Tips to Reduce Taxes Heading Into Retirement
Most of us want to retire at some point in our lives. Since you're not working, you have no income coming in from an employer, meaning you have to take the money you have while you're working, save it, and grow it so it can support you into retirement. But how do you save and plan for retirement? Where do you begin? One way is to reduce the amount of taxes you pay currently.
Park Place Financial is a wealth management company in Bellaire that offers financial planning services, retirement planning, and help with tax planning. We are dedicated to helping you reach your financial goals now and into the future, from college planning to retirement strategies. Our expert financial consultants are dedicated to ensuring you don't outlive your money. Below, we'll take a look at some tips to help you reduce your taxes as you head into retirement. Contact our investment company today!
TIPS TO REDUCE TAXES HEADING INTO RETIREMENT
Invest in a Roth IRA
One of the first things you should do to reduce taxes in retirement is open a Roth IRA. Roth IRA money that you put in and all that you earn on that money comes out tax-free. The downside is that you pay taxes on that money up-front. This is opposite of a traditional IRA or 401(k) where the money that goes in is not taxed. However, the money in your Roth IRA is the money you will be getting out, which helps for retirement planning. Over the long run, a Roth IRA can end up paying off big time for your retirement income plan.
Reduce Expenses Now
One of the big ways to reduce taxes heading into retirement is pay off your debt. This is because as you begin to make withdrawals from your traditional IRA or 401(k), you will be taxed on that money. The less you need to make withdrawals to pay debts, such as your mortgage, the more money you will save. Plus, you can only write off the interest you pay on your mortgage, and as you approach retirement, the interest you are paying is minimal compared to the amount that is going towards the principal. Thus, it's best to get all of your monthly expenses (like a car payment and mortgage) paid off as you head into retirement in order to maximize your income tax planning.
Many people have heard of diversification and have a basic understanding of what it means, but when it comes to implementing it, it can be a tricky business. Diversification is one of the most important wealth management strategies you can implement. In short, diversification is the old adage of not putting all your eggs in one basket. Applying this to investment strategies, it's ensuring that you don't have all of your money in stocks or in savings bonds. You mix up your asset allocation so that if one area of the economy is hurting, say agriculture, your other investments such as real estate can ensure you don't go broke.
This same investment strategy can be applied extremely well to retirement planning with great results. Park Place Financial in Bellaire works with you to ensure you have a good mix of taxable and non-taxable accounts so that when your income is high, for instance while you are still working, you can draw from those accounts that you won't have to pay taxes on, keeping your tax bracket low, and when your income is lower, you can draw from taxable accounts.
CHOOSE PARK PLACE FINANCIAL FOR ALL YOUR INCOME TAX PLANNING NEEDS
Park Place Financial has been helping the people of Bellaire with their retirement planning since 1987. Our mission is to help you maximize your investments so you can be well prepared moving into retirement. Our financial advisors do this in many ways, such as investment planning and management, retirement planning, and with tax strategies. We sit down with you and discover your financial goals and where you want to be in the future. Then we craft a wealth management plan to get you there, customized to your needs. Our caring financial planners love helping you set a path to financial freedom as you head into your retirement years. Call us today for a consultation!