{"id":959,"date":"2021-02-10T16:45:28","date_gmt":"2021-02-11T00:45:28","guid":{"rendered":"https:\/\/www.pinnacleprivateadvisors.com\/?page_id=959"},"modified":"2021-02-23T16:35:56","modified_gmt":"2021-02-24T00:35:56","slug":"tax-efficient-retirement","status":"publish","type":"page","link":"https:\/\/www.pinnacleprivateadvisors.com\/tax-efficient-retirement\/","title":{"rendered":"Tax Efficient Retirement Planning"},"content":{"rendered":"<div id='av_section_1'  class='avia-section main_color avia-section-default avia-no-border-styling  avia-full-stretch av-section-color-overlay-active avia-bg-style-scroll  avia-builder-el-0  el_before_av_submenu  avia-builder-el-first   av-minimum-height av-minimum-height-custom  container_wrap sidebar_right' style='background-repeat: no-repeat; background-image: url(https:\/\/www.pinnacleprivateadvisors.com\/wp-content\/uploads\/2020\/11\/Muskoka-chairs-on-the-dock-high-key-506221154_4928x3279-1-1030x685.jpeg);background-attachment: scroll; background-position: center center; 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' class='av-special-heading av-special-heading-h3  blockquote modern-quote  avia-builder-el-3  el_after_av_submenu  el_before_av_hr  avia-builder-el-first  '><h3 class='av-special-heading-tag '  itemprop=\"headline\"  >Tax Efficient Retirement Planning<\/h3><div class='special-heading-border'><div class='special-heading-inner-border' ><\/div><\/div><\/div>\n<div   class='hr hr-short hr-left   avia-builder-el-4  el_after_av_heading  el_before_av_textblock '><span class='hr-inner ' ><span class='hr-inner-style'><\/span><\/span><\/div>\n<section class=\"av_textblock_section \"  itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/CreativeWork\" ><div class='avia_textblock  '   itemprop=\"text\" ><p>Whether it\u2019s social security, medicare, tax diversification, stock options, sale of real estate, or business exit, our team has you covered. Pinnacle Private Advisors are here to ensure that we work with you and your tax professionals to make certain your money is always working harder and smarter. It s not just about what you make, it\u2019s about what you keep.<\/p>\n<\/div><\/section>\n<div class=\"flex_column av_one_half  flex_column_div av-zero-column-padding first  avia-builder-el-6  el_after_av_textblock  el_before_av_one_half  column-top-margin\" style='border-radius:0px; '><div  class='avia-icon-list-container   avia-builder-el-7  avia-builder-el-no-sibling '><ul class='avia-icon-list avia-icon-list-left av-iconlist-big avia_animate_when_almost_visible avia-iconlist-animate'>\n<li><div  style='background-color:#0061d8; border:1px solid #ffffff; color:#ffffff; ' class='iconlist_icon  avia-font-entypo-fontello'><span class='iconlist-char ' aria-hidden='true' data-av_icon='\ue824' data-av_iconfont='entypo-fontello'><\/span><\/div><article class=\"article-icon-entry av-iconlist-empty\"  itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/CreativeWork\" ><div class='iconlist_content_wrap'><header class=\"entry-content-header\"><h4 class='av_iconlist_title iconlist_title   '  itemprop=\"headline\"  >Tax efficient Real Estate investments<\/h4><\/header><div class='iconlist_content  '  itemprop=\"text\"  ><\/div><\/div><footer class=\"entry-footer\"><\/footer><\/article><div class='iconlist-timeline'><\/div><\/li>\n<li><div  style='background-color:#0061d8; border:1px solid #ffffff; color:#ffffff; ' class='iconlist_icon  avia-font-entypo-fontello'><span class='iconlist-char ' aria-hidden='true' data-av_icon='\ue842' data-av_iconfont='entypo-fontello'><\/span><\/div><article class=\"article-icon-entry av-iconlist-empty\"  itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/CreativeWork\" ><div class='iconlist_content_wrap'><header class=\"entry-content-header\"><h4 class='av_iconlist_title iconlist_title   '  itemprop=\"headline\"  >1031 Exchanges<\/h4><\/header><div class='iconlist_content  '  itemprop=\"text\"  ><\/div><\/div><footer class=\"entry-footer\"><\/footer><\/article><div class='iconlist-timeline'><\/div><\/li>\n<li><div  style='background-color:#0061d8; border:1px solid #ffffff; color:#ffffff; ' class='iconlist_icon  avia-font-entypo-fontello'><span class='iconlist-char ' aria-hidden='true' data-av_icon='\ue857' data-av_iconfont='entypo-fontello'><\/span><\/div><article class=\"article-icon-entry av-iconlist-empty\"  itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/CreativeWork\" ><div class='iconlist_content_wrap'><header class=\"entry-content-header\"><h4 class='av_iconlist_title iconlist_title   '  itemprop=\"headline\"  >Delaware Statutory Trusts<\/h4><\/header><div class='iconlist_content  '  itemprop=\"text\"  ><\/div><\/div><footer class=\"entry-footer\"><\/footer><\/article><div class='iconlist-timeline'><\/div><\/li>\n<li><div  style='background-color:#0061d8; border:1px solid #ffffff; color:#ffffff; ' class='iconlist_icon  avia-font-entypo-fontello'><span class='iconlist-char ' aria-hidden='true' data-av_icon='\ue827' data-av_iconfont='entypo-fontello'><\/span><\/div><article class=\"article-icon-entry av-iconlist-empty\"  itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/CreativeWork\" ><div class='iconlist_content_wrap'><header class=\"entry-content-header\"><h4 class='av_iconlist_title iconlist_title   '  itemprop=\"headline\"  >Tax deferred saving opportunities<\/h4><\/header><div class='iconlist_content  '  itemprop=\"text\"  ><\/div><\/div><footer class=\"entry-footer\"><\/footer><\/article><div class='iconlist-timeline'><\/div><\/li>\n<\/ul><\/div><\/div>\n<div class=\"flex_column av_one_half  flex_column_div av-zero-column-padding   avia-builder-el-8  el_after_av_one_half  el_before_av_hr  column-top-margin\" style='border-radius:0px; '><\/div>\n<div  style=' margin-top:5px; margin-bottom:35px;'  class='hr hr-custom hr-center hr-icon-no   avia-builder-el-9  el_after_av_one_half  el_before_av_textblock '><span class='hr-inner  inner-border-av-border-fat' style=' width:50px; border-color:#efbb20;' ><span class='hr-inner-style'><\/span><\/span><\/div>\n<section class=\"av_textblock_section \"  itemscope=\"itemscope\" itemtype=\"https:\/\/schema.org\/CreativeWork\" ><div class='avia_textblock  '   itemprop=\"text\" ><div id=\"mntl-sc-block_1-0-2\" class=\"comp mntl-sc-block finance-sc-block-callout mntl-block\">\n<div id=\"mntl-sc-block_1-0-3\" class=\"comp theme-whatyouneedtoknow mntl-sc-block mntl-sc-block-callout mntl-block\" data-tracking-id=\"mntl-sc-block-callout\" data-tracking-container=\"true\">\n<div id=\"mntl-sc-block-callout-body_1-0\" class=\"comp mntl-sc-block-callout-body mntl-text-block\">\n<p>Most retirees rely on a few different sources of income, and there are ways to minimize taxes on each of them.<\/p>\n<ul>\n<li>Live in or move to a tax-friendly state.<\/li>\n<li>Reallocate investments so they are tax-efficient and postpone distributions from retirement accounts.<\/li>\n<li>Be strategic about Social Security: Depending on your other income, benefits may be subject to taxes.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<h3 id=\"mntl-sc-block_1-0-4\" class=\"comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading\"><span class=\"mntl-sc-block-heading__text\">Live in a Tax-Friendly State<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-5\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">One of the best strategies for saving taxes on retirement income is to live in or move to a state that is tax-friendly. In the wake of the\u00a0Tax Cuts and Jobs Act, this will be especially important through 2025 when only a total of $10,000 in local property, state and local income, or sales taxes will be deductible for federal income tax purposes.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-1\">1<\/span><\/p>\n<p id=\"mntl-sc-block_1-0-7\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">Seven states have no income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee tax only interest and dividends, but Tennessee will join the list of states with no income taxes in 2021.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-2\">2<\/span><\/p>\n<p id=\"mntl-sc-block_1-0-9\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">States are barred by federal law from taxing residents on retirement benefits earned in another state.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-3\">3<\/span> So, for example, earning a pension in California or New York (high tax states) and relocating in retirement to Florida or Texas (no tax states) avoids state tax on this income.<\/p>\n<div id=\"mntl-sc-block_1-0-10\" class=\"comp mntl-sc-block mntl-sc-block-adslot mntl-block\">\n<div id=\"mntl-block_37-0\" class=\"comp mntl-block\">\n<div id=\"native_5-0\" class=\"comp scads-to-load native mntl-gpt-dynamic-adunit mntl-gpt-adunit gpt dynamic scads-ad-placed\"><\/div>\n<\/div>\n<\/div>\n<p id=\"mntl-sc-block_1-0-11\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">Other states may have low-income taxes or special breaks for retirement income. Some, for example, may have no tax on Social Security benefits and\/or on some or all of the income from IRAs and retirement plans.<\/p>\n<h3 id=\"mntl-sc-block_1-0-13\" class=\"comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading\"><span class=\"mntl-sc-block-heading__text\">Reassess Your Investments<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-14\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">You may want to change your investment holdings in retirement; not only to save on taxes but also to preserve the principal. Here are a few ways to go about it:<\/p>\n<h3 id=\"mntl-sc-block_1-0-16\" class=\"comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading\"><span class=\"mntl-sc-block-subheading__text\">Municipal Bonds<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-17\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">Interest on\u00a0municipal bonds\u00a0is free from federal income tax, although the interest may affect the tax on Social Security benefits.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-4\">4<\/span><\/p>\n<h3 id=\"mntl-sc-block_1-0-19\" class=\"comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading\"><span class=\"mntl-sc-block-subheading__text\">Dividend Stocks<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-20\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">If you receive\u00a0qualified dividends\u2014essentially regular dividends from publicly-traded U.S. corporations, as well as certain foreign corporations\u2014they are taxed at more\u00a0favorable rates than ordinary income. The tax rate may be zero, 15%,\u00a0or 20%, depending on your taxable income.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-5\">5<\/span><\/p>\n<h3 id=\"mntl-sc-block_1-0-22\" class=\"comp mntl-sc-block finance-sc-block-subheading mntl-sc-block-subheading\"><span class=\"mntl-sc-block-subheading__text\">Losses That Offset Capital Gains<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-23\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">You can use losses on the sale of securities and other property to offset\u00a0capital gains\u00a0so that you pay no tax on the gains. What\u2019s more, if you have excess capital losses, you can use up to $3,000 to offset ordinary income (for example, bank interest), and any additional losses can be\u00a0carried forward.<\/p>\n<h3 id=\"mntl-sc-block_1-0-25\" class=\"comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading\"><span class=\"mntl-sc-block-heading__text\">Avoid or Postpone RMDs<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-26\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">If you are at least 72, you\u00a0do not have to pay tax on\u00a0required minimum distributions\u00a0(RMDs) from your traditional IRA if you transfer the funds to a charity.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-8\">7<\/span> The RMD used to be 70\u00bd, but following the passage of the\u00a0Setting Every Community Up For Retirement Enhancement\u00a0(SECURE)\u00a0Act in December 2019, it was raised to 72.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-7\">8<\/span> Here\u2019s what\u2019s required:<\/p>\n<ul id=\"mntl-sc-block_1-0-28\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">\n<li>Your IRA trustee or custodian must transfer the funds directly to an\u00a0IRS-approved public charity.<\/li>\n<li>You must receive a written acknowledgment from the charity as you would for a charitable contribution.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-8\" data-tooltip-position-x=\"center\" data-tooltip-position-y=\"top\">7<\/span><\/li>\n<\/ul>\n<p id=\"mntl-sc-block_1-0-30\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">There is a $100,000 annual limit\u00a0for this strategy. If you are married, each spouse has a separate $100,000 limit. This strategy can only be used for IRAs, not for IRA-like accounts such as\u00a0SEP IRAs\u00a0or\u00a0SIMPLE IRAs.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-8\">7<\/span><\/p>\n<div id=\"mntl-sc-block_1-0-32\" class=\"comp mntl-sc-block finance-sc-block-callout mntl-block\">\n<div id=\"mntl-sc-block_1-0-33\" class=\"comp theme-important mntl-sc-block mntl-sc-block-callout mntl-block\" data-tracking-id=\"mntl-sc-block-callout\" data-tracking-container=\"true\">\n<div id=\"mntl-sc-block-callout-body_1-0-1\" class=\"comp mntl-sc-block-callout-body mntl-text-block\">\n<p>Roth IRAs are not subject to RMDs.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<p id=\"mntl-sc-block_1-0-34\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">Required minimum distributions for traditional IRAs and 401(k)s have been suspended in 2020 due to the March 2020 passage of the\u00a0CARES Act, a $2 trillion stimulus enacted amid the economic fallout from the COVID-19 pandemic.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-14\">10<\/span><\/p>\n<h3 id=\"mntl-sc-block_1-0-36\" class=\"comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading\"><span class=\"mntl-sc-block-heading__text\">Deferred Annuities<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-37\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">You can also postpone the need to take RMDs and ensure that you won\u2019t run out of retirement income by investing in a special\u00a0deferred annuity. You can use up to $135,000 (but no more than 25% of your account balance) from your IRA or\u00a0401(k)\u00a0to buy a\u00a0qualified longevity annuity contract\u00a0(QLAC) within the retirement account. Funds allocated to the QLAC are exempt from RMD calculations.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-10\">11<\/span><\/p>\n<p id=\"mntl-sc-block_1-0-39\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">Payments from a QLAC do not have to begin immediately but must start no later than age 85. The payments are taxable to you, and the funds from the QLAC automatically satisfy RMD requirements for this portion of the IRA or retirement plan.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-10\">11<\/span><\/p>\n<div id=\"mntl-sc-block_1-0-41\" class=\"comp mntl-sc-block finance-sc-block-callout mntl-block\">\n<div id=\"mntl-sc-block_1-0-42\" class=\"comp theme-note mntl-sc-block mntl-sc-block-callout mntl-block\" data-tracking-id=\"mntl-sc-block-callout\" data-tracking-container=\"true\">\n<div id=\"mntl-sc-block-callout-body_1-0-2\" class=\"comp mntl-sc-block-callout-body mntl-text-block\">\n<p>Depending on the year you were born, your full retirement age ranges from 65 to 67.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-11\">12<\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<p id=\"mntl-sc-block_1-0-43\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">Be sure to consider a QLAC&#8217;s drawbacks before proceeding. There is no cash value that can be tapped before\u00a0annuitization. There may be higher fees for this type of investment than others available through an IRA or 401(k) plan. And you must live to the targeted age (e.g., 85) to enjoy the income.<\/p>\n<h3 id=\"mntl-sc-block_1-0-45\" class=\"comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading\"><span class=\"mntl-sc-block-heading__text\">Be Strategic About\u00a0Social Security Benefits<\/span><\/h3>\n<p id=\"mntl-sc-block_1-0-46\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">If you don\u2019t need Social Security at\u00a0full retirement age\u00a0because you have other income, consider delaying the receipt of benefits until age 70. You\u2019ll earn additional\u00a0<a href=\"https:\/\/www.investopedia.com\/ask\/answers\/110614\/what-are-social-security-credits-and-how-can-i-earn-them.asp\" rel=\"noopener noreferrer\" data-component=\"link\" data-source=\"inlineLink\" data-type=\"internalLink\" data-ordinal=\"2\">credits<\/a>\u00a0to boost your monthly benefits at that time, and you won\u2019t have to pay taxes now on the benefits.<\/p>\n<p id=\"mntl-sc-block_1-0-48\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">When you receive benefits, they are either fully tax-free or are included in your gross income at 50% or 85%,\u00a0depending on your other income\u00a0(including tax-free interest on municipal bonds).\u00a0More specifically, if your\u00a0provisional income\u00a0(a term unique to the calculation of the taxable portion of Social Security benefits) is less than $25,000 if you\u2019re single, or $32,000 if you\u2019re married filing jointly, none of your Social Security benefits are taxed.<\/p>\n<p id=\"mntl-sc-block_1-0-50\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">If you&#8217;re single and your income is between $25,000 and $34,000\u2014or between $32,000 and $44,000 if you\u2019re married filing jointly\u2014then 50% of benefits are taxable. Having income over $34,000, or $44,000 respectively, means 85% of benefits are included in gross income. Married persons filing separately automatically have 85% of benefits included in gross income.<\/p>\n<p id=\"mntl-sc-block_1-0-52\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">Because the portion of Social Security benefits that is taxable depends on your other income, try to control this as much as possible. Here are some ideas:<\/p>\n<ul id=\"mntl-sc-block_1-0-54\" class=\"comp mntl-sc-block finance-sc-block-html mntl-sc-block-html\">\n<li><strong>Reduce your\u00a0adjusted gross income\u00a0(AGI).<\/strong>\u00a0Contributing to deductible IRAs and 401(k) plans if you are still working can reduce your AGI.<\/li>\n<li><strong>Limit the sale of securities.<\/strong>\u00a0While sales should primarily be dictated by financial considerations, where you can, you may want to limit sales so that your income doesn\u2019t push you over the 50% inclusion to the 85% inclusion.<\/li>\n<li><strong>Make withdrawals from a Roth IRA if you have one.\u00a0<\/strong>Withdrawals from a Roth IRA are tax-free in retirement and are not taken into account in the computation of the tax on Social Security benefits.<span class=\"mntl-inline-citation mntl-dynamic-tooltip--trigger\" data-id=\"#citation-9\">9<\/span><\/li>\n<\/ul>\n<\/div><\/section>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":2,"featured_media":317,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.1 - 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