Unfortunately, almost everyone who’s retiring today heard the same message for decades: You’ll pay taxes on qualified retirement savings after you step out of the workforce and your tax bracket is lower. Instead, the opposite is true. You paid no income taxes whatsoever on contributions or earnings for years and years, so withdrawals for retirement income and minimum distribution requirements will be fully taxable. Chances are you’ll be paying Uncle Sam far more than you bargained for. The same goes for your non-spouse beneficiaries. With recent rule changes, beneficiaries who inherit tax-deferred plans (with the exception of spouses) must pay the total income taxes within 10 years. Just think about the implications for higher earning adult children whose tax bracket is already high.

It’s also important to consider where U.S. tax rates may be headed in the future. Without Congressional action, there’s speculation that the administration is eyeing additional tax increases to reduce the federal deficit and support new social programs. If that comes to pass, your tax burden will increase.

Fortunately, paying a high tax rate isn’t mandatory for retirees. There are steps you can take to manage your tax situation efficiently. Johnson Brunetti can help you gain tax relief on income from qualified plans, Social Security, and corporate pensions. We can also assist you in planning for tax-efficient wealth transfer.

Our strategies include spreading out your tax liability over a number of years or diversifying your savings across a mix of tax-deferred, taxable, and tax-free accounts. Using a Roth conversion can be a smart move for many pre-retirees as can directing future savings to a Roth account.

Income taxes are a complex subject, particularly within the context of retirement plans.