Skip to main content

Protecting your assets

How tax code changes can affect retirees

3 Minute Read

With an election coming up and a second stimulus package being discussed, assuming that we’ll be seeing a change in taxes is a pretty safe bet.

For those who are no longer working for a paycheck and are now living off finite resources, tax changes can have a significant impact on lifestyle—but that impact can be minimized through proper planning.

What to expect

This year, we’ve seen trillions of dollars distributed to businesses and individuals in the form of economic stimulus packages. No matter what happens in the election, we are likely to see less favorable capital gains taxes and higher income taxes because lower tax revenues coupled with higher government expenses has rendered the federal, state and local governments even more broke than usual and they will need to increase the money that’s coming in.

Tax diversification

Before the election hits, make sure you have some tax diversification in your portfolio. Having all of your assets in qualified accounts—401(k)s, IRAs and similar—leaves your money subject to future income taxation. If you have a greater need for money and must withdraw a large sum, you’ll be paying a good chunk to the government.

Having portions of your assets in accounts that won’t be taxed on withdrawal, such as Roth IRAs, permanent life insurance and health savings accounts, will keep more money in your pocket regardless of future tax changes.

What to do now

Before the end of the calendar year, consider realizing some of the capital gains in the non-retirement portion of your portfolio to pay the favorable 2020 capital gains tax rates.

If you have the ability to pay the income taxes which would be due, consider converting some or all of your traditional IRAs and 401(k) accounts to Roth IRAs and Roth 401(k) account to lock in today’s modest federal income tax rates—especially if you live in a state with low or no income taxes.

Use the remainder of the year to move as much money to accounts which allow for tax-deferral or future income tax-free withdrawal as possible—making sure not to accidentally restrict your liquidity or access to capital adversely.

Have income you cannot outlive

It may soon be more important than ever to have some type of income stream that’s payable for life. While pensions are becoming more and more rare, those who have them will be better protected from changing tax codes. There are other ways to ensure you continue receiving money throughout your life, however.

Looking into sources such as annuities can be the answer for some, but make sure you fully understand what you’re signing up for before you take the plunge.

Is this the time to retire?

In the next year, not only are we likely to see higher taxes but also other volatility and disruptions in our markets. Equity markets are still high and interest rates are still low, but that’s not going to last forever.

It’s a very scary time to retire. If you’re thinking about retiring, you may want to reconsider. Working longer—or having a side hustle that can bring in additional income—may be wise, as it is far harder to restart a career once you’ve fully stopped, especially out of desperation rather than boredom.

The lesson

With our economy in flux and inevitable changes on the horizon, start thinking now about what this decade will hold. Plan for ways to save on taxes, delay retiring until we know what to expect and consider a side hustle to keep you in the game.

This decade has already started off in an unexpected way, but we’re in this together and can handle anything with the proper plan.


This article was written by Eric Brotman from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to


The contents in this article are being provided for educational and informational purposes only. The information and comments are not the views or opinions of Union Bank, its subsidiaries or affiliates.

Subscribe to Perspectives

Get in touch with The Private Bank

Build a financial partnership to last a lifetime.

Connect with The Private Bank