Tax Diversification is Key to Achieving a Tax Savvy Retirement Income Plan

One critical outcome in your retirement income financial planning – on the journey toward a Wonderfully Rich Retirement – is for your plan to become tax savvy. It’s important to manage your taxes each year, and even more important to manage your lifelong taxes.

A tax savvy retirement income plan means managing both annual and lifelong tax obligations. It contains money in each of three tax buckets:

• pre-tax income, such as from your 401(k) account or IRA;
• after-tax income, such as savings account or a joint brokerage account; and
• potentially tax-free income, such as a Roth IRA or cash-value life insurance.

View this brief video for more insights.

We are on a mission to design and implement proactive, tax-optimized retirement income and estate plans that help protect our clients from taxes and volatile markets, while maximizing lifelong income and establishing a legacy.

Pre-Tax Bucket

After-Tax Bucket

Tax-Free Bucket

Being able to draw living expenses in retirement from each of the three buckets enables retirees to manage income taxes up to a predetermined tax bracket. This is also a key to managing lifelong taxes.

During working years, we tend to focus on minimizing taxes each year by increasing pre-tax contributions to retirement accounts. The assumption being, “my tax bracket in retirement will be lower.” From many years of experience, we have learned that the more financially successful our clients are, the less likely it is they will fall into in a lower tax bracket during retirement.

Establishing a Roth IRA in one’s saving years is an excellent strategy. But have you done an analysis to determine if a Roth conversion should be considered? What other tax minimizing strategies are available?

Tax diversification strategies carefully build each of the three tax buckets so that you can achieve a tax savvy retirement income plan.

Our comprehensive retirement income analysis focuses on minimizing lifelong tax. Might you be able to get to a zero percent tax rate at some point in retirement.

While our practice is keenly focused on tax minimization strategies, Charles W. Rawl & Associates, LLC does not provide tax or legal advice. We provide proactive financial planning advice and work closely with your tax and legal professionals to implement the plan.