An often overlooked aspect of retirement planning is the impact of taxes. Without proper planning, taxes can take a significant bite out of your nest egg.
One way to solve this problem is to save and invest even more during your working career so that you have extra money to pay your taxes.
Another is to be tax-smart with your investment and account choices to reduce your tax liability to the absolute minimum.
The simplest and easiest way to avoid taxes on your retirement money is to use a Roth account. Both IRA and 401(k) plans can be structured as Roth accounts.
Those that do not offer a tax deduction on contributions, but allow tax-free withdrawals after age 59 .
Whenever you receive an inheritance, it can be a good supplement to your existing retirement savings. Financially speaking, the best part of inheritance is that it is tax-free.
Municipal bonds are issued by states, cities, and different localities, so if you buy bonds issued in your state, you are generally tax exempt from state taxes as well.
With a health savings account (HSA) when used for qualified health care expenses, which is a fairly broad category, withdrawals are also tax-free.
In many cases, Social Security payments are not taxable, but this is not always the case. If you're only living off your Social Security retirement benefits, it's true that they are tax-free.
Life insurance proceeds are tax-free to the recipient. However, it is entirely possible that you will receive some form of life insurance payment at some point in your senior years.