Tax Planning in Chicago, IL

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Tax Planning Advice

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’ve found that the keys to avoiding that problem are awareness and planning.

First, let’s talk about how different sources of retirement income are taxed, starting with the good news. 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.

Now for the bad news. 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 will be taxed, 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 of 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.

Now, what if your strategy is to systematically sell investment shares to generate retirement income? In that case, each sale would also generate a long- or short-term capital gain or loss, which you would need to report on your tax return. In most cases, this is a bad strategy.

Tax Planning for Individuals and Families

In our years of serving as retirement tax advisors, we’ve seen that the main source of retirement income for most, besides Social Security, is the money they have in their 401(k)s and IRAs. Those accounts are tax-deferred until you start taking withdrawals, which the IRS forces you to do starting at age 72 to satisfy your required minimum distributions (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 strategies and income tax reduction strategies that can help to minimize the amount of taxes you pay when the time comes to start taking withdrawals from your retirement accounts.

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STRIDE Financial is a full-service financial firm dedicated to helping those in the Chicago, Illinois 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.

Copyright © 2022 STRIDE Financial. All Rights Reserved.

STRIDE Financial is a full service financial services brokerage specializing in comprehensive, holistic financial planning, and offers a complete line of financial services and products for families and businesses - including retirement planning, college planning, estate planning, business planning, life insurance; annuities; health insurance; property and casualty insurance; long term care insurance; disability insurance; and investment advisory services. This presentation is for informational purposes only and is not intended to be a solicitation, offering, or recommendation of any security. Although this presentation may include investment-related information or opinions from its presenters, you should not consider anything you find in this presentation to be a recommendation that you buy, sell, hold or otherwise invest in an individual security, or any other investment or asset. This presentation does not intend to provide investment, tax, or legal advice. Investment Advisory services are offered by STRIDE Investments, LLC. Additionally, STRIDE Investments does not represent that any securities, products or services discussed in this presentation are suitable or appropriate for all investors. 

A franchise of The Retirement Income Store.

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Copyright © 2022 STRIDE Financial. All Rights Reserved.

Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. STRIDE Financial and Sound Income Strategies, LLC are not associated entities. STRIDE Financial is a franchisee of The Retirement Income Store®, LLC. The Retirement Income Store®, LLC and Sound Income Strategies, LLC are associated entities.

A franchise of The Retirement Income Store.