Maximizing your money when it comes to taxes involves dotting your i’s and crossing your t’s.
Chances are you plan on retiring at some point.
You know you need to save now to ensure an adequate income in retirement.
According to a recent Kiplinger article titled “Keep More of Your Retirement Savings with Tax-Bracket Planning,” retirement planning should also involve proactive tax planning.
But preserving and maximizing this income is also important.
The biggest threat?
How can you optimize these savings?
You will need tax-efficient investments, withdrawal strategies, and planning.
Investments should have the lowest taxes compared to their dividend interest or income.
You should have a variety of accounts to provide flexibility in withdrawals for income.
When tax planning, take into account all of your retirement tax savings rather than merely savings in a single year.
Why is tax planning important?
Without proper planning, you could pay triple the amount you need to pay in taxes.
How do you avoid this?
You should manage the income you pay yourself.
Your tax bracket will also be key.
Retirees should remain in the 15 percent tax bracket.
Start in your first year of retirement.
Your goals should be to fill your entire 15 percent tax bracket.
You can also convert qualified money into nonqualified money.
What does this mean?
Qualified money is money before it has been taxed.
Nonqualified money has already been taxed.
Why would this be beneficial?
The nonqualified money can appreciate without being taxed until sold.
To truly plan for retirement, you need to consider the tax implications of your decisions.
An experienced financial advisor can help you weigh your options.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (July 2017) “Keep More of Your Retirement Savings with Tax-Bracket Planning”