Todd explained, “One of the biggest financial decisions you will make in your lifetime is how to plan for retirement. There are many factors to consider, including when to retire, how much money you will need to support yourself, and how to generate income during retirement. Another important factor is taxes.”
Listen to the interview on the Business Innovators Radio Network:
Many people think that retirement planning and tax planning are the same, but some essential differences exist. Here’s a look at how retirement income and tax planning are different:
Retirement Income:
When someone is retired, their primary income source is likely from pensions, Social Security, and investment earnings. With proper planning, they can minimize the taxes they pay on this income.
For example, if they have a 401(k) or other employer-sponsored retirement plans, they may be able to choose how their money is invested. They can use this to their advantage by selecting taxable investments at a lower rate than other types of income.
Another way to reduce their retirement income taxes is to take advantage of tax-deferred accounts such as IRAs and annuities. With these account types, they don’t have to pay taxes on the money they contribute until they withdraw it during retirement.
Tax Planning:
Tax planning is all about minimizing the taxes owed. This can be done in several ways, including taking advantage of deductions and credits, investing in tax-advantaged accounts, and timing income and deductions to maximize tax benefits.
Tax planning is important both before and during retirement. By taking steps to minimize taxes now, one can have more money to save for retirement. And, by reducing the taxes they pay in retirement, they can stretch retirement savings further.
The bottom line is that retirement income and tax planning are two different things. However, they are both important factors to consider when planning for retirement. By taking the time to understand both, one can make the most of retirement savings and keep more hard-earned money.
About Todd Smith
After graduating from Hamilton College, Todd began his financial services career in the late 1990s working for Prudential Securities in NY. Since then, he has developed a diverse and valuable financial background as an investor and advisor, working for both small boutique financial planning firms as well as larger financial corporations.
Since 2012, Todd has focused on working with accountants and other tax professionals, helping them offer more proactive and holistic planning to their clients. He founded Level 5 Financial responding to his deeply held belief that wealth management can be far more comprehensive and in how it meets the needs of its clients. Becoming independent gave him the freedom to innovate in order to best meet the needs of his clients. As a business owner and entrepreneur, himself, Todd enjoys designing imaginative wealth creation & preservation strategies, advanced tax mitigation, and business optimization within a virtual family office ecosystem to maximize the potential of business owners and families.
Learn More: http://www.level5financial.com/
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