Steven England discusses tax-free retirement solutions
Listen to the interview on the Business Innovators Radio Network: https://businessinnovatorsradio.com/interview-with-steven-michael-england-president-of-capstone-retirement-discussing-tax-free-retirement-solutions/
Steven Michael England, president of Capstone Retirement discusses tax-free retirement solutions. Steven shares insights into the common challenges faced by clients aged 60 to 75, highlighting that most of their retirement savings are held in pre-tax accounts such as 401(k)s and IRAs. He explains the implications of these accounts, especially concerning estate planning and tax burdens for heirs. The conversation emphasizes the importance of understanding the differences between pre-tax and tax-advantaged accounts, like Roth IRAs, and how to strategically navigate these to optimize retirement planning. Tune in to learn how to approach tax-free retirement solutions effectively.
Many retirees face challenging financial situations due to the substantial amounts of pre-tax retirement money they have accumulated throughout their working years. This includes funds in 401(k)s, IRAs, and 403(b)s, all of which are considered pre-tax money. While these accounts may seem significant on paper, they come with a hidden cost: considerable tax liabilities upon withdrawal.
As Steven Michael England points out in the podcast, the majority of retirement funds are pre-tax, meaning retirees have not yet paid taxes on this money. When they begin to withdraw these funds, they face taxation at the highest income tax rates, both federally and at the state level. This can create a significant tax burden, especially for those with large retirement accounts, potentially leading to a loss of 40% to 50% of their savings to taxes.
Another layer of complexity arises from the requirement for retirees to take Required Minimum Distributions (RMDs) starting at age 73. These mandatory distributions can further exacerbate tax liabilities, as they are taxed as ordinary income. If retirees are unprepared for this, they may find themselves in a difficult financial position, having to withdraw money they do not need simply to comply with IRS regulations.
Given these challenges, it is crucial for retirees to have a tax strategy in place. One effective strategy discussed in the episode is the Roth conversion. By converting pre-tax retirement funds to a Roth IRA, retirees can pay taxes on the converted amount now, rather than later when they may be in a higher tax bracket. This allows for tax-free growth and withdrawals in the future, providing a more favorable tax situation during retirement.
Steven emphasizes the importance of strategically filling one’s tax bracket. For example, if a retiree has a certain amount of income that keeps them in a lower tax bracket, they can convert enough pre-tax money to a Roth IRA to fill that bracket without moving into a higher tax rate. This approach enables retirees to manage their tax liabilities more effectively over time.
It is essential for retirees to start planning for these conversions well before they reach the age of 73. Many individuals do not have a plan in place, which can lead to missed opportunities for tax savings. Steven advises that having a plan is better than doing nothing, as it allows retirees to take proactive steps to minimize their tax burdens.
Steven Shared: “Retirement and Wealth Preservation Strategies for your Retirement for Financial Peace of Mind. Tax Strategies to minimize taxes for you and your loved ones”
About Steven England
Financial advisor and Retirement Planner since 1982, Best Selling Author of “The Wealth Lifestyle”, honored with numerous industry awards and honors of achievement. I value close business relationships with clients and treat them the way I would want to be treated.
Learn more: http://www.thewealthlifestyle.com/
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