Will I Be in a Higher Tax Bracket When I Retire?

Shawn Plummer

CEO, The Annuity Expert

Impact of Retirement Withdrawals on Tax Brackets

  • Withdrawal Strategy: Spreading out withdrawals over time instead of taking a lump sum can reduce the risk of moving into a higher tax bracket. If your monthly income remains below the threshold of the next higher tax bracket, you’ll likely stay in a lower tax bracket.
  • Role of Annuities: Annuities can be a strategic tool to manage income in retirement. They automate the withdrawal process, providing a consistent income stream. This steady flow of income helps in controlling your tax bracket, potentially preventing an increase in your tax bill.

Example

  • Scenario 1: Taking a large lump sum withdrawal could push your income into a higher tax bracket for that year.
  • Scenario 2: Receiving smaller, regular payments through an annuity keeps your income more level, potentially keeping you in a lower tax bracket.

Comparing Withdrawal Strategies

Withdrawal TypeTax Bracket ImpactIncome StabilityTax Bill Control
Lump SumHigher risk of increasing tax bracketLess predictableLess control
Annuity PaymentsLower risk of increasing tax bracketMore predictableMore control

Conclusion

Carefully planning retirement withdrawals is crucial for tax efficiency. By opting for annuities or similar methods that distribute income evenly over time, you can exert greater control over your tax bracket and avoid unexpected increases in your tax bill. This approach ensures a more financially stable retirement. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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