Save Money On Taxes During Retirement
Nashua, NH Couple Looks For Suggestions
One of the easiest ways to keep your tax bill down in retirement is with a Roth IRA. With this account, contribution withdrawals and money earned are tax-free. A health savings account or HSA is a good way of setting aside money for medical expenses, tax-free.
A couple in Nashua had just retired and in an effort to stretch their fixed income they were looking for ways to reduce their taxes. They contacted the experts at Merrimack Tax Associates for suggestions.
For Many, Retirement Income Taxes are Still Applicable
Many people are surprised in retirement to find that a portion of their Social Security benefits are taxed, as well as money taken out of a traditional IRA and 401(k). This can leave retirees under-estimating the amount of money that they actually have to enjoy their golden years.
The tax burden that goes along with these retirement accounts can be managed through careful withdrawals each year. If some of your income is coming from investments that you will be selling periodically, balancing these sales or holding off until a year with lower income can put you in a lower tax bracket and reduce the total amount that you will pay toward taxes. This strategy can also work for withdrawals on your IRA, 401(k) or Roth IRA, carefully managing the money taken out to keep you in a lower tax bracket each year.
Reduce Expenses to Save on Taxes
The less income you need during your retirement, the less you will need to withdraw and therefore pay in taxes. Paying off your mortgage and trimming monthly bills can also help to reduce your tax burden, extending your retirement savings for many years to come.
The couple in Nashua sat down with one of Merrimack Tax Associates’ professionals and were able to develop a plan for their retirement that will ultimately save them money on taxes.