John Badalamenti, discusses how taxes affect retirement
Listen to the interview on the Business Innovators Radio Network: https://businessinnovatorsradio.com/interview-with-john-badalamenti-co-founder-ceo-of-safe-estate-discussing-how-taxes-affect-retirement/
In this episode of Influential Entrepreneurs, Mike Saunders welcomes back John Badalamenti, to discuss the critical impact of taxes on retirement planning. The conversation opens with the universal discomfort many feel toward taxes, emphasizing how they can affect an individual’s financial landscape, especially as retirement approaches. John highlights the compounding effects of market losses on retirement portfolios and introduces the idea of a “domino effect” that taxes can trigger when retirees begin to draw from their investments.
Taxes play a crucial role in determining the actual income that retirees receive from their retirement accounts. When individuals withdraw funds from accounts such as IRAs or 401(k)s, these withdrawals are subject to taxation, which can significantly reduce the net amount available for living expenses.
As John Badalamenti explains in the podcast, retirees often overlook the fact that the amount they withdraw from their retirement accounts is not the amount they get to keep. For instance, if a retiree needs to withdraw $30,000 to supplement their Social Security income, that amount is added to their total income for the year. Depending on their tax bracket, the actual amount they receive after taxes could be considerably less than $30,000.
This situation is exacerbated by the concept of a “silent partner,” referring to the IRS. Retirees must account for this silent partner when planning their withdrawals, as the government is entitled to a portion of the funds withdrawn. Badalamenti emphasizes that retirees cannot simply withdraw the amount they need without considering the taxes owed on that withdrawal. For example, if a retiree wants to live on a total of $70,000, they may need to withdraw $90,000 to cover the taxes, depending on their tax bracket.
The impact of taxes does not occur in isolation; it can create a domino effect on a retiree’s portfolio. As retirees draw from their accounts, they may inadvertently accelerate the depletion of their savings. If they are withdrawing more than they anticipated due to taxes, it can lead to a faster erosion of their retirement funds. This situation raises concerns about whether retirees will outlive their income, especially in the face of market volatility and inflation.
Another critical aspect of retirement income and taxes is the requirement for minimum distributions. As Badalamenti points out, retirees are mandated to start taking distributions from their retirement accounts at age 73. Failing to take these required minimum distributions can result in hefty penalties, which further complicates tax planning. The penalty for not withdrawing the required amount is currently 25%, which can significantly impact a retiree’s financial situation.
To minimize the tax burden on retirement income, retirees can consider various strategies. One effective approach is to convert traditional retirement accounts into Roth IRAs, which allow for tax-free growth and withdrawals. While this conversion may require paying taxes upfront, it can ultimately save money in the long run, especially if tax rates increase in the future.
Additionally, retirees can explore other tax-efficient investment vehicles, such as municipal bonds, which offer tax-free growth. However, it is essential to understand the potential risks associated with these investments, as they can still affect Social Security taxation.
John expressed: “It is Time, Right Now, to STOP the “Casino Mentality” with your Retirement!!”
Video Link: https://www.youtube.com/embed/oo3s4w_MchI
About John Badalamenti
John has lived in this business for a while, 30 years fighting the Wall Street battle! Born and raised in beautiful Michigan with a close family that he loves and cherishes. They spend a great deal of time together traveling and love visiting their family cottage in up north Michigan. One of his truly favorite spots is mystical Mackinaw Island. Being an avid animal lover and protector, he will soon provide a sanctuary for animals that need love and a safe home. This will be in memory of his “ex-partner” and beloved friend, Bambi, whom he rescued and who went everywhere with him in his travels. In his business model, he works in many states but primarily the Michigan and Ohio areas fighting for his students and clients from the stock market insanity.
“Emotions run the market” and he has learned from all those emotions from all his students through the years!
Learn More: https://www.safeestate.net/
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