Retirement Tax Planning

We can help you reduce your federal and state income taxes.

According to research from the Tax Policy Center, the top 20% of income earners in the United States paid 69% of income taxes. So, if you earn more than $115,000 per year, this means you are paying the bulk of taxes in our country. Even worse, you may be overpaying your taxes and not even know it. 

While paying more than your share of taxes may feel like your patriotic duty, for many investors, reducing your current and future tax burden can be a significant goal when planning for retirement.

Our financial planners at Covenant Wealth Advisors excel at providing retirement tax consulting to help you reduce taxable income and increase your tax deductions. We do this by analyzing your tax returns and income sources. Then, in conjunction with your financial plan, we create personalized tax strategies to reduce your taxable income.

 

Unlike filing your taxes, which is a rear-view-mirror, reactive approach to taxes, tax planning in retirement is a forward-looking, proactive approach to tax reduction. Both are important, which is why we'll collaborate with your CPA before implementing any tax planning strategies.

 

If you are within ten years of retirement, our tax advisory services offer the potential to reduce your taxes and provide better control over your taxable in come in retirement. 

WHY TAX PLANNING IN RETIREMENT?

 

Reduce your taxable income in retirement.

There were over 5,000 tax code changes between 2002-2012. Tax planning can help you take advantage of the latest tax laws to reduce your tax liability. From Roth IRA conversion strategies, to tax-loss harvesting on your investments, to state and federal tax credits and deductions, to income smoothing in retirement, tax planning can help.

Determine if Roth conversion strategies make sense.

Most people would love tax free income in retirement. The problem is that many retirees have the bulk of their savings stashed away in tax-deferred vehicles such as Traditional IRAs, 401 (k)s, and other company retirement plans. Tax deferred accounts can be great when you are saving money, but they can create a big tax problem when you start withdrawing money from your accounts in retirement. You will be fully taxed for every dollar you withdrawal from your accounts. As a solution, our financial planners can analyze your personal tax situation to determine if it makes sense to convert some of your tax-deferred investments into a tax free Roth IRA. We can project out how much money you should convert to a Roth IRA and in which years to give you better control over your tax bracket in retirement. The result is potentially lower taxes in retirement, the potential to transfer more after-tax wealth to your heirs, and the potential to get the most out of your investments to fund the lifestyle you deserve. 

Avoid costly Social Security and Medicare "tax traps". 

IRA withdrawals can cause the taxation of Social security benefits, and push taxpayers into a higher marginal tax rate. Just as bad, higher income (i.e. drawing down assets for income) can cause potentially hundreds of dollars a month in extra Medicare premiums.

Determine which accounts to withdraw from first.

You must plan how and when you will use taxable, tax-deferred, and tax-free assets to manage your income
and tax brackets efficiently. Knowing which accounts to draw down first can help reduce your overall tax burden.

Reduce taxes on on your capital gains. 

According to research from Vanguard, tax-managed investing has the potential to increase returns by upwards of 0.75% per year. On a one-million-dollar portfolio, that's a savings of $7,500 per year! But, most investors aren't aware of the all the tax strategies available. We can create a personalized strategy to mitigate current and future taxation on your investments. 

Optimize your charitable giving strategies. 

Are you charitably inclined? Do you give cash or even write a check to the charities that are important to you? If so, there could be a much better way to give and save you taxes along the way. Our tax planners love creating strategies that help our clients give more while also reducing their tax burden. 

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