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Taxes are Biggest Expense in Retirement

Your Retirement Statements Don’t Reflect Uncle Sam’s Take

Mesa 4/17/2017 11:00 AM GMT (WooEB)

Many seniors have plans to take up hobbies, sports and volunteer activity to enjoy the time they’ll have in retirement. But every senior should take up a little course on taxes and learn how to game the system. Surprisingly, retirees are shocked to learn that the government is their retirement partner and it wants its share. Over your retirement years, the accumulated taxes paid throughout retirement will be the biggest expense in your golden years. It can be disheartening to discover that state and federal taxes can deplete your assets faster than any other risk in retirement. So taxes in your senior years can turn your retirement dreams into a nightmare.

The first thing you need to understand is the effective tax bracket or blended tax rate that you pay. Second, you need to take inventory of all your income resources and categorize them by their tax status, i.e. taxable, tax deferred and tax-free. You may be able to construct a strategy that can lower your tax bill and, in turn, increase your spendable cash flow. For most consumers, learning the basics of taxation is well within their learning capacity. Many retirees can increase their monthly income by 10 to 15%. If you can learn a card game as challenging as Bridge, you can learn the principles of taxation. But if you want a pro to do it for you then start interviewing financial advisers who are experts in retirement and incorporate tax management as a major component of their plan designs.

The third item to learn is Social Security Benefit taxation. Social Security benefits are the main source of income for most retired Americans. It’s important to discover what forms of income trigger taxation of your Social Security benefits. There’s a one-page worksheet that can be daunting, but mastering it will assist you in your learning experience. There are also web sites that provide calculators that simply require you to input the information.

So learn how to play bridge, golf, and volunteer in your community. But first become a gamer of the tax system. It’s your money. It’s your retirement. Make it the best retirement possible.

steve@lifesizesoltuions.com
www.lifesizesolutions.com

 

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