Sponsored content by FinanceAdvisors.com | This is a paid advertisement. See full disclosure below.I'm Paul Mazzapica, co-founder of FinanceAdvisors. This question keeps growing. It comes from a very specific kind of person, and it might be the most important transition in all of retirement planning. Here's a representative version, and the framework retirement income advisors use to answer it."I'm 62 and plan to retire at 65. My wife is 61. We have about $2 million across Vanguard and Fidelity accounts. IRAs, a Roth and a taxable brokerage.My main concern right now is taxes. Our goal has always been to enjoy retirement, but we’re concerned taxes may deplete our savings and force us to pick up part-time work to cover our expenses. Can an advisor help us come up with a tax-efficient plan for retirement?”Taxes Can Be Scary – They Don’t Have To Be, Even In RetirementThere’s a reason this is one of the most common questions we get. You’ve spent your entire life building a respectable nest egg, and you deserve to reap those rewards without having to worry about potentially rejoining the workforce. The good news is there are still plenty of things you can do, along with the help of a trusted advisor, to soften your annual tax bill and make sure most of your money stays with you and not the IRS. Here are five tax-saving strategies our advisors recommend for people with $1 million in their retirement accounts. 1. Make Sure Your Assets Are In the Right Account Types Not every retirement account type is created equally, and from a tax perspective, it truly matters where your investments are held.For example, every dollar withdrawn from a traditional IRA is taxed as ordinary income. A Roth, on the other hand, gives you tax-free gains, while income-generating assets in a taxable account may be taxed at a lower capital gains rate.A qualified advisor can help determine which accounts are best suited for growing your assets and generating income without increasing your overall tax bill.2. Look Into Roth ConversionsIf done well over several years, converting portions of your traditional IRA into your Roth can reduce future RMDs, lower IRMAA exposure, decrease the tax burden on Social Security and create additional tax-free income for the surviving spouse.Done poorly, this strategy can spike your tax bracket, trigger IRMAA surcharges and cost more than it saves.The math requires modeling your conversion amount against your projected income, your IRMAA thresholds, your state taxes and your Social Security timing for every year of the ladder. This isn't a spreadsheet exercise. It's an annual, multi-variable projection.You're good with numbers. But this is a different kind of math.3. Look Into Withdrawal Sequencing To Potentially Save Thousands The order in which you pull from each of your retirement accounts can significantly affect your annual tax bill.For example, in a year where your RMD pushes you to the top of the 24% bracket but not into the 32%, there may be room to strategically pull additional funds from a taxable account (taxed at capital gains rates, not ordinary income rates) instead of converting or withdrawing more from the IRA.The math changes every year. This is annual planning, not a one-time decision.4. Use Qualified Charitable Distributions Instead Of Traditional Donations A QCD lets you send up to $105,000 per year (2024 limit, indexed for inflation) directly from your IRA to a qualified charity. The distribution counts toward your RMD but is not included in your taxable income.It satisfies the RMD, but you don't pay tax on it. It doesn't spike your bracket. It doesn't trigger IRMAA. It doesn't push your Social Security into higher taxation.For someone who's already donating to charity from their bank account, switching to QCDs is one of the most straightforward tax wins in retirement planning.For a married couple with $2 million in assets, Social Security claiming decisions involve layers that no calculator captures. If one spouse dies, the surviving spouse keeps the higher of the two benefits. The claiming strategy should account for this.At certain income levels, Social Security income pushes you over provisional income thresholds, and suddenly, 85% of your benefit becomes taxable. If you're also taking RMDs and doing Roth conversions, the interaction between all three determines how much of your benefit the IRS takes.You've made 30 years of smart investment decisions. This one deserves the same rigor, with someone modeling every variable.Five Questions To Ask Advisors About Retirement And Taxes1. "Are my assets in the right accounts from a tax-efficiency standpoint?" 2. "What's your Roth conversion recommendation for me over the next 5-8 years, and what are the possible implications?”3. "What's my withdrawal order across all account types, and how did you decide it?”4. "Am I using Qualified Charitable Distributions, and if not, why?"5. “When should my spouse and I each claim Social Security, and how does that interact with our withdrawal plan?"If your advisor can clearly answer all five questions in a way that makes you feel prepared, you're likely in good hands. If they can't, it's worth exploring whether someone else can.— Paul Mazzapica, Co-Founder, FinanceAdvisors.comAbout This Column"Ask An Advisor" is a sponsored Q&A series produced by FinanceAdvisors.com. The questions featured are composites representative of common inquiries received through our advertising, our platform and audience interactions. They do not depict specific individuals or actual advisory engagements. Paul Mazzapica is the co-founder of FinanceAdvisors.com. He is not a registered investment advisor and does not provide personalized financial advice. His commentary reflects observations from matching thousands of investors with qualified advisors through the platform and is intended for general educational purposes only.DisclosuresThis is paid advertising content ("advertorial") produced and sponsored by FinanceAdvisors.com. It is designed to appear alongside editorial content but is a commercial promotion for the FinanceAdvisors.com advisor matching service. FinanceAdvisors.com receives compensation when users complete the matching quiz and are connected with a financial advisor.FinanceAdvisors.com is an advisor matching service that connects individuals with financial advisors. FinanceAdvisors.com is not a registered investment advisor, broker-dealer, or financial planning firm, and does not provide investment advice, tax advice, or financial planning services. Advisors in our network are independently operated and are screened for active licensing, registration status, and disclosure history through public regulatory databases. "Vetted" refers to this screening process. Many, though not all, advisors in our network operate under a fiduciary standard; fiduciary status may vary depending on account type and services provided. Matching does not imply endorsement of any specific advisor.Please be advised that alternative investments carry a risk of monetary loss. Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. All information contained on this website is provided as general commentary for informative and entertainment purposes and does not constitute investment advice. Benzinga will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on this information, whether specifically stated in the above Terms of Service or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
Ask An Advisor: I Have $2M In Retirement Accounts. How Can I Make Sure Taxes Don’t Deplete My Savings?
Sponsored content by FinanceAdvisors.com | This is a paid advertisement. See full disclosure below.I'm Paul Mazzapica, co-founder of FinanceAdvisors. This question keeps growing. It comes from a very specific kind of person, and it might be the most important transition in all of retirement planning. Here's a representative version, and the framework retirement income advisors use to answer it."I'm 62 and plan to retire at 65. My wife is 61. We have about $2 million across Vanguard and Fidelity accounts. IRAs, a Roth and a taxable brokerage.My main concern right now is taxes. Our goal has always been to enjoy retirement, but we’re concerned taxes may deplete our savings and force us to pick up part-time work to cover our expenses. Can an advisor help us come up with a tax-efficient plan for retirement?”Taxes Can Be Scary – They Don’t Have To Be, Even In RetirementThere’s a reason this is one of the most common questions we get. You’ve spent your entire life building a respectable nest egg, and you deserve to reap those rewards without having to worry about potentially rejoining the workforce. The good news is there are still plenty of things you can do, along with the help of a trusted advisor, to soften your annual tax bill and make sure most of your money stays with you and not the IRS. Here are five tax-saving strategies our advisors recommend for people with $1 million in their retirement accounts. 1. Make Sure Your Assets Are In the Right Account Types Not every retirement account type is created equally, and from a tax perspective, it truly matters where your investments are held.For example, every dollar withdrawn from a traditional IRA is taxed as ordinary income. A Roth, on the other hand, gives you tax-free gains, while income-generating assets in a taxable account may be taxed at a lower capital gains rate.A qualified advisor can help determine which accounts are best suited for growing your assets and generating income without increasing your overall tax bill.2. Look Into Roth ConversionsIf done well over several years, converting portions of your traditional IRA into your Roth can reduce future RMDs, lower IRMAA exposure, decrease the tax burden on Social Security and create additional tax-free income for the surviving spouse.Done poorly, this strategy can spike your tax bracket, trigger IRMAA surcharges and cost more than it saves.The math requires modeling your conversion amount against your projected income, your IRMAA thresholds, your state taxes and your Social Security timing for every year of the ladder. This isn't a spreadsheet exercise. It's an annual, multi-variable projection.You're good with numbers. But this is a different kind of math.3. Look Into Withdrawal Sequencing To Potentially Save Thousands The order in which you pull from each of your retirement accounts can significantly affect your annual tax bill.For example, in a year where your RMD pushes you to the top of the 24% bracket but not into the 32%, there may be room to strategically pull additional funds from a taxable account (taxed at capital gains rates, not ordinary income rates) instead of converting or withdrawing more from the IRA.The math changes every year. This is annual planning, not a one-time decision.4. Use Qualified Charitable Distributions Instead Of Traditional Donations A QCD lets you send up to $105,000 per year (2024 limit, indexed for inflation) directly from your IRA to a qualified charity. The distribution counts toward your RMD but is not included in your taxable income.It satisfies the RMD, but you don't pay tax on it. It doesn't spike your bracket. It doesn't trigger IRMAA. It doesn't push your Social Security into higher taxation.For someone who's already donating to charity from their bank account, switching to QCDs is one of the most straightforward tax wins in retirement planning.For a married couple with $2 million in assets, Social Security claiming decisions involve layers that no calculator captures. If one spouse dies, the surviving spouse keeps the higher of the two benefits. The claiming strategy should account for this.At certain income levels, Social Security income pushes you over provisional income thresholds, and suddenly, 85% of your benefit becomes taxable. If you're also taking RMDs and doing Roth conversions, the interaction between all three determines how much of your benefit the IRS takes.You've made 30 years of smart investment decisions. This one deserves the same rigor, with someone modeling every variable.Five Questions To Ask Advisors About Retirement And Taxes1. "Are my assets in the right accounts from a tax-efficiency standpoint?" 2. "What's your Roth conversion recommendation for me over the next 5-8 years, and what are the possible implications?”3. "What's my withdrawal order across all account types, and how did you decide it?”4. "Am I using Qualified Charitable Distributions, and if not, why?"5. “When should my spouse and I each claim Social Security, and how does that interact with our withdrawal plan?"If your advisor can clearly answer all five questions in a way that makes you feel prepared, you're likely in good hands. If they can't, it's worth exploring whether someone else can.— Paul Mazzapica, Co-Founder, FinanceAdvisors.comAbout This Column"Ask An Advisor" is a sponsored Q&A series produced by FinanceAdvisors.com. The questions featured are composites representative of common inquiries received through our advertising, our platform and audience interactions. They do not depict specific individuals or actual advisory engagements. Paul Mazzapica is the co-founder of FinanceAdvisors.com. He is not a registered investment advisor and does not provide personalized financial advice. His commentary reflects observations from matching thousands of investors with qualified advisors through the platform and is intended for general educational purposes only.DisclosuresThis is paid advertising content ("advertorial") produced and sponsored by FinanceAdvisors.com. It is designed to appear alongside editorial content but is a commercial promotion for the FinanceAdvisors.com advisor matching service. FinanceAdvisors.com receives compensation when users complete the matching quiz and are connected with a financial advisor.FinanceAdvisors.com is an advisor matching service that connects individuals with financial advisors. FinanceAdvisors.com is not a registered investment advisor, broker-dealer, or financial planning firm, and does not provide investment advice, tax advice, or financial planning services. Advisors in our network are independently operated and are screened for active licensing, registration status, and disclosure history through public regulatory databases. "Vetted" refers to this screening process. Many, though not all, advisors in our network operate under a fiduciary standard; fiduciary status may vary depending on account type and services provided. Matching does not imply endorsement of any specific advisor.Please be advised that alternative investments carry a risk of monetary loss. Neither Benzinga nor its staff recommends that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. All information contained on this website is provided as general commentary for informative and entertainment purposes and does not constitute investment advice. Benzinga will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on this information, whether specifically stated in the above Terms of Service or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.
