Consider tax consequences in retirement portfolio

See why you should think about taxes when it comes to retirement planning.

Q: I'm 50 years old and have been practicing for 20 years. I have maximized my retirement plan, but I've got the ability to save more. What are some other options?

A: For retirement planning, it's important to diversify, not only in terms of asset allocation, but also in the tax treatment your investment accounts receive. Putting all your retirement savings into a qualified retirement plan will reduce your income tax in the year you make the contribution. But your withdrawals will be fully taxable, and at a rate that could be higher than today's rates.

That's why you should consider spreading your retirement portfolio among qualified plans where contributions are deductible and earnings are tax-deferred; among nonqualified plans, where contributions are made with after-tax dollars and earnings are taxed each year; and investment vehicles where the contribution has been taxed but earnings are tax-deferred (such as fixed annuities, which offer principal protection and the option of a guaranteed income stream for life). Such an approach creates flexibility and allows you to be tax-wise with regard to the makeup of your retirement income from year to year.

Answers to our readers' questions were provided by Doug Burnette Jr., MD, a partner in Clark & Burnette Wealth Management LLC in Lake Charles, Louisiana. Also engage at and Send your money management questions to