Later this week, on Friday and Saturday, some of the nation's leading advisors will gather in San Diego for Ed Slott and Company's 2-Day Instant IRA Success workshop. Sometimes, when advisors first learn about the program, they wonder "Is there really enough to know about IRAs to fill two full days?" The truth, however, is that if we wanted to, we could put on a two-week program and still have to struggle to decide what information to leave out. There IS that much to know.
Not only is there that much to know, but the information is constantly changing. The rule today might not be the rule tomorrow, and what was true yesterday isn't necessarily true today. In fact, there are many retirement account rules that are completely different than they were just a few years ago. And even when the rules stay the same, the retirement strategies that can save you thousands, potentially even millions, over the course of your retirement are affected by "outside changes."
What on Earth do I mean by that? Well, let me give you one key example. Since last year, there have been no real changes to any of the rules dealing with the tax break for net unrealized appreciation (NUA). NUA can be one of the biggest breaks in the entire tax code for certain plan participants with highly appreciated employer securities (i.e. stock of the company they work for). In essence, it allows certain plan participants to trade ordinary income tax rates for long-term capital gains rates on a portion of their retirement savings.
Well guess what? The top income tax rates for both long-term capital gains and ordinary income have changes since last year. Plus, 2013 is the first year the 3.8% surtax on net investment income might impact such transactions. So even though the NUA rules, themselves, haven't changed, the information advisors have to consider when analyzing if such a move makes sense have. That changes the game.
So what's the message you need to take away? Understand that your retirement tax strategy is not a static plan. It needs to change over time in order to reflect changes to your own situation, as well as changes to the tax rules and related areas. Make sure whomever you are receiving advice from has some way of staying up to date on these changes and continuously monitors your tax plan for improvement.
Remember, paying the tax you're required to is your obligation. Paying any more is your choice.
-By Jeffrey Levine and Jared Trexler