A Nationwide Retirement Institute study revealed that 37% of retirees were unaware of how taxes would impact their retirement income. Betterment Director of Financial Planning Nick Holeman joins Wealth to discuss critical tax considerations for retirement savings.
Holeman highlights that retirement accounts like IRAs and HSAs (health savings accounts) can help lower your tax bill: "Depending on whether you're single or married, these strategies can reduce your tax bill by thousands of dollars."
Regarding Social Security benefits, Holeman describes it as "a very tax-efficient" type of retirement income. He notes that only 85% of benefits can be taxed, advising retirees to delay Social Security to boost benefit amounts and "gain more tax-advantaged income." He also recommends setting up tax withholding for Social Security.
This approach is preferable to simply withdrawing from retirement accounts. Holeman suggests using a "bracket filling" strategy when managing withdrawals.
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This post was written by Angel Smith