Tax Planning Strategies for Retirement - Financial Services from Lundervold Financial

Taxes, tax laws, and tax brackets are a concern for anyone, especially as you approach retirement. How will you pay taxes on retirement income if you live on a fixed income? How can you protect yourself from surprises that show up at tax time and potentially cost you more than you anticipated? How can you potentially reduce taxes, especially in retirement?

Any retirement plan should address taxes, including:

  • Assessing the taxability of your current holdings and assets
  • Including tax-deferred or tax-free money in your retirement plan
  • Reducing your tax burden by strategizing which tax category to draw income from first
  • Leaving tax-free dollars to your beneficiaries

Lundervold Financial LLC is based in the Twin Cities of Minnesota, but we work with clients all over, stretching from New York to Oregon and from Minnesota to Florida. We've got you covered!

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Tax Planning Strategies for Retirement

Very few financial vehicles avoid taxes altogether, but many allow you to defer paying taxes until you reach a certain age.

Tax-deferred assets allow you to earn interest without paying current taxes; however, as soon as you withdraw money from your account, you pay taxes. Tax deferment offers an advantage for retirement plans because when you retire, you could be in a lower tax bracket. So, tax-deferred retirement tools allow you to put off paying taxes for many years.

In fact, some tax-deferred retirement tools have specific restrictions on when money can be withdrawn. If you withdraw money before reaching a certain age, typically 59.5, you may pay an additional 10% in federal taxes as well as other fees and penalties.

Lundervold Financial LLC does not provide tax advice. If you do not have a tax advisor, we can direct you to licensed and qualified tax professionals close to our office in Minnesota or near you if you live elsewhere.

We Help You Reduce Taxes in Retirement

The IRS determines your tax bracket based on your income and marital status. They use a progressive tax system, which means the more money you earn, the higher the percentage you pay in taxes. The good news is that the tax rates, at least as of 2022, are effective tax rates, which means that everyone pays the same rate at each bracket; you pay progressively higher rates on the amounts you earn within each bracket.

For example, if you make $50,000 in 2021, you will pay 10% on the first $10,275, 12% on earnings between $10,275 and $41,775, and 22% on anything over $41,775.

If you are 65 or older, you may qualify for a larger standard deduction, which can help lower your taxes. You can also talk to your tax advisor about local and state tax deferrals and exemptions. Some states and local governments offer property or school tax deferrals to people over certain ages.

We can help you build a tax-efficient strategy designed to protect some of your assets, once we understand your financial situation, risk tolerance and investment objectives.

Lundervold Financial is not permitted to offer tax or legal advice; if you need help with tax brackets and understanding tax deductions, we can refer you to an excellent, experienced tax accountant.

Learn More About Lundervold Financial’s Blueprint for Financial Clarity™

  • When do you want to retire? What do you want your retirement to look like? What sources of income will you have? What expenses will you have? Will you have debt?
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  • Where is your money invested now? What is your tolerance for risk? How hands-on do you want to be with investment management? How liquid will your investments be?
    Read More

  • Are there tax breaks and deductions that you can take advantage of as you age and approach retirement? Once you retire, are there tax benefits you need to know about?
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  • What insurance policies do you have in place for long-term medical care, and are there others that you might consider? Do you have an advance care plan?
    Read More

  • Do you have an estate plan*? Do you need us to introduce you to an estate planner and work with them to help you maximize your income during retirement and for your beneficiaries?
    Read More

*Lundervold Financial does not provide tax or estate planning, but we are part of our clients’ estate planning team. If you are looking for an estate planner, we can refer you to professionals who provide the following services: trusts, probate, charitable giving, estate planning, and tax planning.

Contact Lundervold Financial

Get in touch with Lundervold Financial’s team for information about tax planning for retirement. Review our calendar of events for upcoming financial and retirement planning seminars.