The High Net Worth Doctor and a Roth 401(k) Tax Plan Many of our high net worth Pension Service clients will be withdrawing money tax-free in retirement, thanks to the Roth 401(k) feature we’ve helped them add to their retirement plan. In advance of January 1, 2006, when the Roth 401(k) became effective, our Pension Services Division began providing Roth amendments for more than 400 of our Pension Service clients who use our plan documents. Over 75% of our clients have accepted this provision into their plan, to take advantage of this beneficial financial planning tool. For high net worth doctors, their main asset often is the retirement plan. They recognize that the Roth 401(k) provides additional planning opportunities in their overall financial strategy. Among the benefits are: Effective estate planning tool for those wishing to pass funds to their children or grandchildren, free of federal and state income taxes. Doctors can convert their Roth 401(k) to a Roth IRA through a tax-free roll over prior to age 70 ½, allowing them to avoid the minimum distribution requirements normally occurring for retirement plan assets. This preserves the Roth account, enabling all the principal to continue compounding tax-free. At the doctor’s death, heirs (child, grandchild, etc.) can then receive Roth distributions over their lifetime, also income tax-free. Distribution flexibility results for a doctor in retirement who has both a regular taxable retirement account and a Roth account. In a given year, unusual expenditures (such as a new car or home purchase, relocation, remodeling, nursing home costs, or medical expenses) may occur. It might be beneficial to withdraw tax-free from the Roth account rather than taking money from the taxable retirement account. If a retired doctor’s tax rates are in the 30% - 35% range or higher, once state tax is considered, the tax-free Roth withdrawal provides a lot more money, without triggering a higher tax bracket that year. Tax diversification can be realized through the Roth 401(k) as a hedge against potentially higher marginal tax rates in the future. A more aggressive investment strategy is possible by establishing a separate retirement account for your funds in the Roth 401(k) account. More aggressive investments may yield higher earnings over the long term, but generally increase exposure to investment risk. *Securities and Investment Advisory Services offered through NFP Securities, Inc. a Broker/Dealer, Member FINRA/SIPC and a Federally Registered Investment Advisor. NFP Securities, Inc. is not affiliated with Clayton L. Scroggins Associates, Inc. or Scroggins Financial Services, LLC. NFP Securities, Inc. does not provide legal or tax advice. Tax services are provided through Clayton L. Scroggins Associates, Inc. Clients must consult with their own legal and tax advisors. Any federal tax advice given is not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Code. Representatives of Scroggins Financial Services are licensed to conduct Securities business in the following States: GA, IL, IN, KY, OH.