During most of your working career, as a high income earner you may feel Uncle Sam has been taking a very large portion of your earnings in the form of income taxes.
You may feel you’ve made good decisions in saving in a tax-deferred manner by maximizing contributions to a 401(k) or 403(b) plan. Maybe you’ve even contributed to a 457 or other deferred compensation plan as well?
Now that you’re approaching retirement, perhaps your diligent saving has created an opportunity to pay very little income taxes. Why? Because in early retirement you may be able to withdraw cash from a brokerage account that will create very little taxable income.
Meanwhile, Uncle Sam is patiently waiting because he knows that one day he’s going to once again “raid” your savings when you have to start withdrawing from your tax-deferred accounts. And what will your tax rate be like then? He knows that his patience will often pay off with rewards for those individuals who didn’t plan well.
Maybe it would be wise to actually withdraw cash from a tax-deferred account before you must? Or maybe there are even better tax planning opportunities you can implement during these years of low taxable income?
Just food for thought. Everyone’s situation is different as there are a number of variables to be considered to make wise decisions.
Choose your financial advisory team wisely to keep Uncle Sam at bay. He’s not really your uncle. Happy Planning!
Published: October 9, 2015
Authored by: Terry Prather, CFP®, ChFC®, MSFS
Direct Phone: 812-602-6307
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