New Presidential Proposals and How it Impacts the Future of Financial Planning

Some of the proposed changes recently filed by President Obama’s administration may have a significant impact on the financial planning profession. If the President’s proposed strategies come into effect, previous methods that investors have resorted to in the past may be drastically affected. Some of the most common tax strategies that could take a hit include the 529 savings plan, Roth IRA conversions, and file and suspend strategies.

Let’s take a closer look at the details involved in each area and the choices you could make to adapt to the possible changes:

529 Education Plans – The proposal aimed at eliminating the tax free growth of 529 education plans has been met with so much criticism that the administration has been forced to withdraw from implementing it.

Social Security Strategies – The ability to enjoy greater claims on social security benefits has also been targeted by the administration. Previous file and suspend strategies allowed beneficiaries to enjoy greater monthly benefit returns. Delaying social security claims until the age of 70 is a sound way to adapt to the changes.

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IRA Conversions – New proposals aim to require the beneficiaries of IRA accounts to withdraw funds within a period of five years instead of being able to make withdrawals throughout their lifetime, enjoying more tax-free growth. The decision to grant a beneficiary a large IRA potentially means that he / she may be placed under a higher income tax bracket.

The proposed changes should come to pass this year (if at all), giving financial planners enough time to tweak the strategies that were previously enacted.