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When it comes to paying and planning for taxes, you should be putting your money in different buckets. But do you know which bucket offers the most benefits for your situation?
“Thinking about tax buckets is a way to understand where our money is,” explained Kristian Finfrock, Founder and Financial Advisor at Retirement Income Strategies. “Basically, there are four tax buckets. The first tax bucket is the Tax Me Now tax bucket. That one is our bank accounts. There is the Tax Later bucket. This one is usually a problem for people, it’s retirement accounts which means tax me in the future at unknown rates.”
Then comes the two Income Tax Free buckets. The first is Estate Taxable, so things like Roth IRA’s and Municipal Bonds. The second is Income Tax Free but also Estate Tax free. This bucket includes Irrevocable Life Insurance Trusts and charitable trusts.
“So, thinking of tax buckets is just a simple way to understand where is your money, and maybe more importantly where should it be,” Finfrock said.
Retirees can be affected by a variety of taxes — state income taxes, estate taxes and Social Security taxes, to name a few. But the most common tax — the one that all retirees will deal with — is the federal income tax.
“For retirement planning it’s important to start thinking of our money in terms of the future dollar, not necessarily today. You can’t help but understand from the media today that taxes are going up. And for many young people, taxes are going to be the biggest concern and even retirees, it’s going to take a big chunk of their retirement income.”
The Tax Buckets it’s simply a way to understand that and help plan for the future. To better understand and help with that planning, Retirement Income Strategies is offering a free guide to tax bucket planning.
For your free Tax Buckets Booklet, call or text “BUCKETS” to 608-313-7556.