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Retirement Tax Planning Tips

Sep 1, 2007
Many people do not think ahead about reducing taxes during their retirement years. But actually there are many ways to reduce the amount of taxes that you pay during your retirement years. Some of these include.

Maximizing the nontaxable amount of your retirement plan benefits by taking a lump sum distribution limited to your previous contributions. Planning the order and timing of (a) retirement plan rollovers and (b) IRA distributions to maximize the nontaxable amount.

Eliminating withholding tax on retirement plan distributions by making a trustee to trustee rollover to your IRA. Electing to defer tax on the distribution to you of your employer's stocks and bonds. Carefully considering whether and when you should convert your regular IRA to a Roth IRA.

Planning the order and timing of (a) retirement plan rollovers and (b) Roth IRA conversions to maximize the nontaxable amount. Reversing your previous conversion of an IRA to a Roth IRA because of change circumstances. Obtaining temporary use of retirement or IRA funds without paying tax or interest on the funds.

Deferring or accelerate income or deductions between tax years to minimize tax on social security benefits. Choosing distribution alternatives that delay taxation of required minimum distributions from retirement plans and IRAs.

Taking a partial lump sum distribution from a personally purchased annuity or a funded nonqualified plan after the annuity has started, rather than before. Carefully consider whether your rollover of retirement plan funds to an IRA should include your previous contributions to the plan. Carefully considering whether to roll over your employer's stocks and bonds to an IRA.

Electing the most favorable method for computing the tax on a lump sum distribution from your retirement plan, if you were born before January 1, 1936. Deferring income (or accelerate deductions) between tax years to qualify for a Roth IRA conversion.

Choosing the distribution methods and distribution periods for your retirement, IRA, an annuity benefits that maximize the deferral of your taxes. Taking the first required minimum distribution from your retirement plan or IRA in the tax year generating the lowest tax. Structuring distributions from your retirement plans or IRAs to avoid the penalty tax on premature distributions.

Electing the most favorable method for computing the tax on lump sum payments of prior year social security benefits. Determining the percentage of disability insurance premiums you paid a to maximize the nontaxable portion of your disability benefits. Qualifying for nontaxable VA disability benefits to replace taxable U.S. Military retired pay. Preserving your surviving spouses right to elect to own your IRA or Roth IRA.

Preserving the right of your beneficiaries to choose between alternative methods of distribution of your retirement and IRA benefits. Establishing separate IRA accounts for your beneficiaries to maximize their tax deferrals. Designating a trust as the beneficiary of your retirement or IRA benefits to provide better control of funds.

Devising an estate plan that reduces or eliminates federal estate taxes on your retirement or IRA benefits. Making a charitable beneficiary designation that will eliminate taxes on retirement or IRA benefits. Using multiple trusts as IRA beneficiaries to maximize tax deferral.
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