QCD’s. Our plan is to live very frugally, fund special expenses (trips, car, etc.) from our Roth’s, augment SocSec a bit from pre-tax IRA’s and give the rest away either in the form of QCD’s or inheritance. A good possibility that we won’t owe a dime of income tax in retirement (given no changes in the tax code, anyway).
jayne brownlee
1 month ago
I’m retired do not have a pension and have roughly half of financial assets in post-tax and half in pre-tax accounts. My basic strategy is to subtract a large sum from the total available, for potential end of life needs, calculate an annual distribution from the remaining amount and subtract 10-20% from that amount to account for market downturns. The tax-savings strategy here, has always been not to wait to take distributions but rather to spread the distributions out over my lifetime.
Sanjib Saha
1 month ago
Tax-loss harvesting whenever opportunity arises. Also, move investments that produce un-qualified dividends or interests from taxable accounts to tax-deferred account.
Rick Connor
1 month ago
To me, the most important tax strategy is developing a good understanding of how the tax code works, and what are the key parts. Many folks don’t understand the basics. Without that, you have little chance of taking advantage of the more sophisticated options.
John Goodell
1 month ago
Lots of great points already made. I think the most overlooked tax strategy by folks who’ve maxed out all the usual tax efficient vehicles is simply to continually buy index funds in a taxable account over many working years and don’t sell. You avoid capital gains tax and trying to time the market. “The first rule of compound interest is to never interrupt it unnecessarily.” -Munger
John Yeigh
2 months ago
During our early retirement years we moved from a high income-tax to a zero income-tax state. We are also Roth converting which we believe should result in long-term savings plus improve the inheritance flexibility for our children.
mjflack
2 months ago
Minimize dividends (and therefore taxes), by investing in broad-based index funds.
Marjorie Kondrack
2 months ago
I live in high tax state so Treasuries are a good choice for saving on my state taxes. Also in years when income is higher purchasing 1 year T bills can accelerate reporting of interest income into following when income may not be as high.
Tax-advantaged retirement schemes allowed me to save meaningful amounts of money throughout my working life. Often, my 401(k) contributions made the difference between owing taxes and getting a refund on April 15th. Plus, my employer matched a part of my savings, which I thought of as giving myself a raise.
R Quinn
2 months ago
Except for Roth, HSAs, muni funds and QCDs, most others are actually tax deferral strategies. The current high standard deduction has been a big help too, but not actually a strategy.
steve abramowitz
2 months ago
I am partial to the real estate transaction known as the 1031 exchange, which postpones capital gains from the sale of your property. The strategy entails buying a like-kind replacement property for at least the price of the one you relinquished within six months of the sale.
You may feel under pressure to buy and may have to settle for something other than your ideal. You are also vulnerable to the buyer’s commitment to follow through with the purchase. But the tax benefits can be substantial. For example, the cost basis of your property is “stepped up” at death so that the deferred capital gain is entirely eliminated for your heir.
James McGlynn CFA RICP®
2 months ago
Saving in my Health Savings account is great but hard to build a large balance. Converting my IRA to a Roth IRA gradually is a lot more impactful and is harder as I have to pay tax today and “hope” the government doesn’t find a way to take that tax break overtime.
Andrew Forsythe
2 months ago
Not sure “favorite” is the right word because it’s a pain, but I sit down every fall and estimate what my total income for the year will be so I know how big a Roth IRA conversion I can do without jumping into a higher tax bracket or triggering an IRMAA surcharge on our Medicare premiums.
Mike Zaccardi
2 months ago
HSA. I treat it like a long-term investing account and plan to ‘reimburse’ myself in retirement and (hopefully) use the money like an IRA without needing to tap it for major medical costs along the way.
Also, I do a lot of pre-tax investing on income that would otherwise be taxed at 24% or higher in the event I ever have low-income years between now and retirement (I can then Roth convert) and use the “fill-the-bucket” marginal tax bracket/income strategy in retirement so that my average tax rate is well under 24% then. But still having tax diversification among Roth, pre-tax, and taxable account money is good.
QCD’s. Our plan is to live very frugally, fund special expenses (trips, car, etc.) from our Roth’s, augment SocSec a bit from pre-tax IRA’s and give the rest away either in the form of QCD’s or inheritance. A good possibility that we won’t owe a dime of income tax in retirement (given no changes in the tax code, anyway).
I’m retired do not have a pension and have roughly half of financial assets in post-tax and half in pre-tax accounts. My basic strategy is to subtract a large sum from the total available, for potential end of life needs, calculate an annual distribution from the remaining amount and subtract 10-20% from that amount to account for market downturns. The tax-savings strategy here, has always been not to wait to take distributions but rather to spread the distributions out over my lifetime.
Tax-loss harvesting whenever opportunity arises. Also, move investments that produce un-qualified dividends or interests from taxable accounts to tax-deferred account.
To me, the most important tax strategy is developing a good understanding of how the tax code works, and what are the key parts. Many folks don’t understand the basics. Without that, you have little chance of taking advantage of the more sophisticated options.
Lots of great points already made. I think the most overlooked tax strategy by folks who’ve maxed out all the usual tax efficient vehicles is simply to continually buy index funds in a taxable account over many working years and don’t sell. You avoid capital gains tax and trying to time the market. “The first rule of compound interest is to never interrupt it unnecessarily.” -Munger
During our early retirement years we moved from a high income-tax to a zero income-tax state. We are also Roth converting which we believe should result in long-term savings plus improve the inheritance flexibility for our children.
Minimize dividends (and therefore taxes), by investing in broad-based index funds.
I live in high tax state so Treasuries are a good choice for saving on my state taxes. Also in years when income is higher purchasing 1 year T bills can accelerate reporting of interest income into following when income may not be as high.
Following year, that is.
Tax-advantaged retirement schemes allowed me to save meaningful amounts of money throughout my working life. Often, my 401(k) contributions made the difference between owing taxes and getting a refund on April 15th. Plus, my employer matched a part of my savings, which I thought of as giving myself a raise.
Except for Roth, HSAs, muni funds and QCDs, most others are actually tax deferral strategies. The current high standard deduction has been a big help too, but not actually a strategy.
I am partial to the real estate transaction known as the 1031 exchange, which postpones capital gains from the sale of your property. The strategy entails buying a like-kind replacement property for at least the price of the one you relinquished within six months of the sale.
You may feel under pressure to buy and may have to settle for something other than your ideal. You are also vulnerable to the buyer’s commitment to follow through with the purchase. But the tax benefits can be substantial. For example, the cost basis of your property is “stepped up” at death so that the deferred capital gain is entirely eliminated for your heir.
Saving in my Health Savings account is great but hard to build a large balance. Converting my IRA to a Roth IRA gradually is a lot more impactful and is harder as I have to pay tax today and “hope” the government doesn’t find a way to take that tax break overtime.
Not sure “favorite” is the right word because it’s a pain, but I sit down every fall and estimate what my total income for the year will be so I know how big a Roth IRA conversion I can do without jumping into a higher tax bracket or triggering an IRMAA surcharge on our Medicare premiums.
HSA. I treat it like a long-term investing account and plan to ‘reimburse’ myself in retirement and (hopefully) use the money like an IRA without needing to tap it for major medical costs along the way.
Also, I do a lot of pre-tax investing on income that would otherwise be taxed at 24% or higher in the event I ever have low-income years between now and retirement (I can then Roth convert) and use the “fill-the-bucket” marginal tax bracket/income strategy in retirement so that my average tax rate is well under 24% then. But still having tax diversification among Roth, pre-tax, and taxable account money is good.