Your taxes in retirement are something you have a ton of control over.
Taxes are the variable nobody likes to talk about, but while in retirement, you have much more control than you did during your working years. You need to shift your mindset while in retirement, because you may be losing a lot of money from paying too much taxes.
Taxes in retirement is the variable nobody likes to talk about, but while in retirement, you have a lot of control.
The mindset shift from working to retirement becomes complete when we introduce this third variable. This is the one variable that nobody likes to think about, and one that you have so little control over when you’re working. But when you’re retired, you actually have a lot more control. And that variable is taxes.
Hi my name is Josh Bretl. I’m the founder and president of FSR Wealth Strategies. And as a CPA who focuses on retirement planning, taxes have become the cornerstone of most people’s retirement issues.
People will do a very good job of saving. And if you’re like most people you’ve put most of your money in your 401ks and your IRAs, because that’s what you’ve been told to do.
Most people’s thought process is, “I’m going to be in a lower tax bracket when I retire, so let’s just pay taxes then.”
Understanding that this statement may not always be true, taxes must be taken into consideration.
Not only do taxes have to be taken into consideration, but they have to be planned for. Understanding how your different monies are taxed, and having a plan for when you take that money out, could make a huge difference.
If you’re paying taxes at 22% or 24%, versus 12% or 15%, that’s a 10% loss in revenue. People get really hung up over what happens if the stock market goes down. “What if we have a 20%, 30%, 40%, or even 50% drop in the stock market?”
What happens if tax rates go up?
And not even if they go up, but what happens if you pay more because you simply did something you didn’t know you shouldn’t have done?
Each time the stock market goes down it always comes back up. This is not true for taxes.
When I talk about taxes with clients in a workshop, I always tell them there are two (2) types of taxes out there.
The first type of tax:
The first type of tax is one that you don’t necessarily have to pay. And there are a few problems if you pay a tax that you don’t necessarily have to pay.
- The first problem is that you lose that money you paid to the tax.
- The second problem is that you also lose whatever that money could have earned for you over your lifetime!
What I always tell people is if there’s a tax that you don’t have to pay, let’s not pay it. That’s something most of us can usually agree on.
The second type of tax:
This second type of tax is one that no matter what, come hell or high water, you’re going to have to pay it. And if that type of tax exists inside of your retirement accounts, we want to pay that tax as cheaply as humanly possible.
So the first thing we have to do is we have to understand how you are currently set up from a tax perspective. And then come up with a spending plan of how we’re going to minimize those taxes. And not just how to minimize those taxes over your lifetime, but over the lifetime of whatever future generations you may leave money to as well.
What I always tell people is, “If there’s a tax that you don’t have to pay, let’s not pay it!”
That’s something most of us can usually agree on. ????
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