Securing Eleanor's future with strategic fixed income.
Eleanor, after recently losing her husband, inherited a $1.8 million Traditional IRA and possesses $450,000 in taxable accounts. She needs a reliable income stream to cover her living expenses, but is concerned about the tax implications of IRA distributions and the most efficient way to generate income from her taxable assets, particularly in the current low-interest-rate environment. Additionally, she wishes to establish an estate plan that simplifies asset transfer to her beneficiaries.
We designed a bond ladder strategy, focusing on high-quality corporate bonds within her taxable accounts. Using the Coupon Payment Calculator, we identified bonds with staggered maturity dates to provide a consistent cash flow of approximately $25,000 annually. The Tax Equivalent Yield Calculator helped us compare the after-tax yield of municipal bonds versus corporate bonds, further optimizing her income. We also factored in her required minimum distributions from the IRA and utilized those funds to cover a portion of her living expenses, helping to delay and minimize taxation of her taxable bond holdings.
The Coupon Payment Calculator allowed for precise calculation of the coupon payments from various bonds, enabling the construction of a customized bond ladder. The Tax Equivalent Yield Calculator ensured that the highest after-tax income was generated from her taxable accounts.
$17,000 increased annual income, $8,000 in tax savings per year, and a simplified estate plan.
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