Taxes
How can you reduce your taxes in retirement?
How can you reduce your taxes in retirement?
Consider how each account you have will be taxed. P.S. This should be done long before retirement as you plan ahead. When taking Social Security, it is beneficial to live in a state that does not tax it (states where there is no income tax and multiple other states are in this mix to include the state of Iowa). On the federal tax side of things, do your best to access Roth money (after tax retirement money) when adding to your Social Security benefits. This will keep your provisional income at $0 or close to it (adding other taxable money or pre-tax retirement money may happen whether you like it or not because of earnings and a thing called the RMD at age 70.5).
When looking at other money in retirement (pensions, traditional IRAs, taxable accounts, annuities, etc.) be judicious in your spending so you only pull money out of accounts when needed (allowing it to grow and compound more over time). Look to states where there is no state income tax and/or states where retirement income is not taxed or taxed in smaller amounts (there are many fine choices out there and it pays to explore this issue before deciding where to live in retirement).
At the end of the day, it can be a wise move to build a good relationship with a good tax accountant who will help you develop a plan to reduce your taxes (if your “guy” just does your taxes, get a new guy!). Complaining about taxes will get you nowhere. Get a plan, work that plan, and take that extra money in savings to make for a better retirement. Learn more on this issue by reading my third book, Graduation! Awake to the possibilities.