Tax efficiency in retirement | New

Owill you pay more taxes in retirement? It’s possible. But that will largely depend on how you generate income. Will it be work? Will it come from pension plans? And if it comes from retirement plans, it’s important to understand what types of plans will fund your retirement.

Another factor to consider is the role Social Security will play in your retirement. When do you expect to start receiving Social Security benefits? If you have a spouse, when does he expect to receive benefits? Answering key questions about Social Security benefits is essential to better understand how it will affect your taxable income.

What is a pre-tax investment? Traditional IRAs and 401(k)s are examples of pre-tax investments designed to help you save for retirement.

You will not pay any tax on the contributions you make to these accounts until you start receiving distributions. Pre-tax investments are also called tax-deferred investments because the money you accumulate in these accounts can benefit from tax-deferred growth.

For those covered by a workplace retirement plan, the tax deduction for a traditional IRA in 2021 is being phased out for incomes between $105,000 and $125,000 for married couples filing jointly, and between $66,000 and 76. $000 for single filers.

Keep in mind that once you reach age 72, you must begin receiving the required minimum distributions from a traditional IRA, 401(k), and other defined contribution plans in most countries. case. Withdrawals are taxed as ordinary income and, if made before age 59.5, may be subject to a 10% federal penalty tax.

What is an after-tax investment? A Roth IRA is the best known. When you put money into a Roth IRA, the contribution is made with after-tax dollars. Like a traditional IRA, contributions to a Roth IRA are limited based on income. For 2021, contributions to a Roth IRA are being phased out between $198,000 and $208,000 for married couples filing jointly and between $125,000 and $140,000 for single filers.2

To qualify for tax-free, penalty-free income withdrawal, distributions from the Roth IRA must meet a five-year holding requirement and occur after age 59½. A tax-free and penalty-free withdrawal can also be made under certain other circumstances, such as the death of the owner. The original owner of the Roth IRA is not required to make minimum annual withdrawals.

Remember, this article is for informational purposes only and is not a substitute for real-life advice, so be sure to consult with your tax, legal, or financial professionals before making any changes to your retirement strategy.

Are you looking for greater tax efficiency? In retirement, this is especially important – and worth discussing. A few financial adjustments can help you manage your tax obligations.

This article was provided by Philip J Ambrose, CFP®


Rosenberg Alvis & Ambrose Wealth Management

(229) 702 6100

312 N. Broad Street

Thomasville, Georgia 31792


1876 ​​Eider Ct.

Tallahassee, FL 32308

Securities and investment advisory services offered by Calton & Associates, Inc. member FINRA and SIPC, a registered investment adviser.

Rosenberg Alvis Ambrose Wealth Management is not owned or controlled by Calton & Associates, Inc.

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