To highlight the importance of financial literacy, in 2003, the U.S. Senate designated April Financial Literacy Month. While the intention may be to help youth get a jumpstart on good financial habits, older Americans also often need advice on making smart financial decisions, including about taxes.
With April 15 creeping up on us, we hope that by now you’ve finished and filed your taxes. If you’re expecting a tax refund this year, Martin Plecinoga, Compass Point co-owner and licensed advisor, shares this suggestion for what to do next: “Talk to both your financial and tax advisors about your investment withdrawal rates and tax withholdings. Work together to try and get as close to a zero-sum game as possible where your total tax bill is very close to your total tax withholdings and payments.”
For retirees withdrawing more than their required minimum distribution (RMD) from their IRA accounts and receiving a tax refund, Marty adds this advice: “You may be taking out more than you need from your IRA, withholding more than you need to in taxes from those withdrawals or both. We don’t like to see retirees take out more from their IRAs than they need to, because that means they are paying taxes on income that they did not need to withdraw from their accounts.”