You’ve spent your working years saving money for your golden years. But if you don’t have a smart tax strategy, the IRS could take a big bite out of your nest egg.
During your career, you grow accustomed to yearly contributions into employer retirement plans or individually funded IRAs. What you may not realize is those tax-deferred accounts aren’t tax-free forever. Depending on your birth year, the government will eventually force you to take mandatory withdrawals, which will then trigger a tax bill.
Your increased income from these withdrawals can lead to higher tax brackets, particularly if you have a pension and other savings. That can affect capital gains taxes, Medicare premiums, and even your Social Security benefits.
“It’s a domino effect,” says Amanda McHugh Stilwell, senior financial advisor and founder of Clarity Financial Solutions, adding that tax planning before, during and after retirement is vital. “Understanding the types of money you have and the impact of tax in retirement can help you to control the dominoes.”
Clarity Financial Solutions can work with you to create a strong income, but a low tax bracket, retirement plan based on your income sources, expenses and goals, whether that is traveling or leaving a legacy for family.
“We do a very extensive analysis of every dollar in your life because every type of money, where it is held, and what it is invested in has a different impact on you in retirement,” she says. “I tell people all the time, it’s not what you have, it’s what you keep.”
