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Federal Employees: Do you Have a Tax Plan?

Federal Employees: Do you Have a Tax Plan?

December 15, 2022
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With TSP and IRA contributions limits rising for 2023, (see the changes here) it is a great time to revisit your tax situation. There may be opportunities to adjust your financial strategy to help save on your annual tax bill, both now and in the future during retirement.

As a federal employee, you will have at least three major sources of income in retirement:

  1. Your FERS or CSRS Pension
  2. Social Security
  3. The TSP (The traditional TSP is subject to Required Minimum Distributions (RMDs) starting at age 72)

If your spouse is also a federal employee or entitled to a pension from their employer, your household income in retirement could be significant, potentially putting you in a high tax bracket later in life. Tax planning and efficient retirement distribution planning are critical elements to maximizing your retirement assets. Have you considered the following questions?

  1. How are you saving for retirement? Are you choosing the right methods (traditional vs. roth vs. taxable?) and amounts that align with your goals?
  2. More favorable tax brackets from the Tax Cuts and Jobs Act of 2017 (TCJA) are scheduled to “sunset” in 2026, how will this affect you?
  3. What is your current marginal tax bracket? Do you have some portion of your income in a higher bracket that is costing you unnecessarily? Are you close to “phasing out” on the eligibility of certain credits or contribution limits?
  4. Will your income be higher now or in retirement? The answer may be surprised when you start taking RMDs from your TSP/IRAs after reaching age 72.
  5. Are you aware of tax planning strategies, such as qualified IRA distributions prior to RMDs starting, Roth conversions, and qualified charitable distributions (QCDs) from IRAs?
  6. What are your legacy planning goals? Do you plan to leave a certain amount of your assets to children, family members, or charity? How will this affect your retirement planning?

If you do not know the answers to some or all these questions, you could potentially be costing yourself significant dollars in unnecessary taxes over the course of your lifetime.

Our team of Fiduciary Financial Advisors are happy to discuss how these issues might affect your financial strategy and help you navigate the opportunities available to you! We offer in-depth forward-looking tax planning strategies using advanced software.

Click the link below to learn more about us and schedule a no-cost introductory meeting:

https://www.planvestfinancial.com/p/planvest-federal

Additionally, please inquire about a Federal Employee Retirement Report to help you gain insights regarding how your unique benefits may look in retirement.

  

All the best,

The PlanVest Federal Team