Today’s Prep:
It’s the time of year when people start thinking about taxes. We’ll ask a few questions and offer a few tips to prepare you for tax season.
Equipping Points:
1:05 – Most Folks Assume Their Taxes Will Be Lower In Retirement.
- It’s an easy assumption to make. After all, once you retire, you’re no longer taking a paycheck. Furthermore, folks also assume they’ll be spending less money. However, this isn’t necessarily the case. If you don’t account for the tax consequences of your investments, you could be overlooking an expensive blind spot in your portfolio.
2:07 – Taxes Are Like A Set Of Stairs.
- As you climb to the next stair, you pay the taxes that are associated with that step, and you no longer pay the taxes associated with your previous stair. Withdrawals from your retirement accounts will contribute to the stair on which you find yourself in retirement. Eric explains the taxes associated with each proverbial “stair” and covers the current tax rates.
3:52 – Taxes You Don’t Pay In Retirement.
- There are certain taxes you no longer have to pay in retirement. As an example, you no longer have to pay into Social Security and Medicare once you retire. These tax breaks can help you manage your tax burden and lower your tax bill in retirement.
5:00 – How Should You Develop Your Tax Strategy While You’re Still Working?
- There are three tax buckets that will impact your finances. The first “bucket” is taxable money. This is simply money that’s taxed all the time. It includes income tax, capital gains from brokerage accounts, Social Security payments, etc…The second bucket is your tax-deferred money. This is the money you’re investing in qualified retirement accounts like 401(k)s and IRAs. Tax-deferred means you don’t pay taxes on your initial investments, but you do pay the taxes associated with your gains down the road. The third bucket is your tax-free money, and it really only applies to Roth IRAs and Roth 401(K)s. In retirement, you need to plan to incorporate all three of these buckets into your financial plan. It can help you mitigate your tax burden.
Today’s Takeaway:
“Tax planning is a crucial element of retirement planning. It’s not enough to only think about taxes in April. Lower your tax burden by incorporating tax strategies into your retirement plan. – Retirement Ready“
Subscribe To The Podcast:
Apple Podcasts - Google Podcasts - Spotify - Stitcher - iHeartRadio - TuneIn
Check out some other recent episodes
The National Park Guide to Retirement Planning
Whether you’re visiting one of the 63 national parks this summer or just hitting a local trail, a lot of the best practices for a great hike apply just as well to your retirement plan. Today, Eric “walks” through a few.
Mailbag: Military Pension Mistakes & Retirement Decision Paralysis
What happens if you make a retirement decision you can’t undo? And how do you know when you’ve done enough research before making an important financial move? In this mailbag episode, Eric answers two listener questions—one from a military retiree looking to protect his spouse after declining a survivor pension benefit, and another from a listener who struggles with overthinking every financial decision.
Movie Quotes That Reveal the Truth About Retirement
Can classic movie quotes actually teach valuable retirement lessons? In this episode, Eric takes memorable lines from films like The Terminator, When Harry Met Sally, and The Wizard of Oz and uses them to explain key retirement-planning concepts. From preparing for inevitable market downturns to understanding why every retirement plan should be personalized, these famous quotes provide surprisingly practical financial insights.
Mailbag: Simplify Your Retirement Accounts
Sometimes, the most valuable retirement lessons come from the questions people are asking every day. In this mailbag episode, Eric tackles listener questions covering investment organization, diversification, and pursuing new opportunities later in life.
Where Does Guaranteed Income in Retirement Really Come From?
What does “guaranteed income” really mean in retirement, and is it actually possible to create a paycheck you can count on for life? In this episode, Eric breaks down the different sources of retirement income, including Social Security, pensions, investments, rental properties, and insurance-based solutions. He explains the risks many retirees overlook when relying solely on portfolios, dividends, bonds, or rental income and discusses why predictable income streams can play an important role in a well-designed retirement strategy.
Mailbag: IRA Withdrawals, Whole Life Insurance & Cash on the Sidelines
In this mailbag episode, Eric tackles a variety of listener questions about retirement and financial planning.
He breaks down complex topics into clear, practical guidance to help you make more confident money decisions.
Retirement Lessons Hidden in Walt Disney Quotes
Sometimes the best financial lessons come from the most unexpected places. Walt Disney built one of the most recognizable brands in history, but some of his most memorable quotes offer lessons that extend far beyond theme parks and animated characters.
Mailbag: Working Forever, Safety Nets, and Target Date Funds
A lot of people think they’ll work forever, until life changes the plan. In this special mailbag episode, Eric answers listener questions about retirement timing, backup planning, target date funds, and how to think about risk as retirement gets closer.
The Financial Impact of Losing a Spouse
Losing a spouse is one of the hardest realities anyone can face, and it can create major financial changes that you may not see coming. In this episode, Eric walks through the potential financial impact of becoming suddenly single in retirement, including Social Security changes, tax surprises, IRA rules, beneficiary updates, and income planning challenges.
Old Accounts Could Be Costing You
Today, Eric discusses why old financial accounts deserve a second look. He explains how reviewing these accounts can uncover missed opportunities, improve efficiency, and help create a more coordinated financial plan.