Hello everyone! I’m Roger Brooks from Strategic Investment Management. Today I want to talk with you about minimizing tax liability as a part of your retirement income strategy.
Oftentimes, retirees start by drawing from taxable accounts, then tax-deferred ones, then tax-free accounts. This strategy can help delay taxes on tax-deferred accounts and allow tax-free accounts to grow longer.
But what are some other tax-efficient withdrawal strategies? In this video, we'll explore 4 strategies to help you make the most of your retirement savings.
Strategy 1: Diversifying Account Types Spread your funds across a reserve fund, a taxable account, a tax-deferred account, and a tax-free account. High-income generating assets like bonds are best held in tax-advantaged accounts, while lower-tax investments like stocks can reside in taxable accounts.
Strategy 2: Strategic Withdrawal Planning Early withdrawals from tax-deferred accounts can help decrease future Required Minimum Distributions (RMDs) and limit future tax liability. By funding your early retirement from sources like IRAs, you can also delay claiming Social Security so you have that income later in retirement.
Strategy 3: Leveraging Roth Conversions In this process, you move or “convert” funds from a traditional IRA or eligible employer-sponsored retirement plan into a Roth IRA. This strategy is especially beneficial for retirees with limited taxable income, and it can reduce future RMD requirements.
Strategy 4: Qualified Charitable Distributions (QCDs) For those over 70½ with traditional IRAs, consider making charitable donations directly from your IRA through QCDs. These distributions count towards your required minimum distribution (RMD) but aren't included in your adjusted gross income, potentially reducing your taxable income.
Expanding your retirement withdrawal strategy can help you maximize your retirement income and minimize your tax liability, allowing you to enjoy your golden years to the fullest. We recommend consulting with a tax professional or a financial advisor, like the members of our team here at Strategic Investment Management.
Don’t hesitate to reach out if you have any questions!