periods of lower tax brackets

Achieve $1 million in tax savings with an optimal strategy!

As an example, we looked at Mike and Amanda Brady, 56 and 54 respectively, who plan on retiring at 65.   They have accumulated retirement assets of $ 1.5 million in tax-deferred vehicles and $100,000 in taxable investments.

Our initial observation is that their taxes in retirement could be very high. This is driven by Required Minimum Distributions and Social Security.

Acquire new clients by changing the conversations

Many advisors have success in acquiring new clients by engaging prospects in a tax-efficient distribution conversation. If you are not already, you should plan to incorporate this into your practice.

Differentiate yourself from other advisors

The complexity of the topic has made it difficult for many advisors to effectively deliver the message to their clients and/or prospects.  Spend time with us and we will make those conversations easy for you.

Deliver significant new value fast

The RightCapital tool is intuitive and interactive, allowing you to begin tax-efficient distribution conversations as soon as plans are created.

Most valuable for near retirement prospects

Prospects approaching retirement or already retired are most interested in tax efficiency during distribution.  This approach can also help you to elongate your AUM thus increasing your revenue.

Free recorded webinar and PowerPoint slides

Click here to watch a 20-minute recorded webinar that explains how you can use tax-efficient distribution strategies to acquire new clients. You will also have access to free PowerPoint slides that can be incorporated into your prospecting process.

RightCapital is the leading financial planning software for advisors.

Click here to schedule your demo.

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