For most married couples, there may be a ticking tax time bomb waiting for them later in life during their golden years. This is a problem that most people don’t like to talk about, and is often overlooked until it is too late to do anything about.
But this issue should be discussed as part of any comprehensive financial plan, as there are ways you may be able to diffuse the problem if you act early.
The tax time bomb we are referring to goes off when the first spouse passes and leaves the surviving spouse to file taxes as a single person.
Most often, income doesn’t go down much when the first spouse passes, usually only by some lost Social Security. But their standard tax deduction is cut in half and the tax brackets jump considerably!
Paying a lot of extra tax to the IRS and having a lower standard of living isn’t what most people are longing to do!
If you are married, this could be a ticking tax time bomb waiting for you in retirement one day!
One way you can diffuse this tax time bomb is by utilizing a Roth IRA in your retirement planning.
Taking income from a Roth has no impact on your taxable income or on making your Social Security taxable either, which can be another ticking tax time bomb lurking in retirement!
If you haven’t created a comprehensive financial plan that addresses these future tax issues, contact Jimmy Miller, the founder of Baobab Wealth Management. Jimmy is a Fiduciary Financial advisor who can help you to navigate this and other tax time bombs most people don’t think about until it’s too late.