Our client began working with Financial Harvest Wealth Advisors in February 2022, one year before her planned retirement. In her final year, we recommended adjusting her 401(k) contribution percentages to take advantage of both pre-tax, Roth, and after-tax treatment.
This change allowed us to roll the after-tax portion out of her 401(k) and into her Roth IRA to grow tax-free in perpetuity. We worked together to determine her cost basis on her company stock in her 401(k) account to establish if net unrealized appreciation (NUA) would be advantageous at retirement.
Finally, we opened a Self-Directed Brokerage Account through her 401(k) to invest in low-cost, well-diversified ETFs.
Our client retired as a project manager in March 2023. She has multiple income sources for retirement, including a pension, nonqualified deferred compensation, and a 401(k) plan. The original strategy was to utilize the nonqualified deferred compensation with a 5-year payout to bridge the gap until her pension pays out at age 60.
We determined that NUA was not particularly appropriate at this time and decided to keep the assets in her 401(k) and self-directed brokerage account (SDBA) for now.
Due to recordkeeping issues on the custodian’s behalf, the client cannot start her deferred compensation payout until four years in the future. To ensure her cash flow needs are met, we recommended that the client begin her pension at age 55.
We are also able to supplement with distributions from her taxable account by liquidating the most tax-efficient positions. We provided an updated allocation recommendation for her Nonqualified Salaried Savings Plan (NQSSAP) account to ensure she is getting the greatest return possible while the assets are in a holding period.
We will also work on a new NUA recommendation allocation to see if the circumstances have changed, given her new situation.
