In this video I share an often overlooked tax planning strategy for those in the early years of retirement. The key is to understand how Social Security income is taxed and how your withdrawal order from retirement accounts can have a significant impact on your taxes. Be sure to watch to the end to understand the opportunities to capture. #rothconversion #socialsecurity #retirementplanning #affordablecareact #healthinsurance #retirement
Below are links to the resources mentioned in this video.
Tax Disclaimer: The United States Federal Income Tax System is complicated. The tax estimates provided within the Retirement Budget Calculator are limited in scope and should not be relied upon for accuracy or tax preparation and these estimates are hypothetical and for illustrative purposes only. These estimates are not guaranteed and actual tax could vary significantly. The results herein are dependent in part on the accuracy of the information you have entered. We recommend you meet with a tax adviser to validate these calculations for your specific situation. Do not make changes to your financial or tax situation based on these estimates without getting guidance from a tax professional. These tax estimates are likely to change over time as congress changes the tax law and the tax tables may not be updated in a timely fashion to reflect current law. It is your responsibility to validate the accuracy of the information….(read more)
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Many individuals dream of retiring early and enjoying a life of leisure, but few realize the tax strategies that can help them achieve this goal. While many people focus on saving money for retirement through 401(k) plans and other investment accounts, they often overlook the tax implications of their retirement savings.
There are a number of tax strategies that can help individuals maximize their retirement savings and minimize their tax burden. By taking advantage of these strategies, individuals can potentially retire earlier than they had originally planned.
One often-overlooked strategy is utilizing a Roth IRA. Unlike traditional IRAs, Roth IRAs allow individuals to contribute after-tax dollars and then withdraw funds tax-free in retirement. This can be a huge benefit for individuals who are planning to retire early, as they can potentially avoid paying taxes on their withdrawals altogether.
Another valuable tax strategy is utilizing a Health Savings Account (HSA). HSAs allow individuals to contribute pre-tax dollars to pay for medical expenses. If individuals don’t use the funds for medical expenses before age 65, they can withdraw the money penalty-free for any purpose. This can be a useful tool for individuals looking to bridge the gap between early retirement and accessing their retirement savings.
One other tax strategy to consider is taking advantage of capital gains tax rates. By strategically selling investments with long-term capital gains, individuals can potentially lower their tax burden and increase their retirement savings.
It’s important to note that every individual’s financial situation is unique, so it’s important to consult with a financial advisor or tax professional to develop a personalized retirement plan that takes into account these tax strategies.
In conclusion, early retirement planning is not just about saving money – it’s also about understanding the tax implications of your retirement savings. By utilizing tax strategies such as Roth IRAs, HSAs, and capital gains tax rates, individuals can potentially retire earlier than they had originally planned. Take the time to educate yourself on these strategies and consult with a professional to develop a personalized plan that will help you achieve your retirement goals.
30k a year in Roth 401k. I’ll pay the taxes now!
Awesome! Im contributing 40% of my income to my ROTH 401k and still not maxing it out. Do your future self a favor and max out your ROTH 401k which is about 22k per year.
Good video! I wonder how this calculation would be if the same couple (younger than 62, with same assets and SS) also had a lifetime pension, e.g. about $80k per month with annual COLA….seems like SS will be taxed at a high rate regardless of order of withdrawals. Am I wrong?
Thanks Jason for your hard work and updates on RBC.
Everyone else always hit the thumbs up on the updates. It drives the videos to the top on youtube and exposes more to this great product.
A great example of how to save on taxes. And how well developed the RBC calculator is. Well balanced in what it can do vs. ease of use. Revealing how one can go from 0 to thousands in taxes by account selection.
The only caveat being that they could be setting themselves up for even bigger taxes in the future, esp when RMDs kick in. The relatively small Roth conversions may not be enough to make a significant dent in the size if their nonRoth retirement accounts. Have to run many scenarios with the RBC, or work with a financial planner. After the initial “do I have enough” calculation, the next question optimizing withdraws.