Don’t Forget About Your Tax Bill Lake Point Advisory Group

Before you know it, Tax Day will be here, so it’s best to start getting ready now. Beyond your tax bill this year, don’t forget about your tax bill in the future, even in retirement. Taxes don’t stop when you stop receiving a paycheck, and they could be one of your biggest expenses in retirement. You should understand how different types of income are taxed and create a plan that works to lower your taxes throughout retirement.

Your Social Security Benefit Can Be Taxed

To figure out if your benefit can be taxed, add up your adjusted gross income, nontaxable interest, and half of your Social Security benefit to get your combined income. If your combined income as an individual is between $25,000 and $34,000 or is between $32,000 and $44,000 as a married couple filing jointly, up to 50% of your benefit may be taxable. And, if your combined income as an individual is over $34,000 or over $44,000 as a married couple filing jointly, up to 85% of your benefit may be taxable.[1]

Retirement Account Distributions

Investments that are held for one year or less are considered short-term capital gains. Short-term gains are taxed at ordinary income rates. However, investments that were held for over a year (long-term capital gains) are taxed at either 0%, 15%, or 20%, depending on income level.[2] Although you’ve likely held investments in your 401(k), IRA, 403(b), 457, or Thrift Savings Plan for over a year, withdrawals are taxed as ordinary income. Keep in mind that at age 72, you will most likely be required to take minimum withdrawals from your tax-deferred retirement accounts. Amounts are set by the IRS and may force you to withdraw more than you normally would in one year. This could mean an increased tax burden.

Home Sales

Many people are buying and selling homes right now, and whether or you are or not, you should know how home sales are taxed. At any age, you can take $250,000 tax-free from a home sale if you meet certain requirements, including occupying the property for 2 out of the last 5 years. This doubles to $500,000 for married couples.[3] Keep in mind that this does not apply to other property sales, only primary residences.

Annuity Payments

Annuities can potentially offer certain tax benefits. Annuities can be purchased with pre-tax dollars, in which case payments would be taxed as income. However, annuities can also be funded with after-tax dollars, in which case taxes would only be owed on the earnings.[4] There are many options when it comes to annuities, and a professional can help you pick one that fits with your overall finances and retirement goals.

Tax and income planning are important parts of a comprehensive retirement plan, and we make sure to include them. We could see rising taxes in the future, so now is the time to prepare. To start exploring tax minimization strategies in retirement, Click HERE to schedule your initial complimentary meeting with LakePoint Advisory Group.

[1] https://www.ssa.gov/planners/taxes.html
[2] https://www.irs.gov/taxtopics/tc409
[3] https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp
[4] https://www.annuity.org/annuities/taxation/


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This material is provided for informational purposes and is not an offer to sell or a solicitation of an offer to buy an interest in any security. Such an offer may only be made at the time a qualified offeree receives a confidential private offering memorandum or other appropriate disclosure. This report is intended as a summary; it does not purport to be complete. Information contained herein is believed to be accurate and/or derived from sources which we believe to be reliable; however we do not warrant the completeness or accuracy of such information. Opinions expressed herein do not necessarily reflect those of Lake Point, its subsidiaries, or affiliates. You should not construe this presentation or any other communication received in connection with Lake Point as legal, accounting, tax, investment, or other advice. You should consult with your own counsel and advisors regarding such matters. Past performance is not necessarily indicative of future results. No representation is made that any investment will or is likely to achieve the same or similar results in the future.