Withdrawing strategies require planning. They are vital when it comes to reducing taxes and getting the income you need for retirement.
A straightforward strategy is to withdraw money from your retirement and investment accounts in the following order:
- Required minimum distributions (RMDs) from tax-deferred retirement accounts
- Taxable accounts, such as brokerage accounts
- Tax-exempt retirement accounts (Roth IRAs and Roth 401(k) plans)
Why this order? Contact Us!
If a tax bump is a source of concern, the strategy above will not be a good strategy for you. If you want to be a little more strategic with your withdrawals, you may consider taking withdrawals from a mix of taxable, tax-deferred, and possibly tax-free accounts. This can help you avoid moving into a higher tax bracket.
This requires us to sit down and talk about your goals right before you want to start withdrawing from your retirement accounts, or if you have a business that still brings in earned income or even when your ready to start withdrawing from your social security. They have tax implications and it is important to plan ahead.
This strategy involves actively managing withdrawals from retirement accounts. The government considers up to 85% of your Social Security benefits to be taxable, using a formula that includes most other income, plus one-half of your benefits. The objective of this strategy is to manage your income so that a smaller percentage of your Social Security benefits will be taxable.
Follow the same steps outlined in the "Avoiding Tax Braket Increases" Strategy, with one exception: You’ll target the income thresholds that determine whether your Social Security benefits are taxable, rather than income levels associated with a tax bracket. Get Social Security thresholds