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Tax Planning

Tax Planning

Addressing taxes is an essential piece in preserving your retirement plan. Tax laws can be confusing, and little mistakes lead to larger tax issues. Each year, many people are overpaying taxes without even knowing it, leading to a lower retirement income. Our financial planners offer retirement tax evaluation that pays critical attention to tax liability during every step of your financial planning process to help address problems and create tax efficiencies.

What is tax planning all about?

Tax planning involves taking a pro-active approach to paying taxes.

While it is illegal to avoid paying taxes that you owe, there is nothing wrong with looking at your income and potential deductions in advance so as to pay the least amount of tax possible under the law.

There are a number of steps you can take to help address your tax obligations, many of which involve saving for retirement, childcare, and medical expenses.

Why plan?

Income taxes on the federal level are a fact of life, and many people also have to pay state and local taxes. When you make an effort to plan around taxes, you can save yourself money that you would otherwise pay to the federal, state or local governments.

While you may not notice the impact of federal taxes, they are often the biggest expense that most families incur in the course of a year. For example, if you save for retirement, whether in the form of an employer-based program such as a traditional 401k or individual retirement account (IRA) or both, you can save money on taxes. Saving in a traditional 401k or traditional IRA may help reduce your taxable income when you make a contribution, but distributions are taxed.

You don't get a current tax deduction for contributions to a Roth 401k or Roth IRA, but qualified distributions (including earnings) are not taxed.

Tax law is always changing, speak with a professional about your specific situation.