Adults of every generation are asking, how will the new U.S. tax law affect us? But for baby boomers, so many of whom already are retired and with many more whose retirement is on the horizon, the question is more specific: how will it affect our retirement savings? In this piece provided by Income Strategy, a sponsor of our friends over at the PBS website NextAvenue.org, retirement planning expert Bill Meyer briefly gives his view on the question, and offers Income Strategy’s help.
The Tax Cut and Jobs Act of 2017 promised a simpler tax structure with more going into Americans’ pockets, but how much will you personally benefit from the changes? The tax code is so complicated, and it’s hard to understand the positive impact you might get or exactly how to leverage new opportunities — particularly if you’re in or approaching retirement.
I’ve spent half my career researching how to be “tax efficient” or pay less taxes. It’s important because if you reduce the taxes you pay, you keep more of your hard-earned money, making your retirement savings last longer or giving you more money to live on. Who wouldn’t want that, right?
If you are over 50, there are two big opportunities you should evaluate to be more tax efficient:
1. Tap your savings in a way that leverages your new tax bracket. A smart strategy can potentially reduce your taxes, increase the amount of Social Security you receive and reduce Medicare premiums you pay. It’s the coordination of these “components” that can result in greater tax efficiency.
2. Strategically manage your standard deductions and itemized deductions. It may be possible to “double up” itemized deductions and charitable donations every other year to save thousands. In other words, consider giving your charitable donations in January and December of one year and itemize. In the following year utilize the standard deduction.
Not sure where to start? I’ve read the tax act details and numerous summaries of the implications. All the summaries out there are simply “rules of thumb” without specific advice for you. You need to consider the details of your situation and receive actionable guidance. We can give you that, along with withdrawal strategies that can reduce your tax bill — leaving more money for you in retirement.
Start with the free assessment to determine how the new tax rules apply in your scenario. In about one minute, your personalized report will illustrate how the new rules can add more to your retirement income.