In today’s complex financial environment, taxes are always top of mind even if they’re hard to keep track of. 

, we’re all about living and retiring with confidence. In fact, retiring with confidence was our main objective when starting the company back in 2007, and it remains our top objective today. 

In today’s complex financial environment, taxes are always top of mind even if they’re hard to keep track of. Maybe you find yourself asking questions like: Are tax increases beneficial or detrimental to me? How do taxes affect the annual cost-of-living adjustment percentage? Can I afford the penalty taxes if I need to make an early withdrawal from my retirement accounts? 

These are great questions, and we understand the fear beneath them. We all want to make sure our hard-earned money is safe, growing, and that our financial decisions are in the best interest of our retirement plan.

 can give you the peace of mind you need to live your life to the fullest. Trying to tackle ever-changing tax codes and their implications to your accounts is commendable, but without a clear comprehension it 

Financial Advisor vs Tax Attorney vs CPA vs Enrolled Agent

It’s common to not realize you need help 

 When you’re trying to figure out what you need, there are plenty of tax and finance professionals who may come your way - so which one is right for you?

When it comes to taxes, you have several options for who to contact when the going gets complicated. 

A CFP is a financial advisor who has taken a step further with their training, meeting “rigorous education, training and ethical standards”. While CFPs are financial advisors, not all financial advisors are CFPs. This area 

 be tricky because the term “financial advisor” isn’t regulated, and rules are different based on “

whether they collect commissions and which regulatory bodies oversee them

–  the SEC, the Financial Industry Regulatory Authority or even state insurance regulators.”

CFPs aren’t necessarily who you’d hire specifically to prepare your tax returns - they focus more on the big picture of your investments, retirement savings, and more. Can they prepare your tax returns? Of course, but you may be shelling out more than you need to if you're not as invested in other areas.

Similar to the certification for a CFP, a CPA is also a step further -- they are accountants “who also meet the educational and experience requirements of the state they live in and have passed that state’s Uniform CPA Exam.” A good way to remember the difference is that all CPAs are accountants but not all accountants are CPAs.

 generally who you’d want to hire to help with your varied tax situations. They’re not limited to preparing tax returns - in fact many work year-round for business and individual taxpayers on a variety of tax-related issues.

Tax attorneys are lawyers who specialize in the highly complicated world of tax law. You would typically hire a tax attorney if you have 

technical or legal issues like, but not limited to

: unreported income, undisclosed foreign bank accounts, or owing more than a million dollars to the IRS. 

Tax attorneys will have advanced training in tax law, and many will have a Masters of Law in taxation, knowledge of accounting, but not necessarily in preparing tax returns. If you’re specifically looking for this specialty, you can also find tax attorneys who are CPAs and EAs and cover all your bases.

An Enrolled Agent is a tax advisor who represents taxpayers before the I.R.S. They are certified to represent both business and individual taxpayers and have no restrictions on who they represent. They are tax specialists who can help you with tax planning, prepare a return, in addition to representing you should the need arise. Many people like to have the input of a CFP, CPA, or tax attorney, but if you don’t - an enrolled agent may be a more feasible idea.﻿

T﻿he Benefits of Working with a Tax Professional

, we offer a range of services including financial planning, investment management and retirement planning. We understand taxes can be a demanding, if time-consuming, process. Seeking advice from a tax professional who specializes in your specific situation is imperative, let alone just a good idea.

Here are several reasons we recommend working with a tax professional:

 to prepare a return. If you haven’t been studious throughout the year in keeping your paperwork together, you could be looking at even more time as you collect your 1099s, receipts for deductions, and other forms. 

Tax time comes with a deadline, so the pressure to get everything together in the first four months of the year is 

 for each month your tax return is late, up to five months. In 2018, the IRS reported 

14 million tax submissions on the last day of filing

We talk frequently about how costly mistakes can be for your retirement planning, but mistakes in your tax preparation can be equally devastating. From missed deductions and credits, typos that can invalidate your entire submission, and forgetting sources of income, to making the wrong decision about itemizing deductions -- these seemingly small mistakes add up.

3. Benefit with money-saving tax planning

Having a tax professional as a part of your financial plan and strategy can advise you on how to save and optimize your taxes throughout the year instead of desperately searching for deductions in March. For instance, 

if you get married in the same calendar year as you buy a house

, you could be looking at tax-savings. Other major life events like having children, divorce, new jobs, and promotions 

An audit is the scary word associated with doing something wrong on your taxes, and though the 

 comes with a negative connotation, it doesn’t necessarily mean there was a problem or that there was any wrongdoing by a business or taxpayer. 

The I.R.S. audited approximately 1 out of every 220 taxpayers in 2019

, a significant drop from a decade ago when the odds were 1 in every 90.

 verifies the accuracy of a taxpayer’s return and/or specific transactions. One major paint point is that though many audits are randomly selected, 

the taxpayer has to pay for the audit to happen

, and that can be huge. Additionally, an audit doesn’t just cover your most recent tax statement but will 

, but typically no further back than six years.

When you’ve had any one of the taxation specialists review, prepare or submit your taxes, the odds of your being selected for an audit theoretically decrease because they’re specifically looking for 

 - anything from data entry errors, to unreported income, disproportionately high deductions, and even the self-employed, especially if they haven’t reported a profit in the last three years.

G﻿et Started Building Your Financial Plan

, our goal is to help you enjoy your retirement with confidence, not worrying about whether or not you have enough money to enjoy it.

We understand how important your financial future is to you and your family; we also understand how difficult making these plans can be. If you are not sure if your retirement plan has taken taxes into account, let us review your retirement plan. We utilize tax-efficient strategies and partner with other tax professionals so you can live and retire with confidence. When you

schedule a call with Fullerton Financial Planning

 we’ll show you the best way to review your retirement plan for any tax implications.

Don’t leave your financial future to chance.

 Let us help you create a personalized plan so you can enjoy the retirement you’ve worked so long and hard for.

 Who Do I Talk to About Taxes? 

Are you paying too much in taxes in retirement?

We all want to enjoy every aspect of retirement. From giving up the nine-to-five, to traveling, enjoying time with family, and spending more quality time in your man-cave or she-shed. The last thing anyone wants is unexpected taxes when they begin to withdraw from their retirement accounts. 

It used to be that when you found yourself out of cash, you could go to any ATM. You’d have to 

 if it wasn’t associated with your bank, but it was yours in no time. Not only would you trigger a fee with your bank, however, you’d also have to pay an ATM transaction fee for the machine itself. If you were only trying to access a small amount of cash, the fees might have made you reconsider the withdrawal. While ATM fees haven’t gone away, we’ve been 

as digital banking and transactions have become more popular. 

When it comes to taxes, fines, and fees, your retirement account can feel like an ATM. You can take out money if you need to, but if it’s not within the rules and regulations of your specific plan - you may take a hit that keeps ringing for years to come. The value of a financial advisor in these cases cannot be understated.

Be aware - your retirement accounts are not ATMs.

almost 60% of investors ages 18-34 have already withdrawn money from

 their retirement account - a number that has nearly doubled since 2015. It’s hard to overstate the impact even a small withdrawal can have on the future of your retirement savings. While many of us may not bat an eye at a convenience fee, remember that the people who own 

private ATMs make around $20,000 to $30,000 a year in passive income.

 When you’re finished adding up all the fines, fees, and taxes you’ve paid each year - someone else can be making an income on your money. That’s not how you want to spend your hard-earned cash.

The Rules of Contributing and Withdrawing

There are a few main account types one generally considers funding for their retirement. And they all have different, ever-evolving rules based on how much you can contribute each year, how long you’ve had the account, how old you are when you withdraw, and how much income you earn. These factors barely skim the surface, so we’ll briefly touch on some of the main highlights and pain points of more popular retirement accounts.

1. Traditional IRAs, 401(k)s, and other tax-deferrals. 

 are two of the most popular retirement accounts for plenty of good reasons. Chief among those reasons is that both types of accounts are 

, meaning you’re able to contribute tax-free until you begin withdrawing from those accounts. When you contribute to these accounts, you reduce the amount of taxable income for the current year, which is a nice plus, in addition to the fact that this full amount -- savings, dividends, and investment gains, also known as 

 -- continue to grow and compound over time.

While 79% of companies sponsor 401(k)s nationwide, 

 to take advantage of them. If your employer is matching contributions, not partaking is like leaving free money on the table.

Tax-deferred is not tax-forgiven. Even if you hold off as long as you can, 

 (or RMDs) begin at age 72 - and then, yes, you have to pay taxes on every withdrawal. As you’ll find, retirement accounts are meant for your retirement, so trying to withdraw money before that time can be complicated and costly. 

. Of course, people retire sooner than anticipated all the time. 

In fact, the average retirement age is 61.

 Does that mean you can or should start collecting benefits then? A rock-solid financial plan is your best bet to avoiding the tax penalties that can rob you of a healthy retirement. Generally, for those under the age of 55, you can withdraw from your 401(k) without penalty if you 

, and if you rollover to an IRA after you leave the job that sponsored it. 

 option. The major difference between a Roth and a Traditional IRA is that you pay taxes on the money you contribute as you contribute, and you can’t deduct those contributions on your annual taxes. Though common, 

not everyone qualifies for these accounts. 

Roth IRAs grow through two primary vehicles: your contributions and earnings. Your earnings come from things like dividends and investment gains from stocks, bonds, mutual funds, ETFs, and the like. While you can withdraw your contributions with no additional taxes, fines, or fees at any time, there are limits on what you can withdraw from your earnings without penalty.

If you’re over the age of 59½ and have had the account for at least five years, 

 your contributions and earnings tax-free at any frequency. If you’re younger than 59½, you can still withdraw contributions and earnings, but you’ll owe 

 on the earnings. Of course, there are some exceptions to this rule that will allow you to 

 - such as major medical expenses, health insurance if you’re unemployed, and college costs. As we’ve discussed before, withdrawing this money should absolutely be a last resort.

3. Bank/Brokerage and Other Taxable Accounts

A bank or brokerage account does not offer tax benefits - when your investments earn income or dividends, you will pay taxes on those. You see commercials for these all the time – think 

 – because they generally require few obstacles to begin investing, and you can pull your money out at any time.

While you wouldn’t want a brokerage account to be your only retirement option (or any of these – 

), it’s not necessarily a bad thing to have another income source, especially if you can preserve your principal investment. 

Bank accounts are similar in that they offer no tax benefits but typically only serve as a place to store cash. Additionally, their only growth options are based on interest rates which, when averaging between 

, don’t offer much in actual growth. Brokerages, however, allow you to store cash, stocks, and other securities.

This is not an exhaustive list of retirement options, taxes, fines, or fees. There is a myriad of exceptions and options you may not have previously considered. Health Savings Accounts, or HSAs, are one. Some argue 

HSAs may be a superior retirement savings vehicle than 401(k)s

, but of course, it all depends on your unique situation. HSAs are 

 to help pay for their out-of-pocket medical expenses. It can be a complicated task, but it allows you to put away “

pre-tax or tax-deductible dollars into an account and have them grow free from taxes.

” As long as you use the money for medical costs, it remains tax-free even when you withdraw.

Build a Retirement Plan with a Tax Strategy

, our goal is to help you enjoy your retirement with confidence, not worrying about whether or not you have enough money to enjoy it. 

Our certified fiduciaries and experienced investment advisors have decades of combined experience helping people find answers to difficult financial questions. Sit down with a Fullerton Financial Advisor today

 to discover if you are on the right track for your retirement goals.  

We understand how important your financial future is to you and your family; we also understand how difficult making these plans can be. If you want to know how tax code updates affect your retirement plan, or if withdrawing at a particular time will be detrimental - don’t spend your time analyzing the rules. When you 

schedule a call with Fullerton Financial Planning,

Don’t leave your financial future to chance. Let us help you create a personalized plan so you can enjoy the retirement you’ve worked so long and hard for.

 Avoid Losing Your Retirement to Taxes 

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We believe that knowledge is the key to making informed decisions about your financial future. Our blog is designed to provide you with a wealth of valuable insights, tips, and strategies on everything from financial planning and wealth management to taxes, estate planning, Social Security, and more. 

Whether you're preparing for retirement, navigating complex tax laws, or looking for ways to preserve your legacy, our blog serves as an invaluable resource. Each post is crafted by our team of financial professionals, ensuring you receive relevant, up-to-date information that addresses the real challenges retirees and pre-retirees face today.

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Who Do I Talk to About Taxes?

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