Tax-Deferred Saving

For Mark Roberts’ Use: If you’re not sure whether you’ll really have enough income to retire, you aren’t alone: 38 percent of Americans* share your concern. What’s truly surprising is that this figure represents individuals not just in lower income brackets, but in upper brackets as well.

These worries likely stem from a variety of causes. One common problem is that many tax-advantaged retirement savings plans, such as IRAs and employer-sponsored 401(k) plans, come with annual contribution limits that may impede your ability to save enough money for retirement. Another common problem is that many workers are not able to participate in an employer-sponsored plan, either because they are self employed or because their employer does not offer this benefit.

Fortunately, there are other ways to save for retirement while still reaping tax advantages. A variable annuity is an insurance-based contract, funded with either a lump sum or premium payments, which can provide income in the future. This income can come in the form of a lifetime income for one person or two people, or payments that last a pre-determined number of years. While these are usually purchased with after-tax dollars, the annuity earnings are tax-deferred until withdrawn (subject to certain limitations). It is called “variable” because the contract value depends upon the performance of its underlying sub-accounts. Therefore, you can choose to invest conservatively or aggressively, based on your own willingness to take risks and your long-term goals.

Since variable annuities can fluctuate with changing market conditions, the principal value and returns are not guaranteed. They’re also not guaranteed by the FDIC, and significant surrender fees can apply if funds are withdrawn too early in the contract. While they can be a useful part of your portfolio for many reasons, it’s important to discuss variable annuities in depth with your financial advisor before making a final decision about investing in one.

*Journal of Financial Planning, December 2012 and January 2013

About the Author: Mark Roberts

In addition to managing clients’ money and giving investment and diversification advice, Mark offers something that “the other guys” don’t - a unique approach to Retirement Tax Strategies and distribution. Time and time again, Mark meets with new clients who tell him they have a great relationship with their financial advisor but have never been offered information on this kind of approach to securing their financial futures. Mark has taken this feedback to heart and works tirelessly to ensure that his strategies focus on taxes and distribution. Mark started selling insurance for a major insurance company right out of high school to help put himself through college. After graduating with a degree in finance, he dove into estate planning on the financial side to set himself apart from other financial advisors. However, as changes were made to estate tax laws over time, Mark shifted his focus to income tax strategies. Mark’s philosophy is “the blue prints are more important than the wall paper or carpet.” The wall paper and carpet represent products like investments and insurance policies, whereas the blue prints represent the strategies. Once strategies that truly fit the client’s needs are put in place, our focus can shift to providing you with the right products. According to Mark, “It doesn’t matter what carpet we use if the walls are not in the right place.” Our approach to money management is designed to generate the largest alpha (quality) with the lowest standard deviation and beta (risk). By doing this, we help provide clients with the highest return on the lowest risk. Generating income for our retirees is also very important. Because withdrawing money from your portfolio hurts the account rather than helping it, our goal is to design income strategies to harm the portfolio the least making the money last longer.

Tax-Deferred Saving

Tax-Deferred Saving

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About the Author: Mark Roberts