Taking the grunt work and the guesswork out of retirement-income-tax management could be right around the corner, assuming a new product from LifeYield LLC can live up to the hype building around it.
The Boston-based firm, formed a year ago by a team of highly regarded tax optimization wonks, is developing an overlay software program to flesh out the tax advantages of a client’s entire household portfolio — including taxable and qualified accounts, as well as regular or extraordinary retirement-income distributions.
The LifeYield product, which has received support and financial backing from SunTrust Banks Inc. of Atlanta, could be launched as early as April and is being regarded as a key mechanism for pushing the development of the so-called unified managed household account, which is one that integrates all of a household's accounts, taxable, qualified, assets, property, and all investments and assets. Such an account helps an adviser manage all aspects of a client’s finances.
“It’s not hard to take money out of an account. It’s hard to take money out in the most tax-efficient way,” said Leonard Reinhart, president of Reinhart Consulting Group in West Chester, Pa., and a member of LifeYield's advisory board.
Mr. Reinhart, an industry veteran who retired in 2007 as president of Lockwood, a Malvern, Pa.-based affiliate of Pershing LLC in Jersey City, N.J., said he realized the challenges of retirement-income-tax management while trying to help his mother-in-law take some distributions.
“I didn’t think it was complicated until I started to do it,” he said. “It’s difficult and most advisers doing it don’t know if they’re doing it right.”
According to SunTrust, which plans to make the LifeYield program available to its 600 brokerage representatives and wealth managers, the software will generate a 30% increase in income over a client’s 25-year retirement period.
The best way to determine if the new software will do what it claims to do is for an adviser to go through a withdrawal simulation manually and then check it against LifeYield’s result, said Bruce Moulton, a principal with Moulton Strategic Partners, a technology advisory firm for financial advisers based in Flower Mound, Texas.
“You’d have to see a measurable return in terms of tax savings or time savings to determine whether the software makes sense,” said Mr. Moulton, who has not seen the new product. “All things being equal, though, if the adviser were comfortable with the results and the process took 15 minutes rather than 15 hours, than that would be a pretty good result.”
