Get Retirement Right With Help From Your CPA

Planning for a successful and comfortable retirement encompasses a great deal of strategy. Tax, financial, and economic considerations all come into play, which make professional guidance a valuable resource to help you get retirement right. In helping my clients plan for retirement, I start by asking about their long-term goals, which allows us to make a plan that involves minimal tax liability, accounts for legislative changes, and that’s best-suited for their situation and goals. 

Identify or Redefine Your Goals 

Based on your stage in life, your goals are likely to change. If retirement is still down the road, your main post-retirement goal may be to comfortably meet your monthly and annual expenses. If retirement will occur in the not-so-distant future, maybe you have dreams of traveling, moving closer to your family, or being able to support or help a member of your family. If you have retired already, maybe you have a goal to minimize an unexpected tax liability. 

Once there is a goal in place, it’s important to get a clear picture of your current expenses and investments, as well as to examine future expenses and investment opportunities. I assist clients with long-term cash flow projections that do just that, and include a number of potential outcomes based on different variables and unknowns. 

Avoid Unexpected Tax Burden

Taxable income is generated when a traditional IRA is converted to a Roth IRA, so a conversion may be worth considering. Especially for clients with lower income and other deductible losses in 2020, and since future years’ tax rates are likely to increase. I work with individuals on the necessary projections to determine the tax consequences and whether a conversion would be of benefit in their specific situation. 

Social Security tax is determined based on your combined income for the tax year, which includes your adjusted gross income (AGI), your nontaxable interest, and 50% of your Social Security. So, finding ways to reduce your AGI may make a big difference for those who have already retired. I am committed to finding all eligible deductions for my clients and, based on their situation, I look at options for gifting cash or assets and for tax-loss harvesting losses, even in years without gains.

Tax matters must always be considered at a state level as well. Massachusetts fully exempts public pension income and Social Security retirement benefits. The Commonwealth fully taxes withdrawals from retirement accounts; most other forms of retirement income; and old-age, survivor, and disability insurance benefits. For retired New Englanders, New Hampshire is likely the friendliest state in terms of taxes, as it’s the only state in the region without a general income tax, meaning retirement income isn’t taxed. I assist clients with resident and nonresident state-related matters and help them understand their available options. 

Stay Ahead of Legislative Changes

Now, more than ever, keeping up with legislative changes is imperative. For instance, the SECURE Act changed the age requirement, effective in 2020, to 72 for required minimum distributions (RMDs). The CARES Act contained a provision suspending RMDs payable in 2020 from a 401(k) plan, 403(b) plan, or an IRA, but not for defined benefit plans. The suspension also applies to taxpayers who turned 70½ in 2019, temporarily waiving the SECURE Act’s age requirement change. In June, the IRS issued guidance to include taxpayers subject to one rollover per year and other rollover restrictions for inherited IRAs. By continuously monitoring legislative changes and new tax laws, I’m able to identify key tax planning opportunities and inform clients ahead of potential, negative implications.

Contact Abbott & Company

A proactive approach to retirement planning helps you identify your goals, minimize current and future tax liabilities, and avoid unforeseen issues. Wherever you're at in the process, I can help you get retirement right. Contact me today to get started.

by Mellinda Abbott, CPA

As a CPA and small business owner with experience in corporate America, Mellinda Abbott is a distinguished, invaluable personal and business tax advisor. For individuals, she understands planning and compliance needs, best practices, and long-term goals and concerns like retirement. Mellinda fosters personal client relationships, while providing year-round, customized services designed to maximize savings, limit tax exposure, and, most importantly, to help you reach your financial goals.