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Tax-Savvy Retirement: Strategies Boomers Can Use to Lower Their Tax Bill and Maximize Savings
Retirement is your reward for a lifetime of hard work, but keeping more of your savings in retirement requires strategy. Many Baby Boomers unknowingly leave tax dollars on the table by missing out on tax-savvy moves. You’ve built up a lifetime of savings—now it’s time to make sure they work for you. Let’s break down a few ways to stay tax-efficient in retirement so you can keep more for yourself, your loved ones, and the causes you care about.
Manage Required Minimum Distributions (RMDs)
If you’ve hit the age where RMDs kick in, you know they can increase your tax bill. But there’s a smart way to handle them. RMDs from traditional IRAs or 401(k)s are taxable income, and if you don’t meet the requirement, you’re facing up to a 25% penalty. One way to minimize the tax impact? Consider strategic withdrawals. For example, withdrawing only what you need until RMDs are mandatory may allow your account to grow tax-deferred longer, giving you a larger cushion while controlling your taxable income.
Pro Tip: Schedule a call with us to look at how much you’re withdrawing and assess if we can create a withdrawal strategy that reduces your RMD impact over time. Don’t let penalties and excess taxes eat into your savings when there are steps you can take today.
Leverage Qualified Charitable Distributions (QCDs)
If you’re charitably inclined, here’s a tax-smart move that lets you donate directly from your IRA to a charity, avoiding extra income on your tax return. Qualified Charitable Distributions (QCDs) allow you to transfer up to $100,000 each year directly to a qualified charity bypassing federal income tax on that amount.
This is a powerful strategy, especially if you’re in a higher tax bracket or want to reduce your RMD income. Instead of taking a taxable RMD, channel that money directly to a cause you’re passionate about while reducing your taxable income.
Take Action: Not sure how QCDs work? Connect with our office for a quick QCD rundown, and we’ll help you structure donations in a way that makes sense for your taxes.
Time Your Social Security Benefits Wisely
Social Security is one of the most reliable sources of retirement income, but did you know that timing matters for taxes? Taking benefits too early or waiting too long can affect your taxable income significantly. For example, if you start Social Security benefits at 62, you may miss out on an increase that comes with delaying until full retirement age or even later.
Plan Smart: If Social Security timing feels complicated, that’s because it is! Let’s review your situation and determine the best time for you to start benefits to minimize the tax hit.
Practice Tax-Efficient Withdrawals
Not all retirement accounts are created equal when it comes to tax. In fact, the order you draw down from each account—whether it’s taxable, tax-deferred, or tax-free—can make a big difference. With tax-efficient withdrawals, you can manage your income tax bracket, avoid unwanted tax spikes, and make your savings last longer.
Here’s how it works: Many retirees start with taxable accounts to reduce immediate tax, moving to tax-deferred accounts (like traditional IRAs) later, and using tax-free accounts (like Roth IRAs) strategically. This isn’t one-size-fits-all—it’s about optimizing based on your income needs and tax situation.
Your Next Move: Wondering how to make this work for you? Contact our office, and we’ll help you set up a tax-smart withdrawal sequence that leaves you in control.
Don’t Let Retirement Taxes Surprise You
Navigating taxes in retirement is about more than just saving money—it’s about securing your financial legacy. The tax strategies you choose today can significantly affect your long-term savings. Don’t go it alone; our team is here to help you make the most of your retirement.
Take Charge of Your Retirement Today
Ready to talk specifics? Contact our office to schedule a consultation, and together, we’ll create a retirement tax strategy tailored to your goals. Your future self will thank you.
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Rose Tax & Financial
Cedar Crest, New Mexico 87008
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