By: Jessica Engebretsen, CFP®

Are you looking forward to your golden years? You should be, but you may be surprised to find out why. We are used to thinking of someone’s golden years as a “traditional” retirement, but just as the expectations of post-work life itself are shifting, our old definitions are starting to change as well.

In my recent work with clients, I’ve discovered a new set of golden years – critical years when earned income has ended but set income streams like Social Security and Required Minimum Distributions haven’t yet begun. These years can potentially offer an exciting array of opportunities when it comes to building income and accessing accounts, but you have to know where to look as you plan your income.

Once a person or couple retires, they often claim Social Security and tap retirement accounts without much additional thought. It’s a simple, and sometimes effective, strategy, but based on a person’s unique considerations, there may be a smarter way to start depending on current age, tax bracket, account types, and cash levels.

Everyone’s asset mix is unique, but a few situations consistently arise that could benefit from closer planning:

  • Is there a large concentration of a single stock in a taxable account? Delaying Social Security and IRA withdrawals could allow a person to maximize lower tax brackets and favorable taxable gains rates.
  • Is there a large concentration of a company’s stock in a 401k? It’s possible that the account holder could benefit from a special rule called Net Unrealized Appreciation (NUA) to help access assets, take advantage of capital gains rates, and ultimately diversify a portfolio.
  • Is there a need to limit taxable income to maintain an Affordable Care Act health insurance subsidy? Holding off on Social Security until Medicare age could help save money on healthcare premiums.
  • Is there a large IRA or 401k that will kick off larger-than-needed required distributions in the future? It could be worth tapping retirement accounts early while holding off on Social Security to take advantage of lower tax brackets.

This is by no means a definitive list – in fact, we often see multiple issues interacting with each other, which can create more complications. The key point to take away is that what a retiree has and how he/she/they access it can dramatically impact tax bills both now and in the future. It’s important to take a holistic view of assets and income streams to build an intentional plan moving forward before requirements like RMDs kick in at 72 and maximum SS benefits hit at age 70.

People planning to retire soon as well as recent retirees have a wide variety of circumstances, so there’s rarely one magic bullet that works for everyone when it comes to the “right” way to structure retirement income. Instead of searching for a single universal strategy, it is beneficial to start with a person’s or family’s needs, and then look for smart solutions based on their available assets. We love helping people maximize all of their golden years, so consider utilizing an advisor rather than navigating this process on your own.

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Longview Wealth Management