Don't make these tax mistakes when you retire
Contributed by Daniel Heuer
08 February, 2017
Your golden years are just around the corner. Break out the golf clubs and leave your worries behind.
Well, not all your worries, unfortunately. There's the small matter of making the most of your finances upon entering retirement. There are a number of things to remember that are usually different for every person, so it's not the easiest task in the world, but it's something that will be greatly beneficial to you and your family.
Don't ignore required minimum distributions
Any traditional IRA or 401k requires you to make withdrawals halfway through your 70th year. If you forget or "don't worry" about it, you're losing out in a big way. We're talking up to a massive 50% tax on the amount you neglected to take out. Imagine half of that money gone for no reason. Pay attention to deadlines and use the cash you worked so hard for.
Don't neglect keeping records of what you spend on healthcare
Out of pocket healthcare costs are probably taking a large chunk of your money, but there's good news. "If that chunk is 10% or more of your adjusted gross income, you can claim a medical expense deduction on your taxes," says Dallas tax attorney Joe Garza. "Don't make life harder on yourself. Pay attention to the money you're spending on healthcare and then get back as much as you possibly can."
Do plan ahead of retirement
Unless you have big investments set up, you're probably about to make little to no income. It sounds terrifying, but it has to be looked at as a chance to do some serious tax planning. "For example, there's a good chance you'll have a year of high deductions and when that's coupled with a year of super low income," Garza continues, "so you should convert your IRA to a Roth IRA and then you can get away with paying virtually no taxes."
Do use your retirement money in the right order
If you don't plan the way you spend or gift your retirement benefits you could literally be wasting thousands of dollars. There's an order to follow and that order depends on different factors. No matter your situation it would be wise to hire a retirement planner or similar financial consultant. In most cases the cash you save greatly outweighs what you spend on the much needed assistance. It'll also help you hit that golf course with one less thing to worry about. And isn't that what we all want out of our retirement?
Don't miss out on money that's rightfully yours. Plan ahead. Put in the extra effort. Enjoy your life exactly the way you want with the cash you earned.
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