PFP2316. Quantifying the impact of Tax Planning

Advisors can add reliable value to investors through the strategic selection of investment accounts and financial products that provide tax-advantaged growth. This presentation provides a framework for estimating the benefit of sheltering through a net return methodology. Net returns provide insight into the quantitive benefit of strategic sheltering and allow advisors to gain intuition about when to use various account types for clients to maximize value. Taxable assets with deferred growth, or basis assets, such as stocks and insurance products provide unique value that changes with time horizon and product type. This framework can also be used to understand optimal ordering of asset sales to fund spending in retirement, which can increase retirement spending by as much as 20%.

Learning Objectives:

• Recognize the four fundamental account types and how they influence net investment returns
• Evaluate the quantitative benefit of using tax sheltered accounts for growth
• Recognize when to use Roth and traditional tax deferred accounts for clients, including the value of Roth conversions
• Understand how the benefit of basis assets such as stocks and insurnance increases over time and affects optimal withdrawal ordering in retirement