In this episode of Coffee with Carl, attorney Carl Zoellner goes over the important big-picture considerations to keep in mind when planning for retirement and retirement account taxation.


Updated September 3, 2020

In a previous episode of Coffee with Carl, I discussed the main differences between IRAs and 401(k)s as retirement vehicles. Today’s focus is on the taxation side of retirement and what to consider when using tax-deferred retirement vehicles and/or Roth IRAs.

In real estate, there’s a universal rule that I’m sure you’re familiar with: location, location, location. When it comes to tax planning, whether it’s for retirement or otherwise, there’s a similar universal rule: calculate, calculate, calculate. The best way to figure out the ramifications of any given tax decision is to sit down and do the math.

Without knowing your numbers (and taking some educated estimations), you could find yourself with a ticking tax bomb on your hands. For instance, if I currently contribute to a tax-deferred plan like a 401(k) or IRA and can reasonably expect my tax bracket upon retirement to be higher than my current tax bracket, I should possibly reconsider my choices. In this case, the traditional IRA or 401(k) may not be the best retirement vehicle for me because I’ll pay more upon distribution than I would now.

The inverse is also true. If I currently contribute to a Roth IRA and I’m in a high tax bracket but can reasonably expect to be in a lower tax bracket upon retirement, I may need to rethink my strategy.

Overall, there are lots of different retirement vehicles. What’s most important is to sit down and calculate the different options for your specific situation. Using these calculations with some educated estimations about your future income expectations will put you in a better place than blind guesses and wishful thinking.

Our position here at Anderson Advisors is that 401(k)s are generally the preferred retirement contribution vehicles over IRAs because 401(k)s have significantly higher contribution caps than IRAs. In 2020, you can contribute up to $57,000 a year to a 401(k) compared to the measly $6,000 IRA contribution limit. This higher contribution cap is obviously beneficial if you’re a bit behind in your retirement planning, but can also be a boon to tax planning and income deferring strategies.

Whether you’re a real estate investor, stock market trader, business owner, a combination thereof, or none of the above, it’s important to know the different retirement tools at your disposal. It’s equally important, however, to work with a qualified advisor when making these major retirement decisions to make sure you don’t shoot yourself in the foot without realizing it. With retirement vehicles, there are plenty of prohibited transactions, tax intricacies, and long-term effects. Make sure you work with an expert when navigating this treacherous landscape.

As always, you’re invited to schedule your complimentary consultation with our expert Advisors. It’s free and there’s no obligation. On the call, an experienced Advisor can discuss your retirement options and provide insight on the best choices for your current and future situation.


Watch as Carl sheds light on tax planning with different retirement accounts.


Resources mentioned in this video
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