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Tax Planning
Tax-Free planning in retirement. Hidden taxes you should be prepared for.
One of the keys to effectively manage your taxes in retirement is to understand how your money is taxed throughout the years of your retirement, and how income taxes will effect the different income streams in your retirement.
there are five issues that every
retiring Person Should Think through
1. What will happen to tax rates throughout your retirement? Currently we are in a very low tax rate environment, but with all of the bailouts over the last 20 years and the deficit that the United States government has taken on, there is a strong likelihood that taxes will go up throughout your retirement. Creating tax-free pools of money to manage your income tax rate in retirement could be very valuable.
2. Your taxable sources of income that come to you, can cause your Social Security to be taxed. Being able to have a reduced tax burden in retirement by withdrawing income from tax free pools of money can reduce or eliminate this tax.
3. The amount of money you make every year in retirement once you start claiming Medicare can increase your Medicare premiums.
4. If you’re married and filing your taxes jointly… when the first spouse passes away this leaves the remaining spouse as a single income tax filer subject to a higher tax rate.
5. When we pass away and leave pre tax retirement plans to our children all of that money is taxed to them at their tax rate which can be much higher because they can be in their peak earning years.
A well thought out tax planning strategy can eliminate or reduce the effect of some of these problems.