Retirees: Not Enough Advisors Discuss Tax Planning

By Cyril Tuohy

InsuranceNewsNet

Taxes hit retirees harder than they think, and one reason may be that not enough advisors are really paying attention, according to a new survey by Lincoln Financial Group.

The survey of 750 retirees between the ages of 62 and 75 found that 57 percent said their advisors regularly discussed tax changes with them and shared the impact of these changes on retirees’ retirement plans.

But the survey also found that 43 percent of respondents said their advisor didn’t take any initiative regarding taxes.

Christopher Price, advanced sales attorney for Lincoln Financial Distributors, said financial advisors need to talk to clients early about taxation during retirement.

“Those reviews should include identifying tax-control options and strategies to help mitigate the impact of taxes on the client portfolio.”

Retirees are particularly sensitive to Uncle Sam’s tax bite, so it is in the interest of advisors to be up on the latest tax legislation. The survey found that 62 percent of respondents were aware of recent tax law changes.

The survey, conducted last year, polled individuals with household incomes of $100,000 or more.

“Given the current environment, with taxes at a 30-year high, it is critical that advisors help their clients understand all factors – including taxes – when developing a plan to help clients protect their legacies,” Richard Aneser, chief marketing officer of Lincoln Financial Group Distribution, said in a news release.

Aneser also said that advisors who offer clients astute tax planning and tax protection services are those who are likely to provide clients with the most value.

Survey respondents said that taxes represent an even bigger money drain than mortgages, travel and leisure, or even health care.

On average, retirees reported spending most of their budget outlay on federal income taxes, according to the survey.

In addition, 36 percent of respondents said taxes represented a larger expense than anticipated, while 23 percent didn’t even consider planning for taxes as an expense before retiring. “Retirement is more of a mindset than a specific age,” Price said.

The survey also found that 43 percent of retirees in the 62 to 65 range said they would like to pass on a financial legacy to heirs, yet nearly half the survey participants indicated that they had not worked with a professional to establish an estate plan.

Estate planning is a specialty among financial advisors because of the tax complexities surrounding the passing of assets to the next generation, a transaction which often involves paying hefty taxes.

The survey’s margin of error was plus or minus 3.5 percent.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.