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  • Michael J. Conard, Jr. EA

Navigating the Complexities of Retirement Planning: A CPA's Perspective

Retirement planning is a topic that often gets pushed to the back burner, but it's crucial for securing a comfortable future. In De Pere and surrounding areas, we've noticed that many people are unaware of the different retirement accounts available and their associated tax benefits. That's why we've decided to shed some light on this subject, focusing on the tax implications of various retirement accounts.

#### Traditional 401(k) and IRAs

Traditional 401(k)s and IRAs are popular choices for retirement savings. Contributions to these accounts are tax-deductible, meaning they can lower your taxable income for the year. This is a significant advantage, especially for those in higher tax brackets. However, withdrawals during retirement are taxed as ordinary income. Therefore, it's essential to consider your expected tax bracket in retirement when choosing this option for tax preparation.

#### Roth 401(k) and Roth IRAs

Unlike traditional accounts, Roth 401(k)s and Roth IRAs are funded with after-tax dollars. This means you won't get an immediate tax deduction, but your withdrawals in retirement will be tax-free. This can be a strategic advantage if you expect to be in a higher tax bracket during retirement. In Green Bay, we've helped many clients assess whether a Roth account would be more beneficial for them in the long run.

#### Tax-Efficient Withdrawal Strategies

When it comes to retirement, how you withdraw your savings can significantly impact your tax liability. A common strategy is to withdraw from taxable accounts first, then tax-deferred accounts, and finally from tax-free accounts. This approach aims to minimize the tax burden over time. However, each individual's circumstances are different, and it's crucial to consult with a tax preparation expert to tailor a strategy that suits your needs.

#### Required Minimum Distributions (RMDs)

Once you reach the age of 72, you're required to start taking minimum distributions from your traditional 401(k) and IRA accounts. These RMDs are taxable and can push you into a higher tax bracket if not planned carefully. In De Pere, we often advise clients on how to manage RMDs effectively, such as by spreading out withdrawals or converting to Roth accounts to minimize tax implications.

#### Impact of New Tax Laws

Tax laws are continually changing, and it's essential to stay updated to maximize your retirement savings. The SECURE Act, for instance, has extended the age for RMDs from 70½ to 72, providing more time for tax-deferred growth. In Green Bay, we make it a point to keep our clients informed about such changes and how they impact retirement planning.

In conclusion, retirement planning is a complex but crucial aspect of financial well-being. Whether you're in De Pere, Green Bay, or anywhere else, proper tax preparation can make a significant difference in your retirement savings. Consulting with a CPA can provide you with personalized strategies to navigate the complexities of retirement planning effectively.

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