(UBS)
When raising funds for retirement spending, a common approach is to defer taxable income as long as possible.
Unfortunately, strategies that aim to defer or minimize taxes often create large "tax torpedoes" for later retirement years, forcing families into higher marginal tax brackets and incurring additional costs that can hurt after-tax growth potential.
Another approach is to spread taxable income over time, filling up lower tax brackets and avoiding higher tax brackets.
An “income smoothing” approach involves paying taxes earlier, but it can actively defuse tax torpedoes, help to protect against the risk of higher taxes in the future, and enhance after-tax growth potential.
Click the Download button to read a guide to implementing the spending waterfall approach.
