The Perfect Tax Window | A Review in Charts & Fast Food

The Perfect Tax Window

When you’re going through our financial planning process, specific pieces of advice can produce outsized benefits. One such tax planning opportunity emerges between full (or partial) retirement and when your Required Minimum Distributions (RMDs) begin at age 73.

With the drop in income, you have limited time to access lower income tax brackets than you may have seen in a decade or two. It looks something like the chart below.

In this window of opportunity, we look to utilize annual Roth Conversions.

This proactive tax strategy takes money from your tax-deferred accounts and moves it to a Roth IRA to continue all future growth tax-free.

By moving the money out of your tax-deferred account, you enable it to be taxed at a lower bracket and continue all future growth tax-free. You are taking advantage of the lowest tax bracket you may have had in decades–and the lowest it may ever be again.

Is a Roth Conversion strategy right for you? The best decision is made in the context of an annual review, year by year. This way, we can operate with your comprehensive financial plan in view, including factors like Social Security optimization. We also coordinate with your CPA to ensure your financial team works in unison.

Don’t let your window of opportunity close. If you are fully or partially retired, talk to our team about Roth Conversions for your plan.

A Review in Charts: Sometimes, the best way to view what is happening in our economy is through charts. Here are a few we have found interesting lately:

The average price over this 20+ timeframe (Jan 2004-Jan 2024) is around $3/gallon—not too far off current prices. Overall, though, energy prices have gotten significantly cheaper over the past 15 years or so. Here is the amount people spend on energy as a percentage of overall personal consumption:

Outside of the artificially low prices during the pandemic, consumers are spending a lower amount of their budget on energy than nearly any time dating back to the 1960s.

In other news, gold has actually outperformed stocks by a wide margin this century:

In housing news, the Feds decided to hold rates steady this week. Higher mortgage rates have strangled housing activity this year:

According to the National Association of Realtors, we’re looking at the worst year for existing home sales since 1995. With 70 million MORE people in the country, it seems more housing activity should be happening. Additionally, you have these life events:

Housing market activity accounts for roughly ~20% of economic activity in the United States (including ancillary spending related to housing—construction, furniture, loan originations, moving, etc.).

Inflation and Food: Even fast food restaurants are beginning to pinch the budget. Inflation has hit fast food chains hard in the past decade, with many restaurants seeing a 50% increase. This graph visualizes the average price increase of 10 core menu items from select American fast food chains and the change in the consumer price index (U.S. city average) for fast food from 2014-2024.

*The views expressed are those of the author as of the date noted, are subject to change based on market and other various conditions. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results.