Show Notes
Have you been incorporating tax management into your retirement plan? If you have, you won’t want to miss this series, and if you haven’t, you definitely won’t want to miss this series.
Last week we set the stage for this
retirement tax planning series when we discussed how planning for taxes can work within your retirement plan. This week we’ll make you aware of the hidden tax bombs that could wreck your retirement plan. In next week’s episode, we’ll learn which tools you can use to defuse those tax bombs, and then in the last week of this series, we’ll learn how to integrate those tax tools into your retirement plan.
My goal is to give you an organized way to incorporate tax planning into your overall retirement plan which is why I have invited retirement tax expert Andy Panko from
Tenon Financial to join me to discuss the nuances of retirement tax planning. If you are ready to learn about the hidden tax bombs that are awaiting you in retirement then press play now. Required minimum distributions, the tax bomb that begets other tax bombs
When you contribute your taxable income into a 401K, 403B, or other tax-deferred accounts your taxable income is reduced in the year that you make that contribution. However, many people forget that they are simply deferring that taxable income until later. Remember that taxes are never a question of if you will pay them, it's always a matter of when. Required minimum distributions (RMDs) are the government’s way of insisting that you pay the piper.
RMDs begin at age 72 and at that time you must take 3.9% out of your tax-deferred accounts at this time. The percentage that you must take from these tax-deferred accounts grows each year.
The best way to defuse this bomb is to project the total that your tax-deferred accounts will grow to so that you can get a feeling of how much you will need to withdraw when the time comes. Yes, Social Security can be taxed!
Did you know that Social Security is taxable? It has been since 1984 and up to 85% of your Social Security benefit can be taxed. Just how much is taxable depends on your other sources of income. The more gross income you have, the bigger percentage of your Social Security benefit will be taxed. If you are curious about the percentage of your Social Security income that could be taxed then make sure that you are signed up for the 6-Shot Saturday newsletter. Do ACA subsidies fit into your retirement plan?
If you are in need of health care before the age of 65 you may want to use
Healthcare.gov. The way the marketplace works is by using a tax subsidy system. If a person makes between 1-4 times the poverty level ($17,000) then they can qualify for tax subsidies on a sliding scale.
If you can keep your income below the threshold, then you could qualify for the ACA tax credits. Keeping your income low needs to be balanced with the rest of your retirement goals which is why it is important to have a retirement plan of record.
There are several more tax bombs out there ticking away. To learn what they are you’ll have to press play to listen.
If your interest in retirement tax planning has been piqued by this series and you want to learn more, check out Andy’s
Taxes in Retirement Facebook group. With over 16,000 members, this group is a great way to exchange ideas with others who are on the same journey. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT
- [2:50] RMDs are the first tax bombs
- [11:30] Social Security is the next tax bomb
- [15:46] Will Social Security go broke?
- [21:41] Taking advantage of the ACA subsidies
- [31:00] When you need to watch out for IRMAA
- [37:50] Do you need to be careful of NIIT?
- [38:55] A change in marital status could surprise you
TODAY’S SMART SPRINT SEGMENT
- [44:29] Understand the important numbers sheet in the 6-Shot Saturday email
What is Retirement Answer Man?
A top retirement podcast. Roger Whitney, CFP®, CIMA®, CPWA®, RMA, guides you on how to actually do retirement well financially and personally. This retirement podcast isn't afraid to talk about the softer side of retirement. It will teach you how to retire with confidence. Two-time PLUTUS winner for best retirement podcast / blog and the 2019 winner for best financial planner blog. This retirement podcast covers how to create a paycheck, medicare, healthcare, Social Security, tax management in retirement as well as retirement travel and other non-financial issues you'll need to address to rock retirement. Retirement isn’t an age OR a financial number. It’s finding that balance between living well today and feeling confident about your retirement. It’s about gaining more freedom to pursue the life you want. Join the rock retirement community at www.rogerwhitney.com