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Sales Samples

Financial Advisor



45 Prospect Ave

Albany, NY 12206


Phone:  800-243-5334

Fax:        800-720-0780




November/December 2020

Avoid Tax Surprises in Retirement

Avoid Tax Surprises in Retirement

Too many people underestimate the effect of taxes on their retirement income. And with the national debt expanding, Congress could increase taxes in the future. But with proper planning, there may be ways to help reduce your tax exposure.

Practice Tax Diversification
Tax diversification means dividing your assets into three different buckets:

Taxable - Examples include credit union accounts and brokerage accounts. Gains and income are taxable in the current year. Long-term gains and dividends are taxed at lower rates.

Tax-deferred - These include traditional IRA, 401(k) and 403(b) plans. In these accounts, income and capital gains are generally deferred until you take money out. Withdrawal amounts get taxed as ordinary income and if taken before age 59½ an additional 10% tax penalty may apply.*

Tax-advantaged - You can build up your tax-advantaged bucket by contributing to Roth accounts or by converting traditional IRA assets into a Roth IRA. You’ll pay income taxes on the balance you convert, but growth in your Roth account is tax-advantaged from that point.**

One More Surprising Tax
Many retirees are shocked to discover that up to 85% of their Social Security benefits are taxable if their income rises above a certain threshold. This is just one more reason to consider income taxes early on — when investing for retirement.

Actionable Steps:

  • Consider contributing to a Roth IRA account and/or convert traditional IRA funds to a Roth IRA;

  • Delay Social Security benefits as long as possible;

  • Meet with your financial and tax professionals who can assist in planning for taxes as you invest for retirement.

* The CARES Act suspended the 10% early withdrawal penalty for 2020.

**Converting from a traditional IRA to a Roth IRA is a taxable event. To qualify for tax and penalty-free withdrawals a Roth IRA must be in place for five tax years and the distribution taken after age 59 1/2 or due to death, disability or a first time home purchase (up to a $10,000 lifetime maximum). Roth IRA distributions may be subject to state taxes.


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