Podcast Episode 438: What 59% of Retirees Wish They’d Known About Taxes
Prefer to watch? Click here to watch and listen on YouTube.
According to a recent Nationwide Retirement Institute survey, 59% of retirees regret not preparing for taxes. More specifically, how significantly taxes would shape their retirement income.
In this episode of Money Wisdom, Jake Doser, CFP®, CPWA® and Nicholas J. Colantuono, CFP® discuss common tax surprises retirees face and how to effectively plan around them.
Social Security Is Taxable—Up to 85%
Depending on your other income, your Social Security benefits may be taxed up to 85% at the federal level. Many retirees view their Social Security statement and assume their full benefit amount will land in their bank account.
But Medicare premiums, federal withholding, and possibly state taxes can all reduce what you take home. When making Social Security decisions, pay attention to your net income, adjusted gross income, and modified adjusted gross income.
RMDs and the “Tax Time Bomb”
Required minimum distributions (RMDs) from tax-deferred accounts can become a “tax time bomb” in retirement. When RMDs begin, withdrawals may push you into higher tax brackets, increase Social Security taxation, and raise Medicare premiums.
These distributions don’t exist in a vacuum. Pension income, interest, dividends, and withdrawals from brokerage accounts can all increase your overall tax burden. This is where true financial planning allows you to be proactive in your decision-making and not reactive.
Strategies for Proactive Tax Planning
In early retirement, when your income is temporarily lower, one proactive strategy to consider is a Roth conversion. During this time, you have a unique opportunity to move money from tax-deferred accounts into a Roth IRA. Although you pay taxes upfront, the money grows tax-free and you can withdraw it tax-free.
Ultimately, tax planning is about managing when, how much, and how often you pay taxes, not avoiding them altogether. The right tax strategy can mean the difference between uncertainty and confidence in the retirement income you rely on.
Want clarity about your tax situation? Get your free Are You Paying Too Much in Taxes in Retirement? guide by texting “OFFER” to 800-757-0436.
Information presented here 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.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
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