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Five situations we see most often

Most of the people we work with arrive in one of five situations. Each one carries decisions with deadlines attached, and most of those decisions are easier to get right before the deadline than after.

Approaching retirement

The last working years are the ones with the most leverage and the least attention. Income is usually at its peak, which makes them poor years for conversions, but they are also when the sequence of everything that follows gets set. Decisions about when to stop, how to bridge to Social Security, and what to do with a final year of high income all interact. We would rather work through them two or three years out than in December of the year you retire.

  • A retirement date that is close but not fixed

    You have a sense of when, and enough flexibility that the date itself is still a planning variable rather than a constraint.

  • A final year of concentrated income

    Deferred compensation, a bonus, unused vacation, or a partial year of salary can make the year you retire the highest-income year you have.

  • Decisions that stack

    Social Security timing, Medicare, and the first withdrawals all arrive within a few years of each other, and each one affects the others.

Related: The Withdrawal Sequence

Recently retired

The years between the last paycheck and the first required distribution are usually the lowest-income years of an adult life, and they are also the shortest window you will get. What happens in them determines how much is still taxable later. Most people spend this period focused on whether the portfolio will last, which is reasonable, and meanwhile the window closes. We spend it on conversions, on the withdrawal sequence, and on what Medicare premiums will do in response.

  • A gap before required distributions

    Between retiring and the age your required distributions begin there is a stretch of low-bracket years, and how many of them you have depends on when you stopped.

  • Income you can control

    When most income comes from accounts rather than a salary, you decide how much shows up in a given year, which is the whole basis of the planning.

  • An IRA balance that is still growing

    Left untouched, a traditional IRA keeps compounding into a future required distribution that arrives whether you want the income or not.

Related: The Tax Window | How much to convert, and in which years

Leaving California

A move out of state changes what gets taxed, but not all at once and not for everything. Residency is a question of fact rather than a form you file, and California has a documented interest in the answer. Some of the planning has to happen before the move: which income to accelerate, which to defer, and how a business sale or stock compensation should be timed against the departure.

  • A move decided or under consideration

    The planning differs depending on whether you are choosing a destination or choosing a date, and both are worth working through before either is final.

  • Income with a California source

    A business, real property, or compensation earned here can remain connected to California after you leave, and the treatment is not always intuitive.

  • A conversion decision on either side of the move

    Converting before you go and converting after you arrive produce different results, and which is better depends on where you are going.

Related: What California does to a retirement withdrawal

Concentrated stock or a large IRA

Both of these are the same problem in different wrappers. A position has grown into a size that dominates the portfolio, and the reason it has not been addressed is that addressing it costs something. With appreciated stock the cost is capital gains. With a traditional IRA it is ordinary income, deferred until it is not. In either case the question is rarely whether to unwind it, but over how many years and in which ones.

  • A position that drives the outcome

    When one holding moves the portfolio more than everything else combined, the risk is no longer the market's, it is specific to that company.

  • A cost to reducing it

    Embedded gains or deferred income mean the fix is not free, which is why it usually waits, and why the timing matters as much as the decision.

  • Years that are not all the same

    Income varies from year to year, and a multi-year plan lets the unwinding happen in the years where it costs least.

Related: Unwinding a position that is half the portfolio

Self-employed in California

Running a business here means the tax picture and the retirement picture are the same picture. The entity structure, how you pay yourself, which retirement plan you sponsor, and what happens when you eventually sell are all connected, and California treats several of them differently than the federal rules do. Most of these are decisions you can only make well with a few years of runway. We coordinate with your CPA rather than replacing them.

  • A business that is also the retirement plan

    For many owners the eventual sale or wind-down is the largest single event in the plan, and it deserves to be planned rather than reacted to.

  • Retirement plan choices still open

    The plan you sponsor determines how much can be sheltered each year, and the right answer changes as the business and the headcount change.

  • Federal and state treatment that diverge

    California does not follow the federal rules on several items that matter to owners, which is why the planning has to be done twice.

Related: Asset Location

Intro

Who we are not the right fit for

We are not a good fit for everyone, and it is cheaper for both of us to find that out early. If you want someone to pick stocks or beat an index, that is not the work we do. If you want a portfolio managed and nothing else, you can get that for less elsewhere and you should. If you are looking for a single answer to a single question, an hourly planner or your CPA will serve you better. And if you are not comfortable making decisions before you have to, our process will frustrate you.

Find out if we are a fit

The first meeting is scheduled for twenty minutes and there is nothing to prepare. Tell us which of these sounds closest to your situation, and we will tell you what we would look at first and whether we are the right people to look.

Schedule an Intro Meeting

Twenty minutes by video. There is nothing to prepare.

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