Financial Experts Assert What Baby Boomers Don’t Know about Post-retirement Taxes Can Have an Impact

The retirement that baby boomers are heading into looks significantly different than that of their parents or grandparents. Financial concerns are all too real, and taxes can account for almost 1/3 of a person or couple’s retirement savings from them—unless they’ve planned ahead.

ROANOKE, VA – 01 Apr, 2016 – Many of the 10,000 baby boomers who stream into retirement every day do so without having made any real decisions about how they plan to manage the retirement savings they’ve spent all their working years accumulating. Whether their nest egg is wrapped up in a 401(k) or similar workplace-based savings plan, or their savvy investment strategies over the years have paid off, as soon as a retiree begins making withdrawals on that hard-earned retirement savings the taxes start adding up.

According to a recent study “The Underrated Impact of Taxes on Retirement” sponsored by the Lincoln Financial Group, almost one out of every three dollars spent by a high-income retiree goes to taxes. One big problem is that few retirees anticipate the tax burden that awaits them after leaving the workplace, and most retirees say they never dreamed that taxes would be among their most expensive obligations in retirement.

The study placed a spotlight on a problem that too many baby boomers and retirees don’t even pay much thought to until it’s too late to do anything about it—in fact, the study provides a good snapshot of the concerns among well-to-do retirees, particularly in highlighting some huge gaps of foresight or preparation for what taxes mean in retirement.

Financial professionals like Roanoke, Virginia-based Patrick Ayers say that the tax disconnect among pre-retirees and retirees has been a long-growing concern nationwide. Older Americans can lack the tax and financial knowledge they need to protect their retirement income stream before they leave the workplace, and often they turn their financial affairs over to their adult children to manage, who may not understand what they’re doing themselves.

“There are so many things to consider regarding your taxes, which is why it is so important to seek the advice of your licensed tax professional.” he says. “Often when a retiree needs to depend on an adult child to manage their financial affairs, their children may not understand it any better than their parents do.”

Ayers is quick to add that his opinion isn’t based in self-interest. As a Registered Financial Consultant, he’s not able to provide legal and tax advice, but he has spent years helping people prepare for retirement, so he understands all too well the importance of having professional help when it comes to protecting your retirement income.

“Many adult children have little to no knowledge about effective and tax efficient retirement income strategies and may choose a retirement income distribution option that doesn’t fit with their parents’ personal situation. That could potentially put them in a higher tax bracket, he says. “The parents worked hard to build their assets, and because they didn’t consult a tax professional, they end up limiting their retirement income because they’re paying more than necessary in taxes.”

More often than not, when mistakes are made, they are not realized until after the parents have passed away and the family learns how taxes have decreased their parents’ estate. One good analogy is a football game: too many people get stuck at the halftime score and fail to anticipate the final score—that is, after death and their remaining estate. Even if the parents did a great job building their assets lack of knowledge can inadvertently lead to retirement income decisions which may result in paying unnecessary taxes.

Baby boomers and retirees should be pro-active in their strategies for retirement, and one element of a successful retirement solution is looking at available tax efficiencies. The more tax efficient your retirement income plan is, the greater your retirement income will be.

There are ways for pre-retirees and retirees to lower the amount of taxes they must pay, and those who have a distribution strategy in place before reaching age 65 can benefit from being prepared. Anyone over age 65 who meets certain requirements may be eligible for the Credit for the Elderly or the Disabled if their income, particularly the portion from Social Security, does not reach a certain amount. This tax credit can reduce a retiree’s taxes on a dollar-for-dollar basis.

Some retirees choose to defer receiving their IRA distributions until age 70 ½, since the longer they defer the more growth potential their assets can realize, but this also means potentially increasing the amount of taxes they will pay if they are in a lower tax bracket. The traditional philosophy is to deduct IRA contributions while in a high income tax bracket, and take withdrawals after retirement, paying lower income taxes as money is withdrawn. But too many retirees do not follow this script, and instead of taking advantage of their lower tax bracket by withdrawing money and paying lower tax rates while the option is available, instead they let their money grow without realizing that the taxation rate grows with it, which can create future complications.

Additionally, after taking their required minimum distributions (RMD) every year, many retirees decide to reinvest their money. Often they will reinvest the money in simple mutual funds and pay taxes year after year, because their investments are fully taxable. Instead, they could be reinvesting in a tax deferred state.

It is important for every retirement and financial strategy to have a tax plan built into it. In a perfect world, everyone would begin familiarizing themselves with tax codes and planning for retirement while they’re still in their 20s, but unfortunately not everyone does, and some of the baby boomer generation is heading there with an inadequate retirement strategy, or none at all. For those who are nearing retirement but haven’t reached it quite yet, there is still time to develop a financial strategy, and enjoy the golden years ahead. Keep in mind, it is not about how much money one makes, but how much money one keeps.

For more information about us, please visit

Full News Story:

Media Contact
Company Name: Ayers Financial Services
Contact Person: Patrick Ayers
Phone: (540) 563-9144
Country: United States