Tax

If your retirement goal is to step away from full-time work in your 50s or even earlier, the most important step is ensuring you have a paycheck replacement.

The beginning of 2023 brought the official signing of the Consolidated Appropriations Act, which contains SECURE 2.0. You more than likely heard the news, but what exactly does it mean for you?

English philosopher Carveth Read once said, “It is better to be vaguely right, than exactly wrong.” While applicable to anything, this concept can also lend guidance to your financial planning approach.

Here’s a simple tax saving strategy: Take more than the minimum of your RMD and leverage that withdrawal before it must be taken.

Market investors are primarily focused on market returns, as you should be; but another major component worth considering is how taxes impact your returns.

Many individuals underestimate the impact Uncle Sam can have on your decades’ worth of savings, so to proactively protect your dollars, have a strategy in place; plus, keep some of these principles in mind.

As much as we would prefer Uncle Sam to not follow us into retirement, taxes do not disappear with the elimination of your paycheck.

While your taxes could be lower in retirement than your working years, the reality is, the more income you have, the more taxes you will owe. The first step to mitigating the amount of dollars that go to Uncle Sam is understanding what income is taxed and how.

Based on a recent paper titled “Seeking Tax Alpha in Retirement Income” by James DiLellio and Andreas Simon, the “common rule” when it comes to retirement account withdrawal strategies needs to be reworked.

Having to take your RMD does not mean you are forced to exit the market. You can take your distributions in kind or keep it simple and take it in cash, followed by reinvestment.

As 2023 quickly approaches, analyzing the tax impact of any financial moves you plan to make before year’s end is key.