Customer Reviews

Integrating Investments and the Tax Code

5 star:		(1)
4 star:		(0)
3 star:		(0)
2 star:		(0)
1 star:		(0)

 

 

This is one of the most useful books I've ever read.

Some of the numerical details are a bit out of date due to subsequent tax law changes, but the principles still apply. Among the important things I've gotten out of this book:

1) The importance of doing asset-allocation on a post-tax basis, not a pre-tax basis. It is harder, but clearly more appropriate. Basically, what you need to do here is apply a correction factor to pre-tax retirement assets in order to take into account the future tax hit. Yes, it's true that we don't know what the future tax rate will be. But any reasonable guess is likely to be much closer to reality than assuming a zero percent future tax rate, which is what you implicitly do by ignoring this effect.

2) The tables on page 43 and 44 (and the modeling that resulted therein) have been astonishingly useful. Basically, these tables show the results of a model which shows the after-tax wealth, various years into the future, of various types of "buckets" (e.g., taxable account, pre-tax IRA, non-deductible IRA, deductible IRA, etc.). Among the easy-to-comprehend lessens from these tables is how poor a deal variable annuities and non-deductible IRAs are (actually, non-deductible IRA contributions now may be a good deal, but only if you can immediately convert them to Roth). I've also replicated his model to do my own analysis with different assumptions. I've referred to these two tables many, many times (i.e., many dozens of times).

3) A thorough analysis of the question of when (and how) to file for Social Security Retirement/Survivor's benefits. Among the really good recommendations that I found useful for one of my clients was the following recommendation:
- Note that the question of whether to start retirement benefits on one's own record at Full Retirement Age vs. waiting until age 70 is actuarially close to being fair. So, unless you know that you are likely to live longer than actuarially expected, this isn't likely to increase the expected value of your future ending wealth.
- BUT, if you are a widow/widower, you can start survivor's benefits on your late spouse's record -- and then shift to retirement benefits on your own record at age 70. Basically, this allows you to get the benefit of waiting until age 70 -- without having to wait until age 70. Thus everything you get from your full retirement age until age 70 is "gravy". A legitimate loophole that is shocking to the taxpayer, but astonishingly useful to those who are able to take advantage of it.

Bill Reichenstein is an academic with a long history of research that is extremely useful for the practicing financial advisor. This book both summarizes some of his already well-documented ideas, while breaking some new ground.

This book should be considered an essential resource for any financial planner/advisor. Absolutely essential and outstanding.