How do most people save for retirement?

Saving for retirement is most commonly accomplished through the employer workplace plan, the 401k. Other similar savings vehicles can be through 403b’s, 457’s and IRA’s. What is the common factor between these? They are generally funded with ‘pre-tax’ dollars. Pre-tax meaning when we put money into these accounts we did not have to pay income taxes on those dollars. On top of this initial tax break, over your working career these funds likely grew resulting in investment gains.

When do you pay taxes on those funds then? Only when you make a withdrawal from that account. So they are not taxed when you originally contributed to the account, so they are taxed on the way out, on the withdrawal.

Did you know that a certain level of withdrawals from pre-tax accounts can be taken without paying taxes?* Many times in my practice I see when clients come in for the first time that they were not provided a plan to take advantage of tax free opportunities. The problem occurs when there isn’t a plan for where to take income from and when. Without tax-savvy planning an IRA withdrawal combined with Social Security, the effect could be an effective marginal tax rate as high as 40.7%

If you would like a plan that shows you the most tax efficient order of where to take income from and when, please

*If this withdrawal is not over certain levels and in the absence of other income sources, such as Social Security or capital gains.

The information contained herein is not legal, tax, or accounting advice. For legal, tax, or accounting advice you should consult the appropriate professional, such as a lawyer, CPA, or tax advisor. The information provided in this document is for informational/educational purposes.

The first step toward achieving your retirement goals is having a plan…