Retiring Soon? Consider Your Tax Strategy

If you are planning on retiring in the near future, considering the way that you invest and withdraw money now can affect the amount that you end up paying in taxes later (and thus how much of your money you get to keep). Tax strategy can be a complex subject, so while these guidelines may be helpful to keep in mind, a professional can work with you to consider the ways that certain tax strategies affect your long term financial goals more specifically. At Harvest Wealth Partners, our financial advisors offer services for individuals looking to plan for retirement, manage their wealth, and more. When you meet with us for the first time, we’ll not only discuss your financial circumstances today, but we’ll talk about the goals you have for where you’d like to be tomorrow.

Retirement Tax Strategies

One of the top methods that you can employ in an effort to reduce taxes on your retirement money is to utilize tax advantaged retirement accounts. Accounts like a 401(k), Roth 401(k), IRA, and Roth IRA all come with different benefits, but choose carefully. Some accounts include your contributions in your taxable income now, while others are deferred until you withdraw it in retirement. Choosing which accounts you would like to prioritize will depend on when you hope to retire, how much money you expect to have in income at the time, and many other factors. 

If you are nearing retirement, there are a few additional options and considerations that you may wish to make. According to US News and World Report, workers over the age of 50 who are making “catch up contributions” to their retirement accounts may be eligible for additional tax breaks on those contributions. At this age, you may also be tempted to take an early retirement. However, early withdrawals are often subject to withdrawal penalties, so you should read the policies of the account in question carefully before making a decision. 

Working With a Financial Advisor

Working with a financial advisor will allow you to sit down with a professional for an outside opinion. It also provides an opportunity to lay out how much you intend to contribute to each retirement account in your portfolio, and how much you will withdraw at a time in the future. 

Planning withdrawals ahead of time is key to tax planning in retirement. For example, the timing in which you withdraw funds may also affect your income tax bracket for that year. So if you’d like to make a large purchase, it may make sense to split the withdrawal up over more than one tax year. When you talk to your financial advisor, you will be able to discuss your goals for what you’d like to do with your money and how that may affect the amount of taxes you end up paying at the end of the year. 

Scheduling a Consultation With Harvest Wealth Partners

There are a number of different strategies that you can employ in an effort to manage the amount of taxes that you will pay in retirement. As you get closer to retiring and work to refine your plan, a financial advisor can discuss those options with you. To learn more about the retirement and tax planning services offered by Harvest Wealth Partners, contact us today. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.