Strategy #1: Update your beneficiary designations on your IRA accounts. 

Why this matters:

The SECURE (Setting Every Community Up for Retirement Enhancement) Act became law on December 20, 2019, and it alters several rules related to tax-advantaged retirement accounts. 

Two notable changes: It moves back the age at which retirement plan participants need to take required minimum distributions from age 70 ½ to age 72. In addition, it mandates that most non-spouses who are inheriting IRAs must fully liquidate the accounts within 10 years, rather than over a lifetime. This has a serious, sweeping impact on taxes that must be paid by the beneficiary. 

Action steps you should consider:

We believe that people should reassess their beneficiaries in terms of age and tax bracket. It’s also important to be aware of the fact that the SECURE Act effectively obliterates trust planning with IRAs. 

Be sure to talk with your financial advisor to review any existing trust or tax-advantaged retirement accounts to ensure they’re set up in a way that your wishes will be carried out. 

Strategy #2: Stick to your plan, regardless of the stock market.

Why this matters:

The stock market has been hitting all-time highs as of late, triggering emotionally charged changes to financial planning for some, who seek a quick return based on strong market performance. In our industry, this is referred to as “recency bias,” when people allow recent events to influence their investing decisions. 

What you should do: 

In our view, it’s important to stay committed to a prudent asset allocation and to not let your emotions or rationale based on recent events dictate changes, no matter what the market is doing. 

Likewise, stick to your plan despite rumors of downturns coming later in the year. There’s sentiment among economists and asset managers that we will see volatility in this presidential election year (and due to other factors), but it’s our belief that those who stay the course will emerge in an optimum financial position. 

Strategy #3: Aim for a holistic financial planning + tax solution

Why this matters: 

Sometimes financial advisors — even those acting in good conscience — can be guilty of tunnel vision when it comes to your money, recommending changes that are wise from an asset allocation standpoint, but inadvertently ignore the impact of those changes on you come tax return time. 

What you should do: 

Strive for a unified front in terms of matching up your financial advisor with your CPA. When the two professionals are in a position to coordinate together, and are on the same page when it comes to tax-efficient strategies relative to your wealth, we believe it can make your financial picture stronger overall. 

We can help you protect your assets and assist you to create financial structures that are funded with tax-deductible dollars to minimize your taxes and maximize your wealth.

MOK Financial Planning & Tax, Inc. is a registered investment adviser based in Millis, Massachusetts. We are organized as a corporation under the laws of the State of Massachusetts and have been providing investment advisory services since September 2017.