Hegna's Hotseat

Change Clients’ Tax Fictions into Tax Facts!


ortfolio diversification is familiar to most of you, but what about tax diversification? With the debt, deleveraging, and demographics our current economy faces, where do you think tax rates will be going? I can tell you the math is clear that taxes WILL go up; it’s just a matter of when. Keeping all your clients’ money in fully taxable accounts puts their plan at risk, but think about it, the bulk of their assets are in pre-tax accounts like 401(k)s, TSAs, and IRAs! The tax advantages they have now can become tax nightmares in the distribution phase. What about tax dreams? A tax strategies that include diversification can keep your clients from facing a huge bill.

A Tax PERFECT plan would look like this:

1. contributions that are tax deductible
2. accumulation that is tax deferred
3. distributions that are tax-free

Unfortunately, Tax Perfect doesn’t exist.But your clients CAN get 1 and 2 or 2 and 3.

With the recent tax cut, I have been saying that these are likely the LOWEST tax rates you will see for the rest of your life.So, what does that mean? It means you should NOT be deferring taxes other than to capture a company match. Pay your taxes NOW. Convert as much as you can into Roth IRA’s!In Paychecks and Playchecks I referenced John Bledsoe’s book The Gospel of Roth because it made me a believer. Converting the traditional IRA to a Roth IRA was the way to go, but since recharacterization is no longer possible, you’ll want to make sure your clients truly want to convert. Keep the following in mind.

Converting basically locks your clients in at the current tax rates and protects them from future tax increases.Cash value life insurance can also provide your clients with the opportunity to pay taxes now for tax-free growth and distribution. This financial miracle product even offers them peace of mind by stashing the cash value in a financial bunker that they can borrow against for instant credit. Plus, the cash value accumulates tax deferred which means (just like a traditional IRA or 401(k)) there is no tax due until they actually withdraw more than their basis. And the death benefit is almost always Tax Free! For more on life insurance check out

Remember this hypothetical example?

To put it all together, I’d suggest paying a large portion of taxes up front because taxes will inevitably rise, and use other tax-advantaged financial products to achieve parts of a “tax perfect” retirement plan. Always serve your clients to maximize their nest eggs, and never put all their eggs in one basket.

See you after tax day!
-Tom Hegna

Have an Inquiry or Want to Contact Tom?

Head on over to our contact page to send us a message.