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Taxes will most likely be your single greatest expense in retirement.
For this reason, its important to understand the tax implications of your distributions and create a tax strategy.
This can reduce your tax liability while maintaining your quality of life during retirement.
you could even get started before you retire.
Start by listing all your monthly costs and categorizing them as either necessary or optional.
However, there are exceptions to this general rule.
Different types of investments are more suited to specific types of accounts.
On the other hand, tax-efficient investments likeindex funds or growth stocksmay be better positioned in taxable accounts.
Another important consideration for retirees is selecting tax-efficient funds and ETFs.
Tax-managed funds are also specifically designed to minimize tax implications by employing strategies like loss harvesting within the fund.
She explains, We refer to this time period between retirement and requiredminimum distribution ageas the tax desert.
It may make sense during this time to convert some funds in a traditional IRA to a Roth IRA.
This strategy is called aqualified charitable distribution.
If the funds are sent directly to charity from the IRA, it is tax-free.
Working with a financial advisor or tax professional can ensure that your withdrawal approach aligns with your financial goals.
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