Lifepoint Financial Design – LifePoint Financial Services – Mike Metzger Financial Planning

As a CERTIFIED FINANCIAL PLANNER™, I often see people approaching retirement not giving enough consideration to taxes in their retirement living.  The idea that you will have lower income and lower taxes in retirement is not always true. During the working years, the only tax strategy is to maximize tax deferral and retirement savings.  However, in retirement there are many more considerations for tax savings as you withdraw money from various sources. You have worked hard to accumulate assets to live a fruitful and enjoyable retirement.  Make sure you are not giving away more than is necessary to taxes in retirement by following these five strategies:

  1. Make sure you are being strategic about when and how you are withdrawing funds for income.  Tax management within non-retirement accounts is crucial to mitigate taxation when needing funds.  By establishing a diversified portfolio, you can manage your taxes by capturing losses of some investments against the gains of other investments across non-retirement accounts.  This will help to reduce or eliminate taxation when distributing income for your retirement. Speak to both your financial advisor and tax accountant to make sure they are on the same page with your income strategy.

  1. Know the social security inclusion tax brackets.  Just having an understanding of “provisional income” and how much increases your social security taxation, can mean a significant difference in taxable income.  Social Security income can be added you’re your taxable income by 0%, 50%, or 85%. If you are on the cusp of the social security inclusion brackets, speak to a financial advisor on investment strategies that can help reduce that social security taxation.

  1. Convert traditional IRAs to Roth IRAs at the appropriate times.  It can make sense to slowly covert traditional IRAs to Roth IRAs during the last few years of employment or during retirement when experiencing lower income year.  Often times this will occur between full retirement age (66 or 67) and 70.5 years old, when distributions from retirement accounts are mandated by the IRS. By converting to a Roth IRA, you can reduce the amount of taxable and provide for more long-term wealth.

  1. Maximize your Health Savings Account during your final employment years.  A Health Savings Account, or HSA, is combined with a high-deductible medical insurance plan offered through your employer or on your own.  The HSA can be an extremely valuable and tax-efficient strategy for saving for future medical expenses. With extreme inflation in medical expenses year-over-year, this can provide a lot of value.  An HSA plan is called triple tax-free because the contributions are deductible, the growth of the account is tax-deferred, and the withdrawals for qualified medical expenses are income tax-free. This is tax-efficient vehicle that cannot be passed up.

  1. Manage your investment accounts based upon their tax classification.  Your investment accounts should be managed based upon how they are treated for tax purposes.

  • Your Roth Account: These funds generally should be treated more aggressively due to their tax-free growth.  

  • Your traditional IRA or retirement account: These funds should be treated more strategically with trading, as the taxation is tax-deferred and all funds withdrawn down the road are treated as ordinary income.

  • Your taxable brokerage accounts:  These accounts should be titled in joint with-rights-of-survivorship or in trust name, as these funds will receive a step-up in cost basis should one or multiple owners pass away.  This step-up in cost basis is a major advantage to any beneficiaries or the joint owner

Taxes in retirement can be managed if the right strategies are in place.  If you have any specific questions relative to your unique financial circumstances, please call our office at 805-234-7288 or email me at for a complimentary consultation.

Michael Metzger CA Insurance LIC# 0H86440, is a registered representative with and securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation.

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