Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, March 4, 2014

6 Tips for Curbing Taxes in Retirement


Here are six ways you can reduce your tax bills in retirement:

  1. Diversify your assets.  Start building tax diversification in your portfolio before retirement.  That means you should have Roth accounts, tax-deferred accounts, and taxable accounts all represented in your portfolio when entering retirement.
  2. Consider a Roth conversion.  It’s not necessarily too late to convert to a Roth account when in retirement.  If your main goal is to pass money to heirs, consider converting.
  3. Know about RMDs.  You need to take required minimum distributions from certain types of accounts, but you can be smart about it.  First, see if you can automate your RMDs.  Then consider reinvesting RMDs so you’re not taken off your portfolio plan.  Finally, combine RMDs with any rebalancing you might want to do with your portfolio.
  4. Don’t forget about state taxes.  Those in higher income tax brackets may want to consider state-specific municipal bonds to earn a double tax benefit.  You also want to keep in mind property taxes as well as state estate taxes, where exclusion amounts may be much lower than at the federal level.
  5. Time your deductions.  In some years, it might make sense to take the itemized deduction, provided you can bunch deductions together, such as voluntary medical and dental procedures.
  6. Avoid the “tax torpedo.”  If your income begins to exceed certain thresholds, you may want to watch out for the big jump up in the amount of taxable Social Security income.

See Christine Benz, 6 Ways to Curb Taxes in Retirement, Morning Star, March 1, 2014.


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