Tax And Financial Planning Tips For Retirement

Tax And Financial Planning Tips For Retirement

Retirement is an exciting time. After a lifetime of hard work, you’re finally ready to focus on family, travel, and hobbies. But just because the work stops doesn’t mean taxes do. When your income is fixed, taxes can take on a whole new hue. Whether you’re retiring now or simply thinking about your future, here are some things you should know about taxes and retirement.

As you consider budgeting for your retirement, don’t forget that certain taxes don’t discriminate based on employment. These include property taxes, sales taxes, special assessments from your city or state, etc. Adding these up and making sure you set a proportional amount aside monthly will make paying them much less painful.

To tax now or later?

As you choose your retirement vehicles, you’ll find you have options as to when you pay the taxes. Some contributions are made with after-tax dollars and provide no immediate tax benefit. When the time comes for you to draw down from these accounts, your distributions are tax-free. Other vehicles tax distributions as regular income or, in some cases, as capital gains. Your CPA will help you plan strategies both for choosing your vehicles and also for which to begin drawing down first.

Planning tip: Consider the timing of income tax rates.

When choosing between different types of retirement accounts, be sure to think about the impact of your tax rate before and after retirement. Ultimately,  you will want to choose vehicles that allow for deferring income while in high tax rate years and recognize taxable income in lower tax rate years.

What are some of your options?

Company retirement plans 401(k) or 403(b) provide a great way to save for retirement since the funds are reducing your current income and often companies will provide a match or a company contribution to incentivize participation. In 2022, employees under the age of 50 may contribute up to $20,500 per year to their 401(k). The catch-up contribution for employees age 50 is $6,500, for a total contribution limit of $27,000. The combined total employer and employee contributions cannot exceed $61,000 for the year and $67,500 for employees age 50 and older. If you leave a company, you can generally roll over the balance in the account into an IRA. There is also the ability to borrow against these funds while you are still working at the company and the loan will not be considered a taxable distribution as long as you meet the payback obligations of the company’s plan.

A Roth IRA (Individual Retirement Account) is a special account that allows tax-free growth and tax-free distributions once you’ve reached the appropriate retirement age,  assuming you’ve held the account for at least 5 years. You make contributions with funds you’ve already paid taxes on. Deposits are limited to $6,000 annually or $7,000 if you’re over age 50. However, advisors should note that the income phase-out ranges for 2022 is $204,000 to $214,000 for married filing jointly, compared with $198,000 to $208,000 for 2021.

Roth IRA contributions are subject to income limitations, meaning some people earn too much money to qualify. Your CPA will be able to help you determine if you qualify and can also help you convert a traditional IRA to a Roth IRA if this is a good strategy for you.


In retirement, it’s important to stretch your savings as far as you can. Have a conversation with your CPA about reviewing your available deductions, to learn if they exceed the standard deduction. Some of these might become more relevant in your retirement.