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5 ways to optimize your retirement plans under new tax regime

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5 ways to optimize your retirement plans under new tax regime

This year, the biggest tax reform code since 1986 comes into play. That means you should take another look at your assets, retirement plans, and investment strategies. There’s a lot to know, and if you’re nearing or in retirement, things probably need to shift around a little bit for you. Between capped deductions, changes in charitable giving, and real estate exemptions, you really need to take a good hard look at your financial plan. Here are some tips to get started.

New Limits on Deductions

Many of us have played the tax system using write-offs to manage what we pay the government. Well, those write-offs now have caps against state and local taxes. You cannot write off more than $10,000. This isn’t a big deal if you live in a low tax state, but if you’re in a high-tax state like New York or California, you’re going to get hard – so hard, that New Yorkers will pay $14 billion more combined, which isn’t going over well with Governor Andrew Cuomo. If you live in one of these states, it probably isn’t sitting well with you, either. For some, this is just a miserable fact to live with, but if you can, it might be a good time to move to a less-taxed state.

Convert to Roth Accounts

A Roth IRA might be in order for you. These accounts are tax-free as long as you deduct after age 59 ½ . While you will have to pay tax on the conversion from your regular IRA, since income taxes are at a bottom low (raising so that current levels return in 2026) you’ll likely pay the very lowest percentage for years to come. That said, bear in mind that while Roth IRAs are an excellent choice,  you can’t deduct the contributions from your taxes.

An important change to note, though, is that under this new plan, you can no longer undo your contributions before the next tax filing date. That means that if you do convert now, and the market takes a hit, you’ll still owe the income tax. Analysts suggest waiting until the end of the year after the Thanksgiving holiday or making incremental annual conversions to keep taxable income and potential margin rates low.

Donate Wisely

A big change in the charitable giving category is the increase of $24,000 deduction – that’s a lot of donation for a married couple. One strategy for getting to the minimum is to front-load your anticipated giving into a donor-advised account. This tactic requires you to deposit five years’ worth of giving up front, however, it will be beneficial for only one year of that five-year span.

You could also do what many financial advisors suggest and donate funds through your standard IRA. This works for those who are 70 ½ years and older. The donation is still considered a standard deduction, but also counts for the money you’re required to deduct, so it’s a double bonus.

Handling Your Assets

While the real estate section of the tax bill kept the indexed inflation, exemption rose to $11.2 million per person, and $22.4 million per married couple. The issue affects people who have a higher worth, $11 million or more, and business owners. For high worth individuals, estate and gifting are still lumped together, so you should consider gifting large nets to heirs now since your exemption is currently larger, but will potentially drop. The issue here is that gains tax takes effect as assets increase in value, so if you’re gifting in asset allocation or business designation, your heirs will get hit with taxable gain from the moment they received the gift to when they sell the asset. If you’re hovering near the exemption, it might be better to wait.

In all cases, talking to a financial advisor or CPA is critical before making any decisions. IRAs, real estate, and deductions are a tricky business no matter what, but now that the codes are so radically different, you should seek out guidance so you make the best decision.

After Fifty Living™ was founded by Jo-Anne Lema, a genuine Boomer and member of the 50+ generation. As she likes to say, “Our enormous generation is charting new territory – we’re healthier, better educated, and more financially fit than any other generation at this time. And, as we march through history, 110 million strong – unique, new issues are developing. It’s exciting to be a part of the development and growth of This is a historic solution for a historic generation.”

Jo-Anne spent many years in the financial and operations side of higher education after having received a doctorate in education management and administration from Harvard, and an MBA from Southern New Hampshire University. Launching out on her own, though, has been the fulfillment of a life dream. Jo-Anne believes that “AfterFiftyLiving™ will delight its visitors, catalyze its partners, and will significantly benefit those who engage it.”

Residing in New England along with her husband of 35+ years, she never ceases to brag about her two children and 4 grandkids!

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