Saving for retirement is only part of the picture. How and when retirement income is taxed can affect how much of those savings are ultimately available to support the life you’ve planned. A thoughtful tax strategy can help account for taxes as part of the bigger retirement picture.
A strong retirement plan looks at more than how much has been saved. It also considers how taxes may affect withdrawals from retirement accounts and the income available to support retirement. Retirement savings and retirement spending power are not always the same thing.
Imagine spending decades consistently contributing to retirement accounts and watching the balance grow. Then retirement arrives, and there’s an important realization: distributions from tax-deferred retirement accounts may be subject to income taxes.
Taxes can affect how much of your retirement savings is ultimately available to spend.
Use the Tax Bill Calculator below to explore the potential impact and get a clearer picture of why tax planning can be an important part of a retirement strategy.
Taxes in retirement aren’t limited to withdrawals from retirement accounts. Depending on a person’s overall income, a portion of Social Security benefits may also be subject to federal income tax.
In 2023, an estimated 50% of Social Security beneficiaries had some income tax liability on some of their Social Security benefits.
Building a sizable retirement portfolio is important, but the amount saved is only part of the equation. A more complete retirement strategy also considers how taxes may affect income and distributions throughout retirement.
By looking at taxes as part of the overall retirement picture, rather than as an afterthought, a financial professional can help identify strategies designed to reduce the potential tax burden in retirement.
