Managing Taxes Can Create Cash Flow in Retirement

A preamble to implementing tax-advantaged strategies is knowing all the moving parts and how they integrate with one another. This is similar to knowing the functions of each chess piece and their movements on the chessboard. Until you know that, you can’t use the strategies.

1) Categorize your money into three distribution classifications: taxable monies, tax-deferred monies and tax-free monies.

2) How does income effect the taxation on your Social Security benefits and Medicare premiums?

3) Create three age-based timelines: from age 59½ to age 69, from age 70 to age 85 and from 86 to age 100.

For many Americans, income from Social Security benefits is the foundation of their retirement. Maximizing your benefits and minimizing the taxes on them is a significant strategy. Delaying benefits until age 70 will significantly increase your income, but will also become the benchmark for your surviving spouse. Distribution income from taxable qualified plans, municipal bond income, non-qualified income from CDs, mutual funds and ETFs all are includable on the provisional income test to determine the taxation on your Social Security benefits. But there alternative distribution strategies to help minimize taxes. And keep in mind Medicare is also means tested, so reducing reportable income affects that as well. One consideration that may benefit you is converting qualified plan monies to ROTH IRAs before your retirement date. Also using tax-deferral products like deferred annuities are also options that can delay taxes. You could tap into the equity in your home and/or cash-value life insurance via tax-free loans that can fund an early retirement between the ages of 62 to 70, while delaying Social Security benefits to maximize your guaranteed lifetime income. These are just a few examples on managing your retirement resources with tax-advantaged strategies to help you keep more of your money. For more information on how you can manage you taxes during retirement just write me …steve@onthemoneynews.com

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