Working With a Tax Professional on Future 401(k) Strategy

Why Retirement Planning Works Best When Your Advisor and CPA Work Together

For many people, a 401(k) is one of the biggest investments they’ll ever have. But too often, choices about how much to contribute, when to make Roth conversions, or how to withdraw money in retirement are made without considering how taxes will affect them.

As you get closer to retirement, it becomes even more important for your financial advisor and tax professional to work together. When you, your advisor, and your CPA have frank conversations, you can spot ways to get more out of your retirement savings, avoid surprise taxes, and build a smarter plan for the future.

Retirement planning isn’t just about growing your savings—it’s also about knowing how and when you’ll pay taxes on what you’ve built.

Why Tax Coordination Matters

Traditional 401(k) plans offer tax-deferred growth, meaning contributions are generally made pre-tax, and taxes are deferred until withdrawals occur in retirement. While this structure can provide meaningful tax advantages during working years, future distributions are typically taxed as ordinary income.

Without proper planning, retirees may face several unexpected tax challenges, including:

• Higher-than-anticipated taxable income in retirement
• Increased Medicare premium surcharges (IRMAA)
• Taxation of Social Security benefits
• Larger Required Minimum Distributions (RMDs) later in life
• Reduced agility during market slumps or major life events

A CPA can help you understand the tax side of things, while a financial advisor can make sure your investment and withdrawal plans fit your bigger goals. When they team up, they can help you decide if the way you’re saving now still makes sense for your future.

Evaluating Future Contribution Strategies

One area where advisor and CPA collaboration may be valuable is determining whether future retirement savings should continue flowing into a traditional 401(k), a Roth account, or a combination of both.

The answer often depends on a number of factors:

• Current versus expected future tax bracket
• Anticipated retirement income sources
• Pension income
• Social Security timing
• Expected Required Minimum Distributions
• Estate planning considerations
• Business ownership or stock compensation

For example, if you’re in a lower tax bracket now but expect to pay more taxes in retirement, putting more of your savings into a Roth account might make sense. On the other hand, if you’re earning a lot right now, you might want to focus on pre-tax contributions to reduce your current tax bill.

There’s no one-size-fits-all answer. That’s why talking things over with both your advisor and your CPA can help you find the approach that works best for you.

Planning Ahead for Required Minimum Distributions

A lot of people are surprised by how much Required Minimum Distributions (RMDs) can increase their taxes later on.

Starting at age 73, the IRS usually makes you take money out of your traditional retirement accounts every year—even if you don’t need it. Those withdrawals can bump up your taxable income.

A coordinated tax and retirement strategy may help reduce future RMD pressure via techniques such as:

• Gradual Roth conversions during lower-income years
• Strategic withdrawals before RMD age
• Tax diversification across account types
• Charitable giving strategies such as Qualified Charitable Distributions (QCDs)

These strategies often need careful timing and a close look at your taxes, so having your advisor and CPA on the same page is key.

Managing Retirement Income More Efficiently

Retirement income planning is increasingly complex because retirees often draw income from multiple sources simultaneously.

Those sources may include:

• Traditional IRAs and 401(k)s
• Roth accounts
• Taxable brokerage accounts
• Social Security
• Pension income
• Business or rental income

Each income source has its own set of tax rules.

Your advisor can help you figure out the order to tap these different accounts, and your CPA can make sure you’re not paying more in taxes than you have to. By planning together, you may be able to keep your taxable income steady over the years, instead of having it swing up and down.

In some cases, strategic coordination may also help retirees remain below Medicare IRMAA thresholds and reduce taxes on Social Security benefits.

Roth Conversion Conversations

Roth conversions have become a major planning topic in recent years, particularly during periods of lower tax rates.

Converting portions of a traditional IRA or 401(k) to a Roth IRA may create taxable income today, but future qualified withdrawals from the Roth account can generally be tax-free.

However, Roth conversions are not universally beneficial. The timing, amount converted, and source of funds used to pay the taxes can greatly affect outcomes.

A CPA can show you what your tax bill would look like if you did a conversion now, while your advisor can check that it fits your long-term retirement and estate plans.

Together, they can help determine whether a Roth conversion strategy aligns with the client’s broader financial goals.

The Value of a Team Approach

Many financial decisions overlap multiple disciplines. Investment management, tax planning, retirement income strategies, estate planning, and healthcare costs often intersect in ways that may not be obvious without collaboration.

When advisors and CPAs interact proactively, clients may benefit from:

• More coordinated retirement decisions
• Better visibility into future tax exposure
• Increased confidence around withdrawal planning
• Reduced chance of costly surprises
• Greater alignment between long-term goals and tax strategy

Even a simple annual meeting involving the client, advisor, and tax professional may help identify planning opportunities that could otherwise be overlooked.

Final Thoughts

Your 401(k) plan doesn’t exist in a bubble. The decisions you make about contributions, withdrawals, and Roth conversions all have real tax impacts.

As retirement planning gets more complicated, having your advisor and tax professional work together can help you make smarter choices and build a plan that really fits your whole financial life.

The goal isn’t just to grow your money, but to manage it wisely—so you keep more of it and understand how taxes will shape your retirement for years to come.

Sources

• Internal Revenue Service – Retirement Topics: 401(k) and Profit-Sharing Plan Contribution Limits
  https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide
• Internal Revenue Service – Required Minimum Distributions
  https://www.irs.gov/retirement-plans/required-minimum-distributions-for-iras
• Internal Revenue Service – Roth IRAs
  https://www.irs.gov/retirement-plans/roth-iras
• U.S. Securities and Exchange Commission – Investor Bulletin: Retirement Plans
  https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-72
• Fidelity Investments – Tax-Efficient Retirement Withdrawal Strategies
  https://www.fidelity.com/viewpoints/retirement/tax-savvy-withdrawals
• Charles Schwab – Roth Conversion Strategies
  https://www.schwab.com/learn/story/should-you-convert-to-roth-ira

Disclaimer

This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. Duncan Williams Asset Management (“DWAM”) is a Registered Investment Advisor (“RIA”). DWAM does not provide tax or legal advice. Clients and prospective clients should consult their CPA, tax advisor, and/or attorney regarding their individual financial and tax situations before implementing any financial strategy discussed herein. Investing involves risk, including the possible loss of principal, and past performance does not guarantee future results.

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