Scotia Wealth Management's Guide to Questions That Test Your Wealth Manager

What happens if the wealth manager's roadmap still uses the old rules?

The stale answer to watch for is 'required minimum distributions start at 72.' The rule changed: for anyone born in 1960 or later, the start age is now 75, not 73 or 72. That shift gives you 12 years of retirement before RMDs kick in, not nine.

It matters because those early years are often your lowest-income years, and controlling the timing of withdrawals before RMDs force your hand—especially if you're converting money to a Roth—can save tens of thousands in tax over a decade.

Older roadmaps also paraphrase the 10b5-1 rules incorrectly. A 10b5-1 sales plan isn't a way to sell whenever you want. It protects you against insider-trading claims only if you adopted it in good faith and without material nonpublic information. Officers and directors now wait out a cooling-off period before the first trade. That period is 90 days, or until two business days after the 10-Q or 10-K is filed if that comes later, and never more than 120 days. Amend an old plan to meet the new rules and the clock starts over. An advisor who says 'we just keep selling' hasn't noticed the change.

One more: the catch-up contribution rule for people 50 and older moved at the same time. If your prior-year FICA wages exceeded $150,000, the entire $8,000 catch-up has to go into a Roth account, not pre-tax. An older roadmap that counts a $8,000 pre-tax deduction overstates how much tax you're actually saving and leaves you short on cash.

While RSUs still vest: questions to ask a wealth manager about 10b5-1 sales and deferred pay

The advisor answer that should worry you most is the dismissive one: 'the company withholds, so it's handled.' Or 'we'll handle it when you leave.' Either one tells you the advisor hasn't followed your cash from vest to tax day. Three questions test whether they have. How much of your next vest will the flat withholding rate leave unpaid in April? Which shares does your 10b5-1 plan sell, and in which months? When does your first deferred compensation installment pay out, and in which tax year?

Add two more conversations, because a wealth manager can't do this alone. Ask your CPA which estimated quarterly payments they'll cover for each vest. The withholding may not be enough, and someone needs to reconcile it. Then get your plan administrator to tell you, in writing, what default distribution form applies if no election is on file when you separate. Defaults are often lump-sum IRAs or immediate payouts, and you might have preferred installments. Scotia Wealth Management checks the vest withholding, the estimated payments and the distribution default before the first RSU vests.

A reliable answer to any of these questions has three parts: a date, an account name and a dollar amount. An advisor who gives you dates and account names but no numbers hasn't finished the cash-flow work. An answer without dates is worse; it means the advisor hasn't looked at your company's plan rules yet.

• How do you cover the gap between my RSU withholding and what I actually owe in tax? (Worrying answer: 'The company withholds, so it's handled.') The supplemental withholding rate is often 22 percent federal, but your real top rate might be 32 or 37 percent. The difference is money due on April 15, not covered.
• What does my 10b5-1 schedule sell and when does it end? (Worrying answer: 'We sell when the window opens.') That tells you almost nothing. You need to know the exact number of shares, the sale dates or price targets, and whether the plan expires or converts after separation.
• When is my next deferral election cutoff, and what's the default payout form if I don't make an election? (Worrying answer: 'I'll look into that later.') A good answer has a date—often October or November for the next plan year—and names the account: lump sum, installments or deferred, depending on what's on file. Later is too late when the election period closes.

Your last year at the company: deferred pay and 401(k) stock

The usual answer, 'we'll roll the whole 401(k) into an IRA,' doesn't apply when you hold low-basis company stock inside the plan. That stock may represent 40 or 50 percent of your balance, and rolling it closes an option for good. The key question is whether the advisor brings up the company-stock option before any rollover paperwork is signed. If they don't raise it, they haven't thought through your account structure yet. Concentrated stock planning is a separate page on this site; the point here is that a good wealth manager asks about it before you separate, when you still have the choice.

When the paychecks stop, which income should start first?

Peggy, 63, is a widowed senior vice president at a consumer goods company, retiring this year, with $750,000 in savings and $600,000 in 401(k) assets. Her current roadmap claims Social Security at 63, the same month her salary ends (hypothetical, round numbers). That looks orderly, with no gap between work and benefits.

It also locks in a 25 percent cut to her monthly benefit for life. At 67, her benefit would be $3,600 monthly; at 63, it's $2,700, or $10,800 less each year. Her roadmap claims early so the savings can keep growing. That trade costs her: by age 90, claiming at 67 pays $118,800 more, before cost-of-living adjustments, taxes or investment growth.

The fix is to let savings carry her from her last paycheck to 67 and delay the claim. Peggy draws $2,700 a month for four years, $129,600 in all, and claims $3,600 at 67. The extra $900 monthly benefit repays the $129,600 in 144 months, by about age 79. If she lives to 90, total benefits are $993,600 instead of $874,800. Those early years of drawing from savings are also her lowest-income years, a window before required minimum distributions start at 75. In these reviews, Scotia Wealth Management often finds that the bridge years and the later RMD age leave room for Roth conversions that would not fit once RMDs push income higher. That's only worth doing if the math works. Her savings must last the bridge years, and selling in a down market can cost real money.

The table below shows three common claim ages: 63, 67 and 70. The 63-claim needs no bridge, because benefits start the month her salary stops. The 67-claim draws $129,600 to cover four years and breaks even around 79. The 70-claim pays $4,464 a month and draws $226,800 ($2,700 a month for seven years). Against the 63-claim, the extra $1,764 a month recovers that draw in about 129 months, around age 81. By 90 it pays $1,071,360. The choice depends on Peggy's health, how much savings she has, and whether she expects to live past her early 80s. If she's in poor health or has no savings cushion, 63 may be correct. If her health is good and her savings are solid, 67 usually wins. At 70, she needs both, and she needs to be fairly sure she'll live into her late 80s.

Peggy's example leaves out one option a widow has: she may be able to claim a survivor benefit on her late husband's record and switch to her own, larger benefit later, up to age 70. Her health is good, so she should ask her advisor to run that sequence before she files for anything. The bigger point is what changes when paychecks stop. Before that, the wealth manager's job is RSU withholding and 10b5-1 planning. After that, it's which account pays the bills and in what order. A roadmap that doesn't name the account and the month it starts isn't ready.

At home, Peggy's grown son raised the practical question first: 'who do I call if something happens to you?' He needs to know which account pays her monthly bills and where it lives. That matters because if Peggy becomes unable to make decisions, her son will need to know how to keep the household running. A written roadmap makes that clear. If Peggy's current advisor already answers these questions well and the bridge is funded, Scotia Wealth Management leaves the plan alone and says so. The value is in whether the pieces fit together, not in who owns them.

Talking to Scotia Wealth Management about the advisor you already have

The conversation makes sense when retirement is about a year away, before the separation date decisions lock in. Bring your current roadmap, the latest 401(k) statement showing the basis of any company stock, your deferred compensation election confirmations, and a Social Security statement. Scotia Wealth Management will check the RMD age, the 10b5-1 rules, the withholding plan for RSUs and the timing of your first withdrawal. These are the points a second review catches most often: decisions made before the rule change, answers written down wrong, or pieces that don't talk to each other yet.