For the last 30 or 40 years, clients who are near retirement have been working and saving every dollar possible, and while they’re almost at the finish line, there are still savings to be had.
Clients who are nearing retirement provide a unique tax planning opportunity, as they are likely to have both more income and more income taxes now than they will when they leave full-time employment in the near future.
Here are some important steps advisors should take to reduce their clients’ taxes while they’re working but on the cusp of retirement:
Max Out the 401(k)
Workers on their way out should do whatever they can to increase contributions to a pre-tax retirement plan, like a 401(k) or 403(b). In 2013 the limits are generally the lesser of the employee’s income, or $17,500. That figure rises to $23,000 for contributors over age 50.
Comments