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Here’s a retirement reality check: Tax increases will affect you more today than they did for retirees in years past. Read the article from Kiplinger below.READ THE ARTICLE
Uncle Sam wants his share: Individuals in retirement today make up the first IRA generation. Unlike previous generations that could rely mostly on Social Security and pensions, retirees must now fund much of their second act through pre-tax retirement accounts, and that requires strategic tax planning. Between the history of taxes and Biden’s tax-increasing proposals, higher tax rates seem likely on the horizon, so planning for taxes of the future, not the present, is imperative.
Tax traps: Not only is the modern-day retiree facing income tax increases, but there are also new taxes to be aware of, including the possible elimination of the long-term capital gains taxes rates for wealthy Americans, and a potential Social Security payroll tax, to name a few. And while we are experiencing tax rates at 100-year lows, presidential proposals and increased government spending are adding to the mounting national debt, which in time, needs to be paid off. How? You guessed it – taxes.
Maximizing the amount of money kept in your pocket begins with calculating how much taxable income you have in total, and how much might be left after taxes. Having to start taking RMDs at age 72, for instance, can force you to withdraw more money from tax-deferred retirement accounts, thus causing you to jump to a higher tax bracket.
Focus forward: In order to minimize your long-term taxes, you may have to do something counterintuitive: Maximize your short-term taxes. As the old adage goes, short-term pain equals long-term gain.