William Reichenstein and William Meyer, founders of Retiree Income, share their research on where financial advisors go wrong with their retirement advice.
In their article “How to Beat the Conventional Wisdom: Part 1” published in Financial Advisor Magazine, retirement planning experts William Reichenstein, PhD, Principal, Retiree Income, and William Meyer, CEO, Retiree Income, discuss their latest research which debunks conventional wisdom around tax-efficient retirement withdrawals and proves a better way to create income from retirement savings.
“Through our research, we found there are better strategies for creating retirement income than the ones the industry is currently using,” said Meyer. “These strategies provide greater tax efficiency, creating six or more years of income. As an industry, we can do better for clients.“
Conventional wisdom suggests that an investor should withdraw retirement funds from one account at a time moving to the next one after the previous is exhausted, starting with tax-deferred accounts and moving to tax-exempt accounts. In their research published in The Financial Analysts Journal, Meyer and Reichenstein demonstrate that this conventional wisdom is not the most tax-efficient.
Their research demonstrates the most tax-efficient strategies take into account progressive tax rates, consider drawing from multiple accounts concurrently and use Roth conversions – all while taking advantage of years when the investor has lower marginal tax rates. The research shows that using these unconventional strategies can add more than six years of portfolio longevity compared with a conventional strategy.