To
be in a lower tax bracket after retirement or who don't qualify for a Roth IRA due to income level.
Tax Advantages: Because you only pay on your variable annuity at the time of withdrawl, it's possible you'll
be in a lower tax bracket after you retire, thus decreasing your tax burden.
When you add that to normal income tax, many seniors are in 40 - 70 % tax brackets, so don't just assume you will
be in a lower tax bracket after you retire.
It's often better to go with a Traditional IRA if you pay a lot in taxes now and think you'll
be in a lower tax bracket after retirement.
In general, you should go with a Traditional IRA if you think you'll
be in a lower tax bracket after you retire.
Not exact matches
Although municipal bond yields
are generally
lower than taxable bond fund yields, some investors
in higher
tax brackets may find they have a higher
after -
tax yield from a
tax - free municipal bond fund investment instead of a taxable bond fund investment.
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As an added bonus, if you sell
after you retire, you may
be in a
lower tax bracket than you
are when you
are earlier
in your investing career.
After all, if for some reason I don't end up
being in a
lower tax bracket during retirement, I suppose it will
be a good problem to have.
Although
tax - exempt bonds might have a
lower interest rate than taxable bonds, if you
're in a high
tax bracket, your
after -
tax rate of return might
be higher.
Since the Roth IRA
is funded with
after -
tax money, it makes sense to pay
taxes on the money when you
are in a
lower tax bracket.
When you convert, you'll have to pay income
taxes (as you
're moving from a pre-
tax contribution account to an
after -
tax one), but since you
're in a
low - income
tax bracket for the moment, you'll
be paying as few
taxes as possible.
I will likely
be in a
lower income
tax bracket with the distributions
after retirement (I
'm 39), so do you recommend I avoid the Roth option?
I
was wondering if it
is a valid retirement strategy [
after retiring] to withdraw the first couple
lower tax brackets worth of income from the taxable traditional 401k thus taking advantage of
lower rates, and then switching over to withdrawing from the
tax - free Roth 401k for income that would normally
be in the higher
brackets and thus
taxed at a higher rate.
But a traditional deductible IRA may
be a better tool if you want to
lower your yearly
tax bill while you
're still working (and probably
in a higher
tax bracket than you'll
be in after you retire).
That holds out the potential for even further gains, and the possibility of paying less
tax on your capital gains if you sell
after you retire, when you may
be in a
lower tax bracket.
This strategy
is best carried out when you
are temporarily
in a
low tax bracket perhaps because you
are between jobs or if you expect to
be in a higher
tax bracket in the future, as
is the case sometimes with retirees who may have the RMD from their IRA
after the age of 70 1/2.
Depending on your income, you may
be in a
lower or higher
tax bracket after you retire.
Give this information,
is it better to have 401k pre-
tax which would mean the person pays less
taxes in US, and when withdrawn
after retirement assuming the
tax bracket will
be lower so, the withdrawl would also attract less
tax penalty.
Assuming, however, that our investor will retire
in a
lower tax bracket — say, 30 % — the actual value of his RRSP would
be $ 700,000
after accounting for
taxes.
If you wait to withdraw your money from this account until
after you reach qualified retirement age (currently between 65 - 67) and you'll likely
be in a
lower income
tax bracket and, therefore, pay fewer
taxes on this money.
Under the old
tax law, because the spouse receiving alimony or spousal maintenance
is usually
in a
lower tax bracket after a divorce, more money stays with the divorcing couple rather than going to the Federal Government.
«Payments can
be deferred until
after retirement, when most people
are in a
lower tax bracket.»