How a Financial Advisor in St. Charles Can Help You Plan for a Tax-Efficient Retirement
If you are approaching retirement in St. Charles, IL, you want a plan that develops strategies to manage taxes efficiently. Retirement should reward years of hard work, not saddle you with unnecessary taxes. Yet managing Social Security, investment income, and account withdrawals can feel complicated.
A fiduciary financial advisor in St. Charles can help you design a tax-efficient retirement strategy. From leveraging Illinois tax breaks to planning Roth conversions and managing required minimum distributions (RMDs), personalized guidance can make a big difference.
How Do Illinois Tax Rules Benefit Retirees?
Illinois is generally considered tax-friendly for many retirees. The state does not tax distributions from most retirement plans, including IRAs, 401(k)s, 403(b)s, pensions, or Social Security. That means you can often draw income from these sources without facing a state tax bill.
Federal taxes, however, still apply. If you pull income from pre-tax retirement accounts or taxable brokerage accounts, you need a plan to manage those taxes. A financial advisor in St. Charles can help you determine which accounts to tap first and how much to withdraw to help manage long-term tax exposure.
The Retirement Income Game Plan
The Retirement Income Game Plan is designed to walk you through key decisions and smart strategies to help turn your savings into reliable retirement income.
Why Should You Plan Ahead for Required Minimum Distributions?
At age 73, the IRS requires withdrawals from traditional retirement accounts, including IRAs and 401(k)s. However, you should note that the SECURE Act 2.0 increased the RMD age to 73, but if you turn 73 after Dec. 31, 2032, the RMD age increases to age 75. These RMDs count as taxable income and can push you into a higher tax bracket.
Fortunately, you can plan ahead. The years before RMDs start offer an opportunity for strategic withdrawals or Roth conversions. These moves can potentially reduce future RMDs and create a more tax-diversified retirement income plan. Your financial advisor can run projections to show how these strategies can influence your overall tax picture.
What’s the Role of Roth Conversions?
Roth IRAs allow tax-free qualified withdrawals in retirement. Strategically converting part of your traditional IRA or 401(k) to a Roth IRA during lower-income years can help reduce future taxes for the current owner but also for the next generation if they might be inheriting the assets. Both inherited Roth IRAs and IRAs must be depleted within 10 years of the original owner’s death, but by doing Roth conversions during your lifetime, you may allow the next generation to inherit assets that can be withdrawn tax-free if requirements are met.
For many St. Charles retirees, the early retirement years are ideal for conversions. Lower taxable income during this period means you can convert at a lower rate. A financial advisor in St. Charles can help you decide how much to convert and when, so your plan aligns with your goals.
How Can You Coordinate Social Security and Retirement Income?
You can claim Social Security at 62, but waiting increases your monthly benefit. Timing matters because up to 85% of your Social Security benefits may be taxable at the federal level. Coordinating Social Security with IRA withdrawals or part-time work can help manage your overall tax liability. A financial advisor can guide you through claiming strategies that balance income needs and tax efficiency.
How Should You Manage Investment Income and Taxable Accounts?
Taxable investment accounts generate dividends, interest, and capital gains that can add to your tax bill. Strategies like tax-loss harvesting, charitable giving through donor-advised funds, and smart asset location may help manage taxes. Aligning your investment plan with your income strategy can help your portfolio support both your lifestyle and tax goals.
Why Should You Work with a Fiduciary Financial Advisor in St. Charles?
Navigating these decisions alone can feel overwhelming. A fiduciary financial advisor acts in your best interests, not based on product commissions. At Savant Wealth Management, our advisors in St. Charles understand the financial challenges local retirees face. Whether you’re planning withdrawals, Roth conversions, or Social Security, we’ll help you make informed decisions.
How Can You Start Building a Tax-Efficient Retirement Plan?
Retirement brings exciting opportunities, but it also comes with important financial choices. With the right guidance, you can create a retirement strategy that helps to support your goals and minimize taxes.
If you are ready to take the next step, consider scheduling a call with a Savant financial advisor in St. Charles. We can help you explore personalized strategies designed to align with your goals and your financial situation.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.