Wolf Retirement Navigation February 2019

RET IREMENT NAV IGAT ION

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4230 Pablo Professional Court Ste. 101 Jacksonville, FL 32224

4711 US Highway 17, Suite C-5 Fleming Island, FL 32003

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February 2019

Tax Season Starts Early The 3 Biggest Tax Threats in Retirement

T ime for a reality check: Tax season doesn’t stop just because you no longer have an employer writing you a paycheck. Each year, my retired clients still have to take a step back from enjoying their retirement to pay Uncle Sam. Paying taxes in retirement can get a little more confusing when you start tapping into your traditional IRA or 401(k) tax- deferred accounts. As we get into tax season, here are the three biggest tax areas in which retirees need to be informed. Social Security When it comes to Social Security, your benefits can be taxed depending on your income. If your Modified Adjusted Gross Income —“MAGI” —is less than $25,000 for single filers or $32,000 for married filers, your Social Security benefits are tax-free. However, if you are filing a single return with MAGI ranging from $25,000 to $34,000, you’ll include up to 50 percent of your benefits as income. Filing on over $34,000 in MAGI? You could include up to 85 percent of your benefits as income. For married couples filing a joint return, they could include up to 50 percent of their benefits in income if their MAGI ranges from $32,000 to $44,000 and 85 Investment Advisory Services offered through Retirement Wealth Advisors (RWA), a Registered Investment Advisor. Wolf Retirement Navigation LLC and RWA are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial

percent of their benefits if their MAGI exceeds $44,000. Advanced planning to increase tax-free retirement saving buckets — utilizing Roth IRAs and Roth 401(k)s, cash-value life insurance, and lump-sum pension planning — may help to reduce the taxability of your Social Security benefits, thus saving you significant tax bills for many years to come. Mandatory Distributions When you contribute to a traditional IRA or an employer-sponsorred 401(k), it’s able to grow tax-deferred until you need it. But the tax deferrals on retirement savings don’t last forever. You are required to take withdrawals from your traditional IRA or 401(k) by April 1 the year after you turn 70 1/2 and by Dec. 31 every year after. If you fail to take the required minimum distribution (RMD), you’ll face a penalty of 50 percent of the amount you failed to withdraw. The income from traditional 401(k)s and IRAs is taxable as ordinary income and is added to your other income, but the biggest risk RMDs pose to you during tax season is the possibility of bumping you into a higher tax bracket. Make sure you have a plan to avoid penalty by taking your RMD as needed while simultaneously keeping yourself professional before making any investment decision. This information is designed to provide general information on the subjects covered; it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Wolf Retirement Navigation LLC and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.

from unexpectedly being on the hook for higher taxes.

Pensions Do you have an employer-sponsored retirement plan that includes pension payments? That’s great! These can be excellent sources of income during retirement. But, don’t forget that, much like traditional IRA and 401(k) accounts, income from these plans is fully taxable as you receive your benefit payment. When you start taking money from your pension, be ready to pay for it. Fortunately, much like with Social Security benefits, you might be able to have federal income taxes withheld from your pension or annuity check, which can really reduce your headache when it’s time to file your tax returns. Additionally, if your company offers a lump-sum pension option upon retirement, you are able to roll over the lump-sum pension into an IRA to control taxability and investment options. when you’re in retirement, it’s important to have a strategy for dealing with taxes year round. These are just a few of the heavy tax hitters retirees need to keep in mind. As always, we are here to help. -Adam Wolf, CPA, CFP ® Annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Any comments regarding safe and secure investments, and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed Insurance and Annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by Retirement Wealth Advisors. The tax filing deadline for 2018 isn’t technically until April 15, 2019, but

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