Most people don't consider all the options regarding retirement planning. Would immediate annuities work best for you? Should you try your hand at the stock market? Bonds? How do you adapt to changing tax implications and a life-altering event that shifts your retirement outlook?
In this article, we examine the ways an accountant can help you plan for your retirement. These professionals give you access to financial analytics that simplifies retirement planning so you can enjoy your golden years the way you always dreamed. Continue reading to learn more about how an accountant can help you along the way to your retirement.
Accounting and Planning for the Future
One of the simplest ways an accountant helps you is by planning your future more accurately. Your accountant can advise you on how you can make changes and how you can strengthen your financial position leading up to retirement. Accountants will be able to examine your past and future expenses and investments so they can create a long-term cash flow and tax projection.
These projections will help you decide whether to use a traditional or Roth IRA as a retirement investment vehicle. They will also be able to help you plan for buying or selling investment properties and evaluate your pension and the tax burdens that come with it. You might also wonder whether you want to take social security later. If you plan to work later while taking social security, your earnings stand to decrease during retirement.
Dealing with Retirement Now
Once you retire, there are many ways to reduce your tax burden. Many people might feel that their social security won't be taxed. However, that's not always the case and the amount of social security taxed typically depends on your combined income. If your combined income is under $25,000 for filing or $32,000 for joint files, you will not pay taxes on social security. If it exceeds this amount, you will pay taxes on 50-85% of your social security.
Distributions from pensions, 401(k)s, traditional IRAs, and capital gains or dividends from investments held for a year or less get taxed at the ordinary rate and will be included in your AGI. You can lower your AGI by committing to the following techniques:
- Offset your capital gains with capital losses.
- Direct the minimum required withdrawal from your IRA to a qualified charity.
- Give a cash gift of up to $15,000 to as many people as you can without incurring a federal gift tax.
Long-term capital gains are taxed much lower than regular income. They can result in substantial tax benefits for retirees. Capital gains and dividends held for more than a year are tax-free for income up to $39,375. After that, they are taxed at 15-20%, which is substantially lower than standard tax rates.
These are just a few ways accountants can help you maximize your retirement money.
CPAs Help You Budget and Save
While saving for retirement, you will likely have investment options on the table. However, having a CPA by your side can help you put more money aside to increase the number of investments available to you. Budgeting and sacrificing time to ensure your retirement is set can be difficult. A CPA will take the frustration out of the process so you can create a budget that works for your specific situation.
CPAs can also help you realign your retirement goals. You should be willing to adapt your retirement goals depending on the circumstances. Whether because of family circumstances or new lifestyle desires, retirement plans should be fluid, not static. Whatever the reasons for the change in plans, a CPA can help you adjust your retirement goals as your needs change.
As with your budget and savings, you need to be flexible with your retirement and CPAs can help modify your plan as you see fit.
Advice On Specific Tax Situations
Accountants can issue guidance on specific tax situations. Most people don't have complicated taxes, but many do and some situations can cause strenuous tax planning. Whether through having a large income, many investments, or owning an investment property, tax planning is always difficult. People who intend to give a substantial amount of money to beneficiaries can also benefit from having a CPA look at their finances.
Management of Income On Rental Properties
Owning an investment property is a common investment strategy for many looking to retire. It might be part of their income plans or their eventual retirement. Regardless, that income can complicate their tax situation. Accountants will be able to guide you on how to manage income from your rental property.
You should treat owning a rental property as similar to running a business. It incurs expenses and you have to be prepared for how to deal with those expenses. You have to combat liabilities, income, and expenses. Accountants can help you file your federal, state, and local taxes correctly.
Planning for Large Life Changes
Accountants can help you anticipate or adapt in the wake of a life change. You might want to retire at 65 because you can rely on your spouse's income. If their spouse dies, they will need to adapt to the intense grief of losing a loved one. You can also experience other life altering occurrences, such as a divorce, or large capital gains. Accountants can help you adequately prepare for all these situations.
Closing a Business
A small business owner or a self-employed or sole proprietor can work with accountants if they plan to close their business after retirement. This means they will need to comply with various tax implications and having an accountant to consult can simplify the management of this situation.
Conclusion- Can You Use an Accountant for Retirement?
Retirement planning isn't simple and having a professional by your side is an excellent way to ensure you reach your goals for your golden years. Your retirement plan won't be the same as the next person's and an accountant can help tailor a retirement plan to your needs.
Answering your retirement needs with a professional accountant is a simple way to lay the foundation for your retirement. Once you display your goals in front of you, you can more effectively respond to the challenges of your retirement.
