Straight To The Point:

Having a tax-free retirement should be a major goal of every retiree. Chris will walk us through the five steps you can take to achieving a tax-free retirement.

The Real Deal:

Step 01: Three Bucket Strategy.

  • 01:20 – Divide your money into three buckets. We’ll call them “taxed now,” “taxed later,” and “taxed never.”  These buckets allow you to spread out your tax burden and maximize savings. We’re not saying you don’t have to pay Uncle Sam, but you can plan accordingly and make the most of your wealth.

Step 02: Determine Your Marginal Tax Bracket Capacity.

  • 3:47 – Wow. What a mouthful. The easier way to say that is “how much income can you earn and remain in your current tax bracket?” It’s a bit like playing on the beach while trying to barely avoid the crashing waves. Remember, you don’t want to pay more in taxes than the government requires.

Step 03: Calculate Your 72t Withdrawal Rate.

  • 5:44 – Huh? Stick with us here. 72t is a special rule related to retirement withdrawal. Most of the time, if you’re under 59 and 1/2 and you withdraw from your IRA account, you’re going to be subject to paying a penalty. Basically, rule 72t enables you to withdraw penalty-free. All you have to do is make sure you’re taking five, substantial and periodic payments. If you’re going to withdraw before you turn 59 and 1/2, schedule your withdrawals.

Step 04: Determine Your Roth IRA Eligibility.

  • 8:29 – If you’re under a certain salary cap, you can contribute to a Roth IRA. If you make more than the limit allowed, it doesn’t mean you’re out of options. It just means you have to go through an extra hoop in order to do so. This is what you might have heard us refer to as a “Backdoor IRA.” This “backdoor” strategy allows you to contribute to a traditional IRA and then immediately roll that money into a Roth. Remember, a Roth IRA is an essential tool for creating a tax-free retirement plan.

Step 05: Bring It All Together.

  • 11:23 – The fifth step consists of tying the other four steps together and strategizing your 401k contributions. Your 401k is another useful tool for creating a tax-free retirement. Furthermore, your 401k is a “taxed-later” account. You can leave some money in your 401k while still investing in an IRA or Roth IRA. It’s important to strategize which account to fund and when to fund it. It’s also important to learn how to transfer your money from a “taxed-later” account into other accounts to maximize tax savings. Your financial advisor can help you to complete what we call a 401k rollover. Please, do not try this at home.

Beyond The Zone:

The host: Chris Patterson – EmailWebsite – Tax Free Retirement Toolkit – Call: 904-285-4489

The Toolkit:

***Click the box to get it!