3 Tax Optimization Strategies to Remember for Retirement BML Wealth Management

As you plan for retirement, it’s important to consider tax optimization strategies to minimize your tax liabilities. Here are three key ways to optimize taxes in retirement, based on information from sources published between 2022 and 2023.

    1. Consider the Tax Structure of Your State and Locality

Consider living in a tax-friendly state.[1] Many states offer tax breaks for retirement income or have no income tax, which can help you reduce your tax liabilities in retirement. Some states also offer tax exemptions for Social Security benefits and other retirement income sources. Assessing the tax structure of your state and constructing your retirement plan and financial strategy around your state’s tax system can help you stay a step ahead in retirement.

    1. Utilize a Smart Retirement Account Withdrawal Strategy

Choose a withdrawal strategy that works for you.[2] When you withdraw from your retirement accounts, it can impact your taxes in different ways. One potential strategy to reduce taxes is to withdraw annually from each account based on its percentage of overall savings. This strategy can potentially reduce taxes and extend the life of the portfolio, allowing for an extra year of retirement income. Additionally, it can reduce taxes on Social Security benefits and the premiums paid on Medicare. Consult with a tax professional and have a withdrawal plan in place to manage your taxes in retirement.

    1. Optimize Your Social Security Claiming Strategy

Be strategic about Social Security benefits.[3] Depending on your other sources of income, your Social Security benefits may be subject to taxes. One way to optimize taxes is to delay taking Social Security benefits until you reach full retirement age or even later. This can increase your monthly benefit amount and reduce the portion of your benefits that are subject to taxes. Alternatively, you can consider taking Social Security benefits earlier and investing the money in a tax-efficient manner.

The Bottom Line

Optimizing taxes in retirement can help you maximize your retirement income and minimize your tax liabilities. It’s important to consult with a tax professional and have a plan in place to manage your taxes in retirement. Additionally, plan and comply with filing dates, tax rate schedules, and deductions to ensure you’re taking advantage of every opportunity to optimize your taxes.[4]

 

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The commentary on this blog reflects the personal opinions, viewpoints, and analyses of BML Wealth Management’s employees providing such comments and should not be regarded as a description of advisory services provided by West Wealth Group, LLC. The views reflected in the commentary are subject to change at any time without notice. Nothing on this blog constitutes investment advice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future returns.

Investment advisory services through West Wealth Group, LLC, an SEC Registered Investment Adviser. BML Wealth Management and West Wealth Group, LLC are affiliated entities. Insurance Services are offered through BML Wealth & Insurance Services, California Insurance License #0M15550.

We do not provide tax or legal advice. All individuals are encouraged to seek guidance from qualified professionals regarding their personal situation. Any references to protection benefits or steady and reliable income streams in this guide refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products.