Retiring Soon? How to Avoid the Taxation “Death Star”!

Creating a Personal Paycheck

If you’re within 5 years of retirement, it’s important to take an inventory of the assets that will provide a “personal paycheck” during your “work optional “years. You probably own a traditional IRA or a 401k account with a previous employer. You may also have a Roth IRA and maybe a taxable brokerage account.

Add in Social Security benefits and you might congratulate yourself on the great job you did to accumulate these funds. But, what’s the best way to “de-accumulate” this money to provide retirement income??

It’s a Trap!

To paraphrase a famous general in a galaxy far,far away, “Be Careful! It’s a Trap!”

Retirement Income Planning is loaded with potential potholes if you’re not aware of tax impacts associated with retirement account withdrawals.

Hi. I’m Chuck Lewandowski, CERTIFIED FINANCIAL PLANNER™ professional and I’m going to describe a couple of the tax time bombs that, without careful planning, you may experience.

• A talking head on a TV show encourages you to convert your IRAs to a Roth IRA so your required distributions would be reduced when you reach the distribution age. So, you decide to convert $100,000 of your IRA to a Roth IRA. You know you must pay taxes on the conversion but what you may not know is that 85% of their Social Security may now be taxed, your tax bracket might increase, and all of this may result in Medicare premium surcharges.
• My friend Marty held a lot of shares of stock in a successful Fortune 500 company where he worked for many years. Each December he liquidated some of the shares to purchase Christmas presents for his grandchildren.  He was single and in a very low tax bracket. One year, Marty consulted for his former company and received some consulting income. The following April, Marty’s accountant presented a huge tax bill. Marty didn’t realize that his capital gains tax bracket went from zero % to 15% on his stock sales. A belated Merry Christmas to you, Marty!  

The IRS is Your “Partner”

If you’re considering retirement in the next few years, or, if you’ve already retired, you need to be aware that your significant other isn’t your only financial partner. The IRS has a vested interest in your tax planning success or failure.  If you’re interested managing those unwanted partners expectations, I have some tools that can help. Please call me and Let’s make a Plan!

Advisory services offered through Capital Analysts or Lincoln Investment, Registered Investment Advisers. Securities offered through Lincoln Investment, Broker Dealer, Member FINRA/SIPC.www.lincolninvestment.com West Coast Financial Group, Inc. and the above firms are independent and non-affiliated. Tax advice is not offered through, nor supervised by Lincoln Investment or Capital Analysts.