For some clients, taking distributions from their traditional individual retirement accounts before retirement may be a bridge too far. For others, the strategy could lead them from pre-retirement jitters to higher Social Security benefits and lower taxes a decade or more down the road.

That’s because the array of rules and figures outlined in the slideshow below add up to complex calculations that vary greatly among clients whose financial advisors and tax professionals may want to consider the so-called bridge strategy. The idea revolves around how clients can take IRA distributions in pre-retirement in order to avoid facing required minimum distributions later while gaining the cash flow necessary to delay Social Security until the payments are bigger.

The thicket of financial calculations, IRS guidelines, Medicare rules and long-term planning involved with deciding when to begin withdrawals and Social Security benefits shows the need for careful, individualized advice, according to four experts who spoke with Financial Planning. 

The last two months of a year mark an especially good time to discuss the possibilities of the bridge with clients. Prior to New Year’s Day, factors such as the level of capital gains, investment dividends, business-related transactions or job situations are coming into focus, said Valerie Escobar, a senior wealth advisor with Kansas City, Missouri-based advisory practice BMG Advisors. Advisors and their clients can weigh them against the possible IRA distributions.

“As we’re approaching the end of the year, you have a better sense of what your income picture is going to look like,” Escobar said. “Having that clarity of the picture makes the year-end the best time to be looking at that.”

READ MORE: The post-‘stretch’ home stretch for Roth IRA conversions

The fourth quarter “is the most important time to be looking at your taxes” because “it’s the last chance you have to fix things,” said Erin Wood, a senior vice president for financial planning and advanced solutions with Omaha, Nebraska-based registered investment advisory firm Carson Group. Client decisions on when to take required minimum distributions and when to begin claiming Social Security can have major consequences — including on their spouse’s survivor payments or the size of their monthly benefit checks (clients could see a bump of 8% a year if they wait until age 70).

“Those are a great example of something that you really only get one chance to make the right decision,” Wood said. “Once you make your decision, you are very much going to be stuck with that decision.”

In addition, those considerations often determine whether clients get stuck with “stealth taxes” on their benefits and whether they have to pay an income-related monthly adjustment amount on their Medicare premiums according to Sarah Brenner, the director of retirement education with retirement consulting firm Ed Slott and Company.

Once traditional IRA owners reach 59½ years old — or the age they must be to avoid getting “whacked with a 10% penalty” for a withdrawal, unless they’re for certain exceptions — they’re going to be thinking through how the distribution affects their income.

“It bumps up what you’re going to pay for Medicare,” Brenner said. “One thing they hate is IRMAA charges.”

READ MORE: A post-election checklist for year-end tax talks with clients

Other than a general rule that claiming Social Security benefits while still employed is not usually a good idea, Heather Schreiber, the founder of advanced planning consulting firm HLS Retirement Consulting, said she had no one-size-fits-all standard timeline for beginning the payments.

“First of all, I’d say, ‘Don’t listen to your neighbor,'” Shreiber said. “Everyone’s decision is very unique to them. I really don’t have an, ‘Everyone should file at X date.'”

For a rundown of the key numbers involved with the IRA “bridge” strategy to claiming bigger Social Security benefits later, scroll down the cardshow. To read FP’s year-end tax planning feature, “A primer on the IRA ‘bridge’ to bigger Social Security benefits,” click here. And, for a look at changes to tax brackets and IRA rules for 2025, follow this link.

The Internal Revenue Service may be facing steep cuts in its budget with the win on Tuesday night of President-elect Donald Trump.

Funding for the IRS has become a political issue, with Republicans successfully pushing to cut the extra $80 billion funding from the Inflation Reduction Act of 2022 already during battles over the debt limit.

“I think IRS funding is at significant risk right now, both the annual appropriation funding as well as the remaining IRA funding,” said Washington National Tax Office principal Rochelle Hodes at the Top 25 Firm Crowe LLP. 

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So far, Republicans have mainly called for cuts in the IRS’s enforcement budget. The increase in enforcement is supposed to be used to pay for the cost of the IRA, but the funding increase is also supposed to be used for taxpayer service and technology improvements.

“The only question for me on funding is, will any portion of the funding remain available for taxpayer service-related improvements at the IRS?” said Hodes.

The Direct File free tax prep program that the IRA funded could also be targeted, even as the IRS makes plans to expand it beyond the original 12 pilot states this year to 24 next tax season.

“I don’t think that will be in the sight line, but the IRA money is part of what’s being used for that,” said Hodes. “As we’ve seen in appropriations bills, there could be language directed at that, that no money can be spent on that initiative.”

A more important priority will be the extension of the expiring provisions of the Tax Cuts and Jobs Act of 2017. “Getting TCJA resolved is going to be the first priority,” said Hodes. “The second question is, how will the cost of that endeavor be determined. If the view that is held by several Senate Republicans wins the day, then the cost of extending the expiring provisions will not be counted under those particular budget rules that are created dealing with extending current policy. If, however, that view is not adopted, then there is a high cost just to TCJA, and so any other provisions with cost will sort of stretch the boundaries of what many in Congress would be comfortable with. I think it will be necessary to see how the scoring goes for extending TCJA provisions.”

Trump has also called for exempting various forms of income, such as tip income, Social Security income and overtime from taxes.

“I also am not sure which of the ideas that were put forward on the campaign trail, other than extending TCJA, are provisions that have true champions who will want to pursue those,” said Hodes. 

That may depend on who ends up in Congress, with several important races in the House yet to be decided.

“Although the House remains undecided, the Republicans’ control of the Senate makes it much more likely that Republicans will be able to implement many of Trump’s proposed tax policies, such as making parts of the expiring 2017 TCJA provisions permanent,” said John Gimigliano, principal in charge of the Federal Legislative & Regulatory Services group within KPMG’s Washington National Tax practice, in a statement. “The pressing question now is how the Administration and Congress will fund such an ambitious agenda and what additional measures they might introduce, such as eliminating taxes on tips and overtime. These items will only add to the hefty $4+ trillion price tag they face. Until then, taxpayers should continue to stay apprised of developments and scenario plan for the different outcomes to get ahead.” 

Over half of accounting and tax firms plan to increase fees across all services in 2025, according to a new survey.

The survey, released Wednesday by practice management technology company Ignition, found that the majority (around 58%) cited rising business costs as the main motivator for their fee increases, while only 5% are raising prices to increase revenue. Most of the nearly 350 firms surveyed intend to increase fees across services by 5% or 10%.

Some 57% of the respondents plan to increase fees across all services. With regard to tax preparation specifically, 90% of the survey respondents plan to increase fees for individual tax returns, and 87% plan to increase fees for business tax returns. In addition, 70% plan to increase fees for tax planning and advisory services;. 85% plan to increase fees for bookkeeping and accounting services; and 76% plan to increase fees for CFO and controller services.

“While accounting firm owners are embracing price increases in 2025, the report shows that the majority (around 58%) cite rising business costs as the main motivator,” said Ignition global president Greg Strickland in a statement. “Only 5% are raising prices to increase revenue, which indicates an opportunity for firms to leverage pricing as a strategic tool to unlock revenue growth.”

The report found a shift from hourly billing to fixed-fee and value-based pricing, with 79% of the survey respondents indicating they use fixed-fee or value-based pricing for bookkeeping and accounting services. Over half (54%) use fixed-fee or value-based pricing for tax preparation services, 67% use fixed-fee or value-based pricing for tax planning and advisory services, and 75% use fixed-fee or value-based pricing for CFO and controller services.

The report benchmarked current fees for tax, accounting and advisory services, which varied based on firms’ annual revenue range. The biggest variation in pricing was for tax planning and advisory services in particular. For firms with revenue of as much as $250,000, approximately 23% said they charge less than $500 for these services, while a nearly equal number (around 21%) indicated they charge more than $2000.