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In the next decade, 10,000 Baby Boomers will enter retirement each day. Memphis based, Certified Financial Planner, Reginald Clark, has dedicated himself to serving those retirees and ensuring that they enter into retirement prepared, educated, and set up for success.
Originally from Jackson, Tennessee, Clark attended the University of Memphis and was majoring in finance when was first exposed to the world of financial planning. 23 years later, Clark is the founder of P3 Financial Group and has guided hundreds of happy clients through their retirement process. P3 stands for Plan, Protect and Prosper. In addition to providing exceptional financial advice, Clark and his devoted team educate their clients along the way.
Clark believes that each client should take an active role in their retirement planning so he ensures that they have the tools, resources, and knowledge to make informed decisions. Retirement, and particularly tax planning, can be overwhelming, but with the right strategy, it can become a streamlined, efficient process for anyone.
Reginald Clark shares his top three tips for individuals that are approaching retirement.
- Be wise with how you allocate your funds. Traditional financial advice typically encourages individuals to max out their 401K. Clark takes a different approach. He advises his clients to match what their company contributes to their 401K and then put the remainder of their investment funds into an after-tax vehicle such as a ROTH IRA or LIRP. By contributing to an after-tax retirement plan, those funds will come back tax-free, as opposed to the taxes you’ll pay down the road on your 401K. People are motivated to contribute to their 401K because of the instant gratification they receive from their income tax deduction. However, that entire contribution will be taxable down the road. It is much wiser to allocate some funds after-tax, which will be exempt from future taxes.
- Know the rules to make sure you don’t pay penalties. One of the most recent changes to tax law requires that after age 72, a retiree must take money out of their taxable accounts each year. Say a client has money in a taxable place such as a 401K or traditional IRA, they are required to take a distribution from the account annually and pay taxes on it. annually. If they fail to do so, there is a 50% penalty on what they should have taken out. This is one of the steepest penalties in the tax code! Many retirees may not even know about their minimum distribution obligation, and if they’ve handed over their financial management to an advisor, they should check in with their advisor to make sure they’re meeting this requirement.
- How to avoid the 59.5 Penalty. Most retirees know that if they withdraw money from their retirement plan before 59½ that they may be subjected to a 10% penalty and have to pay taxes on their withdrawal. However, there is an exception in which you can access that money before 59½ without the penalty and hardship. This exception is called Rule 72(t) and it allows for individuals to access their retirement funds early by setting up a systematic withdrawal from the account. Once they set up this withdrawal, they can’t alter it for 5 years or until they reach the age of 59½, whichever is longer.
In his book, “Don’t Take That Cheese”, Reginald Clark explores his predictions for taxes in the next several years and offers poignant advice for how to prepare. “With the proper planning and strategic investments, we can set up anyone for a more successful retirement, free from unnecessary tax burdens.” To learn more about financial planning with P3 Financial Group, visit www.p3financialgroup.com. To buy Reginald Clark’s book, head to www.reginaldclark.com/store, Amazon, or your local bookstore.