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Benjamin Franklin once said, “In this world nothing can be said to be certain except death and taxes.” That said, it is possible to reduce the tax burden—on retirement income. Advisors can help their clients minimize taxes on retirement income by encouraging them to plan ahead and follow three pieces of advice. According to the Indexed Annuity Leadership Council (IALC), organizing a financial strategy that allows for guaranteed income and security can make retirement one of the most rewarding periods of an individual’s life.

Tax considerations figure heavily in any financial planning, but are especially important to retirees. Any retirement investment strategy must include measures to minimize taxes while developing a diversified portfolio of products that can ensure financial security that can allow individuals to live securely and comfortably after leaving the workforce.  

Here are three ways to reduce the tax burden on retirement earnings, according to IALC:

1. Improve financial flexibility: Financial flexibility becomes more important than ever after retirement. This flexibility gives individuals freedom to really enjoy retirement, and not have to worry about finances. The flexibility allows individuals to control their income throughout the year and stay in lower tax brackets, holding down the annual tax bill. One way to improve flexibility is by eliminating the largest monthly expenses before retirement. Paying off a mortgage, for example, or other large expense can free up monthly income for other purposes.

2. Develop a financial withdrawal plan to ensure that a client stays in a lower tax bracket: Many retirement investments are tax-deferred, so retirees are only taxed on the funds when they make withdrawals. Planning in advance, developing – and sticking – to a budget can ensure an individual doesn’t move into a higher tax bracket.

3. Invest in a Fixed Indexed Annuity (FIA): Annuities, in general, offer real tax benefits. In general, individuals purchase fixed indexed annuities in one payment. The account value grows tax deferred at the guaranteed rate. The earnings are taxed as ordinary income only when the individual makes withdrawals. “Money that you invest in an annuity grows tax-deferred. When you eventually make withdrawals, the amount you contributed to the annuity is not taxed, but your earnings are taxed at your regular income tax rate,” according to CNN Money.

An FIA, in particular, can be an especially good choice as this type of annuity provides low-risk to principal and offers a reliable guaranteed income for life. FIAs can also help individuals minimize taxes, since they’re tax deferred and allow the annuity to grow quickly. FIAs also don’t have government-mandated annual contribution limits that other retirement vehicles have, like a Roth IRA.  Once an individual begins to withdraw funds, only the interest from the principal is taxed – not the principal itself. Any distributions from an FIA are subject to ordinary tax, but if an individual withdraws from the FIA before age 59-1/2, he or she will owe an additional 10 percent federal tax.