Hi,
Retirement planning is already complex, but if you’re single, it comes with a whole different set of challenges.
- Which accounts should you fund first?
- How do you minimize taxes now and in retirement?
- Should you be prioritizing Roth over Traditional?
- What about estate planning? Who inherits your assets, and how do you avoid excess taxes on your retirement savings?
We see these questions every day, and if they’re left unanswered, it can result in missed opportunities, unnecessary taxes, and inefficient savings strategies.
Here are key areas where many single individuals go wrong, and how to fix them:
1. Are You Contributing to the Right Retirement Accounts First?
Most people contribute to their 401(k) and IRA without considering how to minimize future taxes. A smarter approach is to:
- Prioritize employer matches first. Free money is free money.
- Utilize a Roth IRA. While a Roth IRA does not provide an immediate tax deduction, all growth and distributions are completely tax-free. We’ve seen 7 and 8-figure gains in Roth IRAs withdrawn completely tax-free.
- Use a Backdoor Roth if you earn too much. If your income exceeds Roth IRA limits ($168,000 in 2026 for single filers), a Backdoor Roth Conversion can still allow you to contribute.
2. Are You Paying Too Much in Taxes Now, or Later?
Most retirement accounts are either tax-deferred (Traditional 401(k)/IRA) or tax-free (Roth 401(k)/IRA). Many individuals don’t balance their pre-tax vs. after-tax savings properly, leading to:
- Massive Required Minimum Distributions (RMDs) in retirement
- Higher Medicare premiums due to inflated taxable income
- A tax bomb on Social Security benefits
Smart Strategy: Consider a mix of Roth and Traditional accounts for tax flexibility in retirement.
3. Have You Planned for Taxes on Inheritance?
Most singles don’t realize that estate and inheritance tax rules are very different for them compared to married couples.
- If you leave assets to non-spouse beneficiaries (siblings, nieces/nephews, friends), they could owe significant taxes.
- Inherited IRAs must be emptied within 10 years, often creating a major tax burden for heirs.
Trusts, Roth Conversions, and Gifting Strategies can help eliminate estate taxes and reduce inheritance tax burdens for your loved ones.
4. Self-Employed or a Business Owner? You Have Even More Options
If you’re self-employed, you have some of the best tax-advantaged retirement options available:
- Solo 401(k) or SEP IRA. You can contribute up to $72,000 for 2026, far more than a regular 401(k).
- Defined Benefit Plan. For high-income earners, this can create over $300k in tax deductions per year.
- LLC Tax Structuring. If you’re self-employed, are you paying more in self-employment taxes than necessary? A proper structure can optimize your tax burden.
Fix the Confusion and Create a Tax-Smart Plan
If you haven’t coordinated your retirement savings strategy, you’re likely overpaying in taxes or missing out on better options. Consider a Strategy Session with your advisor to go over:
- How to optimize your tax savings as a single filer
- Where you may be missing tax-saving opportunities
- How to structure Roth, Traditional, and taxable savings for maximum flexibility
Since these take time to implement, please reply back to this email within the next week if you need help.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com