At Virginia Retirement Services, we have always put an emphasis on the importance of tax reduction as it relates to retirement plans and Social Security income.
- Taxes may continue increase during our life expectancies, and many times we see that maximizing Social Security income (which is only partly taxable, whereas IRA and 401(k)-type plans are 100 percent taxable) may make good sense as it can grow 6 percent to 8 percent per year between your “full” retirement age and the age of 70 — adjusted for inflation — and use funds from the taxable retirement accounts while taxes are lower. In addition, if married, your spouse would then inherit the higher Social Security payment.
- Most clients we speak with have not had a thorough analysis of transferring the taxable 401(k) or IRA-type accounts to a tax-free Roth IRA, paying the taxes up front and then taking some tax-free income. While that strategy is not for everyone, it certainly works for many.
- We also work with clients who would like to leave assets to their heirs with an accompanying tax liability. One way that could be accomplished is by using the after-tax dollars from their retirement accounts to purchase life insurance, whose death benefit is distributed to their heirs tax free.ǂ This strategy often leaves behind a net of far more of your funds!
Determining the strategies like these is an area in which we specialize. The tax laws change every year, therefore it is important to work with a team of professionals who can help you manage these changes and stay up-to-date.ǂInsurance agents do not give tax, accounting or legal advice. See your professionals in these areas to see if this strategy works for your unique situation.
At Virginia Retirement Services we specialize in professional tax planning services for Virginia residents in the Tidewater communities of Virginia Beach, Norfolk, Chesapeake, Portsmouth, and the general Hampton Roads and Tidewater area.