TAX
STRATEGY

We know retirement should be all about relaxation, not tax surprises. A solid tax strategy plan is like shield for your savings—it helps protect you from unnecessary tax burdens and keeps your wealth growing. With smart planning, you can keep more of what you’ve worked hard for, ensuring you keep as much as possible. MATTHEW JAMES Tax & Wealth Management can craft a personalized strategy that allows you enjoy your golden years without tax-time headaches.

DREAM IT. PLAN IT. DO IT.

WHAT YOUR TAX IMPACT NEEDS: MINIMIZATION

Retirement – a time to kick back, relax, and enjoy all those years of hard work.
But if you’re not careful, the taxman can swoop in and ruin all the fun faster than you can say “early bird special.”

That’s why tax management is so important in retirement – it’s like building a moat around your castle to keep the tax dragon at bay.
You could try to fight him off with a sword, but let’s be honest, those tax laws are more confusing than trying to navigate a corn maze blindfolded.

So, what can you do? Well, first off, don’t panic.
Take a deep breath and remember that you’re a retiree now – you’ve earned the right to move at your own pace. And when it comes to taxes, that means taking the time to plan ahead and make smart decisions that can save you money in the long run.

Take advantage of tax deferred retirement accounts, diversifying your investments, or learning to speak the language of the IRS.
There are plenty of ways to manage your taxes and make sure you’re not left penniless in your golden years.

With a little bit of tax planning and some smart financial strategies, you can keep your taxes under control and maximize your retirement income!

TAX STRATEGY & MANAGEMENT

What we do: help minimize your tax burden while maximizing your income. Because you deserve a worry-free retirement.

'DELAY & PRAY'

'SPREAD IT OUT'

'GO FOR BROKE'

UNDERSTANDING TAX STRATEGY:

'DELAY & PRAY'

This strategy is all about deferring taxes as long as possible and praying that tax rates go down in the future.

Retirement can be a confusing and stressful time. Suddenly, you’re no longer receiving a regular paycheck and you have to figure out how to make your retirement savings last for the rest of your life. But fear not, because there are some strategies you can use to make your retirement income go further. One of those strategies is deferring taxes. Now, before you start snoozing off at the mention of taxes, let’s talk about how deferring taxes during retirement can actually be a beneficial and [dare I say it] slightly humorous strategy.

WHAT IT MEANS TO DEFER

First, let’s define what we mean by “deferring taxes.” When you defer taxes, you’re essentially putting off paying taxes on your income or investment gains until a later date. In the case of retirement, this often means contributing to a tax-deferred retirement account, such as a traditional IRA or 401[k]. By contributing to these types of accounts, you’re able to lower your taxable income in the present and instead pay taxes on that money when you withdraw it in retirement.

Now, you may be thinking, “Why would I want to defer taxes? Won’t I just end up owing a lot of money in taxes later on?” It’s a valid concern, but here’s where the humor comes in – the idea is that you’ll be in a lower tax bracket in retirement than you are now. That’s right, you’ll finally be able to say you’ve made it to the lowest rung of the tax bracket ladder. [Maybe it’s not that funny, but you have to chuckle when you can in life, right?]

But in all seriousness, deferring taxes during retirement can be a smart move because it allows you to keep more money in your pocket in the present. By lowering your taxable income through contributions to a tax-deferred retirement account, you’re able to pay less in taxes now and potentially save more for retirement. And when you do eventually withdraw that money in retirement, you’ll likely be in a lower tax bracket than you are now, which means you’ll pay less in taxes overall.

DOWNSIDE TO DEFERRING

Of course, there are some downsides to deferring taxes as well. For one thing, you’ll eventually have to pay taxes on that money when you withdraw it in retirement. And if you withdraw that money before age 59 1/2, you may face additional penalties and taxes. Additionally, if tax rates go up in the future, you could end up paying more in taxes than you anticipated. But overall, deferring taxes can be a smart strategy to help you make the most of your retirement income.

So, what are some ways to defer taxes during retirement? Here are a few options:

Traditional IRA or 401[k]: As mentioned earlier, contributing to a traditional IRA or 401[k] can help you lower your taxable income and defer taxes until retirement. Keep in mind, however, that there are contribution limits to these types of accounts, so you may not be able to contribute as much as you’d like.
Roth IRA: While a Roth IRA doesn’t allow you to defer taxes in the same way as a traditional IRA or 401[k], it does allow you to withdraw your contributions tax-free in retirement. Additionally, if you’ve had the account for at least five years and meet certain other requirements, you can withdraw earnings tax-free as well.
Annuities: An annuity is a financial product that pays you regular income in exchange for a lump sum payment. Annuities can be either immediate [meaning you start receiving payments right away] or deferred [meaning you start receiving payments at a later date]. Deferred annuities can be a good option for deferring taxes, as you won’t pay taxes on the money until you start receiving payments.
Health Savings Account [HSA]: If you have a high-deductible health plan, you may be eligible to contribute to an HSA. Contributions to an HSA are tax-deductible, and you can withdraw money tax-free to pay for qualified medical expenses. Once you turn 65, you can withdraw money for any reason without penalty, although you will have to pay taxes on the withdrawals.
Real Estate: Investing in real estate can be a good way to defer taxes. By owning rental property, you can deduct expenses such as mortgage interest, property taxes, and repairs from your taxable income. Additionally, you can defer taxes on capital gains by doing a 1031 exchange, which allows you to sell one property and use the proceeds to buy another without paying taxes on the gains.
While deferring taxes during retirement can be a smart strategy, it’s important to remember that it’s just one piece of the puzzle when it comes to retirement financial planning. You’ll also want to consider factors such as your retirement goals, your risk tolerance, and your overall financial situation. Working with a financial advisor can help you create a comprehensive retirement plan that takes all of these factors into account.
In conclusion, deferring taxes during retirement can be a beneficial strategy to help you make the most of your retirement income. While it may not be the most exciting topic, it’s important to understand how taxes can impact your retirement finances. And who knows, maybe you’ll find a way to add some humor into your tax planning – after all, laughter is the best medicine, even for taxes.

'SPREAD IT OUT'

Unfortunately, retirement doesn’t mean that taxes are a thing of the past. In fact, you’ll still need to pay taxes on the income you receive during retirement, including Social Security benefits, pension payments, and withdrawals from retirement accounts like 401[k]s and IRAs. And if you’re not careful, you could end up with a big tax bill that eats into your retirement savings. That’s where spreading out income throughout retirement comes in – a strategy that can help you avoid a big tax bill and keep more of your hard-earned money.

MINIMIZE TAX LIABILITY

So, how does spreading out income work? Essentially, it involves withdrawing money from your retirement accounts in a way that minimizes your tax liability. Here are a few strategies to consider:

Use a combination of taxable and tax-deferred accounts: If you have a mix of taxable and tax-deferred retirement accounts, you can strategically withdraw money from each type of account to minimize your tax bill. For example, you could withdraw money from your taxable account first, as those withdrawals aren’t subject to income taxes. Then, you could withdraw from your tax-deferred accounts, like a 401[k] or traditional IRA, but only withdraw enough to keep you in a lower tax bracket.
Take advantage of Roth accounts: Roth accounts, like Roth 401[k]s and Roth IRAs, offer tax-free withdrawals in retirement. By converting some of your tax-deferred accounts to Roth accounts, you can reduce your tax liability in retirement. However, it’s important to remember that Roth conversions are subject to income taxes in the year they’re done, so it’s important to plan ahead and understand the tax implications.
Consider a deferred annuity: A deferred annuity is a type of annuity where you make payments to an insurance company, and the company pays you a guaranteed income stream in retirement. By using a deferred annuity, you can spread out your income over a longer period of time, which can help you avoid being pushed into a higher tax bracket.

Now, I know what you’re thinking – this all sounds a bit complicated. And yes, retirement income planning can be complex, but it doesn’t have to be overwhelming. By working with a financial advisor, you can create a retirement income strategy that’s tailored to your specific situation. And who knows, maybe you’ll find a way to make tax planning a bit more fun. After all, taxes may not be the most exciting topic, but a little humor can go a long way. So, here are a couple tax-related jokes to lighten the mood:

Why did the tax accountant get a promotion? Because he knew how to carry the two.
How do you make a small fortune in the stock market? Start with a large fortune.

Not the funniest tax jokes in the world, but hey, at least we’re trying to inject a little bit of humor into the retirement planning process.

In all seriousness, though, spreading out income throughout retirement can be a valuable strategy for minimizing your tax liability and making the most of your retirement savings. Whether you’re working with a financial advisor or going it alone, it’s important to consider all of the factors that can impact your retirement income, including taxes. By doing so, you’ll be well on your way to a happy, healthy retirement – with a little extra money in your pocket to boot.

'GO FOR BROKE'

Ah, taxes. Just hearing the word can make you break out in a cold sweat. But when it comes to retirement, taxes are a fact of life. After all, you’ve worked hard all your life to save for retirement, and you don’t want Uncle Sam to take a big chunk out of your hard-earned money. That’s where taking advantage of tax breaks and reductions comes in. By planning ahead and making smart decisions, you can reduce your tax bill during retirement and keep more of your money where it belongs – in your pocket.

TAX BREAKS & REDUCTIONS

So, what are some tax breaks and reductions you can take advantage of during retirement? Here are a few to consider:

Standard deduction: If you’re over 65, you may be eligible for a higher standard deduction on your tax return. In 2021, the standard deduction for taxpayers over 65 is $14,050 for single filers and $27,800 for married couples filing jointly. By taking the standard deduction, you can reduce your taxable income and potentially lower your tax bill.
Charitable contributions: If you’re feeling generous and want to support a good cause, you can make charitable contributions to qualified organizations and deduct the amount from your taxes. Just be sure to keep proper documentation of your donations to claim the deduction.
Health savings accounts (HSAs): If you have a high-deductible health plan, you may be eligible for an HSA, which allows you to save money tax-free for qualified medical expenses. In retirement, you can use the funds in your HSA to pay for Medicare premiums and other healthcare costs.
Roth conversions: As we mentioned in the last article, converting some of your tax-deferred retirement accounts to Roth accounts can reduce your tax liability in retirement. By paying taxes on the conversion now, you’ll have tax-free withdrawals in the future.
Tax-efficient investments: By investing in tax-efficient vehicles like municipal bonds or index funds, you can reduce the amount of taxes you owe on investment gains. Just be sure to talk to a financial advisor to understand the tax implications of different investment strategies.

Now, I know what you’re thinking – all of this tax talk is putting you to sleep. And who can blame you? Taxes aren’t exactly the most exciting topic in the world.

PLAN AHEAD

Taking advantage of tax breaks and reductions can make a big difference in your retirement finances. By planning ahead and making smart decisions, you can reduce your tax bill and keep more of your hard-earned money. So, whether you’re working with a financial advisor or going it alone, it’s important to consider all of the tax implications of your retirement income strategy. And who knows, maybe you’ll find a way to make tax planning a bit more fun. After all, laughter is the best medicine – even when it comes to taxes.

It’s like trying to get the most bang for your buck at the all-you-can-eat buffet – you’re going to load up on as much as you can to get the most value for your money. Oh, and did we mention we can help get you to – or close to – the 0% tax bracket…