How to Protect Your Client’s Retirement

Income taxes are one area where your clients can make a substantial number of mistakes when planning for retirement.

Many individuals do not have the knowledge or training necessary to protect their client’s retirement correctly. Thousands of dollars may be forfeited in this way, resulting in a lower standard of living for your clients.

Retirees often receive income from a variety of sources including interest and dividends from taxable accounts, IRAs, Social Security benefits, distributions from pensions, annuities, and other retirement accounts.

There are ways you can reduce your client’s tax liability regarding their portfolios in order to reduce what they owe on investment income.

Here are three to consider:

1. Use tax-exempt bonds

Your clients won’t pay the Medicare surtax on any investments that the federal government doesn’t collect taxes on.

2. Reduce your client’s income

If you want your clients to avoid paying the Medicare surtax, you can try to keep them below the threshold. You can encourage your clients to sell off some of their losses to offset gains, or you can look into deductions that reduce your client’s income.

3. Participate in real estate and business activities

Part of the investment income in question is the income your clients receive from a business they own, or real estate income. If your client is not an “active” participant, that income is unearned and subject to the surtax. However, if your client participates “materially”, you might be able to have that income classed as earned rather than unearned, and they can avoid paying the surtax on it.

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