Irwin Consulting Planning in Singapore and Tokyo, Japan on 3 costs that can destroy retirement

acket when they retire but often don't f<strong>in</strong>d that to be true." Without tax diversification, he says, you could end up pay<strong>in</strong>g
the maximum taxes on all your retirement assets.
Creat<strong>in</strong>g tax diversification beg<strong>in</strong>s with know<strong>in</strong>g what you've <strong>in</strong>vested <strong>in</strong> <strong>and</strong> where those <strong>in</strong>vestments are held. Tax<strong>in</strong>efficient
<strong>in</strong>vestments, such as bonds, belong <strong>in</strong> tax-deferred accounts, while tax-efficient vehicles, like stock <strong>in</strong>dex funds,
should be held <strong>in</strong> taxable accounts. Growth stocks can be used <strong>in</strong> a 401(k) or similar account to capitalize on the
compound<strong>in</strong>g benefit of tax deferral, says Mel<strong>in</strong>da Kibler, a certified f<strong>in</strong>ancial planner with Palisades Hudson F<strong>in</strong>ancial
Group <strong>in</strong> Fort Lauderdale, Florida.
M<strong>in</strong>imiz<strong>in</strong>g the tax bite on your <strong>in</strong>vestments becomes even more important when you beg<strong>in</strong> withdraw<strong>in</strong>g money from
those accounts. "The way <strong>in</strong> which an <strong>in</strong>vestor harvests from their portfolio is more consequential than the way one saves,"
Kenefick says. Investors should tap non-qualified accounts first, she says, leav<strong>in</strong>g tax-sheltered accounts to compound <strong>and</strong>
avoid "the erod<strong>in</strong>g effects of pay<strong>in</strong>g taxes for as long as possible."
Calculat<strong>in</strong>g your target withdrawal rate accurately also matters. Daniel Pr<strong>in</strong>ce, head of product consult<strong>in</strong>g for BlackRock's
iShares U.S. wealth advisory bus<strong>in</strong>ess, says an optimal withdrawal strategy requires retirees to be accurate on both sides of
the ledger. Retirees should be realistic about their <strong>in</strong>come <strong>and</strong> assets, <strong>and</strong> balance that aga<strong>in</strong>st their spend<strong>in</strong>g. "Taxes will
always be a cost," Pr<strong>in</strong>ce says, but between long-term care <strong>and</strong> <strong>in</strong>flation, it's the easiest of the three to proactively reduce.