30 • MARTIN H. RUBY
This. Is. Important. If there is only one thing you take from this book, this is it: you MUST incorporate tax planning into your retirement planning. It is no longer enough to ensure your retirement funds are diversi- fied when it comes to asset allocation. They must also be diversi- fied when it comes to tax status. Tax-Efficient Income Planning In the financial industry, a focus on tax diversification for re- tirement assets is often called “tax-efficient income planning.” And if you’re not working with a financial advisor who’s an expert in this area, you should be. Tax-efficient planning looks at the tax makeup of your portfolio and tries to get you the most after-tax income for each dollar of your savings. We’ll explore what this means in the pages ahead. But for now, I want to offer a warning: savers who fail to plan with taxes in mind risk paying hundreds of thousands of dollars too much in taxes when they’re retired. In the next sections, I’ll show you why. Before we go on, I want to make something clear: I’m not a CPA. I’m not a tax professional of any kind. I’m an actuary, and a saver. Additionally, I don’t know your individual situation. That’s one of the limitations of a book. You should consult a tax profes- sional about any specific questions you have. But what I am qualified to do is change the way you think about taxes when it comes to your IRA or 401(k). And that’s what this chapter is all about.
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