Tax Planning in Melbourne, FL

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Tax Planning in Melbourne, FL

You may leave behind a lot of things when you retire, but your tax burden isn’t one of them. In fact, without proper income tax reduction strategies, they can potentially be an even bigger burden in retirement. As tax and financial advisors, we know the keys to avoiding that risk are awareness and planning.

Tax Planning Services for Your Retirement

It’s important to understand how different sources of retirement income are taxed. If your only source of retirement income is Social Security, you probably won’t pay any taxes. That’s because Social Security income – by itself – is tax-exempt. Unfortunately, if you’re like most people, Social Security won’t be enough. You’ll need other sources of income, which means a portion of your Social Security income probably will be taxed. As for how much, it varies, but it can run as high as 85%.

For example, you’ll probably pay that 85% if you get large monthly income payments from a pension. With the pension itself, most are funded with pre-tax income. If that’s the case, it means all your pension income is taxable each year. However, if a portion of your pension was funded with after-tax dollars, then only a portion of the income will be taxed.

For investment income from interest, dividends, or capital gains, naturally, you’ll have to continue paying taxes on that just like you did before you retired. If you have a strategy that involves systematically selling investment shares to generate retirement income, in that case, each sale will also generate a long- or short-term capital gain or loss, which you would need to report on your tax return. In most cases, and for many reasons, this is a bad strategy.

Required Minimum Distributions

Through years of serving as retirement tax advisors, we know the main source of retirement income for most, besides Social Security, is the money they have in their 401(k)s and IRAs. These accounts are tax-deferred until you start taking withdrawals, which the IRS forces you to do starting at age 73 to satisfy your required minimum distributions, or RMDs. Your RMDs are unavoidable even if you have plenty of income from other sources. Through our retirement tax planning services, we can help you implement tax saving and reduction strategies that can help minimize the amount of taxes you pay when the time comes to start taking your RMDs.

Arbor Financial Services of Florida is a full-service financial firm dedicated to helping those in the Melbourne, FL area meet their long-term financial goals. Our team of financial advisors and wealth managers are experienced in helping clients preserve their savings, so they can use it as a source of steady income in retirement.

All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Arbor Financial Services,  and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services to any residents of states where otherwise legally permitted to conduct business. Fee-based financial planning and Investment Advisory Services are offered by Sound Income Strategies, LLC, an SEC Registered Investment Advisory firm. Arbor Financial Services and Sound Income Strategies  are not associated entities. Arbor Financial Services is a franchisee of Retirement Income Source. Retirement Income Source and Sound Income Strategies are associated entities. © 2023 Arbor Financial Services

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