[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]Even when retiring with a good amount of savings and investments, retirement can definitely be a challenge. Especially when your financial life is based on a limited amount of income, and life can come up with unexpected financial hiccups such as medical expenses outside of coverage and other unforeseen events.
And though you may no longer be working, you still face income taxes. A recent Nationwide survey reveals that over half of Americans that are 50 and over are worried about the taxes they face in retirement.
For those that share this same concern, there are some preventative strategies you can put in place to lessen the taxes you are liable for when you are a retiree.
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If you contribute or rollover your savings into a Roth 401(k) or Roth IRA, you will have to pay the taxes immediately. But when you make withdrawals in the future during retirement, you won’t have to pay any taxes, which gives you more money to use for what you need when you need it.
Another thing you can do is to put money into a Health Savings Account (HSA), which can also lower the amount of taxes you face in the future.
Money put into an HSA are done before taxes, which also allows investment growth sans taxes, and ultimately you can withdraw money from the account without any tax liability as long as the funds are used for medical costs that are eligible such as co-pays for clinical visits, Medicare deductibles, and prescription drugs.
Another strategy is to invest in municipal bonds to lessen the taxes you face in retirement. The reason is that the interest is tax-exempt from the federal government. If you purchase the municipal bonds from the state in which you reside, you will also be exempt from local and state taxes too.
Another plus about these types of bonds is that they have interest payouts semiannually.
The last tip to consider is possibly moving to a state that does not tax your payments from Social Security. This may be a crucial move for those that will mainly rely on these benefits during retirement to get as much money as possible.
If you have a substantial amount of income coming in as a retiree, you may face federal tax on your benefits. But you can at least prevent having to pay more in state taxes by moving to one that does not tax Social Security benefits.
Currently, 37 states do not impose taxes on Social Security payments. The ones that do are listed in alphabetical order: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.
A majority of the states listed do exempt those that have a lower income, so if you live in one of them or wish to move to one of these states, be sure to do some research on the state’s regulation on Social Security taxes.
With some of the pointers given in the article, maybe you will be able to soften the tax blow you face in retirement.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”37270″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]
