5 Tax SECRETS Every Retiree Should Know
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- Опубликовано: 28 май 2024
- There’s only so much you can do during your working years to reduce your taxable income. But in retirement, this changes drastically. James explores these lesser-known strategies and how they can help you save substantial money.
Tax strategies extend beyond business owners and wealthy individuals. Retirees can benefit significantly from tax planning, enhancing their financial security.
👉 Foundation - Standard Deductions: As you age, standard deductions evolve. Turning 65 increases your deduction-$13,850 for those under 65 and $15,350 for those over 65. Although this isn’t a tax strategy of its own, the reduction in taxable income forms the basis for other strategies.
👉 Tax Loss Harvesting and Tax Gain Harvesting: Leverage tax loss and gain harvesting to manage investments and cut tax liabilities. Selling underperforming assets offsets gains, reducing taxable income. Selling strategically at lower tax rates, even 0% rates, lowers the tax burden based on your income.
👉 Tax Arbitrage: Manage investments to minimize tax impact. Roth conversions exemplify tax arbitrage-shifting traditional IRA funds to Roth IRA. Despite upfront taxes, long-term savings result from potential tax rate hikes.
👉 Donor-Advised Funds: Bundle multiple years' charitable donations into one to exceed standard deduction using donor-advised funds. Maximize impact and tax efficiency.
👉 Qualified Charitable Distributions: On top of donor-advised funds, you can start donating directly from your IRA at the age of 70 and a half. The benefit of this is that those donations count against what your required minimum distribution would have been.
👉 Social Security Optimization: Understanding tax implications on Social Security benefits is crucial. Up to 85% of benefits can be taxable. Make informed choices on benefit claiming and retirement income strategy.
Retirement offers unique avenues for tax efficiency. Start early to secure financial prosperity in your golden years.
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⏱Timestamps:⏱
0:00 intro
0:56 Standard Deductions
2:14 Tax Loss Harvesting and Tax Gain Harvesting
8:12 Tax Arbitrage
10:07 Donor-Advised Funds
13:07 Qualified Charitable Distributions
14:06 Social Security Optimization
15:05 Outro
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You have a gift James for being able to take complex topics and break them down into very manageable elements so that they can be well-understood. Thank you!
That Qualified Charitable Deduction is a really good idea, and allows you to be more generous for the same cost to you.
You have to have nonretirement investments for the tax harvesting. unfortunately, many of us were told put all your money in 401k by prominent retirement "experts" and cannot use this strategy.
I love all your videos. You are knowledgeable and very likable. Keep them coming.
Thanks for another outstanding financial lesson! You are a gifted teacher and smart advisor.
Thank you for sharing all this information. I have learned so much from you.
I love this video. several pieces of information that I have been looking for.
re tax gain harvesting: watch out for IRMAA . Same applies to Roth conversions. Also in your planning you might consider tax consequences for your beneficiaries/heirs.
Give now.
Don’t wait for them to wish for your death.
Excellent point. I didn’t want to go that high because of the tax rate.
Now, with trumps tax cuts expiring, I’m forced to go a little higher with conversions but not enough to impact IRMAA.
My goal is the kids will inherit all or most Roth funds.
Another excellent video, James. Thank you for sharing your knowledge - and in such an understandable way.
I especially liked the idea of Donor-Advised Funds, where you can give to charities and get tax benefits. Keep up the great work in helping people with their retirement finances!
Thanks, will do!
Great information on numbers 2 and 3. Roth conversions followed by a three year down market could be devastating to a portfolio and is the reason I can't pull the trigger.
Thanks. Little by little...learning. Some not applicable but still giod
I really enjoy your videos. So good.
great information, thank you
Thanks James, always learn something with your content!
Excellent, James, as usual!
Love your content
Very informative video, thanks
outstanding as always.
I read that in California, social security income is fully taxed.
Thanks for explaining what happens if you go over a little bit. I contributed a few hundred to a regular IRA account to get back under the amount.
The amount of Social Security that is taxed increases with Tax Gain Harvesting. This factor must be taking into consideration when tax gain harvesting or you will overshoot the mark.
😊wow😊 thanks😊
Looking good😊
Love your videos. So easy to understand!
I'm so glad!
😂😂
You’re very sharp for such a young guy 👍
My question is if I withdrwan" unearned income " like mutual fund or selling business ,it will be added to Annual adjusted income (AGI) related tax braket. I worried related to Roth Ira contribution and my next question was 15 percent capital gain applicable to long term investment from mutual fund .Thanks
Re tax gain harvesting: be careful if you are on Social Security. The capital gain income can make more of your SS income taxable, increasing your taxes even though the capital gain income stays untaxed.
Yes, you will need to do the calculation and see which side is better off.
I donate two years in one year and take itemized deduction and then take standard deduction the next year. Putting 150K in the tax fund is like to lock up the potential growth of the 150K over the next 10 years ...
I did that too
Your DAF can stay invested. Usually the company holding it for you has several investment options based on your risk profile.
Charitable organizations need to be promoting your third point on Donor Advised Funds accounts, because ever since the significant increase in the standard deduction a few years ago that took into account charitable contributions, the tax saving incentives for giving away money ended.
DAF allows people to sit on donations for as long as they want but get the tax deduction. Immediatly.
Thank you very much for the useful information. 🙏🏻❤
I might have missed this, but can tax gain harvesting be used with a 401k or IRA, or is it just a brokerage account? My understanding is it only works from withdrawing from brokerage through long term capital gains, since 401k and IRA are taxed as ordinary income. Just want to confirm.
during your discussion of arbitrage, it seems that something was left out, i.e., its explanation is incomplete. how does a roth get involved in arbitrage? what is the connection?
I had been looking at standard deductions Im single and 72 I had figured that my standard deduction for 2023 would be 15700 did I make a mistake?
15,700 for singles is what I was told. Not 15,350?
This video shows why Congress will not simplify paying Taxes. 😳
I hope you can answer this question. I understand that I can put $7500 into a Roth IRA. However, I also have a Roth 401k with my employer. Do they have to total $7500, or are they different, so the two Roth’s can exceed $7500?
They are subject to different limits. So you could do $7,500 to a Roth IRA AND contribute to your Roth 401k up to the max. This assumes your income doesn't disqualify you from making Roth IRA contributions. With the Roth 401k there aren't any income limitations.
Does Roth 401k has contribution limit too? thanks@@RootFP
@@RootFP much thanks!
What's a standard deduction?
Please switch to some videos that give a tutorial on the American tax system. Then you can make more sense of the investment tutorials.
Sorry but you forgot property tax that would greatly change the numbers
Does a retiree who is blind get both the blind and the retiree deduction?
Yes for blind and over 65 years old. Retired or not doesn’t matter.
Something has to be said about considering the trade off in total earnings when you’re focusing on tax savings. You can move to a state with little or no state income tax, but at the cost of lowering overall net take home income to where it’s lower than when you were paying the higher state taxes. Also there are benefits to higher income and paying higher taxes such as with higher income, you can qualify for more credit cards with intro bonuses and also qualify for higher credit card limits, yielding higher total rewards. Higher taxes will allow for increased spend on credit cards with high intro bonuses. Higher income also means more purchasing power with regards to qualifying for home mortgage.
That only applies if you have to take a pay cut when moving to a new lower tax/cost location. I moved from CA (13.3% income tax) to NV (0.0% income tax) and suffered no pay reduction.
Remote work is changing the landscape dramatically.
🤘
good video but you made a mistake, capital gains rate in not determined by your taxable income it is determined by your agi, so if the gain pushes your agi above the threshold you still pay capital gains tax.
James is correct. LTCG is based on taxable income, not AGI.
Let's assume you invested in a miracle stock and got 5x return? Sorry James. Extreme examples don't help.
what's total BS is that roth conversions impact your AGI. I mean, you're paying taxes to the Fed and maybe State, all at once. As long as you make no withdrawals from that Roth, it shouldn't be included as income, it's literally just a rollover.
I despise our govts tax rules, they're nothing but traps for people who've tried to do the right thing and prepare for their own retirements.
There’s a difference between a Roth Rollover and Roth conversion. A conversion is moving pretax money to an after tax account. A rollover is moving from pretax to pretax or after tax to after tax.
James is correct and clarified rollover and conversion. 👍
If you draw down your savings by 3% a year you’ll outlive your savings.
My CPA finds these tax savings. And if I wasn't happy with my CPA, I would simply find another one. If you were to start using these strategies, you'd probably get audited and will have to pay expensive penalties and fines.