An Important Consideration for Retirement Income Planning

Written by: Michael Carbone, CFP®

Retirees are faced with an important task – replacing their wages once they leave the workforce. This process may seem simple, but it can become complicated as taxes are considered. The good news is that retiree cash flow is often more efficient from a tax-perspective vs. cash flow earned during working years. This is because common sources of retiree income are not required to pay certain taxes such as FICA payroll taxes, Medicare taxes etc.

I believe that most retirees replace their income in retirement with a combination of Social Security and Pension benefits with the rest being spent from personal savings. I believe the 12% federal tax bracket can serve as a very helpful guide to making decisions.

For interpretation, the above brackets represent the % federal income tax we pay on our taxable income. What’s taxable income? Put simply, taxable income is the income that’s taxable for Federal purposes after being adjusted for deductions.

Why is this bracket so important? I believe it’s important for several reasons. For example, retirees may be able to pull money from IRAs and other types of retirement accounts or do Roth IRA conversions at relatively low tax rates. For non-retirement accounts, you may potentially be able to sell appreciated investments at a 0% federal capital gains rate.

I believe the goal of most retirees is to maximize “cash flow.” Paying less in taxes may help.

If you’re interested in learning more or would like to discuss these matters in greater depth, please don’t hesitate to reach out to me directly at or 978.455.7799.

Thank you for reading!


Important Disclosures:
Financial and investment planning inherently involve potential tax and legal implications, with which we are generally familiar. We do not, however, practice as lawyers or CPAs and cannot give specific legal or tax advice. You should always consult with your tax advisor, or your attorney, when making complicated legal or tax decisions, however, we’re glad to work with your tax or legal professional to help you meet your financial goals.