Tax planning is different when you’re retired versus during your working years. It also changes from state to state. Some states are more tax-friendly than others. That’s why many people retire in Florida, Tennessee, and Texas. Taxes matter in the decisions that we make. However, you can take tax planning too far. In this episode of the Retirement Made Easy podcast, I cover assessing the quality of your assets, why you can’t let taxes dictate everything you do, and something to watch out for when you choose a financial planner. 

You will want to hear this episode if you are interested in…

  • [4:45] Check out!
  • [6:13] Assessing the quality of the assets that you own
  • [13:34] How are your taxes going to be different in retirement?
  • [15:55] We can’t let taxes take over the driver’s seat
  • [19:00] Carefully chose who creates your retirement plan

How are your taxes going to be different in retirement? 

I’ve talked about taxes before, including the best states to retire to. Tax planning requires looking ahead. How are your taxes going to be different in retirement? Where will you live in retirement? 

If you know you’re moving to Florida (a state that doesn’t have state income tax) it will impact your retirement and tax planning. But if you move to Arkansas, you won’t have to pay state income tax on the first $6,000 you withdraw from your IRA. 

Should you do Roth conversions before you retire? Or After? And what about retirement income? Sometimes we wait to sell brokerage assets (like stocks or ETFs) until you’re retired and in a lower tax bracket and pay lower if any capital gains tax.

There are a lot of different things you’ll need to consider for tax planning in retirement and it’s important to think through them ahead of time. However, tax planning isn’t everything

We can’t let taxes take over the driver’s seat

I met with a gentleman who was worth $3 million. I’ve never met anyone like him. I asked him what his goals were for retirement. He said: “I don’t want to pay any income taxes.” His portfolio was arranged so that he couldn’t lose money but wouldn’t gain any. He didn’t want his portfolio earning interest because he’d have to pay taxes on his social security benefit. He would rather not make money than pay taxes. 

If he made 3% on $3 million, it would be $90,000. But he didn’t want to earn interest to pay taxes on his social security. It just doesn’t make sense. He’d end up paying far less than $90,000 in taxes! Taxes are important—but they aren’t everything. The goal is to minimize lifetime taxes but not avoid them altogether. 

That being said, you need to take into account tax planning when you’re planning your retirement income. When you don’t get guidance from a tax advisor, you might pay more in taxes than you need to. That puts you at risk of your money not lasting your lifetime. If you want to make sure your money lasts, tax planning will help stack the odds in your favor. But you need to choose the right professional to come alongside you…

Carefully chose who creates your retirement plan

One of my listeners had a retirement plan prepared for them that they weren’t happy with. Why weren’t they satisfied? The plan “tasted” like insurance. Why? Because their financial advisor represented an insurance company. His recommendation was to invest in long-term care, life insurance, and disability insurance. Those were the “gaps” that the retirement plan highlighted.

Interestingly, this person gave no tax, portfolio, or social security recommendations. It was very vague about retirement income. But it was extremely detailed when it came to the insurance section of the retirement plan. The plan was an insurance analysis of their risks—not a retirement plan. Insurance certainly plays a role in retirement planning, but a retirement plan needs to be more comprehensive. 

The bottom line is that there will always be bias depending on the type of financial advisor/retirement planner you work with. Learn more about choosing the right assets and tax planning considerations in the whole episode!


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