Weekend Reading: 3 Strategies for Reducing Tax Risks in Retirement

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.
Weekend reading reducing tax risks Weekend reading reducing tax risks
Weekend Reading

A share of your earnings has always gone to Uncle Sam, and unfortunately, you’ll find the same holds true when it comes to your retirement income. On a positive note, however, there are actions you can take by simply being proactive when it comes to tax planning and minimizing your tax risk.


Take note: Today’s tax laws provide opportunities to help alleviate your taxable income in the form of tax credits, increased standard deductions and pre-tax or after-tax retirement accounts. At the same time, not all tax provisions were designed to work in your favor, which is why creating a tax-efficient strategy is key to saving more hard-earned dollars in your pocket. Here, you will find three ways to keep the IRS at bay in retirement:

📌 1 – Consider Roth IRA conversions: Pre-tax employer sponsored plans are a popular way to stash away your savings; however, upon withdrawal of these savings, you will owe Uncle Sam. By converting your pre-tax dollars to a Roth IRA, you will pay taxes now, versus later when tax rates could be higher.

📌 2 – Explore charitable giving options: Reap tax reduction benefits and leave a financial legacy through various charitable giving avenues, which can include a charitable trust, qualified charitable distribution (QCD) or a donor-advised fund, all of which will differ in their approach to tax-minimization.

📌 3 – Use a health savings account for accumulation: While HSAs help cover the cost of qualified medical expenses, contributions are also tax-free, and not made under a “use-it-or-lose-it” basis. This means you can continue saving pre-tax dollars for health-related costs in retirement up until you are enrolled in Social Security or apply for Medicare at age 65.

Planning paves the way: Your personal tax environment may be more favorable today than you realize. If you can first recognize this, then you can begin safeguarding your lifelong savings for the long-haul, and leverage opportunities that will become clearer as a result.