Tax & Retirement Planning

Tax Considerations for Retirement

A lot goes into retirement planning — identifying sources of income, estimating expenses, managing your estate, choosing a savings program, deciding where to settle down. Along with all of these elements, you also need to think about taxes.

When planning for retirement, you need to consider the benefits (and potential pitfalls) of various retirement accounts, while also utilizing tax strategies designed to lower your tax burden and maximize your income.

Luckily, you’re not alone. At Boxelder, our team of tax attorneys, CPAs, and enrolled agents can assist you in planning for retirement and making whatever adjustments are necessary to optimize your tax situation. Let us guide you into retirement, so you can enjoy your post-career years free of financial worry.

Taxes & Retirement Accounts

You’re probably familiar with a few types of retirement accounts. Among the most common is the 401(k) account, or 401(k) plan, which is generally sponsored by your employer. Employers often offer “matching” 401(k) plans, meaning they will contribute a certain amount to an employee’s account every pay period.

There are other retirement plans as well, such as Roth IRAs, 403(b) accounts, and Employee Stock Ownership Plans (ESOPs). The suitability of any given plan depends on the particulars of a person’s financial situation.

As savings vehicles, retirement accounts offer certain advantages. For one, the money contributed by both the employee and the employer in a 401(k) or other similar account is not automatically subject to immediate taxation. You can choose to contribute funds either pre-tax or post-tax. This flexibility allows you to plan ahead and determine which course will yield the most favorable tax treatment.

The bottom line: most retirement plans are tax-deferred or otherwise tax-advantaged. Utilizing one of these accounts will yield optimal tax benefits, as compared to saving within a “regular” savings account or investing with a brokerage account.

Be advised, however, that retirement accounts can also carry certain disadvantages for those who need to access them prematurely. If you need to access your retirement account pre-retirement, you will likely face stiff tax penalties.

Strategies to Lower Your Tax Burden

Planning for retirement means trying to maximize your post-tax income, so you should always consider strategies that can lower your tax burden. Ideally, this is something you should be thinking about for a long period of time; the earlier you start implementing tax reduction strategies into your financial routine, the better position you will be in when it comes time to retire.

The key idea here is that the more you save on your yearly tax bill, the more you will be able to stash away for retirement.

Luckily, helping you save on your yearly tax bill is what we do. Our team of tax attorneys, CPAs, and enrolled agents can assist you in planning for retirement and making whatever adjustments are necessary to optimize your tax situation. Let us guide you into retirement, so you can enjoy your post-career years free of financial worry.