Stretch Your Retirement Savings with Multi-Year Tax Planning

The years approaching retirement are rich with opportunities for those who can carefully fill their income “buckets” to just the right level.

By DAVID STOLZ, CPA/PFS, CFP® | Stolz and Associates, PS

As people wind down their careers and begin picturing what retirement will look like, it’s important that they consider a few big questions. Where will their income come from? How will taxes affect their cash flow? And how do they determine what asset drawdown strategy makes the most sense for their unique financial situation?

While the specifics of tax law change from year to year, we recently saw large-scale change to the tax code that impacted the majority of Americans. The passage of the Tax Cuts and Jobs Act (TJCA) in late 2017 resulted in many financial planning opportunities. As soon as the law passed, my firm began meeting with clients to identify opportunities to apply the new rules to their unique situations for asset drawdown. As a CPA and financial planner, it is second nature for me to overlay multiyear tax planning onto clients’ short-term and long-term financial goals. After all, what matters is your cash flow after tax — not before. It’s the net, not the gross that you will live on in retirement.

When applying the new tax rules to retirement planning, you may find opportunities with the newly created tax brackets. With roughly similar income levels, if you were in the 28% tax bracket in 2017, you might be in the 24% bracket now. If you were in the 25% bracket last year, you might be at 22% now. To maximize this new opportunity, you have to be proactive and develop a plan.