Did you know that one of the largest expenses during retirement is taxes? However, many people aren’t planning for them.
“A lot of times retirees don’t know that a lot of taxes are waiting, lurking for them in retirement,” said Anna Christine, a partner with Golden Reserve. “As those IRA and 401K accounts grow, which we love, a part of that is always going to Uncle Sam. And so, a lot of times they don’t even realize that a good portion of that portfolio is Uncle Sam’s.”
While appearing on “Live In The D”, Anna Christine talked about what she called “tax traps”.
She said most retirees plan to wait until 73, or their required minimum distribution age, and then only take out a small percentage. However, that can be a setup for two tax traps. First, Anna Christine mentioned the “widow’s penalty”, which she said happens when one spouse passes away and the surviving spouse then has to pay at the single filer rate, which is higher than two people filing together.
Next, Anna Christine discussed the “kiddos penalty”.
“When both spouses pass away and it goes to the kids, they’ve only got ten years to take it out. If they’re still working that tax liability is going to be even bigger,” she said.
Watch the video above to learn more about planning for your retirement.