Planning for taxes in retirement is a lot like asking a child to eat their vegetables. While both parties don’t appreciate the task they’ve been presented with, not doing so could lead to some bad consequences. Especially not paying taxes.
For those who are retired or approaching retirement, it’s important to understand that there are many ways to minimize taxes but no one-size-fits-all solution. This can make tax planning very complicated for retirees and even worse, costly. Living off a fixed income during retirement means that every dollar counts. And for those who choose the wrong strategy or happen to make a mistake, it could mean losses of potential tax savings or possible issues with the IRS.
“To avoid costly mistakes, retirees and those approaching retirement should work with a financial professional who specializes in retirement planning and tax planning strategies,” suggests Alex Haase, President of Greene Point Partners.
Alex went on to add “Tax planning is crucial to your financial wellbeing in retirement. Unfortunately, when it comes to taxes, the best and most practical answer to a person’s particular situation might not be the most obvious one. That’s why our firm specializes in providing advice based on all of the financial considerations you will have in retirement. By doing so we can provide our clients with effective strategies based on their needs and objectives.”
Tips to Reduce Taxes in Retirement
Here are some tax deductions and tax credits that can be used to lower taxes in retirement.
Leverage a Higher Standard Deduction
By taking the standard tax deduction rather than itemizing, an individual can deduct $12,400 for the tax year 2020 and $12,550 for the tax year 2021. Keep in mind that the standard deduction is considerably higher for people who are over 65.
Convert a Pre-tax Plan to a Roth IRA
If an individuals who would like to transfer their retirement funds from one kind of retirement plan to another, the IRS permits them to do this. For example, a person can convert funds from their traditional IRA account or 401(k) account to a Roth account. Converting these funds helps reduce future tax liabilities but upon doing so the individual will pay taxes on any pretax funds as they convert them.
More Opportunities to Shelter Income
The IRS limits the amount a person can contribute to a 401(k) each year. This is because contributions to this account are tax-advantaged. For people under 50, this limit is $19,500 in both 2020 and 2021. However, if a person is 50 or older, they can put in $26,000 each year.
About Alex Haase
Alex has 15 years in the financial services industry and has worked hard to assist clients with all their diverse financial, retirement, and insurance needs. Whether a person is starting off in life or wants to enjoy their retirement, Alex Haase and his competent team can help clients wrestle any financial issue that a person is faced with. And with a large and diverse network of qualified professionals that Alex works with, he can ensure all his clients are taken care of to the highest degree.
About Greene Point Partners
Greene Point Partners specialize in retirement planning, Social Security, and tax reduction strategies in retirement. The firm can help a person develop, implement, evaluate, and monitor a tax strategy designed to address their individual situation.
The firm carefully creates a comprehensive roadmap to and through retirement for all of its clients. This roadmap takes into account inflation, taxes, expenses, Social Security, long-term care events, market corrections, medical costs, legacy planning, Medicare, and RMD’s. Greene Point Partners helps its clients take adequate steps to help them retire peacefully when they want and also at the same standard of living that they enjoyed during their working years.