Safe Retirement Strategies
  • Home
  • Services
  • Resources
    • Bob's Thoughts
    • Blog
    • Podcasts
    • Videos
  • About
  • Contact
  • 913.814.9600

Blog

3 Tax Management Tips for Retirees

3/8/2018

0 Comments

 
Picture
​Tax time is here again. If you’re recently retired, you may be surprised to learn that taxes still play a big role in retirement. Many retirees assume that because they are no longer earning income, taxes won’t be a major expense.

The truth, though, is that taxes are often a significant expense for retirees. Many common sources of retirement income are taxable. Social Security is taxable, as are distributions from traditional IRAs, 401(k) plans and other qualified plans. Pension benefits usually are also taxable.
 
If you don’t plan ahead, you could find that taxes take a big bite out of your retirement budget. You may have less spendable income than you’d expected, and that could limit your ability to enjoy retirement.
Fortunately, there are steps you can take to minimize your tax exposure. Below are a few tips to consider as part of your retirement strategy:

Consider a Roth conversion.
Distributions from traditional IRAs and 401(k) plans are taxable. This is because most traditional IRAs are funded with untaxed dollars. You may receive a tax deduction for your contributions. Your funds then grow on a tax-deferred basis inside the account. The IRS collects taxes on those funds when you take a withdrawal. That could be problematic in retirement if you’re relying heavily on IRA or 401(k) assets.
 
One possible option is to convert your traditional IRA funds into a Roth. You pay taxes on the converted amount. Once the funds are in the Roth, however, you won’t pay taxes on growth or distributions. It may create a tax liability today, but it could also eliminate tax exposure in the future.

Use a health savings account (HSA) to pay for health care costs.
You’ll likely face a broad range of out-of-pocket health care costs in retirement. Fidelity estimates that the average retired couple is likely to pay $275,000 for health care expenses in retirement.1 That includes things like premiums, deductibles, copays and more.
 
However, you can use a health savings account (HSA) to pay those expenses with tax-free distributions. With an HSA, you can make tax-deductible contributions, grow your funds tax-deferred and then take tax-free distributions to pay for qualified health care expenses. Using the HSA for your health care costs could reduce the amount you need to take from your IRA, thus reducing your taxable income.

Donate your RMDs to charity.
Traditional IRAs and 401(k) plans are popular in part because they allow you to defer your taxes on investment growth. However, you can’t defer those taxes forever. The IRS requires you to take minimum distributions at age 70½. These required minimum distributions (RMDs) are treated as taxable income.
 
If you’d already planned on giving money to charity, however, you could take advantage of a unique exception to reduce your taxable income. The IRS allows you to donate your RMDs to charity and avoid paying taxes on the distribution. To do so, you’ll have to set up the distribution to transfer directly to the charity without passing through your account first.
 
Ready to develop your retirement tax strategy? Let’s talk about it. Contact us at Safe Retirement Strategies. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.

 
1https://www.fidelity.com/viewpoints/retirement/retiree-health-costs-rise
 
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
17377 - 2018/2/13

0 Comments



Leave a Reply.

    Categories

    All
    Benefits
    Employer Plans
    Estate Planning
    Financial Planning
    Income
    Managing Healthcare Expenses
    Medicare
    Medicare Premiums
    Millennials
    Podcasts
    Retirement Planning
    Social Security
    Tax Planning

    Archives

    October 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017

    RSS Feed

Picture
​Bob Lindquist
Phone: 913.814.9600

[email protected]
Safe Retirement Strategies
​
8900 Indian Creek Parkway
​Building 6 Suite 250

Overland Park, KS 66210

*Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation.

​Licensed Insurance Professional. Respond and learn how insurance and annuities can positively impact your retirement. This material has been provided by a licensed insurance professional for informational and educational purposes only and is not endorsed or affiliated with the Social Security Administration or any government agency. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
16045 - 2016/8/23 | Privacy Policy
  • Home
  • Services
  • Resources
    • Bob's Thoughts
    • Blog
    • Podcasts
    • Videos
  • About
  • Contact
  • 913.814.9600