The theme this week on the Retirement Quick Tips Podcast is: Top Challenges Retirees Face In 2023

Today, I’m talking about a real sore spot for retirees - taxes. 

Even though your income is likely to be lower in retirement, you still need to contend with taxes in retirement. Your social security is taxes, you still pay property taxes, and when you combine income taxes with other taxes like dividends and capital gains, many retirees still face tax burdens that are higher than they planned on.

Then, once you reach age 72, you’re forced to take mandatory distributions from your Traditional IRA and 401k accounts, which usually causes your taxes to go up even more. 

On top of that there’s the ever-changing tax climate and the unexpected nature of how taxes change from year to year, making taxes a big question mark when it comes to planning and budgeting where you’re money will go in retirement. 

Unfortunately, there isn’t much you can do about paying taxes, but of course, it still is important to minimize your taxes wherever possible and to make decisions with the tax implications in mind. 

Unless you have a very simple tax situation, the first piece of advice I usually offer clients is to pay someone like a CPA or an enrolled agent to do your taxes. The long-term benefits of using a professional, especially one with a good grasp on current tax laws who is proactive, will usually provide far more financial benefit in the long-run compared to what they charge to do your taxes. 

Beyond hiring a professional to help you minimize your taxes, it’s important to consider where you want to live in retirement, be strategic and careful about your withdrawals and charitable giving, pick tax free investments and minimize capital gains where possible, especially if you’re in a higher tax bracket in retirement, and consider Roth conversions in lower income years are all ways you can try to keep your taxes lower in retirement. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance