Everybody makes mistakes, but some are more costly than others. Here’s hoping you plan your retirement with no errors by implementing these great tax tips before you enter retirement.
Plan Ahead
Chances are you’re about to enter a phase of your life where income will be very limited. You have two choices here: struggle with what little social security you may get, OR get down to some serious tax planning. Did you know that if your year was all high deductions and low income, you can actually change your traditional IRA into a Roth IRA and pay little to no taxes? There are opportunities save a lot of cash if you start planning now instead of waiting till it’s too late.
Take out your minimum distributions
Once you hit 70 and ½ years old, you absolutely need to start making yearly withdrawals from any traditional IRA or 401k. Why? Because if you don’t, you can receive up to a 50% tax on whatever the amount of the withdrawal was supposed to be. Imagine you were supposed to take out $2,000 and forgot, and now half of that is gone. Diligence, in this case, absolutely pays off in every sense of the word.
Keep impeccable healthcare records
Are you writing down every dollar you spend on healthcare? Saving your receipts and insurance invoices? No? START. Sloppy healthcare records are one of the most predictable ways retirees miss out on getting some money back come tax season. For example, if your out-of-pocket costs are 10% or more of your adjusted gross income (AGI) you can and should claim the medical expense deduction that you’re owed.
Use your benefits in the right order
This one is a bit tougher if you’re not a finance whiz, so the best advice is this: Hire someone that is. Whether you’re spending or gifting or doing just about anything with your retirement money, you could be throwing thousands out the window if you use your benefits in the wrong order. The cost of hiring a financial retirement planner will most likely be far outweighed by the cash you save.
Have the kind of retirement you want with the capital you deserve. Read this article if you’d like to dig a little deeper into getting financially ready for retirement: http://www.lowtax.net/articles/Dont-make-these-tax-mistakes-when-you-retire-574127.html
All it takes is a little bit of planning, a little bit of effort and maybe a little bit of help.