Income Taxes

The Lighter Side of Retirement Taxes: Keeping More in Your Pocket

Tomasina Hill

April 8, 2024

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Introduction:

Welcome to a unique Cardinal lesson that promises to not only enlighten but also entertain! As we age, our financial landscape shifts, especially when it comes to taxes in retirement. It’s time to debunk myths and reveal how retirees can actually end up paying less in taxes.

The Myth of Equal Taxation:

Many believe that the tax burden remains the same before and after retirement. However, this couldn’t be further from the truth. For individuals over 70, combining Social Security checks with withdrawals from retirement accounts, the tax scenario changes dramatically, especially for those in middle and upper-middle-income brackets.

Live Tax Planning with Tom:

Join us as Tom navigates through real-life tax planning using mock tax returns. This session is designed to demonstrate the impact of strategic planning on your retirement taxes. Discover the nuances of tax brackets, deductions, and the taxability of Social Security and capital gains.

Maximizing Your Money:

Understanding how taxes work in retirement is crucial for maximizing your income. We’ll cover:

Standard Deductions: For those over 65, deductions can significantly lower taxable income.
Social Security and Taxes: Not all of your Social Security benefits are taxable. We’ll show you the effect on your finances.
Capital Gains Tax: Learn how selling assets like land or stocks could benefit from a 0% federal tax rate under certain conditions.

Strategic Income Planning:

We delve into examples demonstrating how thoughtful planning can result in paying much less in taxes. From the importance of managing IRA distributions to considering Roth conversions, we outline strategies that can lead to a more financially secure retirement.

Why This Matters:

In retirement, it’s not about the gross income but what you get to keep after taxes. Our goal is to equip you with knowledge and strategies to ensure you enjoy your golden years with more financial freedom.

Conclusion:

Retirement brings a significant shift in how taxes affect your income. By understanding these changes and planning accordingly, you can potentially save a substantial amount in taxes, keeping more money in your pocket. If you’re looking for personalized advice or have specific questions, don’t hesitate to reach out. Let’s make your retirement planning as tax-efficient as possible!

Get In Touch

Contact us today with any questions, concerns, or just to stay connected.

Have questions? Contact us today.

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Income Taxes

The Lighter Side of Retirement Taxes: Keeping More in Your Pocket

Tomasina Hill

April 8, 2024

Share

Sign Up For Our Newsletter To Receive Weekly Updates.

Introduction:

Welcome to a unique Cardinal lesson that promises to not only enlighten but also entertain! As we age, our financial landscape shifts, especially when it comes to taxes in retirement. It’s time to debunk myths and reveal how retirees can actually end up paying less in taxes.

The Myth of Equal Taxation:

Many believe that the tax burden remains the same before and after retirement. However, this couldn’t be further from the truth. For individuals over 70, combining Social Security checks with withdrawals from retirement accounts, the tax scenario changes dramatically, especially for those in middle and upper-middle-income brackets.

Live Tax Planning with Tom:

Join us as Tom navigates through real-life tax planning using mock tax returns. This session is designed to demonstrate the impact of strategic planning on your retirement taxes. Discover the nuances of tax brackets, deductions, and the taxability of Social Security and capital gains.

Maximizing Your Money:

Understanding how taxes work in retirement is crucial for maximizing your income. We’ll cover:

Standard Deductions: For those over 65, deductions can significantly lower taxable income.
Social Security and Taxes: Not all of your Social Security benefits are taxable. We’ll show you the effect on your finances.
Capital Gains Tax: Learn how selling assets like land or stocks could benefit from a 0% federal tax rate under certain conditions.

Strategic Income Planning:

We delve into examples demonstrating how thoughtful planning can result in paying much less in taxes. From the importance of managing IRA distributions to considering Roth conversions, we outline strategies that can lead to a more financially secure retirement.

Why This Matters:

In retirement, it’s not about the gross income but what you get to keep after taxes. Our goal is to equip you with knowledge and strategies to ensure you enjoy your golden years with more financial freedom.

Conclusion:

Retirement brings a significant shift in how taxes affect your income. By understanding these changes and planning accordingly, you can potentially save a substantial amount in taxes, keeping more money in your pocket. If you’re looking for personalized advice or have specific questions, don’t hesitate to reach out. Let’s make your retirement planning as tax-efficient as possible!

Understanding the Upcoming 2026 Income Tax Increase: What You Need to Know

A Brief History of the Tax Cuts and Jobs Act (TCJA)

In today’s Cardinal lesson, we’re discussing the significant changes coming to income tax rates in 2026. This isn’t a proposal but a law already set in motion. The Tax Cuts and Jobs Act (TCJA), passed in 2017 and effective from January 1, 2018, brought about substantial reductions in income taxes. However, these reductions were only funded for eight years, meaning they will expire at the end of 2025.

What Changes to Expect in 2026

As of January 1, 2026, the tax rates will revert to their 2017 levels, adjusted for inflation. Key changes include:

The 12% bracket will increase to 15%.
The 22% bracket will rise to 25%.
The top rate of 37% will revert to 39.6%.

Not Just a Proposal

It’s crucial to understand that this change is already the law. Many people mistakenly believe that the tax rate increases are still under discussion. However, unless Congress enacts new legislation, these higher rates will take effect as scheduled.

Implications for Your Financial Planning

Impact on IRAs and 401(k)s

With the current lower tax rates, now is the time to consider strategies like Roth conversions. By converting funds from a traditional IRA to a Roth IRA now, you can potentially save a significant amount in taxes over the long term.

Why Planning Ahead is Crucial

For individuals with substantial retirement savings, understanding these changes is vital for effective tax planning. The window to take advantage of the current lower tax rates is closing, and planning ahead can make a significant difference.

Case Studies and Planning Opportunities

Hans Scheil and Tom Griffith discuss specific case studies and planning strategies in our latest video. These examples illustrate how different scenarios can be managed effectively:

Case Study 1: A married couple with an adjusted gross income of $150,000 in 2024 can convert part of their IRA to a Roth IRA, taking advantage of the lower current tax rates.
Case Study 2: High-net-worth individuals with large IRAs can save substantial amounts in taxes by planning conversions over the next two years.

Estate Tax Considerations

The TCJA also doubled the estate tax exemption, which will revert in 2026. This change can significantly impact high-net-worth individuals, making estate planning more crucial than ever.

Action Steps to Take Now

Review Your Current Tax Situation: Analyze how the upcoming changes will affect your finances.
Consider Roth Conversions: Take advantage of the lower tax rates before they expire.
Plan for Estate Taxes: Assess your estate plans in light of the changing exemptions.

Conclusion

The changes coming in 2026 are significant, but with proper planning and informed decision-making, you can navigate these changes effectively. Watch our video for more detailed insights and personalized advice.

Get In Touch

Contact us today with any questions, concerns, or just to stay connected.

Have questions? Contact us today.

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