The concept of compounding interest has been widely recognized as a key driver of long-term wealth creation, with many experts referring to it as the “eighth wonder of the world.” However, there’s another overlooked strategy that has the potential to save families a small fortune in taxes for the rest of their lives: compounding tax savings. According to financial advisors Ryan Thacker and Tyson Thacker, the president and CEO of B.O.S.S. Retirement Solutions, this strategy is often overlooked despite its huge potential.
“This is not some product or tax loophole. And we’re not trying to beat the system,” Ryan explains. “It’s just a powerful strategy that many families overlook.”
So, how does it work? The Thackers describe it as a process of saving money in taxes in one year, and then enjoying those same tax savings every year in retirement. This strategy can snowball into significant savings over time. Let’s consider an example. Suppose you save $10,000 in taxes in one of the first years of retirement through some simple tax planning strategies. If you repeat those tax savings every year for the next 25 years, that’s $250,000 in savings. However, if this money stays invested during this time, these savings could quietly snowball into $500,000 or more.
- When you convert your traditional IRA or 401K to a Roth, you pay taxes on the money you convert now, but then that money grows completely tax-free.
- No taxes on your investment growth. No taxes when you withdraw this money in retirement. No RMDs.
- Plus, it can be passed on tax-free to your heirs.
The Thackers recommend converting to a Roth as a key strategy to reduce taxes in retirement. “You’re not just saving money once,” says Tyson. “You’re saving it year, after year, after year. And those savings could grow significantly over time.”
To illustrate the potential impact, let’s consider another example. Suppose you save $300,000 in retirement and convert it to a Roth. If you have a low tax bracket, you could save tens of thousands of dollars in taxes every year.
| Year 1 | Year 2 | Year 3 |
|---|---|---|
| $10,000 | $10,000 | $10,000 |
Over time, these tax savings can add up significantly. Don’t need millions
The good news is that you don’t need millions of dollars to save a lot of money in taxes when you’re retired. “In fact, many of the families who have saved at least $300,000 could benefit from these tax-savings strategies,” says Ryan. When your CPA files your return in April, they’re just reporting history,” explains Tyson. “But tax planning is different; it’s about making proactive moves now that could reduce your taxes for the rest of your life.”
The Thackers emphasize that this is about retirement tax planning, not just tax preparation at the end of each year.
The sooner you start, the more options you have to save.
“We don’t know how long this window is open,” says Ryan. “These low tax rates won’t be around forever. Besides, the sooner you start, the more options you have to save.”
B.O.S.S. Retirement Solutions offers a free, customized Retirement Tax-Savings Analysis to help you uncover these tax-savings opportunities. During this quick appointment, they’ll gather some basic information from you.
Then, they’ll identify the specific strategies that are best-suited for your situation.
And finally, they will show you how much money you could potentially save – not just this year, but every year in retirement.
It’s not uncommon for families to realize tens of thousands of dollars in tax savings every year.
While other advisors may charge hundreds of dollars for this type of customized analysis, B.O.S.S. offers it absolutely free, even if you’re not a client.
The Thackers emphasize that this offering could be especially beneficial for families who have saved at least $300,000 for retirement. About the Authors:
Tyson Thacker and Ryan Thacker are the CEO and President of B.O.S.S. Retirement Solutions. They are published authors of the Amazon best-selling book, The B.O.S.S. Retirement Blueprint, Your Guide to a Secure and Independent Retirement. B.O.S.S. Retirement Solutions has helped 50,000 area families plan for a better, more secure retirement, and they have seven offices located throughout the Wasatch Front.