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What your clients don't think about can come back to haunt them. How taxes will affect their retirement income, for example.
In a survey conducted last year by The Harris Poll for the Nationwide Retirement Institute, 35% of Americans who were retired or expected to retire in the next 10 years said their retirement planning had not taken into consideration how taxes would affect their income.
Thirty-two percent of retirees among the respondents, who had $150,000 or more of investable assets, said they wished they had better prepared for paying taxes in retirement.
"With many Americans already reviewing their finances while submitting their taxes, as well as assessing how COVID-19 has impacted their financial goals, it's an ideal time to also examine their plans for taxes in retirement," Eric Henderson, president of Nationwide's annuity business, said in a statement.
"The reality is many older adults are not considering or knowledgeable about taxes in retirement."
The survey found that 38% of future retirees worried about what taxes would do to their retirement income, yet 35% said they rarely considered the taxes they were paying or would pay in retirement.
Not only that, only 43% said they knew how to leverage taxable, tax-deferred and tax-free accounts.
"The data clearly illustrates that retirees aren't always strategically preparing for — or even thinking about — taxes in retirement, and as a result, may be paying thousands of dollars more than needed," Henderson said.
Nationwide noted that building tax flexibility into a retirement income plan allows older adults to use a variety of investment and retirement accounts to potentially avoid higher tax brackets and effectively manage their income.
COVID-19 Focuses Attention
Nationwide followed up its 2019 study with two online surveys conducted in April and May among some 2,000 U.S. adults each, again by The Harris Poll. Thirty-eight percent of respondents said they would need to retire later than planned, would not be able to retire at all or were forced into retirement due to the pandemic.
