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Beth A. Botti, CFP®, ChFC, CLU, CDFA™
Financial Consultant
California Insurance License #0G24537
612 Wheelers Farms Road, Milford, CT 06460
Phone: 203-877-6556 Ext. 169
Fax: 203-301-0736
Email: beth.botti@equitable.com
November/December 2020
Avoid Tax Surprises in Retirement
Too many people underestimate the effect of taxes on their retirement income. And with the national debt expanding, Congress could increase taxes in the future. But with proper planning, there may be ways to help reduce your tax exposure.
Practice Tax Diversification
Tax diversification means dividing your assets into three different buckets:Taxable - Examples include credit union accounts and brokerage accounts. Gains and income are taxable in the current year. Long-term gains and dividends are taxed at lower rates.
Tax-deferred - These include traditional IRA, 401(k) and 403(b) plans. In these accounts, income and capital gains are generally deferred until you take money out. Withdrawal amounts get taxed as ordinary income and if taken before age 59½ an additional 10% tax penalty may apply.*
Tax-advantaged - You can build up your tax-advantaged bucket by contributing to Roth accounts or by converting traditional IRA assets into a Roth IRA. You’ll pay income taxes on the balance you convert, but growth in your Roth account is tax-advantaged from that point.**
One More Surprising Tax
Many retirees are shocked to discover that up to 85% of their Social Security benefits are taxable if their income rises above a certain threshold. This is just one more reason to consider income taxes early on — when investing for retirement.Actionable Steps:
- Consider contributing to a Roth IRA account and/or convert traditional IRA funds to a Roth IRA;
- Delay Social Security benefits as long as possible;
- Meet with your financial and tax professionals who can assist in planning for taxes as you invest for retirement.
* The CARES Act suspended the 10% early withdrawal penalty for 2020.
**Converting from a traditional IRA to a Roth IRA is a taxable event. To qualify for tax and penalty-free withdrawals a Roth IRA must be in place for five tax years and the distribution taken after age 59 1/2 or due to death, disability or a first time home purchase (up to a $10,000 lifetime maximum). Roth IRA distributions may be subject to state taxes.
GE-3144808(7/20)(Exp.7/22)
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Duly registered and licensed financial professionals offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN), offer investment advisory products and services through Equitable Advisors, LLC, an SEC-registered investment advisor, and offer annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc.). Equal Opportunity Employer - M/F/D/V. Equitable Advisors and its associates and affiliates do not provide tax, accounting, or legal advice or services. Representatives may transact business, which includes offering products and services and/or responding to inquiries, only in state(s) in which they are properly registered and/or licensed. Your connection to this website does not necessarily indicate that the sender is able to transact business in your state. The information in this website is not investment or securities advice and does not constitute an offer. For more information about Equitable Advisors, LLC you may visit https://equitable.com/crs to review the firm's Relationship Summary for Retail Investors and General Conflicts of Interest Disclosure.
GE-6572038.1 (4/24)(Exp. 4/26)
CFP®, and CERTIFIED FINANCIAL PLANNER™ are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete the CFP Board's initial and ongoing certification requirements.
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