Whether you’re gearing up for retirement in the next few months or you’re making plans to retire sometime next year, there are a handful of common missteps that new retirees tend to make when it comes to their taxes and financial planning.
5 Tips to Maximize Your Retiree Tax Savings
Paying close attention to your budget and tax responsibilities are top concerns for most individuals, but perhaps especially for retirees. As you enter this new stage of life, it’s important to keep in mind that there are specific strategies you’ll need to adopt to ensure your benefits and savings will be maximized year after year. Let this advice help you—or any other new retirees you might know!
1. Plan for health emergencies with good insurance
Health care costs can easily throw a wrench in any budget. That’s why it pays to plan ahead. If you don’t have the right insurance policy in place or you haven’t reviewed your Medicare enrollment options in a while, then you could be putting yourself at risk. Rather than withdraw money from your retirement account to pay for medical bills—which could result in penalties—it might be worth investing in supplemental insurance or long-term care insurance to avoid a worst case scenario.
2. Consider your Social Security benefits taxes
If you’re considering partial retirement and still working, you’ll probably want to run the numbers on how excess earnings might impact your Social Security benefits. Scheduling a tax planning consultation before the year’s end can help you feel better about your options for receiving the benefits you want and need.
3. Follow the best pension plan strategy
When there’s a pension to consider, taking the lump-sum payout option may or may not be the best course of action. Having a careful conversation with your financial advisor is a smart way to make sure you aren’t making any mistakes with your income. You’ll want to think through every angle to reach the right decision.
4. Take necessary action with required distributions
The penalty for not withdrawing the minimum required distribution from your retirement plan can catch a lot of retirees by surprise. Marking your calendar each year to review the requirements and take necessary action for your distributions is a crucial part of protecting your bank account.
5. Be prepared for more changes down the road
We all know the phrase that two things are certain in life! Don’t overlook the possibility that future tax rates can affect your retirement lifestyle. Your retirement plan should have the flexibility to handle these changes, as well as any increases in your Medicare health care costs. Again, working with your financial advisor and trusted tax planning professionals can help you run the numbers to feel better about the road ahead.
Good Tax Planning Makes All the Difference!
Entering retirement should be something to celebrate, not a source of stress. By getting the right information and guidance, you can have more confidence in your financial situation and new opportunities to explore as a retiree.
If you need a trusted CPA or tax planning team on your side, then NSO and Company would be happy to help. Please call our office at (317) 588-3131 to get your retirement tax planning consultation scheduled!