Retirement Tax Management: Hidden Tax Bombs
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Have you been incorporating tax management into your retirement plan? If you have, you won\\u2019t want to miss this series, and if you haven\\u2019t, you definitely won\\u2019t want to miss this series.\\xa0
Last week we set the stage for this\\xa0retirement tax planning series\\xa0when we discussed how planning for taxes can work within your retirement plan. This week we\\u2019ll make you aware of the hidden tax bombs that could wreck your retirement plan. In next week\\u2019s episode, we\\u2019ll learn which tools you can use to defuse those tax bombs, and then in the last week of this series, we\\u2019ll learn how to integrate those tax tools into your retirement plan.
My goal is to give you an organized way to incorporate tax planning into your overall retirement plan which is why I have invited retirement tax expert Andy Panko from\\xa0Tenon Financial\\xa0to join me to discuss the nuances of retirement tax planning. If you are ready to learn about the hidden tax bombs that are awaiting you in retirement then press play now.\\xa0
Required minimum distributions, the tax bomb that begets other tax bombs
When you contribute your taxable income into a 401K, 403B, or other tax-deferred accounts your taxable income is reduced in the year that you make that contribution. However, many people forget that they are simply deferring that taxable income until later. Remember that taxes are never a question of if you will pay them, it\'s always a matter of when. Required minimum distributions (RMDs) are the government\\u2019s way of insisting that you pay the piper.\\xa0
RMDs begin at age 72 and at that time you must take 3.9% out of your tax-deferred accounts at this time. The percentage that you must take from these tax-deferred accounts grows each year.
The best way to defuse this bomb is to project\\xa0the total that\\xa0your tax-deferred accounts will grow to so that you can get a feeling of how much you will need to withdraw when the time comes.\\xa0
Yes, Social Security can be taxed!
Did you know that Social Security is taxable? It has been since 1984 and up to 85% of your Social Security benefit can be taxed. Just how much is taxable depends on your other sources of income. The more gross income you have, the bigger percentage of your Social Security benefit will be taxed.\\xa0If you are curious about\\xa0the percentage of your Social Security income that could be taxed\\xa0then make sure that you are signed up for the 6-Shot Saturday newsletter.\\xa0
Do ACA subsidies fit into your retirement plan?
If you are in need of health care before the age of 65 you may want to use\\xa0Healthcare.gov. The way the\\xa0marketplace\\xa0works is by using a tax subsidy system. If a person makes between 1-4 times the poverty level ($17,000) then they can qualify for tax subsidies on a sliding scale.
If you can keep your income below the threshold, then you could qualify for the ACA tax credits. Keeping your income low needs to be balanced with the rest of your retirement goals which is why it is important to have a retirement plan of record.\\xa0
There are several more tax bombs out there ticking away. To learn what they are you\\u2019ll have to press play to listen.
If your interest in retirement tax planning has been piqued by this series and you want to learn more, check out Andy\\u2019s\\xa0Taxes in Retirement Facebook group. With over 16,000 members, this group is a great way to exchange ideas with others who are on the same journey.\\xa0
OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN
PRACTICAL PLANNING SEGMENT
- [2:50] RMDs are the first tax bombs
- [11:30] Social Security is the next tax bomb
- [15:46] Will Social Security go broke?
- [21:41] Taking advantage of the ACA subsidies
- [31:00] When you need to watch out for IRMAA
- [37:50] Do you need to be careful of NIIT?
- [38:55] A change in marital status could surprise you
TODAY\\u2019S SMART SPRINT SEGMENT
- [44:29] Understand the important numbers sheet in the 6-Shot Saturday email
Resources Mentioned In This Episode
Andy\\u2019s\\xa0Taxes in Retirement\\xa0Facebook group
Roger\\u2019s YouTube Channel -\\xa0Roger That
BOOK -\\xa0Rock Retirement\\xa0\\xa0by Roger Whitney
Roger\\u2019s\\xa0Retirement Learning Center
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