Retirement Tax Forecasting

We may not know what tax legislation will look like on the exact date you retire, but there is great value in forecasting what we do know.

As one example among many, if you are required to take minimum distributions from retirement accounts at age 73, you will likely face a tax balloon. We can create a tax minimization plan to address the effects of those distributions with a retirement tax forecast.

Tax-Forward Retirement Income Planning

Knowing that your retirement income streams are not all equal in the eyes of the tax-man, it’s essential to know when you should start drawing from each and how much to withdraw.

Considering that one additional withdrawal from the wrong place at the wrong time could mean a tax rate of 49.95%, income planning becomes essential to tax minimization.

Social Security Benefits Optimization

There are 96 different months you can claim your Social Security benefits. If you’re married, that’s 192 different numbers. Additionally, there are five different ways to file for these benefits.

Figure in options your spouse may have, survivor benefits, and advanced filing options – there are over 20,000 variations to how a married couple could file for benefits. Each variation means a different amount of lifetime Social Security income.

With Social Security making up over 50% of the average retiree household’s income, we need to manage it like an asset. Having a strategy for when and how to file is a critical retirement decision.

Optimizing your benefits means factoring in all of your other assets and income sources as a part of a holistic retirement income plan.

Social Security Tax Calculation

Social Security income is subject to federal income taxes if your combined income reaches a certain level. Combined income consists of your adjusted gross income (income from wages, dividends, capital gains, business income, retirement distributions, and other income), nontaxable income, and half of your Social Security benefits.

Based on current tax laws, if your combined income exceeds $34,000 filing as a single person, or $44,000 filing as a married couple, up to 85% of your Social Security benefits may be taxable. Understanding how these tax implications affect your Social Security benefits as well as your other assets might make you reconsider when to file.

Tax Deferral Strategy

Deferring tax on earnings (interest, dividends, or capital gains) until retirement can create substantial returns. Instead of premature taxation on an annual level, which could erode annual returns, the taxation is triggered only upon withdrawal.

In many cases–with proper planning–a household’s tax rate in retirement will be lower, making tax deferral attractive.

This too is part of an optimized retirement savings and income plan focused on tax minimization.

Small Business Tax Planning

Taxation for sole proprietors and other small businesses is usually their most significant expense. Savvy business owners look at minimizing taxes as a way of increasing income.

Some of the other challenges facing small businesses include rewarding key employees and protecting against their loss, as well as planning for an exit strategy.

We work on an individualized level along with a team of CPAs and attorneys to assist our business clients with a strategic, tax-advantaged plan to maximize business assets and create sustainability.