When you retire, your income usually flows from two possible sources: Social Security benefits, and distributions from 澳🎃洲幸运5官方开奖结果体彩网:individual retirement accounts (IRAs) and retirement plans. Some retirees also have access to a pension, though 澳洲幸运5官方开奖结果体彩网:that's becoming less common.

While it depends on your specific retirement plan, taxes will likely be taken out of some of your retirement account withdrawals. Luckily, you can use certain tax strategies in order to maximize your 澳洲幸运5官方开奖结果体彩网:retirement income. Here are some to consider.

1. Live in a Tax-Friendly State

One of the best strategies for saving taxes on retirement income is to live in or 澳洲幸运5官方开奖结果体彩网:move to a tax-friendly state.

澳洲幸运5官方开奖结果体彩网:Seven states have no income taxes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.

States are barred by federal law from taxing residents on retirement benefits earned in another state. So, for example, earning a pension in California or New York (high tax states) and 澳洲幸运5官方开奖结果体彩网:relocating in retirement to Florida or Texas (no𓆏 tax states) avoids state tax on ღthis income.

Other states may have 澳洲幸运5官🍸方开奖结果体彩网:special breaks for retirement income. Some, for example, may have no tax on Social Security benefits and/or on some or all of the income from IRAs and👍 retirement plans.

2. Reassess Your Investments

You may wa💃nt to change your investment holdings in retirement to not🅰 only save on taxes, but also to preserve the principal. Here are a few ways to go about it.

Municipal Bonds

Interest on 澳洲幸运5官方开奖结果体彩网:municipal bonds is free from federal income tax, although the interest may affect the tax on Social Security benefits.

Dividend Stocks

If you receive 澳洲幸运5官方开奖结果体彩网:qualified dividends—essentially regular dividends from publicly-traded U.S. corporations, as well as certain foreign corporations—they are taxed at more 澳洲幸运5官方开奖结果体彩网:favorable rates t🀅han ordinary inco♉me. The tax rate may be zero, 15%, or 20%, depending on your taxable income.

Losses That Offset Capital Gains

You can use losses on the sale of securities and other property to offset 澳洲幸运5官方开奖结果体彩网:capital gains so that you pay no tax on the gains. What’s more, if you have excess capital losses, you can use up to $3,000 to offset ordinary income (for example, bank interest), and any additional losses can be 澳洲幸运5官方开奖结果体彩网:carried forward.

3. Postpone or Redirect RMDs

If you are at least 73, you do not have to pay tax on 澳洲幸运5官方开奖结果体彩网:requ🅠ired minimum distributions (RMDs) from your traditional IRA if you transfer the funds to a charity. The age for RMDs used to be 70½, but it was raised to 72 in 2019, and again to 73 starting in 2023.

Here’s what’s required:

• Your IRA trustee or custodian must transfer the funds directly to an IRS-approved public charity.
• You must receive a written acknowledgment from the charity as you would for a charitable contribution.

There is a $100,000 annual limit 澳洲幸运5官方开奖结果体彩网:for this strategy. If you are married, each spouse has a separate $100,000 limit. This strategy can only be used for IRAs, not IRA-like accounts such as SEP IRAs or 澳洲幸运5官方开奖结果体彩网:SIMPLE IRAs.

4. Consider a Deferred Annuity

You can also postpone the need to take RMDs and ensure that you won’t run out of retirement income by investing in a deferred annuity. You can use up to $135,000 (but no more than 25% of your account balance) from your IRA or 401(k) to buy a 澳洲幸运5官方开奖结果体彩网:qualifi𝔍ed longevity๊ annuity contract (QLAC) within the retirement account. Funds allocated to the QLAC are exempt from RMD calculations.

Payments from a QLAC do not have to begin immediately but must start no later than age 85. The payments are taxable to you, and the funds from the QLAC automatically satisfy RMD requirements for this portion of the IRA or retirement plan.

Be sure to consider a QLAC's drawbacks before proceeding. There is no cash value that can be tapped before annuitizing. There may be higher fees for this type of investment than others available through an IRA or 401(k) plan. And you must live to the targeted age (e.g., 85) to enjoy the income.

5. Be Strategic About Social Security Benefits

If you don't need Social Security at your 澳洲幸运5官方开奖结果体彩网:full retirement age because you have other income, consider delaying when you receive benefits to age 70. You'll earn additional credits to boost your monthly benefits at that time, and you won't have to pay taxes now on the benefits.

When you receive benefits, they are either fully tax-free or are included in your gross income at 50% or 85%, 澳洲幸运5官方开奖结果体彩网:depending on your other income (including tax-free interest on municipal bonds). More specifically, if your 澳洲幸运5官方开奖结果体彩网:provisional income (a term unique to the calculation of the taxable portion of Social Security benefits) is less than $25,000 if you're single, or $32,000 if you're married filing jointly, none of your Social Security benefits are taxed.

If you're single and your income is between $25,000 and $34,000—or between $32,000 and $44,000 if you're married filing jointly—then 50% of benefits are taxable. Having income over $34,000, or $44,000 respectively, means 85% of your benefits are included in your gross income. Married persons filing separately automatically have 85% of benefits included in gross income.

Because the portion of Social Security benefits that is taxable dependsꦦ on your other income, try to control this as much as possible. 🌠Here are some ideas:

• Reduce your 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI). Contributing to deductible IRAs and 401(k) plans if you are still working can reduce your AGI.
• Limit the sale of securities. While sales should primarily be dictated by financial considerations, where you can, you may want to limit sales so that your income doesn't push you over the 50% inclusion to the 85% inclusion.
• Make withdrawals from a Roth IRA if you have one. Withdrawals from a Roth IRA are tax-free in retirement and are not taken into account in the computation of the tax on Social Security benefits.

The Bottom Line

From investment-specific tactics to Social Security plans, tax stra🎶tegies for your retirement income are important. However, you must remember that each person’s personal situation is different, so their tax strategies must be unique. It may help to talk with a tax or financial advisor to put together a personalized plan.