How Well Do You Understand Taxes In Retirement?
There are many common phrases that reference the certainties of taxes. One of the most popular is Benjamin Franklin’s “In this world nothing can be said to be certain, except death and taxes.” Unfortunately, this phrase does have some truth. And unfortunately again, taxes for most people do not ever stop – not even in retirement. So, how well do you know taxes in retirement, and do you know how to minimize them?
One of the biggest mistakes retirees make is not paying enough attention to taxes. The lack of understanding of how different types of accounts are taxed and the lack of planning efforts to minimize taxes are two very big detriments to many people’s retirement plans. This lack of understanding and planning can make a huge difference in the ultimate value of your overall retirement plan and the type of retirement lifestyle you get to live.
The first step in minimizing your tax burden in retirement is knowing how different types of retirement assets are treated tax-wise. For example, tax-deferred accounts, taxable accounts, pre-taxed retirement accounts, Roth IRAs, Social Security, Pensions, and Annuities all have their own individual tax rules. In order to minimize the tax effects of all these accounts, expert knowledge and key understanding along with strategic planning is necessary in most cases.
One conventional wisdom theory is that you should simply tap taxable accounts first, followed by tax-deferred retirement accounts, and then your Roth. While this strategy may work for some retirees, in most cases it is much more complex. So, don’t just take common or general advice when it comes to minimizing your tax burden, as it could really make a big difference in your retirement nest egg.
If you think you don’t need to worry about taxes in retirement, think again. Join me next weekend on “Your Retirement Quarterback” as we will be discussing, in detail, how different types of retirement assets and incomes are taxed, and some good strategies to minimize your tax burden. Additionally, we’ll talk about several things that I bet you did not know were taxable. The show airs on Sundays at noon on WPHT 990am, or online at www.newstalk990.com. Of course, you can always reach out to me at Franklin Retirement Solutions at 215-657-9200 or [email protected]