One challenge during retirement is determining when to withdraw from each type of retirement account. The conventional view is to withdraw from taxable accounts first, then tax-deferred (e.g., 401(k)s), then tax-free (e.g., Roth accounts). However, this method could potentially waste tax deductions or place you in a higher tax bracket. A number of factors have to be considered in planning your withdrawals, including tax rates, time horizon, income and spending. Asset placement matters as well. This means placing stocks and bonds in the appropriate type of account for tax purposes. It can be complex, but a financial advisor can provide advice on how to maximize efficiency of retirement withdrawals.
Key Takeaways:
- You shouldn’t just leave a Roth IRA for your retirement because it actually can cause you to have a negative taxable income.
- You want to come up with a retirement withdrawal strategy that allows you to take advantage of the deductions available to you.
- Tax rates are very important when it comes to what decisions you are going to make regarding your portfolio. Where you place your investments is just as important.
“The theory is that you can prolong your portfolio by deferring tax bills as long as possible.”
Read more: https://www.exchangecapital.com/blog/whats-your-retirement-withdrawal-strategy
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