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Beware of What You Ask For

by Anthony J. Ogorek Ed.D., CFP™

This week I attended a meeting of the local estate analyst community. This group is comprised of some very high-end accountants, attorneys, and advisors, among others, who were being briefed on some of the intricacies of stretching out required minimum distributions from retirement accounts. Toward the end of the presentation it occurred to me that the advice they were giving, although technical in nature, could conflict with why any of us save money in the first place.

The thrust of the presentation was a reaffirmation of what all of us have been trained to advise our clients: in order to save taxes, defer payments from retirement accounts for as long as possible. “Success” is viewed as keeping the greatest amount of money from Uncle Sam’s hands. The only drawback with keeping it out of our Uncle’s hands is that it also keeps it from our hands! To better frame this conflict, how would you answer this question: ‘Who is wealthier, someone with a $1 million account who refuses to spend it, or someone with $100,000 who intends to spend it on activities that give him or her enjoyment?’ Obviously this is a very skewed example, but you can appreciate the point: does money really matter if you have no intention of deriving any economic value from it?

I am sure that none of the professionals at the meeting would advocate that a client sacrifice their lifestyle in order to save on taxes. However, if saving taxes is your sole gauge of success, perhaps you need to reassess what having money is all about. No one, including yours truly, wants to pay more tax than is required by law. However, there are situations when denying you just to spite the tax man makes little sense.

In our line of work, everything comes with a price. There are no silver bullets that produce remarkable results without creating tradeoffs in other areas of your life. Before you engage any financial professional, be sure that you carefully weigh what you are looking to accomplish, with the tradeoffs that are sure to accompany any strategies you decide to employ.