Retirement means not having the pleasure of a regular income. The absence of income, however, does not mean that you do not have to pay taxes. The government will take its cut even from the money you have spent your working years in earning and painstakingly saving. The tax cut can be shockingly huge. When you want to know the amount of money you have gathered for retirement, it is important to ascertain the amount which you can actually spend.
You need to plan smart prior to retirement and make strategic money moves. This can reduce he IRS takings by a significant amount. According to financial author Phil DeMuth, it is possible to make adjustments to long range tax saving schemes. You will be saddled with high taxes if you do not have a plan.
Prior to retiring, go for a Roth. Other than putting your hard earned money in an IRA or 401(k), which increases free of any tax until retirement, do consider the pulling away some of the retirement savings to be kept in Roth account. Such kinds of accounts compel you to pay your taxes presently on contributions. The money, however, is not subjected to tax and no taxes are imposed on qualified withdrawals as well. Qualification for Roth IRA entails earning not more than $131,000 for an individual or $193,000 for any married couple. However, there will be no limits on income if your company provides Roth 401(k). Even if you are a high earner, it makes sense to open a Roth account.
You should regard the health savings account as a kind of retirement account. You can put money into health savings account in case you have health insurance plan under the high deductible category. The Health Savings Accounts or H S A enjoys triple benefits under tax rules: your money goes inside prior to taxes and increases without any tax encumbrances as well. Withdrawals are also not taxed as long they are utilized for health related expenses. Even though you will be forced to tap the account to meet current expenses, maximum savings in this account will provide you a source of funds which is completely free of taxes. You can use these funds to finance sudden medical expenses post retirement. Asset location is also important in this regard. You can ensure that you have a good mix of bonds and stocks throughout the portfolio as per your time and risk profile.