Weekend Reading: Is Your Retirement Portfolio a Tax Bomb?

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

All tax-deferred savings come along with a tax liability. Over time, contributions, employer matches and investment returns can create a snowball effect when it comes to the dues you owe Uncle Sam.


A Tax whammy: For example, higher RMDs can prompt Medicare means testing surcharges, resulting in higher Medicare Part B and Part D premiums too. And on top of that? Tax-deferred accounts can create burdens for heirs due to the elimination of the stretch IRA rule.

Bomb-diffusing strategies: In order to help avoid some of the major tax implications that could come along with tax-deferred accounts, a proactive tax planis crucial. Some of the strategies included in that might be:

📌 Shift savings from pre-tax to Roth accounts: This will provide future you tax savings, despite losing a tax deduction in the current year.

📌 Take advantage of asset allocation: Ever heard of the three tax buckets? This is where they come into play, as they utilize tax-free accounts to limit tax liability down the road.

📌 Consider Roth conversions: Roth accounts are tax-free, and conversions can be especially helpful prior to utilizing Medicare, Social Security benefits and before RMDs kick in.

The clock is ticking: You’ve had years since TCJA to take advantage of lower tax rates. Don’t miss out on the little time we have left to strategically exit those tax-deferred retirement accounts.