62+ Taxes

Income taxes are affected when you turn 65, go on Medicare, start your Social Security check, start drawing down your IRA, possibly need long term care, and leave money to your spouse or kids.

There are simple ways to minimize the tax of your estate—if you know the mechanics of how various assets are valued and the details of tax law. There is great value in consulting with an expert; mistakes are costly.

Questions we can answer

  • How do income taxes change in retirement?
  • Do I pay taxes on my Social Security?
  • What is the Medicare tax or IRMAA?
  • When do I pay taxes on my IRA and 401(k) money?
  • How can I reduce my income tax in retirement?

Taxes in Retirement

We are forward looking tax planners. Tax planning in retirement is balancing Social Security income, taxable IRA and 401(K) withdrawals, Roth IRA withdrawals, pension income, and withdrawals from regular savings to meet your income needs. Cardinal helps you find the balance that minimizes your total income tax paid.

Cardinal Lessons on Income Tax

Tax-Free Retirement Savings

Hans talks about how you can make the most of your money in retirement with tax-free retirement savings. Learn about the three types of money — taxable, tax-deferred, and tax-free — and how each can change your bottom line in retirement. Finally, Hans explains the best way to maximize tax-free money through a Roth IRA or maximum-funded life insurance. Who doesn’t love tax-free money? Board Transcript: Tax-Free Retirement Savings 1) Taxable: Money market. CDs, stocks, bonds, mutual funds, employment income, rents, and dividends Liquidity 1099 2) Tax-Deferred: Traditional 401(k), IRA, 403(b), 457, simple, SEP… Principal + interest taxed when it’s distributed 1099 RMDs starting at 72 Death benefit taxable (other than spouse) 3) Tax-Free: ROTH IRA: | MAXIMUM-FUNDED LIFE INSURANCE PRINCIPAL | Already taxed | Already taxed EARNINGS | Tax-free | Tax-free DEATH BENEFIT | Tax-free & = cash value | Tax-free & > (greater than) cash value LIFE-INSURANCE COST | No | Yes RE-DEPOSIT WITHDRAWALS | No | Yes LONG-TERM CARE BENEFIT | No | Yes GUARANTEES | No | Yes CORRELATED TO THE STOCK MARKET | Yes | No CAN BE REMOVED FROM TAXABLE ESTATE | No | Yes Call us at (919) 535-8261 | Visit our website at CardinalGuide.com | Listen to the “Finishing Well” Podcast Email Hans at Hans@CardinalGuide.com

2022 Taxes for Retirees

Hans goes over the Tax Rates for 2022 and discusses how retirees can lower their taxable income. Board Transcript: 2022 Taxes for Retirees Ordinary Income Tax Rates: Rate | Married, Filing Jointly | Single 10% | $0 – $20,550 | $0 – $10,275 12% | $20,550 – $83,550 | $10,275 – $41,775 22% | $83,550 – $178,150 | $41,775 – $89,075 24% | $178,150 – $340,100 | $89,075 – $170,050 32% | $340,100 – $431,900 | $170,050 – $215,950 35% | $431,900 – $647,850 | $215,950 – $539,900 37% | Over $647,850 | Over $539,900 Long-Term Capital Gains + Qualified Dividends Tax: Rate | Married, Filing Jointly | Single 0% | $0 – $83,350 | $0 – $41,675 15% | $83,350 – $517,200 | $41,675 – $459,750 20% | Over $517,200 | Over $459,750 Standard Deduction: Married, Filing Jointly = $25,900 Single = $12,950 Extra Standard Deduction for Age 65+: Married, Filing Jointly = $1,400 | $27,300 Single = $1,750 | $14,700 Email: Hans@CardinalGuide.com Remember to Like and Subscribe!

How the Build Back Better Plan Will Increase Estate Taxes and More

Hans addresses the upcoming rise in Estate Taxes, and how to utilize different paths to protect what you want to pass on to your beneficiaries. Call us at (919) 535-8261 or visit our Website at cardialguide.com. Board Transcript: Estate Planning: Possible Return of the 40% Estate Tax – “Build Back Better Act” not yet passed – Grantor trusts – ILIT – Life insurance – $11,700,000 lowered to $6,020,000 per person – Step-up in basis — income tax – Family farms and businesses Year / Exemption / Tax Rate 1997 / $600,000 / 55% 2002 / $1,000,000 / 50% 2007 / $2,000,000 / 45% 2011 / $5,000,000 / 35% 2017 / $5,490,000 / 40% 2021 / $11,700,000 / 40% *2022* / $6,020,000 / 40% ** proposed ** Email: Hans@CardinalGuide.com

Standard Tax Deduction 2021

Most retired people are not used to the fact that they have some control over their taxable income. Your 2021 Standard Tax Deduction provides a great starting point to create your financial plan.

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Step Up In Basis: Tax Breaks for your Inheritance

Capital assets like real estate, a business, and/or stocks and bonds receive a step-up in basis at the death of the owner.

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Income Tax: 2025 Tax Sunset

Taxes are at a historical low and are scheduled to go up after the end of 2025. There are ways to minimize the impact of tax increases if you are willing to pay something now to pay less later.

The Cardinal Guide To:
62+ Taxes

Listen to learn:

Up to 85% of your Social Security can be taxed depending on your “other taxable income” in a given year. In 2021, if your combined income is above $25,000 as an individual, or above $32,000 as a couple, some of your Social Security check will be taxed. State taxes on Social Security vary, with some states completely excluding Social Security from state income tax and others taxing it as regular income.

Medicare applies a surcharge to higher-income beneficiaries. IRMAA, or the Income Related Monthly Adjustment Amount, is an additional tax charged on your Part B and Part D monthly premiums. In 2021, if you make over $88,000 as an individual, or $176,000 as a couple, you can be subject to IRMAA charges.

Purchasing long term care insurance has tax benefits. Not only are the benefits paid to you tax-free, but there is a way to deduct some of the premiums paid for long term care insurance.

IRAs and 401(k)s allow you to postpone income taxes, but you can’t avoid income taxes altogether. RMDs must start by age 72. RMDs increase your taxable income, and possibly increase your Social Security and Medicare taxes. Consider using a Roth IRA, or a Roth IRA conversion, to reduce your taxable income in retirement.

There are income taxes even in death. If you leave a traditional IRA or 401(k) to your heirs, they will have to pay the income taxes before they can use the money.

Want more information about taxes in retirement?