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Photo of Ray Ferrara CFP Ray Ferrara CFP Jul 11, 2022

Retirement planning is an important part of financial planning in general. If you’re planning for retirement, there are five basic steps for you to consider. A financial planner knows how essential each one of these steps is and can guide you through each of them. The first is to start planning at the right time. Next is understanding how much you will need to save for retirement. The third is knowing your personal financial goals. Then, you should choose a plan with your advisor that best aligns with your needs. Lastly, you should select a diverse portfolio of investments to sustain your wealth during retirement. 

One very important part of the whole retirement planning process, which should be kept in mind during each step of the way, is how you will be taxed as a retiree.

What should you plan to be taxed on after retirement?

  • Social Security benefits — Once you start receiving payments from your Social Security benefits, you will likely have to pay taxes on a portion of these payments, and these taxes largely depend on income after retirement.
  • Pension income — Retirees are responsible for paying varying state income taxes on pensions, investments, and traditional retirement plans like IRAs and 401(k)s in addition to federal income taxes.

What can retirees do to lower their tax liability?

  • Live in states with minimal taxes — Certain states, like Florida, are more tax friendly. This can be advantageous for retirees when they aren’t required to pay taxes to the state in addition to the federal government.
  • Know how to withdraw your money — Withdrawing money from accounts or investments can result in tax penalties or higher taxes if not done correctly. The IRS has requirements for withdrawals that won’t result in penalties if you are informed and make smart withdrawal decisions.

Talk to a ProVise CFP® professional about your tax planning for retirement

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance, and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about tax planning for retirement? Contact ProVise today to schedule a complimentary consultation.