5 Ways to Get Tax-Free Income in Retirement
5 Ways to Get Tax-Free Income in Retirement
Find out how you can get tax-free income in retirement to ensure that more money stays in your pocket during the later years of your life.
When you’re planning for retirement, there can be a lot of uncertainty.
You don’t know what the future holds. That includes future tax rates
Thankfully, there are ways you can take income taxes out of the equation.
If you have certain types of investment accounts or income, you can get tax-free retirement income.
This allows you to keep the money you withdraw from these accounts without paying anything to the federal government for income taxes. In some cases, you can avoid state income taxes, too.
What this means for you:
You get more certainty when planning your retirement income.
Here are five common sources of income you can access tax-free in retirement as far as federal income taxes go.
1. Roth IRA or Roth 401(k) Withdrawals
2. Municipal Bonds Income
3. Health Savings Account (HSA) Withdrawals
4. Life Insurance Cash-Outs
5. Social Security Benefits
Tax-Free Retirement Income Helps Predictability
Having tax-free retirement income takes one of the many variables out of your complex retirement planning equation.
When you know you won’t have to pay taxes on certain types of retirement savings, you know exactly how much money you have at your disposal.
You don’t have to worry about tax rates going up on ordinary income in the future.
Even if tax rates go up, it won’t reduce the amount of tax-free money you have available to live your life.
Even so:
It usually doesn’t make sense to have all of your retirement savings in assets that allow you to get tax-free income.
There are many tax concepts you could take advantage of to get tax-free income or at least income at a very low tax rate, but you may have to have some taxable income to take advantage of them. They include:
Standard deduction
Tax credits
Capital gains tax rates
The initial low marginal income tax rates on taxable income
Other planning strategies
This means keeping some income in a tax-deferred retirement account may be a good idea, too.
This way, you can take advantage of opportunities to have income with a relatively low tax rate.
Then, you can withdraw your tax-free income to fill the rest of your income needs.
The bottom line is:
You need to evaluate what you think is right for you and your future. Whether that means focusing on tax-free retirement income or a mix of both, you’re responsible for your future retirement.
Important Thing is NOT HOW YOU INVEST
IT IS HOW MUCH YOU WILL PAY TAXES WHEN YOU WITHDRAW WHEN YOU NEEDED MOST SPECIALLY IN RETIREMENT...
Having well Tax Diversified Approach to your Overall Planning Can put more Money in your Pocket and Lott Less to
UNCLE SAM... ( TAX)
Would you Agree?