It’s probably a safe bet that 2020 isn’t turning out in a way that any advisor or their clients expected one year ago. Today, one can see replays of vague warnings about a pandemic from Bill Gates and former Presidents Bush and Obama. Still, it’s difficult to believe they could have conceived 2020 as it has played out.
As this bizarre year heads into the final stretch, it is clearly emerging as a tax season unlike any other. That’s why Financial Advisor has endeavored to provide you with articles from two unparalleled tax experts—Ed Slott and Jim Blase. Roth IRAs present clients with an opportunity that may not exist in several years, if, as expected, the government is forced to control deficits.
A decade ago, in the wake of the financial crisis, we were warned repeatedly that trillion-dollar federal budget deficits were unsustainable and would lead to runaway inflation. The deficit scolds turned out to be dead wrong in the short term—and dangerously so, as they are now perceived in many quarters as a pack of Chicken Littles.
Today, with the federal budget deficit running at around $3 trillion or more, most advisors are telling affluent clients to prepare for inevitable tax increases. That’s why the Roth opportunities, while a far cry from where they stood in late March with equity prices at huge momentary discounts, could be a last chance to shelter qualified assets.
Advisors and their clients have lots of other issues to grapple with. Just as financial experts debated the inflation-deflation argument a decade ago, it is resurfacing once again. The ramifications for recent retirees and those about to leave the labor force are profound.
In one of the most important cover stories we’ve ever published, Bill Bengen examines retirement withdrawals under a variety of different scenarios. The worst likely scenario for investors is an inflationary one. The loss of purchasing power retirees experienced in the 1970s altered their lives.
Given that so much uncertainty exists today, it’s more important than ever to consider a wide range of outcomes. Bill acknowledges that there are many scenarios in which retirees could safely withdraw more than 4.5% of their assets and not run out of money. But with interest rates and equity prices where they are today, this wouldn’t appear to be one of them.
These are only two of the articles in the current issue that will provide you with both cause for serious consideration and actionable ideas. I’d urge you to read Stephanie Bogan, Steve Gresham, Carolyn Armitage and Russ Prince—for starters. It’s one of the best issues we’ve ever produced.
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