Tax Tips for Retirement
Curtis has earned the Life and Health Insurance licensure, has passed the Series 66 examination, and has earned a degree from the University of Nevada, Reno. He has over 20 years of experience in the financial industry, helping others protect, grow and manage their wealth. Curtis helps clients create customized strategies for their portfolios based on their unique financial goals.
TAX TIPS FOR RETIREMENT
As the old saying goes, there are two certainties in life, death and taxes. Since taxes continue as we transition from our working years to retirement, what are some things that can help with our tax burden in retirement? In this blog, we will discuss a few items that may be applicable to your retirement situation.
TAX TIP #1 | HOW MUCH ARE YOU WITHHOLDING?
The first thing to keep in mind is how much you are withholding in taxes from your income streams and pre-tax distributions. Sometimes when people set up Social Security for the first time, they forget to withhold taxes. This can be a mistake as your Social Security will be taxed once you pass certain income thresholds in retirement.
The other thing to keep in mind is the type of pre-tax account you have when you are distributing income from said account. If you are in a retirement plan account, such as a 401k, 457, TSP, etc., most of those plans require you to withhold 20% from any distribution. The question that you need to ask yourself is whether that 20% withholding is efficient and effective for your income plan in retirement.
TAX TIP #2 | THE POWER OF ROTH CONVERSIONS
Another tax tip that I think makes sense in retirement and pre-retirement is looking at the power of Roth Conversions during your pre-retirement and retirement years. Looking at the lifetime of your assets is a major component here, such as how your pre-tax monies are taxed for a surviving spouse. If you pass and leave money behind, how much of that is taxable to your beneficiaries? These are things that are important to address and looking at converting pre-tax to Roth can help alleviate some of the tax pressure over the lifetime of your savings. Remember, it’s a marathon not a sprint.
TAX TIP #3 | WHERE YOU PLACE YOUR ASSET TYPES MATTER
The last tip I will share here is to look at what assets are held and what type of account they are held in. For example, if you have an IRA and a Non-Qualified account, what type of holdings are in each account? Does it make sense to have an income producing asset such as a dividend portfolio in a Non-Qualified account where you are taxed on the dividends and interest as well as Capital Gains? Or does it make sense to hold the income producing assets in the IRA where Capital Gains and Dividends / Interest do not matter – because you are just taxed on the money as income when it comes out of the IRA. Where you place your different asset types matters, your retirement plan should address this.
CAN THESE TAX TIPS WORK FOR YOU?
In conclusion, there are quite a few things that you can do to potentially help with the taxable burden in retirement. There are other avenues you can pursue that aren’t included in the list above. The main thing would be to focus on an income plan, supported by an investment plan that is as tax efficient as possible. Working with your financial professionals such as your Financial Advisor and your CPA can help get you on the right path with paying your fair share of taxes, without paying too much to the IRS.
To find out what tax tips could potentially help with your retirement, contact our team here at Cornerstone. Our advisors look at the big picture and use several best-in-class resources to curate a personalized plan for you. We want to help you live the life you want to live through fiduciary-based financial planning. Call us today at (775)-853-9033 if you’d like to see how Cornerstone could help you.
Based in Reno, NV, Cornerstone is for individuals and families looking to grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy. Schedule a time to discuss your financial goals with us.
PCIA, Cornerstone and their representatives provide general information, not individually targeted personalized advice, and are not liable for the usage of the information provided. Exposure to ideas and financial vehicles should not be considered investment advice or a recommendation to buy or sell any of these financial vehicles. This information should also not be considered tax or legal advice.