At our recent Taxes & Tastes event, we tackled a question that comes up often: Which accounts should I take money from first in retirement?
Key Blind Spots Addressed
The truth is, there’s no one-size-fits-all answer. But by coordinating taxes, Social Security, and Medicare planning, you can keep more of your wealth working for you. Here are some of the key areas we explored:
- Federal vs. State Taxes
Retirement income is taxed differently depending on the type of account it comes from. Traditional IRAs and 401(k)s are fully taxable, Roth IRAs are generally tax-free, and brokerage accounts may benefit from lower capital gains rates. On top of that, some states don’t tax retirement income at all, while others do. Understanding the interaction between federal and state tax treatment is an important part of planning.
- IRMAA Awareness
Many retirees are surprised to find that Medicare premiums aren’t fixed. If your income rises above certain thresholds, you could pay an extra monthly surcharge called the Income-Related Monthly Adjustment Amount (IRMAA). Managing taxable income from withdrawals, investments, and other sources can influence whether IRMAA applies.
- Timing Social Security
Deciding when to claim Social Security is one of the most important retirement choices you’ll make. Claiming early locks in a lower benefit, while delaying increases your monthly check. The timing can also affect how much of your benefit is taxable and how your other accounts are used to supplement income. Coordinating these factors is key.
- Account Order and Roth Conversions
The order in which you use taxable, tax-deferred, and Roth accounts can impact both current and future taxes. In addition, some retirees consider converting a portion of a traditional IRA into a Roth IRA. Conversions mean paying taxes today in exchange for potential tax-free withdrawals in the future, as well as greater flexibility with required minimum distributions (RMDs). The timing and size of conversions depend heavily on your personal tax situation.
I was on fire - almost
4. Managing Surcharges on Investment Income: Even small income changes can trigger surcharges on long-term capital gains or qualified dividends. We work to keep clients below those thresholds whenever possible.
5. Georgia Retirement Income Planning: For Georgia residents, we help develop a plan to fully take advantage of the state’s retirement income tax exemption starting at age 65.
6. Bracket Management for Retired Couples: With retired spouses, we often maximize the Georgia exemption while keeping total income within the 12% federal tax bracket—creating tax-efficient income streams.
Final Thoughts
The bottom line? Retirement planning isn’t just about building enough assets — it’s about understanding how taxes, Medicare, and Social Security fit together. Each decision can have ripple effects, and what works best often depends on your individual goals and income picture.
If you’d like to explore how these considerations apply to your own plan, let’s set up a time to talk. As we like to say: Yes, we can help with that.
Contributions to a traditional IRA may be tax deductible in the contribution year, the current income tax due at withdrawal. Withdrawals prior to age 59.5 may result in a 10% IRS penalty tax in addition to current income tax.
Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.
- Check Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do.
- Check Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do.
- Check Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do.
- Check Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do.
And Now …
Today, 10 years later, our practice has grown considerably. We have phenomenal clients, a great team, and our practice is still part of the Integrated Financial Group. During this time, we have helped individuals and families with their estate planning, investment planning, executive compensation planning, retiree tax planning, and insurance planning. These are just a few of the areas we focus on for our clients.
I eventually got my drivers’ license (at the ripe age of 27), married my lovely wife, Wendy, and purchased a home in Woodstock GA complete with a fire extinguisher on each floor and a built-in sprinkler system.
Working with my amazing team to best service you has been the ultimate privilege. Our team will continue to expand our range of offerings with the goal of responding to all your financial planning needs. We will also make sure to do so without ever letting up on our service and responsiveness to you.
Thank you so much for being part of this journey.
Most investments are meant to be long term. Always evaluate whether the time horizon required for an investment to succeed matches your timeline for liquidity.
Imagine in mine and Wendy’s case if the doors and the windows locked just as we were trying to leave or that someone came down the stairs just as we were wandering around the main level.
Our motto is “we can help you with that.” We will collaborate with you on any financial decision you make, engaging other subject matter experts when necessary. We will not stop until we get things right. We encourage you to reach out to us for assistance in making important financial decisions and we always appreciate you recommending us to others.
by Hetmayar
Authored by Gary Alpert
Tracking ID: 800869-1
Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium.
Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium.
