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Bob Powell: Lisa, how are you? Thank you for being here.

Lisa Skelly: Thank you for having me. This is gonna be fun.

Bob Powell: Well, so let's get started with some Q&A. I know a lot of people out there have a lot of questions about retirement income and taxes, how to maximize their retirement income and how to minimize their taxes in retirement.

Bob Powell: Here are some of the more popular questions that we've received so far. So first, we often think of maximizing social security benefits, claiming strategy in terms of longevity insurance, but there are some tax implications to that as well, is that correct?

Lisa Skelly: Oh, absolutely. So it's different for everybody. It's a matter of what income do you want and when? And there's huge strategies behind the taxability of your social security. So the later you wait, the more you're gonna get out of your social security. But if you have other streams of income, that's gonna impact it too. So you gotta be careful to make sure if you've got another stream of income that you're not bringing in too much income to cause your social security to be taxable. So a lot of people don't realize that. They think, "Oh, social security is tax free." Not necessarily.

Bob Powell: Right. And I should mention too that there are two phases to this, right? There's social security before full retirement.

Lisa Skelly: Correct.

Bob Powell: And social security after full retirement. And they are two very different things.

Lisa Skelly: Oh absolutely. Absolutely. So one is putting in and one is taking out. So how much you put in is going to regulate how much you get to take out. And again, it's all about timing.

Bob Powell: So what do people need to know about the tax implications of withdrawing from their retirement accounts? As well as taking money from the social security, that there is some implications in terms of being boosted into a higher tax rate with your social security for instance.

Lisa Skelly: Absolutely. So there's all kinds of strategies around retiring and waiting to pull from social security because you have retirement plans. So number one that I love, the Roth, because it's going to be tax free. Now, the longer you're not pulling out, the more it's building. That's pretty standard. But let's say you want to retire a little earlier, start pulling from your Roth, wait to pull from your social security. Both would be, hopefully, non-taxable then. Or, early one pull from your traditional, that is gonna be taxable. Pull from your social security and your Roth later. So that's gonna minimize the amount that's gonna be taxable on your social security.

Bob Powell: So that brings to the point the bridge strategy does, accomplishes one other thing, which is when it comes to required minimum distributions, it obviously lowers the RMD and potentially the tax [crosstalk 00:02:30].

Lisa Skelly: Exactly, exactly.

Bob Powell: Yes.

Lisa Skelly: Required minimum distributions, that's the other one that people kind of ... Deer in the headlights all of a sudden. You're 70 and a half, and the rules around it are just so weird. It's the year you turn 70 and a half. How many of us track our half birthdays? That's really-

Bob Powell: My daughter.

Lisa Skelly: ... that's really important. Hitting those distributions ... There's even strategies around that. There's things like getting rid of one IRA because it's not preforming, to cover all of your RMDs. So if you have multiple IRAs, you can do that.

Lisa Skelly: There's charitable contribution IRAs. I love those because then you're pulling out and it will be tax free.

Bob Powell: So it goes by the name of QCD.

Lisa Skelly: Correct.

Bob Powell: So tell us a little bit more about the rules regarding that.

Lisa Skelly: So QCD stands for qualified charitable distribution. It is out of IRA, SEP IRA, SIMPLE IRA, that type of thing. When you make that distribution, you're making it directly to the charity. Instead of you receiving the money and you giving the money to the charity, it goes directly to them. And that actually will classify it as being non-taxable income.

Lisa Skelly: Again, if you have a traditional IRA, and let's say you've made good money in that, so you'd have this big tax bill. Instead of having a tax bill, if you were going to give to that charity anyways, use that as a vehicle to give to your charity and not have it be taxable income.

Bob Powell: And there's a maximum amount that you can do that with?

Lisa Skelly: Correct. Those limits are not on the top of my head 'cause they do change.

Bob Powell: Obviously, it meets your RMD requirement?

Lisa Skelly: Absolutely. That is the other nice thing, is it does meet the RMD.

Bob Powell: Okay. So right now it's tax time. Last minute filers are rushing to get their taxes done.

Lisa Skelly: Oh yeah.

Bob Powell: Retirees are getting all kinds of forms or have already gotten their forms. What are those forms that they are getting and what do they need to know about them?

Lisa Skelly: So the biggest, two biggest ones they're going to get is the [1099-SSA 00:04:47]. That's your social security. That hopefully has come earlier in the season, but sometimes it's a little late. So that's your social security income. The other is your 1099-R. So that's your retirement distribution.

Lisa Skelly: People that are new to retirement, I always let them know that's kinda like your W-2 for your retirement. That's going to indicate the type of account, the type of distribution, how much is taxable, if you've had tax withheld from it. That's a really important piece of information to have.

Bob Powell: Right. So with tax deadline coming up soon, what can tax payers do now to make the tax deadline? How can they help if they have ... Where can they go for help if they have questions about their retirement income?

Lisa Skelly: Obviously TurboTax. We have a great program called TurboTax Live, so you can actually talk to a CPA. It's one way video, so you can do it in your pajamas if you want to. They can't see you, but you can see them and have an interactive conversation with them.

Lisa Skelly: Say you got a form and you don't understand it. They can walk you through where to put it in TurboTax. If you're not comfortable ... Let's say for years you've been using TurboTax, this is new, you're not comfortable this year, you can actually transfer that return to a pro and with TT Live we can actually prepare the return and sign it, and put it in for you.

Bob Powell: So you can go online and file with TurboTax-

Lisa Skelly: Correct.

Bob Powell: ... up until?

Lisa Skelly: Midnight, or technically, 11:59 your time zone. 'Cause you want it timestamped 11:59. That's perfectly legitimate.

Bob Powell: With TurboTax there's no need to know the tax rules, right? Or tax forms. This is ... You're being walked through it.

Lisa Skelly: Correct, correct. With TurboTax, that's actually what my team does, is we walk you through every step, and ask you all the questions that you need to answer in order to get you the lowest tax. We'll even bring up stuff going, "Hm. You have this. Do you possibly have this over here?" To remind you of things while you walk through.

Bob Powell: Right. And obviously we live in a country where English is not the only language spoken, so TurboTax Live, CPAs, and enrolled agents are available both in Spanish-

Lisa Skelly: In English and Spanish. Correct.

Bob Powell: And then my understanding is that they can review, sign, and file the tax return?

Lisa Skelly: Correct. 'Cause they are all licensed CPAs, enrolled agents. They are certified tax preparers. They just happen to be using TurboTax, and TurboTax Live as the vehicle to prepare your return.

Bob Powell: After April 15 they don't go away? They're still-

Lisa Skelly: Absolutely. So let's say you file an extension, say you're not quite ready. You can actually either go through TurboTax Live, or TurboTax also has an Easy Extension. So very quickly you can get your extension in for your paperwork. Remember extension does not extend payment. So if you think you're not going to pay, sorry. You still need to pay on time, but you can extend for the paperwork.

Lisa Skelly: Let's say that 1099-R is elusive and you don't know where it is, and it's April 15, and it's 11:59, file an extension. TurboTax Live can walk you through that. Then you can come back later and we can help you prepare the return.

Bob Powell: All right. So for folks who may owe the government money, and who may not have the money to pay their tax bill due, they have options?

Lisa Skelly: Absolutely. So even with an extension or filing your return, you can do an installment. Again, TurboTax is great as walking you through, setting up the installment plan, and making payments with the IRS. You can make installments, you can spread it over six years if you want to. You can pay it faster if you'd like to, but if you need a long time to pay ... A lot of times people don't realize social security is taxable. All of a sudden they have a tax bill. They're on a fixed income, they want to spread it out some. So an installment plan is great for that.

Bob Powell: All right. Anything else that you want to mention that we haven't covered?

Lisa Skelly: Plan, plan, plan for retirement. I do highly recommend just taking your time. The first year that you're in retirement, TurboTax again, will walk you through all of the breaks and all of the things you can do. It's never to late.

Lisa Skelly: The other thing, a lot of people don't realize, you can actually put into an IRA for last year, this year. But there is deadline. It is April 15. So if you wanted to put in to a traditional IRA, or you wanted to put into your Roth IRA, you need to get it in by April 15. But it counts on your return for this year. Especially if you're doing a deductible.

Bob Powell: Great. Thank you, Lisa. This has been really informative. Appreciate you coming and-

Lisa Skelly: Thank you.

Bob Powell: ... helping tax payers save money, and make it through the tax deadline.

Lisa Skelly: Thank you.

How to Create Tax Efficient Income in Retirement was the subject of a panel discussion at TheStreet's Retirement, Taxes & Income Strategies Symposium, held recently in New York. One solid piece of obvious but little-followed advice: Doing a lot of the planning before retiring is wise.

Waiting carries powerful risks, according to Robert Powell, the panel's moderator and editor of TheStreet's Retirement Daily. This is especially true when it comes to tax planning.  Powell says, "We often think of maximizing social security benefits, claiming strategy in terms of longevity insurance, but there are some tax implications to that as well."

To dig a little deeper into these tax implications, Powell sat down with one of the panelists, Lisa Skelly, Development Manager, TurboTax.

Watch the video above for tax strategies in retirement.

How to Create Tax Efficient Income in Retirement 

Panel Description: Given your assets, how do you create ongoing income in retirement? The traditional plan to take 4% from your IRA every year will probably not cut it. Will you work part time or invest in annuities? When is the right time to claim social security? Expert panelists will take a sophisticated look at the "great debate" on what strategy should be used to maximize retirement income to achieve your lifestyle goals. 

Moderator: Dirk Cotton, The Retirement Café
Panelist:
Devin Ekberg, Chief Learning Officer, Managing Director of Content Development, Investments & Wealth Institute
Panelist: Jeffrey Levine, CEO, Director of Financial Planning, Senior Wealth Manager, Blueprint Wealth Alliance
Panelist: Lisa Skelly, Development Manager,Turbo Tax

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