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I retired after 20 years in the US Navy and receive a monthly distribution from retirement. This income is taxed federally and by the state. Income is reported on a 1099 form and kills me at tax time. I currently contribute to a Traditional IRA. Have stock purchase (discount) from my employer and my wife and I contribute to 401ks from our salaries. What would be the best way to shelter this income? annuities?
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bryan763,
Welcome to Savings Advice!
The top things that I can think of to reduce your tax burden is to max out your contributions to both your 401Ks. Also, if you have medical expenses that justify it and your company has an FSA--contribute to it. Then, tax efficient investments. My idea of a tax effiecient investment would be something like stocks in which the long term gains are taxed at a lower rate.
After you have done that, you should check out the IRS withholding calculator to see if you need to adjust your withholdings. You can log into your DFAS account and adjust the withholding so that you don't end up with a shocking tax bill at tax time.
As to your investments, I'm not a fan of annuities, but I guess that would have to be something that you would decide based on your overall asset allocation and your risk tolerance. Since you already have a pension coming in, maybe your risk tolerance mightbe higher, but only you can decide what is right for you. -
You Can Hire Financial Advisor
I would like to say that if possible you can hire financial advisor for yourself. Financial advisor can guide you to manage your investments and as far as annuities are concern it is one good option for you to invest your money. Annuities gives you money after regular interval as well as it also provide retirement saving option.Comment
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Bryan,
As the other have said, welcome to Saving Advice.
I also am a retired Navy vet...21.5 year AT...
When I first retired, nothing was deducted from my 1099R and it killed me at tax time. A few of my coworkers, also retired Navy vets have experienced the same thing.
Not sure if it was a glitch in Cleveland or what, but man it sure hurt that first year.
As with the other recommendations, re-calculate what you need to have deducted, and go from there.
I have been retired for 8 years now, and this is the first year I have received a small refund (whopping 86 bucks)since I retired. Another thing that kills me every year is that my wife is self-employed, so we pay both halves of the taxes for her.
Welcome to "retired life" or should I say "career change"Comment
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