Taxes and Retirement. Taxes are a fact of life – and they don’t retire when you do. With today’s unpredictable tax codes, how can you better prepare for your income needs in retirement?
The amount you withdraw from your investments may be the most influential factor in how long your money will last – but you should also pay attention to the order in which you withdraw this money. By using tax diversification, you can structure your withdrawals to potentially reduce taxes and increase your amount of after-tax spendable income.
As a general rule, we suggest taking any required minimum distributions first, and then focusing on dividends and interest from taxable accounts. Next, look at the taxable accounts themselves – especially those that may have experienced losses. After that, consider withdrawing from any tax-deferred accounts, such as a traditional IRA, and then finally your tax-free accounts, such as a Roth IRA.
Keep in mind that this sequence is just a guide. The account you withdraw from may vary from year to year depending on your tax situation. For example, you may decide to withdraw from a Roth account earlier if this would prevent you from moving into a higher tax bracket. And it’s always important to ensure you maintain proper balance between your stocks and bonds. Therefore, we recommend discussing this with your financial advisor and tax professional.
Disclaimer - Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.
This information is for educational and illustrative purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.
Learn more about:
What should your portfolio look like when you're retired: http://bit.ly/2ls0IFM
Are you emotionally ready to retire: http://bit.ly/2lPnKYg
Required minimum distributions: http://bit.ly/2mDVdEi
If you would like to talk about your specific situation, please contact an Edward Jones financial advisor near you: http://bit.ly/2lPxtxI
Tags: Taxes and Retirement, taxes, tax, retire, retirement, income, roth ira, ira, traditional ira