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Financial Planning > Tax Planning

Tax planning is vital for retiree financial success

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Taxes will require more consideration in future years for retirees. Shouldn’t you ask them about it? Taxes can be the start of so many wonderful conversations with prospects and clients about something they hate to pay. 

See also: When teaching clients, repetition and questions are key

Our government desperately needs more revenue for:

  • Social Security: Currently, 9,100 baby boomers retire daily. Our biggest birth year was 1957, followed closely by 1958 to 1964. We will have 11,400 baby boomers retiring every day between 2022 and 2029. Seventy percent of baby boomers will retire between 2022 and 2029. We cannot afford the ones who are retiring now. Where will the government get enough revenue to cover all who retire between 2022 and 2029?

  • Medicare, Medicaid and the Patient Protection and Affordable Care Act: Aren’t these costs intertwined? Are their costs increasing or decreasing?

  • Homeland Security: Would you like to wait in even longer lines to fly? Are the costs associated with this increasing or decreasing?

  • Defense: Aren’t there more skirmishes everywhere? Skirmishes cost money.

  • Infrastructure: How would you like to drink Flint, Michigan, water? Should we repair Pittsburgh’s bridges? What is it like to drive in major cities like Atlanta, Chicago or Los Angeles? How are they going to fix this?

  • National Debt: The Congressional Budget Office forecasts the U.S. will be $57 trillion in debt by 2034. By 2019, our tax revenue will only pay for entitlements, interest on the debt and defense. By 2023, only entitlements and interest on the debt are covered. The CBO details that we already pay more in taxes than for food, clothing and shelter combined. It will be much worse in the future.

  • Where are they going to get the money? Tax planning is vital to the success of future retirees. Agents and financial professionals must have a basic understanding of income taxes to provide beneficial advice for current and future retirees.

Here is the easiest and quickest way to learn about taxes. Go to and click on forms and publications. Print out all 105 pages of the form 1040 instructions. Read them several times. Pay close attention to the following pages:

  • 30: The Social Security Worksheet

  • 39: The Personal Exemption Worksheet

  • 40: Standard Deduction Chart for over 65

  • 101: Income and Outlays

  • 102: Tax Rate 

Learn that a couple over age 65, filing a joint return and not itemizing, has a standard deduction of $15,500 for tax year 2016. Additionally, each gets a $4,050 personal exemption. That couple can have $23,600 of fully taxable income and not pay any income tax.

If they are only taking a $10,000 RMD in addition to their Social Security, they could withdraw an additional $13,000 from their IRA and not pay income taxes. Over a 20 year period that would eliminate taxes on $13,000 x 20 or $260,000!

This remains effective in the 10 and 15 percent tax brackets because tax laws are progressive.

I made my own rule for this age group that I call Rule of 99-15. It reminds me that people over 65 can have $99,000 of taxable income and be in the 15 percent tax bracket. That means they pay zero percent capital gains. Couldn’t we use this as a reason to harvest capital gains for prospects and clients before they lose it to taxes?

Ask prospects and clients if they love someone at the Internal Revenue Service enough to leave them a lot of money. I bet the answer will be no. Then help them make sure they have strategies in place to prevent that.

Read also these columns by Van Mueller:

Covering health care costs in retirement: tools you can use

What women planning for retirement want: income guarantees

Doing right by clients in volatile markets: 3 examples

20 issues to inspire your prospects & clients to take action


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