What Should I Know About My Taxes Before I Retire?

People spend their entire adult lives preparing for their retirement. But what is often forgotten in this preparation is personal estate tax planning. What’s worse is that certain tax surprises may pop up when you are newly retired. Continue reading to learn how to best prepare for tax surprises before you retire and how one of the experienced Werdann Devito LLC certified public accountants & consultants can provide you with our national tax services

How do I prepare for long-term care before I retire?

As always, you should prepare for health emergencies. But once you plan to retire, you should also prepare for long-term care. This is because, unfortunately, sometimes health insurance is not enough, and you may need to withdraw from your retirement plan to keep up with your bills. 

This withdrawal may be subject to income tax if the funds are from a pre-tax account. This is why when you are no longer working, you should prepare in advance for the possibility of long-term care by enhancing your health insurance coverage or otherwise reducing your living needs.

How do I prepare for the taxability of social security benefits prior to retirement?

It is important to understand that your Social Security benefits may be reduced if you have excess earnings. Also, if you are still working after retirement, these benefits could be subject to income tax. One option you may have is to possibly delay your reception of these benefits. 

How do I prepare for the minimum required distribution before retirement?

You need to know that there are tax consequences if you forget to take your minimum required distribution from your retirement plan. Specifically, the penalty on the amount not withdrawn is 50%. That said, it can benefit you to choose a significant date so that you always remember to review your minimum required distribution. 

How do I prepare for future tax rates once I retire?

And lastly, retiring means the likelihood of a change in tax rates. By a change, this means a rise after you retire. To best prepare for this possibility, you may want to create a plan with the following:

  • Higher state and federal tax rates.
  • Increases in health care costs through medicare.
  • More tax on Social Security benefits.
  • Higher capital gain and dividend tax rates.

Rest assured, you do not have to go through this personal estate tax planning by yourself. Do not hesitate in consulting with one of the skilled Werdann Devito LLC certified public accountants & consultants who can provide you with our CPA services

Contact our experienced New Jersey firm

Werdann DeVito LLC is an experienced Certified Public Accountant firm serving clients throughout New Jersey with all of their financial needs. If you need quality assistance with accounting, tax, or consulting services, contact Werdann DeVito LLC today.