Retirement doesn’t mean the end of taxes. But with the right strategies, there are ways to reduce their impact. Through proactive tax planning, your retirement accounts become a year-round strategic priority. Taking control now can make a huge difference in minimizing your lifetime tax obligation and preserving your wealth for future generations.

In this week’s Retire Wiser with NBC Connecticut, Joel Johnson, CFP® shares tax-efficient strategies to help optimize your savings and reduce the tax bite in retirement.

Diversify Your Accounts

It’s possible you could lose more money in retirement to taxes than from getting a poor rate of return on your investments. That’s a significant risk worth planning for. A good place to start is by understanding how each of your retirement accounts is taxed.

Building a diversified portfolio that includes a mix of taxable (brokerage accounts), tax-deferred (traditional IRAs), and tax-free (Roth IRAs) accounts can give you greater flexibility when it comes time to withdraw income in retirement.

Strategically Time Your Withdrawals

When considering when to take withdrawals from your savings, strategic timing is key. The decisions you make can directly impact your tax liability as well as affect your Medicare premiums and taxes on Social Security benefits, depending on your income.

That’s why it’s crucial not only to time your withdrawals properly but also to draw from the right accounts at the right time. With the right tax strategy in place, you can stay in a lower tax bracket and reduce your lifetime burden.

Consider the Benefits of a Roth Conversion

If you don’t have any assets in tax-free accounts, transferring a portion of your money into a Roth IRA may be worth considering. Roth accounts offer tax-free growth and withdrawals, and they can potentially be passed down to your heirs tax-free.

For many people, a Roth conversion is a powerful strategy, but it’s important to work with a financial planner to determine if it’s the right move for you. Converting too much at once could push you into a higher tax bracket or create other unintended consequences.