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Taxation – How to minimize Taxes?

What should you be thinking about when it comes to taxes?

  • Did you know that taxes have a significant impact on investment returns?

We use tax-managed managers to elevate an indexing strategy. This can save you substantial taxes in the future when you begin liquidating your holdings or when you sell a business.

  • Do you have your tax-inefficient holdings in your IRAs? Do you have your high growth
    holdings in your Roth IRA?

Placing the appropriate holdings in the right vehicle, can increase your overall after-tax return dramatically.

  • Do you have a Roth or other tax-free strategies in place?

If you don’t, you should. We can maximize contributions and/or conversions at the optimized levels.

  • The value of your business and/or real estate are not liquid? How do you protect those holdings from having to be liquidated to pay estate taxes? This is even more important now than ever before given some of the tax proposals coming out of Washington D.C.

   Did you know that Washington is proposing eliminating the step-up in basis for estates? This could have significant ramifications on businesses, farms, and real estate holdings for future generations.

We look at all aspects of your situation and, only then, will we recommend the appropriate
strategies.

Tax Planning Strategies

It is most beneficial to utilize your financial advisor to help you with tax planning strategies to make the most out of the income you do take in. Reducing tax implications now allows you to maximize your income in retirement. Ultimately, the goal is to use tax planning strategies to have as much as possible for your retirement.

Retirement Tax Strategies

  • Live in a Tax-Friendly State – If you already live in a tax-friendly state, that is a significant plus for you. If you don’t, it might be a smart move to consider. There are
    seven states without state income taxes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
  • Reassess Investments – Changing investment holdings in retirement can save on taxes and also preserve principal.
  • Avoid or Postpone RMDs – If you are 72 years old or more, you won’t have to pay taxes on required minimum distributions (RMDs) from a traditional IRA if the funds are transferred to a charity. There are stipulations and limitations to this strategy.
  • Deferred Annuities – Postpone RMDs and never run out of income during retirement by investing in deferred annuities. You can use a specified amount of a retirement account to purchase a qualified longevity annuity contract (QLAC). Funds allocated to a QLAC are exempt from required minimum distribution calculations.
  • Strategize Social Security Benefits – If you have other retirement income for when you reach full retirement age, it is a possibility to benefit from delaying receipt of social
    security benefits until age 70. You can earn additional credits and boost your monthly benefits. You also defer taxes on benefits in this process. Social security benefit tax implications depend on other income. Try to use some innovative strategies to control the taxable benefits, such as reducing your adjusted gross income (AGI), limit the sale of
    securities, and make withdrawals from a Roth IRA if you have one.
  • Find the Right Financial Advisor – The right financial advisor will ensure that you maximize your tax planning for retirement and have access to the right retirement tax strategies for you.

Avoiding Taxes on IRA Withdrawals

To maximize the amount of income you have in retirement and ensure you are avoiding taxes on IRA withdrawals as much as possible, consider the following strategies:

  • Avoid early withdrawals or face penalties.
  • Rollover your 401(k) without having taxes withheld.
  • Set up a Roth conversion strategy
  • Do not forget about required minimum distributions.
  • Do not receive two or more distributions in a year.
  • Donate to charity.

Tax-Free Retirement

Having specific retirement account savings vehicles, including a Roth 401(k) or Roth 403(b), can give the owner some tax-free retirement income. Like a Roth Individual Retirement Account, growth and withdrawals are tax-free. You pay taxes ahead of time on the contributions made. This can be ideal for someone who is likely to be in a higher tax bracket in retirement than they are in now. Maximizing contributions to these kinds of retirement accounts help lead you on the right track to having tax-free retirement income or at least a tax-free asset that you can pass onto your heirs.

It all starts with knowing what your options are. Give us a call for advice!

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