It’s All About Planning

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About Steve Kerby

Steve Kerby is a lifetime resident of Oregon, having graduated from Southern Oregon University, where he majored in business. Throughout his 49 years in the financial services industry, Steve has maintained the most professional approach to each of his client’s needs. His background is extensive and based on helping people save money on taxes and making sure money set aside for retirement is safe and secure. If there is one asset that Steve exhibits, it is his ability to “listen.” Steve knows how important it is to understand each client’s goals and ambitions and to match them up with the best possible financial planning options.

Retirement—when our careers fade into the backdrop of life and a new world of possibilities opens up. It’s a time to indulge in hobbies, spend quality time with loved ones, and explore new avenues of life. But the golden years of life can lose their luster if you are caught off-guard by unexpected tax bills. Therefore, diligent tax planning becomes paramount to ensure a worry-free and financially secure retirement.

  1. Required Minimum Distributions (RMDs)

You’ll have until April 1 of the year after the year you turn 72 (or age 73 if you turn 72 in 2023 or later) to make your first RMD. These are mandatory withdrawals from your traditional IRA, SEP IRA, or SIMPLE IRA accounts, which become taxable income. Without proper planning, RMDs may catapult you into a higher tax bracket, leaving you with a significant tax bill. By having a comprehensive tax plan, you may be able to strategically manage your distributions, possibly maintain a lower tax bracket, and keep more of your hard-earned money.

  1. Tax Bracket Management

This strategy is often referred to as “tax bracketing”. It involves understanding where you stand in the tax brackets and adjusting your income sources to avoid a higher bracket. By manipulating your taxable income, such as capital gains, you may potentially pay less in taxes over your retirement years. Balancing between taxable, tax-deferred, and tax-free accounts can be a wise strategy to ensure tax efficiency.

  1. Roth Conversion

Another powerful strategy to consider is a Roth conversion. This is where you convert a traditional IRA into a Roth IRA, paying taxes on the money at your current rate. While you pay tax now, the Roth IRA offers tax-free growth and withdrawals in retirement. The magic of Roth conversion lies in its strategic implementation. By converting in a year where your income is lower, you may pay less taxes on the conversion, providing more tax-free income in retirement.

  1. Beneficiary Tax Planning

Finally, effective tax planning extends beyond your lifetime. It is also about managing the potential tax burden on your heirs. Proper beneficiary tax planning ensures your estate transfers with the least tax liability, allowing your heirs to enjoy more of their inheritance. Many inherited assets may qualify for  a step up in basis allowing for the beneficiaries to inherit an asset tax free. Make sure you understand the rules for this type of asset transfer.

As you approach retirement, remember that proper tax planning is not a one-size-fits-all process. It’s an intricate balancing act customized to your unique financial situation and goals. It’s about the smart use of tax laws and strategies to optimize your retirement income and leave a lasting legacy.

Consider partnering with a knowledgeable tax professional or financial planner to help you navigate the complexities of retirement tax planning. With their assistance, you can better anticipate and manage tax obligations, thereby ensuring that your golden years remain precisely that: golden.

Proactive tax planning is an integral part of retirement preparation. By considering RMDs, tax-bracketing, Roth conversions, and beneficiary tax planning, you set the stage for a more financially stable, enjoyable retirement.

  • Required Minimum Distributions (RMDs) and Tax-Bracketing: Effective management of RMDs can prevent a surge in taxable income and potential movement into a higher tax bracket. Retiree can proactively control their taxable income through tax-bracketing and ensure it stays within a manageable tax rate.
  • Roth Conversions: Converting funds from tax-deferred retirement accounts to Roth IRAs allows for tax-free growth and distributions, benefiting retirees who expect to be in a higher tax bracket during retirement and those wishing to avoid RMDs.
  • Beneficiary Tax Planning: By designating Roth IRAs as beneficiary accounts or considering life insurance policies, retirees can ensure their wealth is transferred efficiently, minimizing the tax burden on their beneficiaries.

Many people have learned about the power of using the Safe Money approach to reduce volatility. Our Safe Money Guide is in its 20th edition and is available for free.  

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About Steve Kerby

Steve Kerby is a lifetime resident of Oregon, having graduated from Southern Oregon University, where he majored in business. Throughout his 49 years in the financial services industry, Steve has maintained the most professional approach to each of his client’s needs. His background is extensive and based on helping people save money on taxes and making sure money set aside for retirement is safe and secure. If there is one asset that Steve exhibits, it is his ability to “listen.” Steve knows how important it is to understand each client’s goals and ambitions and to match them up with the best possible financial planning options.

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Content in our posted articles is deemed to be accurate but topics, facts and laws can change. It is always a good idea to verify facts before making decisions. Always seek authorized and professional advice regarding financial decisions which includes investing, annuity purchases, tax planning, changes in a financial portfolio and retirement planning.

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