When it comes to being prepared for retirement, the majority of Americans are not in good shape. A recent study found that “less than one-third of Americans are saving money in their 401(k)s and other workplace retirement accounts” (Bhattarai). Even if you are prepared for retirement, you may be shocked by the amount of taxes you owe once you start using your retirement funds. To learn how you can minimize your taxes during retirement take a look at the below strategies.

IRA Conversion

One of the simplest ways to reduce your tax burden during retirement is to convert your traditional IRA or 401(k) to a Roth IRA. When you make withdraws from a Roth IRA, you do not owe taxes on the amount you take out. Although it’s possible you may owe taxes when you convert to a Roth IRA, once you’re retired and make withdraws you’ll save money on taxes. Since you generally make less money during retirement, every bit of saved money helps. Most financial advisers recommend that you convert your IRA funds over the course of a number of years rather than all at once. This way you can keep an eye on your tax bracket and make sure you don’t enter a tax bracket that’s too high.

Home Equity Conversion

Using home equity as an income source during retirement is a strategy that doesn’t receive as much attention as some other retirement strategies. Yet it’s one of the best conversions to consider as you enter your golden years. Many retirees downsize during retirement and free up cash by selling their homes. By using a home equity conversion, though, you can stay in your current home and gain access to cash. One of the best strategies to consider is a reverse mortgage. To learn more about the benefits of reverse mortgages take a look at this blog I wrote last year.

Indexed Universal Life (IUL) Conversion

In the past, I have written about the financial benefits of IUL policies. In particular, IUL conversions offer numerous tax advantages that retirees should consider. While the policy gains money you do not owe any taxes. IUL policies also help protect you from the up and down nature of the market. The policy’s gains are linked with the market, but you don’t face any market risk since your money isn’t actually tied up in the stock market. To learn more about how an IUL policy can help you minimize taxes during retirement, I encourage you to read this article.

Learn More

Here are three more useful articles that I suggest you read to learn more about minimizing taxes during retirement: