Mike Giordano, CFP®

Taxes is one of our biggest reoccurring expenses. So, it needs to be managed just like other expense—your subscription services, your dining decisions, your healthcare policies. 

Find a better streaming service, you swap. A tastier menu, you change. A more affordable policy, you switch.

Find a way to lower your tax bill, you adjust your strategy to claim it.

At different points in your life, you have different opportunities for tax savings.

Here we’ll address retirees who have yet to start claiming social security benefits.

Let’s take a couple with a lifestyle that matches their after-tax income of $120,000.  They decide 2024 is the time to hang it up and head for the beach.

So, the challenge now is making up that $120,000 shortfall. If they take it all from their Traditional IRA or 401k, they’ll pay taxes on that entire amount. Those taxes could easily top $20,000 in some states. If they take their income from a brokerage account, they’ll only pay taxes on the gains. And, those gains may be taxed at a lower rate if they’re selling long-term assets. Furthermore, if they have a Roth IRA, they could grab the money from there and potentially pay no taxes.

You can see how the decisions you make on where to get your income matter profoundly when it comes to your tax bill.  

Let’s take it a step further. You’re under 65 and need health insurance before Medicare kicks in. You look around on the Healthcare Marketplace (healthcare.gov) and see you may be eligible for tax credits based on your income. Here, again, is another potential pitfall from taking money from your Traditional IRA or 401k. You just drove up your income, thus reducing your tax credits. A double-whammy!

Social Security would factor into this equation as well. That’s why there’s not a cut-and-dried approach fit for every retiree.

Financial planning is a giant puzzle that involves playing lots of real-life games with many pieces.  Working the tax code is one of those games. The more assets you have, the more you may stand to benefit (i.e. save) from better understanding the code.

Recognizing how all the pieces fit together is how you can craft a strategy to reduce your tax bill.  No two people have the same setup, the same goals. That’s why everyone needs their own strategy.

Right now, early in the year, is the best time to think about long-term tax planning.


This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. 

Advisory Services Network, LLC does not provide tax advice.  The tax information contained herein is general and is not exhaustive by nature.  Federal and state laws are complex and constantly changing.  You should always consult your own legal or tax professional for information concerning your individual situation.

All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.