Tax Torpedo

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For many people, the difference between a retirement filled with enjoyment, fun and security and a retirement dominated by worry, concern and fear depends on a single factor. INCOME. But there are a number of words that must be placed in front of the word “income” before you can get what you really want.

Ample Income

Inflation-Adjusted Income

Lifetime Income

And perhaps the most important of all: Tax-Efficient Income

Spendable Income

Spendable income means what remains of your income after taxes that is available to spend on the things you need and want throughout retirement.

Generally speaking there are two ways you can try to increase spendable retirement income. One approach is to attempt to increase the growth rates or returns on your savings and investments. A one or two percent increase in return each year can make a big difference in the amount of income your portfolio can provide. Unfortunately, from a risk management perspective, we know that in order to get a boost in return we must either select financial instruments higher up on the risk vs. reward pyramid, meaning more risk of investment loss, or instruments higher up on the time vs. reward pyramid, meaning committing our money for longer terms or maturity dates.

But for some, there may be another option that should at least be considered. If we can find a legal way to reduce the amount of taxes we must pay on our income, then we end up with a greater amount of net after-tax spendable income.

Here at IFC, we help our clients with advanced planning in this time in their life by helping them reposition financial instruments or change their location on the tax pyramid. Our goal is to ensure that when you start taking retirement income from these instruments, combined with your Social Security, the taxable portion of the Social Security benefit will go down and the tax-free portion of that benefit will go up.

The bottom line is that some people might be able to increase their spendable retirement income throughout their retirement years by being “tax-wise” about their Social Security and other retirement income. Which means that, depending on a person’s specific circumstances, there might be alternatives for boosting one’s spendable income that do not require selecting financial instruments located higher up on the risk vs. reward pyramid.

Learning if this is a strategy that can work for you starts with an understanding of Social Security claiming strategies, that’s where we come in.

Contact us today to find out the schedule for our next class.

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