INDIANAPOLIS (WISH) — According to Ed Wright from Golden Reserve, a retirement planning firm in Indianapolis, retirees often overlook taxes in their financial planning, leading to costly mistakes.

Wright highlights that many retirees lack a proactive tax plan, which can result in significant penalties and increased taxes, especially for surviving spouses. This oversight can lead to retirees defaulting to standard tax advice, which may not be in their best interest.

“The biggest mistake we see folks making is just not having a plan, a proactive plan on how I am going to address taxes in retirement,” Ed Wright, a partner at Golden Reserve said.

Wright explains that the tax code includes penalties for following standard retirement account withdrawal rules. Retirees are often handcuffed into IRAs and 401ks, where taxes are deferred until withdrawals are made.

A significant issue arises when a spouse passes away, leaving the surviving partner with the same amount of money but facing higher taxes due to moving from a married to a single tax bracket.

This situation can result in double the tax burden for the surviving spouse. Golden Reserve offers a ‘roadmap for retirement’ that includes a tax map, which aims to provide a proactive approach to managing taxes.

This plan is designed to help retirees save money by avoiding the default tax plan set by the government. Wright shared an example where a client with a million dollars in a 401k could potentially pay $350,000 in taxes if they followed the standard plan.

However, they could save at least $175,000 with a proactive approach.

By adopting a proactive tax plan, retirees can significantly reduce their tax burden and protect their financial future. Golden Reserve’s roadmap for retirement aims to provide a comprehensive strategy to address these challenges.