Advanced Financial Concepts: Tax-deferred Retirement Planning

Guided by Justin F. Shaw, Houston-based Advanced Financial Concepts (AFC) provides clients with wealth management solutions that emphasize steady retirement incomes and minimal expenses. Taxes are a key concern for many in planning for retirement, particularly those with employer-sponsored retirement funds such as IRAs.

The majority of IRA plans function on a tax-deferred basis, with taxes postponed until after retirement. When distributions are taken on retirement accounts (typically after age 59½) they are thus viewed by the IRS as taxable income. In cases where funds are withdrawn early, a 10 percent IRS penalty is applicable, making it sensible to leave retirement funds intact until retirement. Some employees choose to make nondeductible contributions into IRA accounts and these are calculated on a “cost basis.” The end result is that this portion of IRA funds is not considered taxable when later withdrawn.

Justin F. Shaw and the Advanced Financial Concepts team stress that, after age 70½, traditional IRAs and Roth 403(b) and 401(k) plans are subject to required annual minimum distributions.

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