At Total Financial Solutions, president and CEO Arif Halaby is reminding the community about the importance of planning for required minimum distributions in retirement.

Many people use retirement accounts like a 401(k) or IRA that allow them to put off paying income taxes on these funds, but it is crucial to remember that the government will collect on these owed taxes when the account holder reaches age 70 ½, according to Halaby, a Certified Estate Planner.

“This is called a Required Minimum Distribution, or RMD,” Halaby explained. “By being forced to pull out money from your retirement accounts, your taxes and tax bracket can increase.”

This increase could mean that as much as 85 percent of a retiree’s social security income can be subjected to their current income tax brackets, which Halaby has seen reduce a person’s retirement by more than $500 per month.

A potential solution to this problem is utilizing a Roth IRA, which is exempt from Required Minimum Distribution rules, according to Halaby.

Related: Total Financial Solutions President, CEO Talks Financial Literacy For Santa Clarita Residents

“Consider converting some of your retirement accounts to a Roth IRA each year leading up to retirement,” he said. “Meet with your tax advisor and financial professional and ask how much you can convert each year without paying huge amounts in taxes. You may be able to use business write-offs, child tax credits or other credits that allow you to absorb some or all of your tax liability.”

Under current law, when a retiree reaches age 70 ½, their required minimum distribution will only be calculated based on non-Roth IRA values, meaning that funds they withdraw from their Roth IRA are never subject to state or federal income tax again — including any growth since the account was converted.

Halaby advised keeping in mind that what he called “the political wind” may change this benefit, and recommended considering acting sooner rather than later for this reason.

“At Total Financial Solutions, we can help you with the process by working with your CPA or tax preparer,” Halaby said. “Your goal should be to have a ‘team approach’ towards this issue so that your best interest is the center of focus. The sooner you begin to plan, the more prepared you will be financially.”

Total Financial Solutions offers assistance with preparing for retirement in Santa Clarita and the surrounding valleys. Santa Clarita financial professional Arif Halaby, a Certified Estate Planner, and Total Financial Solutions staff work with people of all ages, helping them protect, grow and preserve their assets through an individualized approach. As a well-known financial professional, Arif Halaby is also the host of “Total Financial Solutions Safer Money Hour” on KHTS AM-1220. Launched in 2004, the show offers listeners retirement planning tips and guidance for dealing with today’s ever-changing financial needs.  

Total Financial Solutions, Inc.

24322 Main Street

Newhall, CA 91321

661-753-9683

800-990-7344

Total Financial Solutions – Newhall

https://www.youtube.com/watch?v=g9S4orbb9is

Arif Halaby, Total Financial Solutions, Financial Planning, Planning for Retirement, Retirement Planning