You’ve worked hard for your retirement savings, and the last thing you want is to lose more than necessary to taxes. But too many retirees in Springfield unknowingly pay more than they should—simply because they don’t have a solid tax plan for retirement.
Tax laws change, and so do the strategies to keep more of your money. The good news? A few smart moves can help you legally and effectively reduce your tax burden in retirement. At LaTour Asset Management of Springfield, we help retirees like you understand tax implications with complete confidence. Here’s how you can keep more of your hard-earned money.
- Time Your Social Security Benefits Wisely
Social Security benefits can be taxed, depending on your income. If you start collecting early—while still working or pulling from other taxable accounts—you could end up paying more than expected.
- If your combined income exceeds certain thresholds, up to 85% of your benefits could be taxable.
- Delaying benefits until age 70 can maximize payouts and reduce taxes in your early retirement years.
- A tax-smart withdrawal strategy can keep you in a lower bracket and reduce how much of your Social Security is taxed.
- Be Strategic With Required Minimum Distributions (RMDs)
At age 73, the IRS requires you to start withdrawing money from traditional IRAs and 401(k)s. But if you’re not careful, these withdrawals can push you into a higher tax bracket.
- Convert portions of your IRA to a Roth before RMDs kick in—Roth IRAs don’t have RMDs, and withdrawals are tax-free.
- Consider Qualified Charitable Distributions (QCDs) to donate directly from your IRA and avoid taxes on RMDs.
- Work with a tax professional to create a multi-year withdrawal strategy to avoid tax spikes.
- Use Tax-Efficient Withdrawal Strategies
The order in which you withdraw money from different accounts matters—a lot. A tax-efficient withdrawal plan helps minimize unnecessary taxes and extend the life of your savings. Start by withdrawing from taxable accounts first, followed by tax-deferred accounts like traditional IRAs or 401(k)s.
It’s typically wise to withdraw from tax-free accounts like Roth IRAs last. This simple but smart approach allows taxable investments to grow with favorable capital gains rates while keeping RMDs and other tax liabilities in check.
- Relocate Your Investments to Tax-Friendly Accounts
Not all investment accounts are taxed the same. Placing the right assets in the right accounts can save you thousands over time.
- Taxable accounts should hold investments with lower turnover and qualified dividends.
- Tax-advantaged accounts (IRAs, 401(k)s) should hold bonds and high-tax investments to shield growth from annual taxation.
- Roth IRAs are ideal for high-growth investments, since withdrawals are tax-free.
A well-structured portfolio protects more of your earnings from unnecessary taxes.
- Plan for Medicare-Related Taxes
Did you know that higher retirement income could increase your Medicare premiums? If your Modified Adjusted Gross Income (MAGI) crosses certain thresholds, your Part B and Part D premiums will go up.
- Keep your taxable income in check to avoid Medicare IRMAA surcharges.
- Plan Roth conversions carefully—they increase your MAGI temporarily.
Remember, tax-smart withdrawals will keep your premiums lower in the long run.
Take Control of Your Retirement Taxes Today
Lowering your tax bill in retirement means keeping more of what you worked so hard for. With the right approach, you can retire with complete confidence. You can’t afford to wait—start planning now. Call LaTour Asset Management of Springfield at (417) 886-5724 to schedule your tax strategy consultation today.
