For the vast majority of retirees, every penny counts. However, a significant portion of those pennies may end up with Uncle Sam, so potential retirees and their families must learn about the tax duties people face even as they age.
After all, while paying taxes is necessary, you have no reason to pay more overboard. Plus, if you’re on the verge of receiving a large tax bill, it isn’t easy to budget and figure out how much money you have to live on.
Here are ten ways seniors can reduce the burden of taxes on their retirement savings:
- The Social Security Administration: People may owe taxes on up to 85 percent of their Social Security benefits, depending on their overall income and filing status. Amu earnings up to $19, 560 are not subject to Social Security taxation.
- Premiums for Medicare: Medicare D premiums, Medigap, and Medicare Advantage Plans are all tax-deductible if a person is self-employed and does not qualify for group coverage.
- Contribution to IRAs and 401(k)s can be made before or after taxes. Once you start withdrawing money, you’ll only have to pay taxes on what you take out as income, and withdrawals from a Roth IRA are tax-free.
- Profits from Investments: Many people will retire after they reach the age of 65, lowering their income and perhaps their capital gains rate.
- The Sale or Purchase of a Home: If you’ve lived in your home for at least two of the previous five years before selling it, you’ll not have to pay capital gains taxes on profits up to $250,000 for an individual or $500,000 for a married couple.
- The Cost of Long-Term Care: Deductions are available for nursing facilities, assisted living home care, and memory care costs, as well as premiums paid for qualified care insurance policies.
- Charity Donations: Cash donations can be deducted up to 60% of AGI and property gifts, such as a vehicle or real estate, can be deductible at the item’s fair market value.
- Gifts to Family Members: Individuals might give money to family members on an annual basis. As of 2022, the annual gifting maximum for each family member is $16,000, and your spouse can donate another $16,000 to the same family members.
- Loans and Mortgage: Since the money obtained through a loan or reverse mortgage is borrowed rather than earned; it is not taxed.
- Life Settlements: The money received from a life insurance policy’s sale (life settlement) may be exempt from federal taxes if the policy owner is suffering from chronic health conditions or terminal conditions.
Understanding these and other aspects of how taxes affect seniors is vital so you can minimize their impact and make informed financial decisions. If you don’t factor in the impact of taxes, you won’t be able to create a budget that works for your family.
Seniors should seek the advice of a tax professional who can guide them through the complexities of the IRS requirements and highlight the potential deductions that may be available to them depending on their specific circumstances.
Contact Information:
Email: [email protected]
Phone: 3604642979
Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely withhelping them pursue the most comfortable financial life possible.Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.Aaron can help you and your family to create, preserve and protect your legacy.That’s making a difference.
Disclosure:
Disclosure:Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.
