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.