RETIREMENT IS A WHOLE NEW phase of life. You’ll experience many new things, and you’ll leave others behind — but what you won’t avoid is taxes. If you’ve followed the advice of retirement plan consultants, you’re probably saving in tax- advantaged retirement accounts. These types of accounts defer taxes until withdrawal, and you’ll probably withdraw funds in retirement. Also, you may have to pay taxes on other types of income: Social Security, pension payments or salary from a part-time job. With that in mind, it makes sense to develop a retirement income strategy.
CONSIDER WHEN TO START TAKING SOCIAL SECURITY. The longer you wait to begin your benefits (up to age 70), the greater your benefits. Remember, though, that currently up to 85 percent of your Social Security income is considered taxable if your income equals more than $34,000 each year.
BE COGNIZANT OF WHAT TAX BRACKET YOU FALL INTO. You may be in a lower tax bracket in retirement, so you’ll want to monitor your income levels (from Social Security, pensions, annuity payments) and any withdrawals to make sure you don’t take out so much you get bumped into a higher bracket.
THINK ABOUT YOUR WITHDRAWAL SEQUENCE. Generally speaking, you should take withdrawals in the following order: Start with your required minimum distributions from retirement accounts. You’re required to take these, after all.
Since you’re paying taxes on taxable accounts, make this the second fund you withdraw from.
Withdraw from tax-deferred retirement accounts like IRAs, 401(k)s or 403(b)s third. You’ll pay income tax on withdrawals, but do this before touching Roth accounts.
Lastly, withdraw from tax-exempt retirement accounts like Roth IRAs or 401(k)s. Saving these accounts for last makes sense, as you can take withdrawals without tax penalties. These accounts can also be used for estate planning.
These factors are complex, and you may want to consult a tax professional to help you apply these tips to your own financial situation. You can test different strategies and see which ones can help you minimize the taxes you’ll pay on your savings and benefits.
The content of this article is for informational purposes only. It is not intended to be a substitute for professional financial advice. Always seek the expertise of a certified financial advisor or other qualified provider with any questions you may have regarding personal finance, investment and money-related issues.
Read This Next
Tour a Newly Rebuilt Christchurch
February 2020
Feb 11, 2020
Introducing
FX Excursions
FX Excursions offers the chance for once-in-a-lifetime experiences in destinations around the world.
#globility
Insta FeedDaily
Oct 2, 2023Tricks and Treats Await in the Enchanted Forests and Gardens of America’s Botanical Gardens
Pleasant weather, autumn foliage and vibrant flowers are among the many delights awaiting nature lovers at botanical gardens and arboretums across the United States. However, some of these green spaces take on additional color this month and through Halloween when enterprising gardeners, landscape architects, management and other creative minds cast a spell with themed environments running the gamut from spooky to utterly bewitching.
Sponsored Content
Exclusive Savings: Cruise Along the Danube River with Global Traveler
Exclusive Sailing with Global Traveler
Daily
Oct 2, 20235 Reasons Crystal Springs Resort Serves as the Perfect Backdrop for Fall Bucket List Escapes
For travelers who love all things autumn, Crystal Springs Resort, New York City’s closest destination resort, features special offers and experiences to meet the demands of everyone’s fall bucket list. Located only 80 minutes outside New York City in Sussex County, New Jersey, Crystal Springs Resort offers a quick getaway to enjoy fall foliage. Are any of these new offers or experiences on your bucket list?
Daily
Oct 2, 20237 Historic Cemeteries in Europe to See on Your Travels
It’s time to start dreaming of your next trip. Here’s some destination inspiration for you. Take a visual journey with us through these historic (and famous) cemeteries in Europe.
Sponsored Content
Share Your Travel Preferences with Global Traveler in a Short Survey & Win
Learning more about our readers’ travel habits and preferences ensures Global Traveler delivers the content you desire. As the travel industry has adapted and changed over the last few years, it’s more important than ever to connect. To best meet your short- and long-term travel content needs, please help us!
Daily
Oct 2, 2023At the Entrance of a French Fishing Village Lies the Perfect Hideaway
At the entrance to the fishing village of Les Goudes, a 40-minute drive south of Marseille facing the Mediterranean, is Tuba Club. Nestled in a historic seaside building,with its laid-back restaurant and sun-splashed terraces it is a perfect hideout for locals and international visitors who can actually find it.
Daily
Sep 27, 2023On This Cruise, You’re Guaranteed to See the Northern Lights or Your Second One’s Free
There’s no doubt the northern lights are awe-inspiring and spectacular. Unfortunately, they’re also fickle and fleeting, and despite your best-laid plans of checking this item off your bucket list, sometimes Mother Nature’s luminescent show just doesn’t cooperate. But one cruise line has a new fail-safe in place.
Daily
Sep 27, 2023Sail Away on Dream Yacht Worldwide’s Easy Crewed Expeditions
Think you need a degree in sailing to enjoy a yachting holiday? Dream Yacht Worldwide, a leader in yacht charters, wants you to relax and enjoy the journey. Newly expanded to include the British Virgin Islands, Martinique, Tahiti and the Seychelles, the "Easy Crewed” offered by Dream Yacht Worldwide also include charter options in Greece and Croatia.
ShareThis