Retirement & Tax Planning Answers
Signs Your Financial Advisor Isn't Doing Real Tax Planning
Quick answer
The clearest sign is that your advisor has never brought up a Roth conversion, your future Required Minimum Distributions, or your IRMAA exposure without you asking first. Real tax planning is proactive and multi-year: it models your tax bracket five and ten years out, not just this year's return. If your annual review only covers portfolio performance and risk tolerance, if your advisor has never asked to see your actual tax return or talked to your CPA, if tax only comes up in November or December when the calendar year is nearly closed, or if a large pre-tax IRA balance has never prompted a conversion conversation, you're getting investment management, not tax planning. Those are two different jobs, and most advisors, including many good ones, are only licensed and equipped to do the first one.
A tax-planning advisor can tell you your current marginal and effective federal tax bracket, roughly where your bracket is projected to go once RMDs begin, and whether a Roth conversion in a low-income year would reduce your lifetime tax bill. If your advisor has never walked you through that projection, or doesn't have the tax software or license to run it, tax planning isn't part of what you're paying for, regardless of what the engagement is called.
Real tax planning treats your tax return as an input, not an afterthought. That means an advisor who asks for your actual Form 1040, not just your account statements, and who reviews it for QCD eligibility, capital gains harvesting opportunities, and whether income is landing in a bracket where a Roth conversion or an accelerated deduction would help. If your advisor has never asked to see your return, or coordinates with your CPA only to send year-end 1099s, the planning and the filing are two disconnected processes, and the coordination gap is exactly where expensive mistakes happen.
IRMAA is a good test question because it's specific and checkable. Ask your advisor what your Medicare Part B and Part D premiums would be at your current income trajectory once you're 65, and whether any planned withdrawal, conversion, or capital gain in the next two years would push you into a higher IRMAA tier. A two-year lookback means this year's decisions determine a surcharge two years from now. If the answer is vague, this isn't being modeled.
RMD planning has the same test. Required Minimum Distributions starting at 73 are calculable years in advance once you know your pre-tax balance and the IRS Uniform Lifetime Table. An advisor doing real tax planning has already shown you a projection of what your RMDs will be at 73, 75, and 80, and what bracket that income lands in given your other income sources. If RMDs have never come up except as an operational reminder to take the distribution each year, the planning stopped at compliance, not strategy.
The most reliable single signal is timing. Genuine tax planning happens throughout the year, because most of the moves that matter (Roth conversion amounts, tax-loss harvesting, charitable strategy, withdrawal sequencing) have to be executed before December 31 to count for that tax year. If tax only comes up in a rushed conversation in Q4, or not until your CPA calls with a surprise number in April, the planning is reactive rather than proactive, and reactive tax planning after the window has closed isn't planning at all.
Ask your advisor directly: 'What's my projected tax bracket when RMDs start, and have we modeled a Roth conversion against it?' A specific, numbers-based answer is a good sign. A general answer about 'keeping an eye on it' is not.
If you have a separate CPA or EA, ask both your advisor and your tax preparer the same question about your situation and see whether the answers match. A mismatch usually means the two aren't actually coordinating.
- Assuming an advisor is doing tax planning because they mention 'tax efficiency' in general terms without a specific projection or number attached.
- Confusing an annual portfolio review with a tax plan. They are not the same document or the same process.
- Waiting until your CPA files the return to find out a Roth conversion window or a tax-loss harvesting opportunity already closed.
- Not asking whether your advisor is actually licensed to give tax advice at all. Many are not, and a good ones will say so directly.