Tax Efficient Retirement Income

Project Synopsis

The goal of this project is to optimize annual retirement distributions by minimizing the amount of tax paid on those distributions. The software’s optimization strategy works in two pieces. First, it optimizes distributions based on a retiring individuals current asset mix. The second piece incorporates clients that are in pre-retirement and still saving. With the second piece not only are the distributions optimized, but also the savings strategy which eventually feeds the distribution strategy.

Pre­retirement inputs would include savings rates in various types of accounts (IRA/401k, Roth, after­tax, etc), expected rates of return, and predicted interest rates. During retirement, typical clients will derive their income from multiple sources, such as Social Security, IRA distributions, Roth distributions, HSA distributions, pensions, and other savings, all of which are taxed differently.

If there are substantial assets, the goal is to maximize the assets remaining after a 30­ year horizon when the client could be expected to pass away. For example, situations may arise where paying more tax presently creates savings over the client’s lifetime. Detailed knowledge of individual income tax rules, tax table breakpoints, and tax treatment of various accounts will be required to produce a useful product.

Team Members

Ryan Wilson, Derek Leung, Jordan Tice, Phil Rotoli

Faculty Coach

Tom Reichlmayr

Project Sponsor

Beltz Ianni & Associates