Broker Check

Tax Efficiency in Retirement

May 10, 2023

Are you striving for greater tax efficiency in retirement?

It’s important to understand how your retirement income is generated and how Social Security benefits will affect your taxable income. Knowing the differences between pre-tax and after-tax investments can help you make informed decisions about your retirement strategy. Pre-tax investments, such as traditional IRAs and 401(k)s, allow you to make contributions with money that has not yet been taxed. The contributions are tax-deductible and the money accumulates tax-deferred. However, you will be required to take required minimum distributions from these accounts once you reach age 73 and the withdrawals will be taxed as ordinary income.

For 2021, the tax deduction for a traditional IRA is phased out for incomes between $105,000 and $125,000 for married couples filing jointly, and between $66,000 and $76,000 for single filers.1 You may also want to consider an after-tax investment like a Roth IRA. Contributions to a Roth IRA are made with after-tax dollars, but the money can benefit from tax-free growth and withdrawals can be taken tax-free and penalty-free after age 591⁄2, or under certain other circumstances. For 2021, contributions to a Roth IRA are phased out between $198,000 and $208,000 for married couples filing jointly and between $125,000 and $140,000 for single filers.2 It’s important to consult your tax, legal, or financial professionals before modifying your retirement strategy.

1., November 16, 2020 2., June 26, 2021 The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.