Investors expect higher taxes but aren’t preparing for them
A lot of people feel anxious about taxes in retirement. A recent Advisor Authority study1 powered by the Nationwide Retirement Institute® found that four in five investors (80%) broadly expect taxes to rise in the future. Yet fewer than one-third (31%) of this cohort say they’re proactively adjusting their financial plan accordingly.
According to the same research, only about one in four investors (26%) say they actively manage tax considerations throughout the year. That means many people may be missing opportunities today that could help them keep more of their income in retirement.
The gap between worry and action is where financial risk may build. Proactive planning is an important step. When investors feel anxious but unprepared, that’s when they should turn to a financial professional for personalized guidance.
Why tax planning matters for retirement
Taxes are one of the many factors that can influence how far your retirement savings will go. Different types of accounts and investments may be taxed in different ways. The timing of withdrawals can also affect taxes for investments.
That’s why it can help to think about taxes as part of your overall retirement strategy—not just something to handle during tax season.
When taxes are part of an ongoing financial plan, you may be able to make more informed decisions about saving, investing and generating income in retirement. Over time, those decisions may influence how much of your money stays in your pocket.
Why use a financial professional
Because everyone’s financial situation is different, tax planning isn’t one-size-fits-all. What works well for one person may not make sense for someone else.
Financial professionals understand this. By looking at your full financial picture—including your savings, investments and retirement goals—they can help you understand how taxes may affect your long-term plans. That may include guidance on portfolio diversification and other financial plan management.
The survey results indicate that working with a financial professional is also linked to greater retirement confidence. In the Advisor Authority study, 65% of investors who work with a financial advisor expect to retire on schedule or earlier than planned, compared with 44% of those without an advisor who say they plan to retire around their original timeline.
Conversations about tax planning can be an important part of those discussions. A financial professional can help you think about how taxes fit into your broader financial strategy and identify opportunities to plan ahead.
How to start planning with taxes in mind
While tax rules and individual situations vary, there are a few ways you can begin thinking more proactively about taxes as part of your retirement plan.
- Get familiar with your portfolio. Understanding how your investments may be taxed can help you make more informed decisions about saving and withdrawals over time.
- Look beyond tax season. Remember that taxes don’t only affect you when it’s time to file your returns. Reviewing your financial plan throughout the year can help you spot opportunities and avoid surprises later.
- Consider working with a financial professional. A financial professional can help you build a plan tailored to your goals and help you think through how taxes may affect your retirement income.
Find a financial professional
Taxes will likely remain an important part of retirement planning for years to come. Taking time to think about them now—and working with someone who can guide you through the process—may help turn uncertainty into a clearer plan for the future.
If you’d like help getting started, a financial professional can help you create a more tax-efficient retirement strategy. If you don’t currently work with someone, we can help you find a financial professional near you.
