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3 Strikes to Avoid When Tax Planning

3 Strikes to Avoid When Tax Planning Cornerstone Wealth Management

3 Strikes to Avoid When Tax Planning Cornerstone Wealth Management

Taxes are among the most common concern for people in retirement. You might be wondering how to start thinking about your tax strategy so you aren’t taxed more than you need to be. These three mistakes can help start the conversation about what a comprehensive tax strategy might look like for you.

Taking Too Much Income

When you start to approach retirement, you’ll have to start thinking about transitioning from the wealth accumulation stage to the income stage of your life. The whole point of saving for retirement is so you can live comfortably off your savings in retirement. But asking your money to grow is a different question than asking it to provide you income.

Make sure you know as best as you can exactly what your expenses will be in retirement. Think of it this way: There is no point in providing yourself extra taxable income with the money you already saved if all it will do is get taxed and go back into your savings.

This is especially important if you are worried about moving into a higher tax bracket due to your income levels. So, make sure your income is strategized so that you have what you need in any given year and won’t see extra income from mistiming your multiple income sources.

Misusing Retirement Accounts

Retirement accounts are a crucial piece of your retirement puzzle. But each one differs slightly and may have different benefits and limitations. It’s important to know how each retirement account is structured so you don’t end up paying penalty fees and missing out on any tax-advantaged perks of these accounts.

For starters, make sure you know the differences between a Roth IRA and a Traditional IRA. In general, the Roth offers greater tax advantages but has greater restrictions, such as income limits for contributions.

Consider how to take control of your 401(k) as well. 401(k)s are offered by your employer, and although they often come with contribution matching benefits and other tax perks, they sometimes offer less flexibility with what they hold and what you can do with them since they are employer sponsored.

Not Factoring in Social Security

Social security is taxed! But it’s not all taxed at the same rate. In fact, your Social Security tax rates are based on the amounts of other income you receive in retirement. Up to 85% of your Social Security payments are subject to regular income tax rates based on the levels of your other income. So, make sure your Social Security and retirement account income plans are lined up so you can claim your maximum benefit with minimal taxation.

Don’t just wait until tax season to figure out your tax plan. Taxes affect your whole retirement so factor them into your wealth preservation and income plan too. We can help you build a comprehensive retirement that considers your unique financial situation. Click here to schedule your complimentary retirement readiness meeting to get started.


The article and opinions in this publication are for general information only and are not intended to provide specific advice or Recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your Individual situation. This content was created by Lone Beacon.

Registered Representatives offer securities through Independent Financial Group, LLC (IFG), Member FINRA/SIPC. Investment Advisor Representatives offer Advisory services through Independent Financial Group, LLC (IFG), a Registered Investment Adviser. Cornerstone Wealth Management, Cornerstone Tax Advisory and IFG are unaffiliated entities.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

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