The 3 Tax Buckets In Retirement

Retire Ready with Kyle Hammerschmidt

Send us a text

Summary
In this episode, Kyle and Kolin discuss the three tax funnels that can be used to build a tax-efficient retirement plan. The first funnel is the tax later bucket, where contributions are made with pre-tax dollars, such as employer plans and IRAs. Distributions from this account are taxed as income. The second funnel is the tax now bucket, where contributions are made with after-tax dollars, such as brokerage accounts. The growth or income from this account is subject to taxes. The third funnel is the tax never bucket, which includes Roth plans where contributions are made with after-tax dollars and distributions are tax-free. The hosts also provide a case study to illustrate how these tax funnels can be applied in practice.

Takeaways

• There are three tax funnels to consider when building a tax-efficient retirement plan: tax later, tax now, and tax never.
• The tax later bucket includes contributions made with pre-tax dollars, such as employer plans and IRAs. Distributions from this account are taxed as income.
• The tax now bucket includes contributions made with after-tax dollars, such as brokerage accounts. The growth or income from this account is subject to taxes.
• The tax never bucket includes Roth plans, where contributions are made with after-tax dollars and distributions are tax-free.
• It's important to understand the tax implications of each funnel and consider the best withdrawal strategy to minimize taxes and maximize income in retirement.

Subscribe to The Retire Ready Weekly Newsletter
Get more information on The Retire Ready Academy
Looking for personalized financial planning? Visit our website
Disclosure: You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. This podcast is intended for educational purposes only. Nothing in this podcast constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. MOKAN Wealth Management is a registered investment adviser with the SEC. Registration of an investment adviser does not imply a certain level of skill or training.