The Pre-Retiree’s Guide to Tax Planning: Questions You Can’t Afford to Ignore

Could Washington impact your retirement plans? Discover through these essential questions to ask your financial professional. Like many savers, you might have allocated your retirement savings into tax-deferred vehicles, such as 401(k)s and IRAs. Any future tax changes could significantly affect your retirement income, requiring more contributions to the IRS. How can you assess the risk of rising taxes on your retirement strategy?

Question one: Given my anticipated income needs, structure of my retirement accounts, and the current legislative landscape, are taxes expected to be lower, the same, or higher in retirement compared to today?

Question two: How would potential tax increases in retirement affect my income? Would my assets suffice to achieve my retirement goals and protect me from running out of money in my lifetime?

Question three: What savings methods have I employed? Are my retirement savings vehicles shielding me from tax increases, or do they pose a greater risk due to legislative shifts in Washington?

Question four: If I intend to leave surplus funds in my IRA or 401(k) as a legacy, how might legislative changes in Washington affect the inheritance taxes my heirs face, and how much of it will they be able to retain?

Question five: What strategies can I implement now to minimize my future tax burden and maximize retirement savings? Are there specific accounts or investments that offer better tax advantages for my situation?

Question six: How do required minimum distributions (RMDs) from retirement accounts impact my tax situation in retirement, and what planning can be done to manage this?

Understanding tax and legislative risks is crucial, as they are significant, yet often overlooked, dangers to retirement savings. It’s vital to consult with your financial professional to identify your vulnerabilities and strategize accordingly.

Lastly, consider how state taxes could influence your retirement finances. Does relocating to a state with lower income taxes benefit your retirement savings?

Engaging in these discussions will empower you to make informed decisions, ensuring a more secure and enjoyable retirement. Remember, proactive planning and open dialogue with your advisor are key to navigating the complexities of taxes in retirement.