You're Ignoring Taxes and Retiring With Less

ATLANTA (TheStreet) -- An overlooked, often misunderstood impact on retirement savings can be summed up in one frightful word: taxes.

For years, the focus for retirement plans has been placed squarely on the "accumulation" phase and maximizing investment returns. The onslaught of 80 million retiring baby boomers has made the drawdown of those savings a more mainstream concern.

Selling retirement assets without a tax strategy could be eroding 20% of retiree savings.

Big questions abound for retirees and near-retirees regarding their savings. Will they last? How much can retirees take, when and how? What's the best way to turn assets into income?

Mark Davis, senior vice president and retirement solutions manager at SunTrust Bank(STI), says decumulation strategies are made more difficult by the fact that investors have typically bought different products at different times and for different reasons. It's a mix that often is far from tax advantaged and leads to the erosion of assets.

Davis oversees an initiative by SunTrust called "Integrated Tax-Smart Household Management." He sums it up in easier-to-digest language: By drawing down assets in a predictable, tax-smart way, investors can boost retirement assets by as much as 20% and ensure better after-tax returns, increased retirement income and a greater bequest to heirs.

Ongoing research since 2009, Davis says, has revealed areas commonly missed when strategizing retirement income.

"A lot of folks had not put a lot of time and thinking into transitioning from earning income to spending retirement funds," he says. "Many clients have not been familiar with tax-related terminology and understanding how some of the decisions their financial advisers are making would impact the amount of taxes they were going to pay over their retirement time."

Market volatility, paired with the influx of new retirees, has made those discussions more commonplace and important, he says.