New Tax Clarity Software Reveals Hidden Marginal Income Tax Rates That Can Harm Retiree Cash Flow

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Software from the Makers of Social Security Timing Helps Advisors Show Clients That Additional Income Often Is Taxed at Higher Rates Than They Expect — up to 55.5% in Some Cases

Tax Clarity logo

Tax Clarity logo

Tax Clarity really opens up some great opportunities to help clients, especially middle-income clients who haven’t yet taken their Social Security benefit.

The makers of the patented Social Security Timing® software have released new software, Tax Clarity™, for financial advisors to show clients the hidden marginal income tax rates that can significantly damage cash flow in retirement.

By simply entering a client’s retirement income, financial advisors can reveal in less than five minutes that a client’s perception about tax rates is quite different from reality. Whereas taxpayers typically think of the traditional progressive tax rates — 10%, 15% and 25% and upwards as income increases — Tax Clarity shows how taxes have evolved into a more-complicated system. The software calculates the effective marginal rate, the rate at which one additional dollar of income will be taxed when added to existing income. Those rates can be upwards of 50% in some cases, even for people who would otherwise be in a 15% bracket for ordinary income.

“Tax Clarity identifies those dangerous points where just one additional dollar of income can push clients into much higher effective marginal rates, in some cases costing over 50 cents of the next dollar to taxes,” said Joe Elsasser, creator of Social Security Timing and Tax Clarity. “When clients’ or prospective clients’ eyes are opened to this, they see the value of working with a financial advisor.”

Other tax tools require financial advisors to run scenario after scenario to find these challenges and opportunities, Elsasser said. Tax Clarity shows a bigger picture, but with less work and time invested by the financial advisor.

“Tax Clarity eliminates the need for iterations by showing you the impact of each successive dollar of IRA withdrawal, earned income or capital gain,” Elsasser said.

Tax Clarity is especially powerful when financial planners pair it with Social Security Timing, software that helps identify the best time to claim Social Security benefits. Advisors then are not only minimizing taxes and maximizing Social Security income, but also identifying when Social Security income or other retirement income could translate to higher taxes.

“By using both software programs, we’ve been able to reduce income taxes by 90 percent in some cases,” said David Cechanowicz, Social Security Timing’s director of education and an expert in retirement, tax and Social Security planning. “Tax Clarity really opens up some great opportunities to help clients, especially middle-income clients who haven’t yet taken their Social Security benefit.”

Tax Clarity produces an easy-to-understand graphic, called a Tax Map. The graphic shows the stair-step, traditional tax brackets in red. Above the red, gray indicates the effective marginal tax rate that is created by any additional taxes due to inclusion of other income or phase-outs of deductions. The visual representation of ordinary tax rates compared to effective marginal rates helps clients understand how taxes are different in retirement.

“Once clients understand the concept of effective marginal tax rates, you’ve engaged them and opened up opportunities to harvest retirement income in unusual and creative ways that ultimately will produce better results,” Elsasser said.

The introductory rate for a Tax Clarity subscription, available through April 15, is $24.99 a month or $250 a year. After April 15, a subscription will cost $49.99 a month or $500 a year.

About Tax Clarity™
From the makers of the patented Social Security Timing® software, Tax Clarity™ is software that helps financial advisors show their clients the hidden effective marginal income tax rates that can significantly damage cash flow in retirement. With its easy-to-understand Tax Map graphic illustration, Tax Clarity engages prospects and clients so that they understand the value of working with a financial advisor to carefully plan their retirement income, manage withdrawals and minimize income taxes. Learn more at http://www.TaxClarity.com.

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Dan Trumblee
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