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Created: December 18, 2023
Modified: May 14, 2024

Does it Make Sense to Retire Before the New Year?

Today’s question is: Does it make sense to retire before the New Year? Let’s unpack that a little bit.

What are the Benefits?

Benefits to retiring before the New Year really mean that in the year ahead, you will likely be in your lowest tax bracket ever. You’re out of those high earning income years where you’ve got salaries and bonuses.

Sure, you’re able to make deductions into the 401(k) and IRA along the way, but let’s face it – you’re now no longer working and no longer saving. You might have just noticed that your tax rate went from the highest it’s ever been to the lowest it’s ever been.

Roth Conversion Planning

That’s what we love as financial planners because one of the hot button topics right now for almost everyone we’re meeting with is Roth conversion planning. Suddenly, your income goes down, your tax rate goes down.

It might make sense to look ahead 5 to 10 years and say, “Well, I don’t want to be forced to take those required minimum distributions (RMDs) at a point in time in which I might not need them or at a point in time in which tax rates might be significantly higher than they are right now.

Take Advantage of Low Income

Let’s take advantage of that low tax bracket and maybe move some money out of those tax-deferred retirement accounts; the IRA, the 401(k). Pay a little bit of tax on it now but remember while you’re in those low tax years after you’re retired and put some of that money into a Roth account where the main benefit is that money grows 100% tax-free, not just for you but also for the folks that you care about and the people you leave that money behind to.

Again, one benefit of retiring before the New Year is that in the coming year, you will have very little earned income and we can take advantage of some meaningful tax planning tips as financial planners.

Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.

Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.

Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.

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