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A share of your earnings has always gone to Uncle Sam, and unfortunately, you’ll find the same holds true when it comes to your retirement income. On a positive note, however, there are actions you can take by simply being proactive when it comes to tax planning and minimizing your tax risk.READ THE ARTICLE
Take note: Today’s tax laws provide opportunities to help alleviate your taxable income in the form of tax credits, increased standard deductions and pre-tax or after-tax retirement accounts. At the same time, not all tax provisions were designed to work in your favor, which is why creating a tax-efficient strategy is key to saving more hard-earned dollars in your pocket. Here, you will find three ways to keep the IRS at bay in retirement:
📌 1 – Consider Roth IRA conversions: Pre-tax employer sponsored plans are a popular way to stash away your savings; however, upon withdrawal of these savings, you will owe Uncle Sam. By converting your pre-tax dollars to a Roth IRA, you will pay taxes now, versus later when tax rates could be higher.
📌 2 – Explore charitable giving options: Reap tax reduction benefits and leave a financial legacy through various charitable giving avenues, which can include a charitable trust, qualified charitable distribution (QCD) or a donor-advised fund, all of which will differ in their approach to tax-minimization.
📌 3 – Use a health savings account for accumulation: While HSAs help cover the cost of qualified medical expenses, contributions are also tax-free, and not made under a “use-it-or-lose-it” basis. This means you can continue saving pre-tax dollars for health-related costs in retirement up until you are enrolled in Social Security or apply for Medicare at age 65.
Planning paves the way: Your personal tax environment may be more favorable today than you realize. If you can first recognize this, then you can begin safeguarding your lifelong savings for the long-haul, and leverage opportunities that will become clearer as a result.