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Tax Bracket Management

You have done a good job of saving over the years to create a nest egg that will sustain you throughout your retirement years.

Now comes the hard part. Reducing, if not eliminating, the biggest drain on your portfolio in retirement. 

Did you guess taxes?

Managing your tax brackets throughout retirement might be a new concept for you.

If so, it is time to pay attention - summer school is in session.  

Tax bracket management should be an essential part of your financial plan as it can significantly impact your post-work financial security. By forecasting your income over the next 5 to 15 years, you can strategically manage your tax brackets to minimize your tax liability and optimize your income.

This is accomplished by integrating your tax planning with various income streams (Social Security, employer pensions, and required minimum distributions from IRAs), along with investment decisions (asset location, tax-efficient investment strategies, and capital gains management).

 A few tax planning strategies to consider are:

  1. Harvesting losses in high-income years.
  2. Harvesting gains in low-income years.
  3. Contributing to traditional IRAs in high-income years.
  4. Contributing to Roth IRAs in low-income years.
  5. Creating different types of charitable remainder trusts.
  6. Implementing Roth IRA conversions. I highlighted the tax savings these conversions can make in my recent newsletter.
  7. Creating family trusts.

To gain more insight on this topic, Vanguard presents three key decisions you need to make in optimizing your income in retirement.

Happy summertime reading!

What's Your Tax Plan?

Managing your tax bracket is a vital component of financial planning during retirement. If you have $1 million or more of investible assets and are in or close to retirement, let's build a tax bracket strategy into your financial plan.