"For many retirees, taxes don't disappear once the paychecks stop; they simply change form. Withdrawals from retirement accounts, Social Security benefits, required minimum distributions, and even investment income can all result in unexpected tax bills. Without proper planning, it's easy to end up paying far more in taxes during retirement than you thought you would. At times, it feels as though you are quietly eroding the savings you worked decades to build."
"But it's a good way to keep your IRS burden to a minimum once you're no longer working. Roth IRA or 401(k) withdrawals are yours to enjoy tax-free. Roth accounts also don't impose required minimum distributions (RMDs), which means your investments can enjoy tax-free growth for as long as you don't need the money. That said, a Roth conversion creates a tax liability - and a potentially large one - the year you move those funds over."
Retiree income from retirement-account withdrawals, Social Security, RMDs, and investment income can create unexpected tax bills that erode savings. Tax planning and small adjustments to how and when income is taken can significantly reduce retirement taxes. Roth conversions convert taxable balances into tax-free qualified withdrawals and eliminate RMDs, enabling longer tax-free growth. Conversions trigger taxable income in the conversion year, so timing conversions when tax rates are low and consulting tax or financial professionals can reduce costs. When conversions are unsuitable, managing withdrawals and RMD timing helps limit taxable income during retirement.
Read at 24/7 Wall St.
Unable to calculate read time
Collection
[
|
...
]