Think Tax Season Is Over? Think Again—Your Retirement Depends On It

Most people breathe a sigh of relief when tax season ends, but if you're planning for retirement, now is the perfect time to get strategic about taxes. Why? Because the way you plan for taxes today could determine how comfortably you live tomorrow. Retirement isn’t just about saving—it’s about keeping as much of your hard-earned money as possible. And smart tax planning is the key.

Maximizing Retirement Income

One of the primary goals of retirement planning is to maximize your income during retirement. Over your lifetime, the single largest expense you will have is taxes. Effective tax planning helps you achieve the retirement you want and deserve by minimizing the amount of taxes you pay on your retirement income. This can be done through various strategies, such as:

Managing Withdrawals

Tax planning helps you manage your withdrawals from retirement accounts in a tax-efficient manner.

• Order of Withdrawals: Managing how and when you withdraw funds from your retirement accounts can significantly impact your tax liability. Strategic withdrawals can help you reduce your overall tax burden and extend the life of your retirement savings.
• Managing Required Minimum Distributions (RMDs): Under current law, when you reach age 73 you are required to take funds from traditional IRAs and 401(k)s. Proactively processing Roth conversions can allow you to pay taxes when it is most beneficial for you and then allow your money to grow tax free. You can also withdrawal from these accounts prior to age 73 to reduce the size of the RMD in the future.

Reducing Taxable Income

By strategically planning your retirement income sources, you can reduce your future taxable income. This can be achieved through:

• Tax-Efficient Accounts: Non-retirement accounts can invest in tax-efficient investments or implement tax-reducing strategies to aid in keeping the tax burden lower.

• Charitable Withdrawals: Utilizing the Charitable RMD provision can reduce the taxes you pay while allowing you to give more to charity.

Social Security Benefits

Tax planning also impacts the taxation of Social Security benefits. Depending on your overall income, up to 85% of your Social Security benefits may be taxable. By managing your other sources of income, you can potentially reduce the amount of your benefits that are subject to tax.

Estate Planning

Effective tax planning is also crucial for estate planning. By understanding the tax implications of transferring assets to your heirs, you can minimize estate taxes and ensure that more of your wealth is passed on to your beneficiaries. Each type of account can have different tax consequences for your heirs.

Healthcare Costs

Healthcare costs can be a significant expense in retirement. Tax planning can help you manage these costs by utilizing tax-advantaged accounts such as Health Savings Accounts (HSAs). Often referred to as having a ‘triple tax advantage,’ HSA accounts have tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

The Bottom Line: Plan Smart, Retire Smarter

Tax planning isn’t just a smart add-on to your retirement strategy—it’s a foundational piece that can significantly impact your financial future. From maximizing income and reducing taxes, to optimizing Social Security and planning your legacy, the right tax strategy can help ensure you enjoy the retirement you’ve worked so hard for.

Remember, you don’t have to navigate this alone. Tax laws are complex, and everyone’s financial situation is unique. Working with a knowledgeable advisor can help you build a retirement plan that’s not only well-funded but also tax efficient.

If you’re ready to take a proactive step toward a more secure and stress-free retirement, let’s start the conversation. I’m here to help you make the most of every dollar—now and in the future.

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The information presented is for educational purposes only and is not intended to be a comprehensive analysis of the topics discussed. It should not be interpreted as personalized investment advice or relied upon as such.

Allworth Financial, LP (“Allworth”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of the information presented. While efforts are made to ensure the information’s accuracy, it is subject to change without notice. Allworth conducts a reasonable inquiry to determine that information provided by third party sources is reasonable, but cannot guarantee its accuracy or completeness. Opinions expressed are also subject to change without notice and should not be construed as investment advice.

The information is not intended to convey any implicit or explicit guarantee or sense of assurance that, if followed, any investment strategies referenced will produce a positive or desired outcome. All investments involve risk, including the potential loss of principal. There can be no assurance that any investment strategy or decision will achieve its intended objectives or result in a positive return. It is important to carefully consider your investment goals, risk tolerance, and seek professional advice before making any investment decisions.