Unless you had to file for an extension, you’re probably feeling pretty good that you were able to check “Tax Day” off your to-do list. Now you can relax, right? Well, we like to be prepared so we suggest maintaining organized planning to better prepare yourself for your upcoming 2022 income tax returns. Did you know that there are some advanced tax planning opportunities that you can take advantage of to help save you money now and in the future?
First, make sure that you’re familiar with and understand the changes to the tax brackets. There are still 7 Tax Brackets for taxpayers under the following filing status’: Individual Taxpayers, Married Individuals Filing Joint Returns and Surviving Spouses, Married Filing Separately, and Heads of Household. Essentially, each individual tax bracket is broken down by the ranges of your taxable income, along with the corresponding income tax rate or percentage of taxable income that is due to the IRS. Taxable income is the amount of income used to calculate how much tax an individual or company owes to the government in a given tax year. For the most part, the IRS considers just about every type of income taxable. It includes, but is not limited to: Wages, Salaries, Bonuses and Tips, as well as Investment Income and Unearned Income. One type of income that is nontaxable is when you receive a life insurance payment when someone dies.
Next, it’s important that you look to employ tax diversity in your retirement plan. When it comes to retirement, having accounts that receive varying tax treatment is a key strategy. Since different types of investments impact your taxes differently, you should work with a qualified professional to help determine exactly how much you should have in each tax “bucket” and to help minimize your overall tax burden in retirement. There are several common mistakes that could force you to pay out a larger part of your nest egg to the government. From deadlines for your required minimum distributions, confusing laws surrounding your Social Security claiming strategies, to potential mistakes when converting a Traditional IRA to a Roth IRA, there are many ways in which your taxable income can be affected.
Finally, you will want to investigate certain strategies that help lower your overall tax bill. Taxes are one of the biggest expenses facing retirees today. Therefore, an important aspect to your overall retirement strategy is utilizing investment options that won’t minimize your gains come tax time or knowing when it’s time to begin withdrawing/distributing from them. Depending on your individual situation, it might make the most sense for you to try and max out your retirement accounts. And, if there’s a charitable cause that you feel strongly about, then consider developing a charitable giving strategy centered around that cause.
In the end, no matter what lies ahead for you in your life in retirement, make sure you have discussed specific tax strategies with your trusted financial professional. Handling taxes without a plan is like driving with a blindfold on. It doesn’t make sense if you can’t see where you’re going. Let us help you navigate through the confusion and take all your personal factors into account.
Securities and advisory services offered through Royal Alliance Associates, Inc. (RAA), member FINRA/ SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA. RAA is not affiliated with Lone Beacon
Neither the named representative nor the named Broker/Dealer or Investment Advisor gives tax or legal advice.
Fixed index annuities are designed to meet long-term needs for retirement income. Early withdrawals may result in loss of principal and credited interest due to surrender charges. Distributions may be subject to ordinary income tax and, if taken prior to age 59 ½, an additional 10% federal tax. An income rider or benefit (sometimes called Guaranteed Lifetime Withdrawal Benefits, or GLWB) is an additional feature available with some annuities and generally optional and come with additional cost. Income benefits are designed to provide income options above and beyond the standard annuitization or free withdrawal features in annuities. All contract gains beyond the CAP rate are surrendered to the insurance company to pay for the expense of the product.
The views expressed are not necessarily the opinion of Royal Alliance Associates Inc, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss.