Getting Close to Retirement? We Have Some Important Information for You

If you're nearing retirement, planning for the future, or currently reaping the rewards of years of hard work, it's essential to understand your tax implications. That way, you can maximize your financial health during your golden years.

In this blog, we'll explore five key considerations that help you navigate taxes during retirement.

1. Familiarize Yourself With Each of Your Retirement Accounts

401(k), pensions, annuities, traditional IRA, Roth IRA—there are many different retirement accounts, each with tax treatments and implications.

Traditional retirement account contributions, like a 401(k), are typically tax-deductible. That helps you reduce your taxable income during that contribution year. However, once you reach retirement and start withdrawing from that account, those withdrawals are subject to income tax, which means you could be left with a hefty bill when it comes time to file. Planning for your future is essential and can help you avoid costly retirement income taxes.

Did you know that retirement accounts require minimum distributions (RMDs), which are the minimum amounts you must withdraw each year? Most people are required to start withdrawing from retirement accounts at 72, and failure to do so can result in steep penalties.

As you can see, even understanding each retirement account you have can seem daunting. Because each type can have rules that impact tax liability, many people choose to work with financial planners. That way, they can create a comprehensive wealth management plan that factors in any retirement accounts and associated tax considerations.

2. Consider Tax-Loss Harvesting

Tax-loss harvesting involves strategically selling investments that have experienced a loss to help offset any taxable gains.

By leveraging this strategy, it's possible to reduce your taxable income, which could help lower your tax bill in retirement.

3. Utilize Tax-Efficient Withdrawal Strategies

You’ve spent years paying taxes, like medicare taxes, so when it comes time to enjoy retirement, be sure you’re utilizing tax-efficient withdrawal strategies. Anticipated expenses, any investment income you’ll have, and your tax bracket are all critical factors to consider.

To help preserve more of your retirement savings, consider tapping into various accounts rather than focusing solely on one at a time. You can better optimize your tax burden by withdrawing from a mix of taxable, tax-free, and tax-deferred accounts.

4. Leverage Your Health Savings Account

Many people establish and use a Health Savings Account (HSA) for current medical expenses, but these accounts can also be a powerful retirement savings tool. How?

• Withdrawals for qualified medical expenses are tax-free
• Contributions are tax-deductible
• Earnings grow tax-free

That means HSAs offer a triple-tax advantage. By contributing the maximum allowable account to your HSA and allowing it to grow over time, you can build a tax-efficient source of money for retirement healthcare expenses.

5. Don't Forget About Social Security Taxes!

Social Security benefits are a significant source of income for many retirees. However, those funds may be subject to income tax. For that reason, it's vital to understand your total retirement income. That way, you can implement strategies in other areas to help minimize your taxable income.

Confidently Take on Taxes With Help From Shared Vision Wealth Group

Navigating taxes during retirement involves many moving parts. Turn to Shared Vision Wealth Group for assistance with all of it. We'll review your retirement accounts, create a comprehensive financial plan, and help you comply with all withdrawal requirements.

As your fiduciary, we're legally obligated to act in your best interest and provide you with the peace of mind you deserve. Ensure your hard-earned money is working hard for you during retirement—get in touch with us today.