Will The New Tax Cut Impact Boomers' Retirement Strategies?

Michael Goss, president of Michael Goss and Associates, Overland Park, Kan., is also not making any changes in his investment advice for baby boomer clients. But he does note that some clients may be more apt to sell an investment now, due to the lower capital gains tax rate. "With the 15% tax rate now, it might make more sense," he says.

Like the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the new tax law has a variety of sunset provisions. For instance, the capital gains tax reduction will not apply to assets sold after Jan. 1, 2009. Also, the dividend tax cut will only last through 2008, at which time dividends will once again be taxed at investors' marginal tax rate.

"It's short-lived," says James Jacobs of Jacobs Financial Group, Chesterfield, Va. "You've got some other options, but it's not going to make any major changes in the long run," he says.

Jacobs adds that for a retiree who may be looking for income, the tax reductions may have a positive short-term impact, but for those boomers looking ahead to retirement, he isn't making any changes.

"You can supplement your current investment objectives with these changes as an add-on, but not a complete change," he says.

"For the majority of boomers we're dealing with, we don't feel there's a need to make a strategic change," adds Joe Wimpee, of The Joe Wimpee Agency, Rockwell, Texas.

Rather than modify his boomer clients' investment strategies, Wimpee feels the tax law changes provide him with an opportunity to build on client relationships.

"These changes give you the opportunity to discuss some new information that might make them [clients] feel more comfortable. In turn, they may want to invest more, or buy more, or tell a friend about you," he says.

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 28, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.