four older friends talking and sitting on the front porch of a house

Three Tax Tips that Can Help as You Approach or Begin Retirement

Think of retirement as a whole new phase of life. You’ll experience many new things, and you’ll sometimes leave others behind – but what you can’t avoid the taxes that come with it. If you’ve followed the advice of retirement plan many consultants, you’re probably saving in tax-advantaged retirement accounts. These types of accounts defer taxes until withdrawal, and you’ll probably withdraw funds in retirement. Also, you may have to pay taxes on other types of income, like Social Security, pension payments, or even the salary from a part-time job. With that in mind, it makes sense for you to develop a retirement income strategy.

Consider when to start taking your Social Security. The longer you may wait to begin your benefits (up to age 70), the greater your benefits will be. Remember, though, that currently up to 85 percent of your Social Security income is considered taxable if your income is over $34,000 each year.

Be cognizant of what tax bracket you fall into. You may be in a lower tax bracket in retirement, so you’ll want to monitor your different income levels (Social Security, pensions, annuity payments) and any withdrawals to make sure you don’t take out so much that you get bumped into a higher bracket.

Think about your withdrawal sequence. In what order should you withdraw from the following accounts?
• Required Minimum Distributions (RMDs) from retirement accounts
• Any Taxable Accounts
• Types of tax-deferred retirement accounts like IRAs, 401(k)s, or 403(b)s
• Tax-exempt retirement accounts like Roth IRAs or 401(k)s

The factors in selecting your optimal withdrawal sequence are complex and are the topic of our next Financial Wellness Webinar. We hope you can join Nate Moody and Michelle Romano on May 4th at 12:00 p.m. as they address ‘Decumulation’ and Retirement Risks. Register here

The information presented here is for educational purpose only and is not intended to provide specific advice or recommendations for any individual nor does it take into account the particular investment objectives, financial situation or needs of individual investors. The information provided has been derived from sources believed to be reliable, but is not guaranteed as to the accuracy and does not purport to be a complete analysis of the material discussed. This material is not intended to provide, and should not be relied on for tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated.

Retirement Plan Advisory Group (RPAG) is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc.

Similar Posts