Taxes are never easy. It is always difficult to watch your earnings slip away as more and more money is deducted for various reasons. It is even more difficult to watch as you are attempting to save for a lengthy and active retirement.
Taxes are unavoidable, but there still may be ways in which you can optimize your retirement savings. Start by reading these helpful taxation tips!
Social Security
Many retirees wrongly assume that they will no longer pay large amounts in taxes upon retiring since they no longer receive steady income from an employer. However, many retirees still generate income in other ways, which are often still subject to taxation.
One major source of income for retirees is their Social Security benefits. Up to 85% of such benefits, according to the Social Security Administration, may be subject to federal income taxes.
The specifics of this taxed amount depends upon your income and possibly also your spouse’s income if you file jointly. It is important to remember that such a hefty taxation may apply during your retirement, as this may greatly affect the funds you have available.
Tax-Deffered Investments
Yes, it’s true. Even these types of income can be taxed upon retirement. Long-term investments such as traditional IRAs, 401(k)s, etc. still require an income tax to be paid in the same year in which withdrawals from such accounts are made.
State Taxes
It is very common to see recent retirees moving out of their home state. Some make this choice simply to be closer to family members, or to enjoy warmer weather and avoid all of the snow that never seems to end here in Michigan.
However, the most common reason for this major move is tax breaks. Many retirees feel it is best for them to move to a state that does not require taxes to be paid on Social Security Benefits or even on income.
AARP describes two states within the U.S. as hitting the “Tax Trifecta”. Neither Alaska nor New Hampshire levy any taxes on Social Security, income, or sales. If you are looking for the ultimate retirement savings on taxes, these may be a couple of locations to at least consider.
SMART Retirement With CKS
At CKS, we believe in handling taxes with the SMART approach: Strategic Movement Around Retirement Taxation. This program is designed specifically to help you meet your goals for retirement by limiting post-retirement taxation.
To speak with a CKS Summit Group financial advisor about getting SMART for your own retirement, please give us a call today at 586-286-5820. You can also request a personal strategy session with one of our experts by clicking here.
Thank you, and we look forward to making the most of your retirement income soon!
