When you’re working, the focus is often on what you earn from your investments. But in retirement, what you keep after taxes can matter even more.

That’s why the order in which you withdraw from your investment accounts can have a meaningful impact. It may influence how much you pay in taxes, how long your portfolio lasts, and even what you’ll pay for Medicare premiums.

Here’s a general framework that financial professionals often consider when building tax-aware withdrawal plans:

• Start with taxable accounts. These are brokerage or investment accounts where taxes have already been paid on contributions. Selling investments from these accounts may trigger capital gains, which are often taxed at lower rates than ordinary income.
• Then consider tax-deferred accounts. Withdrawals from traditional IRAs and 401(k)s are taxed as ordinary income. By spreading these distributions over time, you may reduce the chances of being bumped into a higher tax bracket later.
• Preserve Roth IRAs for later. Roth accounts grow tax-free, and withdrawals are generally tax-free in retirement. Plus, Roth IRAs aren’t subject to required minimum distributions (RMDs), making them a valuable tool for later-life needs or legacy planning.

A Hypothetical Example

Imagine a retired couple, Elaine and Bill. They have a mix of taxable, tax-deferred, and Roth accounts. After reviewing their situation and long-term goals, a strategy was developed that began with their taxable assets, incorporated modest distributions from their IRA to manage future tax exposure, and left their Roth IRA intact for later.

This approach helped them create a more predictable tax picture and supported their long-term planning objectives.

Tailored to You

Of course, the best strategy depends on your personal circumstances—things like your income needs, tax bracket, account types, family or charitable goals, and how markets perform over time.

That’s why we take a collaborative and proactive approach. At Hill, we coordinate closely with your tax professionals and use evidence-based planning tools to help ensure your withdrawals are as tax-efficient as your investments are intentional.

Want to explore your retirement income strategy or review your current plan? We’re here to help—and to take the long view with you.

Hill Investment Group does not provide tax or legal advice. You should consult with a qualified tax professional regarding your individual circumstances.

At Hill Investment Group, we recognize that when a few clients raise the same question, it’s likely that more have similar thoughts. To better serve you, we’re introducing a new segment in our newsletter where we’ll address common questions and how we approach them. To submit questions for future newsletters, email us at info@hillinvestmentgroup.com.

Hey Hill, do I need umbrella liability insurance?

It’s an important question! Many clients feel there’s no shortage of situations or assets that can be insured; however, having adequate risk management is key to protecting your assets and financial health. 

So, what is umbrella insurance, and do you really need it?

Most insurance policies, such as home and auto, only pay up to a certain amount for liability coverage. Umbrella insurance can help protect you against claims other policies may not cover entirely. Typically, umbrella policies don’t kick in until all other related policies have been exhausted. For example, if someone gets hurt in your home and you’re sued for medical bills, your umbrella policy would kick in after your home or auto limits are reached.

Further, umbrella policies might have broader liability coverage than your other policies. For example, umbrella policies might cover false arrest, defamation, libel, and slander. 

The Texas Department of Insurance provides some examples of claims that could fall under an umbrella policy:

• You cause a severe car accident.
• Your dog bites someone.
• A child is hurt on your property (e.g., in your pool or on your trampoline).
• Someone hurts themselves in your home.

Generally speaking, it is a great idea to have an umbrella insurance policy to cover any additional liability not covered by your existing policies (especially if you have teenagers, as you are responsible for their actions)! For example, auto and home policies typically only cover up to $500,000 in liabilities. If you have a net worth of more than that, you should take advantage of this cost-effective coverage (~$125 annual premium/$1,000,000 of coverage).

To provide additional perspective, we recommend booking a meeting to review your entire risk management portfolio and working with a licensed insurance agent to ensure you are adequately covered at a fair price.

*Hill Investment Group acts to help you secure the appropriate solution but does not sell insurance, nor do we receive compensation from insurance-related firms. 

Hill Investment Group is a registered Investment Adviser. Registration of an Investment Advisor does not imply any level of skill or training.  This information is educational and does not intend to make an offer for the sale of any specific securities, investments, or strategies.  Investments involve risk, and past performance is not indicative of future performance. Return will be reduced by advisory fees and any other expenses incurred in managing a client’s account. Consult with a qualified financial adviser before implementing any investment or financial planning strategy.

We are excited to welcome Mordecai Obeng-Appiah to the Hill Family! Mordecai joined our team in July as an associate advisor and will play a role in trading operations. As an Associate Advisor, Mordecai will help us continue our commitment to saving clients’ money by minimizing trading costs and offering holistic portfolio management and planning.

Based in Boston but originally from Ghana, Mordecai enjoys spending his time outside work doing calisthenics, reading, and exploring forest trails and lakes in nearby New Hampshire. Mordecai is also close with his six sisters–talk about being outnumbered! 

Mordecai was attracted to Hill because of HIG’s mission-driven and passionate desire to help clients achieve their financial goals. We look forward to working with Mordecai as this team addition shows HIG’s continued effort to hire the best talent in the industry wherever they’re located!