How to Minimize Taxes In Retirement

How to Minimize Taxes In Retirement

October 07, 2022

If you asked us one of the most common questions clients ask, it's definitely how to minimize taxes in retirement. So in this blog post, we're walking you through the basics of minimizing taxes in retirement to keep in mind for your own retirement plan.

When considering how to minimize your taxes in retirement, you want to consider a few things. First, what types of accounts are your assets held by? Are they kept in traditional 401K or IRA accounts? Are they in Roth accounts? Are they in taxable investment accounts? All of those different accounts have different tax treatments.

As you're accumulating and distributing those assets into retirement, you also want to factor in what other sources of income you have because you need to understand your tax situation. So, for example, what tax brackets are you in? If you're not maximizing a certain tax bracket, maybe it makes sense to start looking at strategies where you convert money that will be treated as ordinary income tax into a tax-free vehicle like a Roth IRA or Roth 401k.

Should I be doing Roth conversions?

When it comes to whether or not it's beneficial for you to be doing Roth conversions, the answer to that question is it really depends on your own circumstances.

We want to gather all of the information related to your retirement and start doing some sophisticated tax analysis to figure out if we can shift income into lower tax brackets in the future. This means maybe you pay a little bit more tax today, but it creates a lower tax burden for you in the future and provides you with a high probability of success and achieving your financial goals.

Is a Roth account better than a Traditional account?

When it comes to deciding which type of account is right for you, the answer, again, is that it really depends. It depends on the tax bracket you're in today and the anticipated tax bracket you will be in the future.

There could be other considerations that you might want to take into account. For example, do you need this money, or is this money that you'll never tap into and want to pass it down to a family member? It really is specific to your own personal circumstances. At Fiduciary Financial Partners, we can help you by providing a detailed tax analysis to determine which vehicles are most appropriate for your circumstances.

If you're interested in learning more about how Fiduciary Financial Partners can help you minimize your retirement taxes, you can schedule a consultation here.

If you found this blog helpful, be sure to read our recent blog. When should I take social security?

Wondering if a Roth or a Traditional 401(k) account is right for you? Check out our YouTube video: Roth vs. Traditional 401(k): which one is right for you?