Retirement doesn’t mean you stop paying taxes – but there are ways to minimize the bite in the long run. With thoughtful, proactive tax planning, you can stay ahead of the curve and keep more of what you’ve worked so hard to build.

In this week’s Better Money Boston with WCVB Channel 5, join David Shapiro as he shares key strategies to help you optimize your retirement income and reduce your lifetime tax liability.

Diversifying Your Accounts

Diversification isn’t just about stocks, bonds, and conservative investments – it also applies to how your retirement accounts are taxed. There are three main “buckets” of income, each with differing tax implications. A well-balanced mix of tax-deferred (e.g., traditional 401(k)s and IRAs), taxable (like brokerage accounts), and tax-free (Roth 401(k)s and IRAs) accounts can provide greater flexibility and control in managing your tax burden in retirement.

Strategically Timing Your Withdrawals

Strategically choosing when and where to withdraw income is another key part of tax planning. If you rely solely on tax-deferred accounts, every dollar you withdraw may count as taxable income – potentially pushing you into a higher tax bracket or triggering other unwanted tax consequences.

That’s why it’s critical to plan both the timing and source of your withdrawals. In some cases, it may even make sense to wait for a year when your income is lower before taking distributions.

Considering a Roth Conversion

A Roth conversion lets you pay taxes now in exchange for tax-free growth and withdrawals later. As long as the account has been open for at least five years and you’re over age 59½, your money can grow tax-free, be withdrawn tax-free, and potentially be passed down tax-free.

However, converting a large sum of money in a single year could trigger additional taxes, so it’s important to evaluate the long-term impact. As with any strategy, consult a financial professional to determine whether a Roth conversion is the right move for your situation and retirement goals.