If you are a Jeopardy fan, and even if you aren’t, you may have heard of Ken Jennings. He holds the record for the most wins on the TV show Jeopardy, with a total of 74 consecutive wins. His streak ended with the clue, “Most of this firm’s 70,000 seasonal, white-collar employees work only four months out of the year.” If you recall the answer, or are guessing for yourself, the firm is H&R Block, which Ken Jennings did not guess correctly. But it totally makes sense, the first four months of every year, a major conversation for us in the wealth management industry is how to prepare for taxes.
As financial advisors, we work with our clients to ensure they are planning properly for retirement and other accumulation events, but we also spend a lot of time reviewing what distribution planning is in place. During most individuals accumulation years, taxes are usually taken out of earnings before they are paid to employees. Surely there is an element of planning that goes into that, such as are you withholding enough, or too little? But when you are in your distribution years, depending on your sources of income, your tax withholding may need to be reviewed more often, and in some cases with thoughtful planning there could be years where a tax liability is very limited while still enjoying a lifestyle you desire. The tax code is a complex system that requires more than just a passing glance, we as financial advisors spend a lot of time reviewing relevant topics that are applicable to our clients’ planning future.
And by the way, Ken Jennings final Jeopardy answer was, “What is, FedEx” – can you imagine if FedEx only worked four months out of the year?
This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your
specific tax situation with a qualified tax advisor.