CALL US: (888) 440-2468

CALL US: (888) 440-2468

have an annuity question?
have an annuity question?

How much spendable income will you have in retirement?

And will it be enough?

Generating an ample retirement income can be somewhat challenging these days, especially given the volatile stock market and (still) historically low interest rates. There is also the issue of longevity because living a longer life can subject you to all of the other financial risks for a longer period of time.

If you’re counting on a certain amount of income in retirement, there are some other unknowns, too, such as what the then-current income tax rates will be. So, even if you can rely on a set amount of before-tax income, you still may not know how much you actually have available to spend.

Will Income Taxes Be Higher or Lower When You’re Ready to Retire?

Both federal and state (where applicable) income taxes have varied quite a bit for over a century, with the low being at just 7% in the early 1900s, and the high point at more than 90% in multiple years.

Top Federal Income Tax Rates 1913 – 2020

YearRateYearRate
2018-202037195084.36
2013-201739.61948-194982.13
2003-2012351946-194786.45
200238.61944-194594
200139.11942-194388
1993-200039.6194181
1991-199231194081.1
1988-1990281936-193979
198738.51932-193563
1982-1986501930-193125
198169.125192924
1971-1980701925-192825
197071.75192446
196977192343.5
196875.25192258
1965-1967701919-192173
196477191877
1954-196391191767
1952-195392191615
1951911913-19157

Source: Inside Gov (http://federal-tax-rates.insidegov.com/)

 

Higher taxes can equate to less – and in some cases, far less – income available to spend on the items and services that you need in retirement. With that in mind, having an income plan that also reduces or eliminates income taxation is essential.

How to Reduce – or Eliminate – Tax on Your Incoming Cash Flow in Retirement

With income tax rates so uncertain – but likely to go up in the future – taking strategic steps now can provide you with much more spendable income down the road. One way to do this is to take advantage of the Roth IRA.

These accounts are funded with after-tax dollars. But they can more than make up for this with their tax-free growth, as well as tax-free withdrawals. Roth accounts can be funded in a variety of ways, including:

  • Direct cash deposit each year into an individual Roth IRA account (up to an annual maximum, and provided that you qualify based on the income limits)
  • Conversion/rollover from a traditional IRA and/or employer-sponsored retirement plan to a Roth IRA
  • Participation in an employer-sponsored Roth 401(k) plan
  • Solo Roth 401(k) account for qualifying business owners

Further, by having an annuity in a Roth account, the income distributions from that account can be received tax-free, as well as guaranteed to last for a certain amount of time (such as 10 or 20 years), or even for the remainder of your lifetime.

Will You Get the Most from Your Retirement Income?

Because everyone has different income and investment goals, there isn’t just one single strategy for all retirees across the board. That’s why it is important to discuss any of your short and long-term financial objectives with a specialist.

At Annuity Gator, our mission is to ensure that consumers and financial professionals are well educated in “all things annuity.” These financial vehicles can be complicated – but they can also offer a long list of benefits, both before and after retirement.

If you would like more information on how to generate an income for life, while at the same time maximizing your spendable retirement income, feel free to contact us directly at (888) 440-2468, or send us an email with your questions to our secure online contact form. We look forward to assisting you.

How much spendable income will you have in retirement?

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