In the journey toward a secure retirement, tax planning often doesn’t get the spotlight it deserves. Yet, it’s one of the most powerful tools in your financial toolkit. At Strategic Retirement Plans, we believe that effective tax planning is not just about filing your annual return—it’s about implementing strategic moves throughout the year to keep more of your hard-earned money where it belongs: in your pocket.
What Is Tax Planning?
Tax planning goes far beyond the annual ritual of filing your tax return. It’s a proactive, year-round strategy designed to minimize your tax burden legally and effectively.
True tax planning involves making strategic decisions about:
- When and how you receive income
- Maximizing available deductions
- Optimizing retirement account withdrawals
- Planning major financial moves with tax implications in mind
The goal is simple but powerful: keep more of your money working for you, both now and throughout your retirement years.
Why Should You Make Tax Planning a Priority?
The truth is uncomfortable but important: most Americans pay more in taxes than necessary. Without a thoughtful tax strategy, you might be leaving thousands of dollars on the table each year.
Effective tax planning helps you:
- Lower your taxable income through legitimate strategies
- Avoid costly penalties and surprises
- Make smarter decisions about retirement account withdrawals
- Preserve more of your wealth for yourself and your loved ones
And contrary to popular belief, tax planning isn’t just for the wealthy. It’s for anyone who wants to maximize their financial resources and secure their retirement dreams.
What Makes Tax Planning Challenging?
Tax planning can be complex for several reasons:
- Constantly changing tax laws
The tax code is always evolving, making it difficult to stay current without professional guidance. - Life changes affect your tax situation
Major life events like retirement, selling a home, receiving an inheritance, or starting a business can dramatically shift your tax picture. - Income fluctuations
Unexpected bonuses, investment gains, or business success can push you into higher tax brackets if not properly managed. - Timing matters
By the time tax season arrives, many of your best tax-saving opportunities for the previous year have already passed. - Other Factors
There are additional variables that need to be considered such as healthcare, phaseouts, limitations that are tied to tax planning. (Read on as we explore some of these factors below.)
This is why proactive planning with a knowledgeable advisor is so valuable. At SRP, we believe in addressing tax considerations throughout the year, not just during tax season.
How We Approach Tax Planning at SRP
At Strategic Retirement Plans, tax planning is one of our five core pillars of comprehensive retirement planning.
Our approach is both sophisticated and practical:
Advanced Technology: Holistiplan
We utilize powerful tax planning software called Holistiplan to analyze your tax return in minutes, identifying opportunities you might be missing. This technology allows us to:
- Quickly spot potential tax-saving strategies
- Model different scenarios to estimate future tax liabilities
- Make real-time adjustments to your financial plan
- Evaluate Roth conversion opportunities
- Estimate tax implications of major financial decisions
As noted in our 2024 Annual Letter, our advisors Kaelen and Ryan have continued to lead the implementation of Holistiplan for detailed estimated tax planning, bringing this powerful technology to benefit our clients.
Comprehensive Annual Tax Review
Our tax planning services include:
- Annual Holistiplan review to identify opportunities
- Year-end tax planning to capture last-minute savings
- Tax loss harvesting when applicable
- Tax strategies around debt and major purchases
- Required Minimum Distribution (RMD) execution and planning
- Discussion of legacy and Qualified Charitable Distribution (QCD) opportunities
- Education about new and important tax laws
- Analysis of current and future tax brackets
- Cash flow analysis
How Tax Planning Affects Your Retirement
Many retirees are surprised to discover how significantly taxes can impact their retirement income. Here are some critical areas where tax planning makes a difference:
Healthcare Costs
Earning too much retirement income can substantially increase your Medicare premiums through Income-Related Monthly Adjustment Amounts (IRMAAs). Strategic tax planning can help you manage your income to avoid these additional costs.
Social Security Taxation
Up to 85% of your Social Security benefits may be taxable, depending on your overall income. With proper planning, you may be able to reduce or eliminate taxes on these benefits.
Healthcare Subsidies
If you retire before Medicare eligibility, your income levels can affect your eligibility for healthcare subsidies under the Affordable Care Act. Proper tax planning can help preserve these valuable benefits.
Common Retirement Tax Mistakes to Avoid
Over our years of helping clients prepare for retirement, we’ve observed several common tax mistakes that can significantly impact retirement security:
- Taking large IRA withdrawals all at once
This can push you into higher tax brackets and increase your Medicare premiums. - Earning too much from part-time work
Post-retirement employment can be fulfilling, but without tax planning, it might cost more than expected. - Selling a second home without a tax plan
Capital gains from real estate can create significant tax events that require advance planning. - Not planning for business or rental income changes
Changes in business or rental property income can have unexpected tax consequences. - Being unprepared for unexpected windfalls
Inheritances, bonuses, or investment gains can push you into higher tax brackets without proper planning.
How Your Advisor Should Help With Tax Planning
A comprehensive financial advisor should be actively helping you navigate the tax implications of your financial decisions. Your advisor should be:
- Optimizing your IRA and 401(k) withdrawal strategies
- Managing capital gains and losses in your investment accounts
- Helping reduce Medicare premiums and Social Security taxes
- Guiding you through the tax implications of business and rental income
- Preparing for and responding to unexpected income events
If your advisor isn’t regularly discussing tax planning with you, you might not be receiving the comprehensive guidance you deserve.
Take the Next Step Toward Tax Efficiency
At Strategic Retirement Plans, we believe that effective tax planning is an essential component of a successful retirement strategy. Our team is ready to help you identify opportunities to keep more of your hard-earned money and pursue greater financial security.
Remember, it’s never too early—or too late—to start implementing tax-efficient strategies. The sooner you begin, the more opportunities you’ll have to benefit from smart tax planning.
Want to see how tax planning can work for you? Let’s talk!
*Strategic Retirement Plans does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
