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This webinar features the research of Professor Jim DiLellio that provides a framework to find an optimal decision for tax-efficient retirement income. By developing a model for income and capital gains tax with stock and bond investments in tax-deferred, tax-exempt, and taxable accounts, Professor DiLellio identifies three categories of retirees based on their income needs and net worth. He proposes and evaluates a simple heuristic to determine what retirement income strategy is optimal, quantifying a 0.5% annual return benefit. This tax alpha benefit, which is due to paying taxes early, contrary to common wisdom, is one that is tax robust across varying model input parameters. Professor DiLellio will illustrate that seeking an optimal decision for retirement income withdrawals requires different strategies.

Learning objectives:

  • Review the common rule’s application to retirement drawdowns
  • Identify where the common rule can be tax-inefficient with knowledge the heir’s marginal tax rate.
  • Understand a simple heuristic to categorize a retiree’s assets into insufficient, sufficient and excess based upon their income needs and retirement horizon.
  • Learn why there is a strategic benefit to paying taxes earlier, particularly for a retiree and spouse with a large age difference.