Tax strategies

To protect client nest eggs, advisors must know which savings vehicles are protected — and they’re not all created equal.

While it can be a great outlet for employees who want to help coworkers, or their favorite charities during the pandemic, PTO sharing can also present tax issues if not handled properly.

The majority of U.S. workers do not have enough savings to help them in the event of a medical emergency and often turn to their retirement funds for help.

For starters, they can use the windfall to pay off debt, shore up their HSAs and build a cash reserve.

For one, clients will owe taxes still on the distributions, unless they recontribute the money into the account within three years.

Older clients are advised to take extra steps to protect their finances as the current crisis may leave them prone to making poor financial decisions.

Clients are advised to minimize spending and tap possible sources of cash and credit, including their tax refund.

While some retirees have seen a substantial increase in spending, many others are enjoying financial freedom.

To start, these clients are advised to start saving as early and contribute enough to their 401(k)s to qualify for their employer's matching contribution.

Aside from income taxes, retirees will also pay consumer taxes and may face a 3.8% Medicare surtax.