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Originally published: May 13, 2025
Let's face it: age has long been the benchmark we use to determine our retirement strategy. While it's an important number, it's worth knowing how other numbers can impact your retirement savings journey, for instance, taxes. With Tax Day on April 15th, it's essential to strike a balance between the various retirement vehicles and how they may impact your tax contributions, both short and long-term.
One of the goals of retirement is to maintain a certain lifestyle, and that means knowing how much to put away. By having a number in mind, you'll have a better understanding of how much to put away each month and for how long. There are some considerations to take into account:
There are several ways to determine how much you need to retire. Two of the most popular options is to use your annual, pre-retirement income as a guide.
The first method suggests you save up enough to replace at least 70% to 80% of your income for each year you're retiring. What makes this method a little bit tricky is that no one really knows how many years after retirement they'll need to have an income for. This may require you to speak to a financial advisor about products and strategies that can help generate ongoing income.
The second method is simply saving 10 to 12 times your annual income. This method allows you to accumulate a healthy lump sum, but it requires some finesse when it comes to your budgeting post-retirement. You'll need to consider out-of-the-ordinary expenses that may elevate your income needs.
Surprisingly, your retirement age will play a part in your retirement taxes as those under the age of 59½ may have to pay higher taxes than those who are older. The type of retirement vehicle you choose also carries certain tax implications.
Qualified Roth IRA and Roth 401(k) distributions are tax-free, but there are restrictions in terms of contributions.
Traditional IRA and traditional 401(k) offer a tax deduction, however, distributions are calculated at your personal tax rate.
With Social Security, depending on your income, up to 85% of your benefits may be subject to income tax. Those with lower combined retirement income may owe little or nothing. Consult a tax professional for guidance specific to your situation.
There are other investment options, too, and it's important to seek advice from a tax professional or a financial advisor to see how this would affect your taxes. For instance, some investments may have capital gains taxes and/or investment income taxes as well.
Savvly's Longevity Benefit is designed to help investors build potential income for the later years of retirement. It adds a longevity-based reallocation layer to market-linked performance, creating the opportunity for additional payouts at ages 80, 85, 90, and 95 for investors who reach those milestones. Savvly is not insurance, not a guaranteed product, and not FDIC insured. For full details on fees, assumptions, risks, eligibility, and disclosures, visit savvly.com/disclosures.
To learn more, visit savvly.com/contact-us.
This article is for informational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified financial professional before making retirement planning decisions.
Disclosures
The information on this page is provided for educational purposes only and is not intended as investment, legal, or tax advice. It is designed solely to illustrate how longevity-linked investment benefits may work under certain assumptions. Actual results will vary. All illustrations, examples, and case studies are hypothetical and are intended to demonstrate potential scenarios — not to predict or guarantee actual outcomes. They do not represent the performance of any individual investor, portfolio, or account.
Key Assumptions Used in the Illustrations
Life expectancy and mortality projections are based on the most recent Social Security Administration (SSA) tables available at the time of simulation.
In the event of death or early withdrawal, hypothetical scenarios assume that investors who exit early, or their estate in the event of death, may receive 75% of the lesser of the initial investment or current market value, plus 1% for each full year the account was active. Case studies assume standardized market growth of 8% annually and do not incorporate unexpected market volatility, inflation, changes in interest rates, or changes in an investor's personal circumstances.
Simulations may assume a 3% annual early withdrawal rate prior to payout or death. All figures shown are net of fees. No forecast, projection, or hypothetical return should be relied upon as a promise or representation of future performance.
Past performance is not indicative of future results. The 8% annual market growth rate used in illustrations is a standardized assumption for modeling purposes only and does not represent the historical or expected performance of any specific investment. Note that early or voluntary withdrawals by other participants can affect fund performance and the size of distributions, and that a higher-than-expected number of participants reaching payout milestones may reduce the per-participant benefit received.
Savvly's Longevity Benefit is not a bank product, not FDIC insured, not insured by any federal government agency, not a guaranteed or insured investment, and not insurance. Investment values may decline.
Savvly's Longevity Benefit may not be suitable for all investors. Eligibility to invest is subject to qualification requirements and not all investors will be eligible. Investors should carefully consider their investment objectives, risk tolerance, time horizon, and financial situation before investing. See savvly.com/disclosures for current eligibility criteria, fees, risks, withdrawal terms, and fund assumptions.
This content is published by Savvly, Inc. Savvly has a financial interest in the products described and this content should not be interpreted as independent financial research or analysis. Investors should carefully evaluate their own circumstances and consult a qualified financial professional before making any investment decision.
