TAX PLANNING STRATEGIES FOR RETIREES

            We have worked with people planning for retirement and seniors for years and our own business experience indicates that almost ninety percent of all retirees we serve are doing no tax planning!  Not unlike most taxpayers, retirees are only doing tax preparation.  We find about 65 percent of the people we provide a free tax review over pay income taxes.  Many others are creating a Social Security penalty tax problem by the way they manage their retirement nest egg.

            An important fact most often overlooked by a retiring taxpayer is that tax planning during the tax year can increase their retirement income.  In fact, many people are able to increase their income by $100 to $500 per monthly simply by doing a little tax planning.

            The biggest mistake people make when they retire is that they manage their money and savings in such a way that the receive 1099 tax statements from banks, mutual funds and other investments that increase their income taxes.  Yet others invest too much money in tax-free bonds that create provisional income which tends to increase their Social Security penalty taxes.    Many people can completely avoid the 50 percent and 85 percent Social Security penalty taxes by reviewing the way they are saving and investing their retirement funds.

            The second biggest mistake retirees make is the way they take their retirement income.  Many people are supplementing their Social Security and pension income by taking 100 percent taxable income.  The way you take your income can cause a lot of extra income taxes and Social Security penalty taxes.  During a tax review, we always look for ways to take retirement income from personal investing that is 80 to 90 percent tax-free rather than taking 100 percent taxable income.  This strategy, called retirement income management, can do a lot to increase your retirement income. 

            For most retirees, a simple tax review of seven key tax planning issues can quickly tell you whether you can reduce your income taxes or not.  The ICA provides free information on Social Security penalty taxes and a free booklet entitled, “INCOME TAX PLANNING FOR RETIREMENT”.  You may request this free information.

            In addition, the ICA also can provide you with a free 1040 tax review through a volunteer advisor team member.  You may voluntarily request a personal 1040 tax review at no cost to see if you can reduce your income taxes.  Volunteers of the ICA are independent financial professionals who offer their services to ICA members.  The key to tax planning is to review your tax situation, evaluate the way you are receiving retirement income and see if there is a tax planning opportunity to reduce taxes.  Doing nothing but tax preparation will never reduce your income taxes or Social Security penalty tax.