Most of us spend decades working on one question: how much do I need to save?
Then retirement gets close, and a different question shows up. How much of this am I actually going to keep?
But, here's the thing. Taxes don't sit off to the side in retirement. They get tangled up with almost everything else.
Your IRA withdrawals, your Social Security, required minimum distributions, a pension, rental or business income, the money in your regular brokerage account.
They all land on the same tax return, and they can push and pull on each other in ways that are easy to miss.
It usually doesn't start with one big mistake
I don't think most people do anything wrong. It's small decisions made at different times, with different people, for good reasons.
A big pre-tax IRA that kept growing because that's what you were supposed to do. A Roth conversion that never got looked at. Withdrawals taken from whichever account was easiest.
Everything was reasonable on its own. Put together, it can look pretty different from what you pictured.
A few places where trouble can show up:
• Required minimum distributions that are larger than you expected, and that arrive whether you need the money or not
• More of your Social Security becoming taxable, up to 85% of it for some people
• Medicare premiums that rise when your income crosses certain lines, based on your tax return from two years earlier
• A tax bill on the next generation, when your kids inherit an IRA
None of these is a given. Each depends on your numbers, which is kind of the point.
Questions worth asking before you retire, or while you're in it
• Which accounts should I take money from first, and why?
• What do my required minimum distributions look like ten or fifteen years from now?
• Would moving some money to a Roth now cost me less than if I wait? (Sometimes yes, sometimes no.)
• Could taking a little extra income this year change my Medicare premiums or how much of my Social Security gets taxed?
• Does my plan still fit what I want to leave to my family?
If you can't answer most of those, that's okay. Most people can't.
I couldn't have a few years ago, to be honest with you. But, let me say this...
It's not about the smallest tax bill this year
Sometimes paying a little more tax now means paying less over the long run. Sometimes it's the other way around.
That's why it helps to look at the whole retirement, not one tax return at a time.
Done well, it can give you more say in when and how you take income, and fewer surprises later on.
Sure, planning probably can't remove all taxes, and it can't promise how any of it will turn out. Markets, tax law, and your own life will all keep moving.
How we look at it
At Clear Wealth Strategies, we look at your investments, your taxes, your retirement income, and your estate plan side by side, because each one affects the others.
We work with your CPA and attorney so everyone is looking at the same picture.
If you're within a few years of retiring, or you're already retired and wondering how your taxes are going to play out, we'd be glad to take a look with you.
Feel free to grab a time and let's look at everything together.
