In an effort to move into retirement with as many issues settled as possible, it is necessary to address decreasing retirement savings tax issues. Taking steps in this regard will aid in having a more pleasurable and lucrative retirement. Here are 6 ways to lower your retirement savings tax issues.
Tip 1: Have a Retirement Date Goal
For retirement in general, you need to have a plan. This is also true for decreasing retirement savings tax issues. Make every effort to avoid retiring on a whim. Instead, one of the primary ways to lower your retirement savings is to:
- Have a timeline of when you will retire; and
- Work with an elder law legal matters lawyer to evaluate and start a plan towards that timeline.
An elder law legal matters attorney can assist you in implementing your retirement goal date plan, especially in light of tax issues. Doing this prior to your imminent retirement is ideal. However, even if you are about to or have already retired, you need to meet with a lawyer for assistance.
Tip 2: Create a Realistic and Thorough Spending Plan
What income will you need upon retiring? Planning goes beyond accepting and looking forward to more freedom. You will need to have a sense of what finances you will need during retirement. Your plan to lower retirement tax issues cannot be effective unless it can accurately anticipate your needs.
Consider the following scenario. Rather than doing a retirement spending plan, you decide to spend freely during retirement and draw off of various income sources as needed. While your general thought was that you wouldn’t need much, it ends up being the opposite! With more freedom, you find yourself:
- Traveling more;
- Taking up new expensive hobbies;
- Eating out more;
- Doing home improvements; and
- Helping adult children and grandchildren financially.
If you did not anticipate these costs, you may end up taking money from accounts that will substantially increase your tax burden. This does not have to happen. With a reasonably accurate spending plan, you can prepare for the costs to come and utilize financial resources that may decrease your retirement savings tax issues.
Tip 3: Know All of Your Resources
When you are working on ways to lower your retirement savings tax issues, you need to evaluate all of your income options. One of the biggest tax mistakes retirees can make regarding taxes is to draw money from a resource that will negatively impact their tax status when they have other options.
So, how do you know what your options are? Start with the basics, make a list of what you have, including all:
- IRAs,
- 401ks,
- CDs,
- Pensions,
- Savings Accounts,
- Social Security,
- Part-time work future income,
- Rental Income,
- Life Insurance,
- Investments, and
- Unused college savings accounts.
Leave no stone unturned. Do you have a small pension from a job very early in your career? List it. Do you intend to work a seasonal job when you retire? Estimate that income.
Lowering your retirement tax liability means being strategic on what resources you draw from and when. An attorney with a practice area of elder law can help you make an advantageous plan, but they must get accurate information from you.
Tip 4: Know Your Social Security: Inside and Out
Tip 4 takes into account that Social Security is not without a variety of income and therefore tax implications. These include that Social Security:
- Is subject to income tax;
- Provides greater income the longer you wait to collect it; and
- Eligibility is based on many factors, including the year in which you were born.
Regarding the last point, currently, the Social Security administration has a retirement benefits scale that explains the correlation between full benefits and birth year. Be sure that you understand that though you can claim a Social Security benefit as early as age 62, this will permanently reduce your benefit amount. When you take Social Security at age 62 it could mean a 30% benefit reduction.
Primary takeaway of Tip 4? Access your Social Security statement, know what you are eligible to collect, and when you will reach full retirement age. Knowing that you qualify for Social Security is not enough. You need to have information on the entire picture so that your tax plan for retirement can accurately reflect your options.
Tip 5: Once You Implement Your Retirement Savings Tax Plan, Try and Stick to It
When addressing ways to lower your retirement savings tax issues:
- Taking funds from already taxed accounts, such as Roth IRAs or Roth 401(k)s, may be better than withdrawing from other sources; and
- Working part-time may be better than starting pension access.
The above are just examples. The point is that once you have a plan regarding where to draw your retirement income from, try and stick with it.
Veteran elder law legal matters attorneys use their vast experience and resources to create a plan to lower your taxes and protect your assets. Sticking to their plan for you is a primary way of decreasing retirement savings tax issues.
Tip 6: Get an Elder Law Legal Matters Attorney
An elder law legal matters lawyer experienced in tax issues can help with every step referenced above. These professionals understand retirement tax issues. Too many times those who retire believe that they will have the time and ability to work through these things later. They put off or ignore finding ways of decreasing retirement savings tax issues. But these issues need the evaluation of a legal practitioner who is:
- Experienced in work on tax and retirement in general;
- Well versed in all areas of elder law;
- Able to provide an objective analysis of your retirement;
- There to help you reach your retirement goals; and
- Has a successful history of decreasing retirement savings tax issues.
Excitement and relief are often the first feelings you experience as your time to retire draws near. Having worked hard and saved diligently, you deserve retirement to be a stress-free time. To have this, work with a law firm known for elder law advocacy, which includes tax savings in retirement.
The Law Office of Andrew M. Lamkin P.C. Is Ready to Help
The Law Office of Andrew M. Lamkin P.C., is a voice, guide, and advocate for individuals and families in the greater Long Island, NY area. We practice elder law and have a history of creating strong relationships as we help clients navigate retirement and estate planning issues. Plans are distinct for every client. We provide a free consultation and remain available for teleconference or video conference meetings for those who feel most comfortable with limited in-person contact. Please contact us online, by calling 516-605-0625 or by emailing us at andres@lamkinelderlaw.com.
Andrew Lamkin is principal in the law firm of Andrew M. Lamkin, P.C., where he focuses his practice in the areas of elder law, estate planning and special needs planning, including Wills and Trusts, Medicaid planning, estate administration and residential real estate transactions. He is admitted to practice law in New York and New Jersey.
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