![]() Because there isn’t a one-size-fits-all approach for tax diversification, your financial advisor will make personalized recommendations based on your financial goals, time horizon and tax situation. The sooner you consider how and when your retirement assets are taxed, the more time you have to accrue the benefits. You want to withdraw money in retirement without being pushed into a higher tax bracket. You want more flexibility for when you can withdraw your money and don’t want to consider required minimum distributions (RMDs). You anticipate you will be in a lower tax bracket during retirement. Taxable distributions are generally taxed as ordinary income upon withdrawal. Examples: Roth IRA, 1,5 Roth 401(k), 1,5 529 plan, 6 municipal bonds, 7 cash value life insurance 8.Earnings can be tax free, provided certain conditions are met.Examples mutual funds, stocks, bonds, bank accounts 4.Taxable income, including capital gains when realized, interest when received or dividends when paid.3.Contributions made with after-tax dollars.Distributions are generally taxed at ordinary income rates. Contributions made with pre-tax or post-tax dollars.Here’s a refresher on the three tax treatment categories: Taxation is just one consideration when making investment decisions. Coupled with a tax-efficient withdrawal strategy, tax diversification could help your assets last longer in retirement. Tax diversification is a strategy that takes into consideration various tax treatments across the investment accounts you will eventually use for income after you stop working. Over a 30-year period (such as retirement), a planned approach for the tax treatment of your retirement assets could save you money in taxes. Take more control of your financial picture, now and in retirement.ĭiversifying the taxability of retirement savings.Gain flexibility in how you access retirement income in the future. ![]() Potentially fuel savings over time and help your assets last longer.When you retire, they can also help you develop a sustainable withdrawal strategy with taxes in mind.īy diversifying your investments across tax treatments, you can: Your financial advisor will review the tax treatments across your investment accounts during your working years. So it’s important to not let taxes diminish your savings more than necessary. Your retirement could last several decades.
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