In order to have the comfortable retirement you’ve hoped for, you need to start planning responsibly –and early – in your career. Over time, you can get closer to your retirement goals with money that is placed in accounts like an IRA or 401(k). Once you reach retirement, however, all the money you’ve worked hard for and saved over the course of decades may experience a fundamental shift.
While many retirement accounts like 401(k)s allow money to be invested before taxes, all of this money becomes or may be subject to income tax after retirement. Often, retirees are unaware of the impact that taxes will have on their retirement savings and fail to include taxes into their spending plans.
On the bright side, retirees may have a level of control and predictability when it comes to their taxes in retirement – especially if they choose to consult professional help.
At American Financial Security, LLC, we are an integrated retirement and tax planning company, so we provide the proper planning for income and the impact of taxation in that plan. That’s why we have a team of dedicated tax professionals that will review your taxes, prepare a report and help you form a tax strategy that’s right for you and your retirement.
Sometimes, it is essential to control the amount and timing of your income streams to bring yourself into a lower tax bracket, or make sure you take every deduction available to you to help ensure you don’t pay more in taxes than necessary. There are strategies that will help you keep more of your dollars rather than giving them to Uncle Sam.
One option that works for many is a Roth IRA. With this type of account, you pay the income taxes upfront on the amount that you are converting, or initial investment/principal and then enjoy years of potential tax-free growth, followed by tax-free withdrawals on qualified distributions. Ideally, the tax-free withdrawals that you make in the future will outweigh the upfront tax hit.
Another tax-saving approach is having life insurance. While it is often overlooked as a strategy, life insurance can be one of the best in terms of tax-free disbursements. Life insurance may also be an option for those hoping to provide financial security for their loved ones.
In the current economic landscape, it is more important than ever that you work with a financial professional who can help provide you with the tools you need to help protect and preserve your nest egg – especially when it comes to taxes.
Taxes can be a burden in retirement – but they don’t have to be. Once we’ve ensured that you’ve taken all of the deductions and credits that you are entitled, we can begin exploring the options and routes that will help you save money on taxes in retirement. QCBN
By Ronald Stevenson and Barbara Clark Stevenson
