One of the biggest financial challenges you can face – both before and after you retire – is income taxes. Depending on your tax filing status and bracket, your net spendable income may be significantly reduced.
This is particularly true if the bulk of your retirement savings is in “traditional” FERS (Federal Employees Retirement System) or FRS (Florida Retirement System) plans where none of the principal has yet been subject to taxation. Plus, if income tax rates rise in the future, Uncle Sam will receive even more of your money.
Top Federal Income Tax Rates 1913 – 2021
Source: Inside Gov (http://federal-tax-rates.insidegov.com/)
Over the past century or so, the top federal income tax rate has been 70% or more in forty-nine years, and in some years, it has been 90% or more. If income taxes rise to this level in the future, would you be able to live comfortably?
If you’re like most people, the answer to this question is no.
While there is no way to control income tax rates, there are strategies that you can put in place to help with reducing – or possibly even eliminating – taxes on your income in retirement. This can better ensure that you can purchase the items and services that you need.
If you would like more information on tax-reduction strategies in retirement, please reach out to us. There is no cost or obligation! You can contact us at 813-926-9909 or email us at firstname.lastname@example.org. We look forward to talking with you.
Tax Reduction Strategies
Even if the bulk of your retirement savings is invested in taxable accounts – such as a traditional IRA and/or employer-sponsored FERS (Federal Employee Retirement System) plan – there may be ways that you can reduce or eliminate the taxes that you owe when these funds are accessed in retirement. This, in turn, can give you more money to spend on the items and services you need and want in retirement.
Some of these strategies could include:
Keeping other income below a certain level if you’re receiving Social Security benefits
Converting traditional retirement assets to a Roth IRA
Taking advantage of tax deductions or credits
Because everyone has different scenarios regarding short- and long-term financial objectives and risk tolerance and time frame until retirement, not all tax-reduction strategies will work for all investors and retirees alike.
It’s essential to talk over your options with a financial professional who is well-versed in creating income-generation strategies that can also keep your income tax liability to a minimum.
If you would like more details on tax-reduction strategies in retirement, you can reach out to us directly by calling 813-926-9909 or via email at email@example.com. We look forward to answering any of the tax and retirement income questions that you have.