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  • Writer's pictureSteven J. Rosenthal, CPA, CFP, JD

Tax Returns and Retirement Financial Planning

tax calculating

Tax returns are essential for developing a retirement plan, especially at or near retirement years. A tax return can provide clues to help retirees avoid high marginal tax rates that diminish their retirement savings. Some income items shown on a return that could spike a retiree’s effective marginal tax rate include the following:

  • Taking taxable distributions from a retirement plan, whether voluntarily or due to a required minimum distribution (RMD).

  • Receiving Social Security payments that are subject to a higher tax rate when reported along with other types of income on the tax return.

  • Recognizing capital gains or receiving other investment income will make a retiree subject to the 3.8% tax on net investment income (NIIT).

In addition to triggering higher marginal tax rates, an increase in income for any reason could result in higher premiums for Medicare insurance, which is a type of hidden tax.

A tax return can reveal strategies for maximizing deductions. For example, many taxpayers have not been able to take full advantage of the charitable deduction due to the increase in the standard deduction under the Tax Cuts and Jobs Act of 2017. However, retirees 70½ or older may be able to reduce their income by making a Qualified Charitable Contribution (QCD) from their retirement plan. This strategy can be seen by reviewing a retiree’s tax return and retirement assets. See IRS Pub. 590-B, page 14:

Fulcrum Wealth Advisors will review tax returns as an essential part of developing a retirement plan.


For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

James Falcone and Jon Bever are Investment advisor representatives offering securities and investment advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer, and Registered Investment Advisor. Cetera is under separate ownership from any other named entity. In addition, some Investment advisory services are offered through Fulcrum Wealth Advisors, LLC. Fulcrum Wealth Advisors, LLC is a registered investment advisor in the State of Washington.

Branch Address: 10940 NE 33rd PL., #210 Bellevue, WA 98004 Branch Phone: 877-400-0260


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