Assisting women through the various stages of life and transitions that impact their financial future is something we take seriously and pride ourselves on. It is impossible to ignore the personal and professional differences impacting men and women, and it calls for diversified financial strategies. We lay out some need-to-know strategies when it comes to women’s retirement and taxes.
Creating a Long-Term Plan
If you’re single
For single women, you are reliant upon yourself for saving for your retirement. You may want to save as much as you can for retirement and optimize your tax strategy. To gain the most benefits, it is recommended to continuously fund your retirement channels. You should max out your tax-favored IRA and 401(k) contributions, while also investing in taxable mutual funds or exchange-traded funds or ETFs. This diversified approach can limit risk and stretch the most from your investments.
If you’re married
Being married doesn’t give you a free pass to leave your finances and retirement planning to your partner. Even if you’re married, you should stay up to date on decisions being made that affect your financial future. You should especially stay in the know of your finances should something happen and you are handed control.
Regarding taxes, you should know your filing status – do you file jointly? Or separately? Your filing status affects the taxation of your Social Security benefits, pensions, and more. This can affect what you owe in taxes and your future income.
If you’re divorced
Divorce can be emotionally draining and convoluted. Alimony and Maintenance Trust is an option to consider that may be tax-advantageous. It’s important to remember that alimony you may have received if divorced prior to 2019 must be reported as received income on your federal tax return.
If you’re widowed
Because women tend to outlive men, many will find themselves widowed at some point in their lives. Not only is it an emotional burden to bear, it can also be financially challenging. One of the first things to do is see if you’re eligible for Social Security survivor benefits. Then, check for any life-insurance payments you may receive. If your spouse had a contribution plan such as a 401(k), you’ll inherit it. Work with a tax professional to determine how you’d like the account to be distributed and how that may affect your taxes.
Tax-Deferred Products to Lower Your Tax Burden
If you’re wanting to reduce some of your tax burdens now, look into tax-deferred products, such as IRAs and 401(k)s, as well as annuities. Using these retirement vehicles, your assets can grow tax-free until it’s time to take money out of the accounts.
A Tax-Diversified Approach
This strategy involves using different types of retirement vehicles to help lower your tax obligations, whether now or in the future. Your investment options include:
- Taxed now:
- Taxed later:
When making these decisions, consider your lifestyle, current income, and financial goals. Ask yourself if you expect your income tax bracket to be higher or lower when you retire and whether it makes sense to be taxed now or later. Working collaboratively with a tax professional and financial advisor can help you determine the best solution for your situation. Let’s start the conversation to help you build your retirement plan and talk more about your options.