Do You Know the Four Tax Liability Buckets?

Do you know what the four tax liability buckets are and what you have in each bucket? Scott Dougan explains why it’s important to know this information.

The Bird’s Eye View:

Do you know what the four tax liability buckets are and what you have in each bucket? Scott Dougan explains why it’s important to know this information. 

 

Your Guide:

Do you know where your tax liabilities fall? You may not realize it, but your tax situation likely falls into one of four buckets, and you may have a little bit in each bucket. On this episode of Your Retirement Elevated Podcast, Scott Dougan explains what the four buckets are and why it’s important to know this information.  

We spend a lot of time talking about how to save and grow your money, but we don’t talk as much about tax efficiency.

“I think it’s one of those things that’s overlooked, is that tax planning portion of most retirement plans,” said Scott.

DOWNLOAD THE FOUR BUCKETS WHITEPAPER

Taxable bucket

This bucket contains money you earn from CDs, checking accounts, money market accounts, after-tax stocks, bonds, mutual funds, your dividends and the capital gains you earn from your stocks and bonds.

This is where you should keep your emergency fund.

“Most experts say that we should have about six months worth of essential expenses in our emergency fund,” said Scott.

Tax-deferred assets bucket

This is the largest bucket and contains things such as your 401K, IRA, 403B, 457 or TSP.

You get a tax deduction when money goes in and you are taxed when you take it out. At age 72, you will have required minimum distributions.

Tax-free bucket

This bucket includes Roth IRAs, most municipal bonds, appreciation of capital assets, properly structured life insurance policies, etc.

How much should be in this bucket? “As much as possible,” said Scott.

A lot of work is focused on getting money from the tax-deferred assets bucket to the tax-free bucket.

Estate tax-free assets

This bucket requires more advanced planning and includes things such as irrevocable life insurance trusts and charitable trusts. The goal is to do some higher-end planning so you don’t have to give a large portion of these assets to the federal government due to bad planning.

Thanks for checking out the Your Retirement Elevated Podcast. Listen to the full episode or use the time codes below to listen to a specific segment. We’ll talk to you again on the next show.

1:30 – Tax liabilities

3:29 – Taxable bucket

7:10 – Tax-deferred assets bucket

10:08 – Tax-free bucket

Thanks for checking out the Your Retirement Elevated Podcast. We’ll talk to you again on the next show.

 

Your Guide:

Home Insight About Scott

Scott Dougan, RFC, Investment Advisor – Contact

DISCOVER MORE...

Financial Checklists and Important Birthdays

A new year means many of us are looking for ways to improve our financial lives in 2023. Today we’re sharing a great checklist to give you areas of focus in order to be better prepared financially. If you’re nearing retirement, these are questions you want to think through and have a plan for before you make that transition.

LISTEN NOW »

SUBSCRIBE

Apple PodcastsGoogle PodcastsSpotifyStitcherTuneIniHeartRadio

ABOUT YOUR HOST...

Scott Dougan founded Elevated Retirement Group in 2003 in order to fill a niche he felt was not being addressed properly in the retirement planning environment – helping retirees and pre-retirees in the Kansas City metro area find answers to issues that may affect the quality of life during their retirement.

Scott is a Registered Financial Consultant (RFC) and holds a Series 65 Investment Adviser Representative license, which holds him to the fiduciary standard. He also holds insurance licenses in Kansas, Missouri and other states.

GET IN CONTACT...

HAVE YOUR QUESTION FEATURED ON THE SHOW

MORE WAYS TO CONTACT

info@erg-kc.com

(913) 393-4724