Many retirees are financially illiterate about their retirement funds. In order for retirees to have a happy and healthy retirement, there are three common mistakes they should avoid. The first common mistake is not knowing how taxes affect retirement income, especially from especially from social security, capital gains, and distributions from IRAs. Next, they fail to create tax diversification. Finally, retirees get stuck with large withdraw minimums, also known as RMDs, which can affect their overall cash flow.
- Instead of paying taxes on the wages you earn, after you retire you will have multiple streams of income and these aren’t all taxed at the same rates.
- You will need to diversify your taxes, so that you have the flexibility that comes with owning assets in different types of accounts.
- At age 70.5, RMDs start and unless you have diversified your accounts, you could be paying a lot more in taxes.
“make sure you are addressing the opportunities specific to your situation and crafting a strategy to create tax diversification”