Tax Strategies for Retirees

A successful retirement begins with having the money you need to enjoy your new status as a “retiree”. A big component of retirement financial security is having an effective, tax-strategic withdrawal plan for your retirement funds.

Following are some sound ideas for a tax-efficient retirement from *Tara Siegel Bernard, The New York Times:

“Manage tax brackets. With a little planning, many older people can manage which tax bracket they will land in. But you will need different types of retirement accounts to work with, including a traditional 401(k) or I.R.A. (tax-deferred), a Roth I.R.A.(money is withdrawn tax-free) and taxable investment accounts. That way, you can strategize about what to draw from in a given year and better manage how much of your income is taxable.

One approach is to simply start spending down traditional I.R.A. accounts first — perhaps while delaying taking Social Security. By doing that, the eventual required minimum distributions will be lower.

Roth conversion. Retirees might consider converting a portion of a traditional I.R.A. account to a Roth I.R.A. Taxes will be due on the amount converted, which is why this is best done when you’re in a lower tax bracket, perhaps before turning to Social Security.

Pay $0 in capital gains. Long-term capital gains are not taxed for people in the 10 and 15 percent tax brackets, which means many retirees will have opportunities to pay nothing at all.

“Harvest capital gains in years when the tax rate on them is zero,” said Wade Pfau, a professor of retirement income at the American College of Financial Services.

Charitable deductions. Charitably inclined taxpayers nearing retirement — who also itemize their deductions — might consider making two years of donations right before they stop working (while they are still in a higher tax bracket). But instead of donating directly to the charity all at once, you can parcel it out over a few years by parking the money in a donor-advised fund.

Retirees who must take required minimum distributions are also permitted to donate some or all of that amount directly to charity (up to $100,000). “If they do that, they don’t get the charitable deduction,” Mr. Luscombe said, “but they don’t have to take that into income.”

Medical deductions. While it has become more difficult to deduct medical expenses, people 65 and older have an advantage in 2015 and 2016: They can deduct medical and dental expenses that exceed 7.5 percent of their adjusted gross income. After 2016, the floor will rise to 10 percent.

So retirees and their spouses might consider getting any nonemergency procedures, operations or even dental work with high out-of-pocket costs during the same year if they expect their combined expenses could exceed that floor.”

Tax strategizing for retirement income is a vital component of your plan.

With offices in Williston and Rutland, Vermont, Copper Leaf Financials’ team of experienced financial planners include Certified Public Accountants (CPAs). Licensed CPAs have long been considered the standard for financial knowledge, objectivity and integrity, prepared to handle the most demanding and complex decisions about taxes, retirement, estate planning, investments and insurance. Shouldn’t the person who assists you with your planning and wealth management also understand the complexities of your tax situation?  Make sure that your plan is “CPA Strong”. Visit or call 802-878-2731.

*For the full article by Tara Siegel Bernard visit:

John Davis, CPA, CFP®, Copper Leaf FinancialTax strategies for retirees