John Napolitano CFP®, CPA, MST
US Wealth Management Chairman and CEO
Most Americans are conditioned to postpone the payment of income taxes for as long as humanly possible. Yet for some, this desire to postpone could end up costing you more in the long run.
I’m specifically thinking about those who were high earners during their working years. During the first few years of retirement, before your required minimum distributions (RMD’s) kick in, you may feel pretty good about filing tax returns with a very low taxable income and an equally low amount of tax. But that temporary joy could be even better if you extended your tax planning mentality to all of your retirement years, and not just the first few.
Because of the new tax act, taxable income over approximately $9,500 will be taxed at 12%. That’s a pretty low rate for someone who may be used to paying in excess of 30% in federal taxes. That 12% tax bracket for married couples filing jointly lasts until your taxable income creeps up over $77,400. If you’re likely to be over that amount when you must start taking retirement distributions, this year could be a year when you may consider creating income, but at a lower tax rate. For a retiree, the best way to create income is to withdraw from retirement assets.