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Robert A. Imparato, Jr CFP®
CERTIFIED FINANCIAL PLANNER™ professional
Craig A. Hyldahl CFP®
CERTIFIED FINANCIAL PLANNER™ professional
R.I.C.H. Planning Group, LLC
105 Fieldcrest Avenue, Suite #507
Edison, NJ 08837
Robert: 732-326-5240
Craig: 732-326-5240
Fax: 732-326-5331
Robert: robert@richplanninggroup.com
Craig: craig@richplanninggroup.com
Website: www.richplanninggroup.com
November/December 2020
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.
GE-3144808(7/20)(Exp.7/22)
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Securities offered through Equitable Advisors, LLC (NY,NY (212) 314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN). Investment advisory products and services offered through Equitable Advisors, LLC, an SEC-registered investment advisor. Annuity and insurance products offered through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC; in Utah as Equitable Network Insurance Agency of Utah, LLC; and in PR as Equitable Network of Puerto Rico, Inc. Equitable Advisors and Equitable Network are affiliated companies and do not provide tax or legal advice.
R.I.C.H. Planning Group, LLC is not owned or operated by Equitable Advisors or Equitable Network. Equitable Advisors and Equitable Network are brand names for Equitable Advisors, LLC and Equitable Network, LLC, respectively.
GE-4833845.1 (7/22)(Exp. 7/24)
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