You probably are looking forward to retirement because you have a tax deferred retirement account that has been growing throughout your career. However, the bad news is it is not always going to be a tax-deferred account. Therefore, you have to come up with a plan that is not going to allow taxes to take majority of your hard-earned money that you have been saving for decades.
Withdrawing the Funds
If you take money from your tax-deferred account at the proper time and go about doing so correctly, you can save a lot of money in taxes during your retirement years. The first thing you have to do is withdraw the funds. If you have stocks and mutual funds, you will find they have appreciated longer, and they encounter a long-term capital gain tax, yet this is usually low for majority of taxpayers.
When you have to go into accounts such as IRAs or 401k plans things can be painful. This is because once you turn 70 ½ you have to take the annual required minimum distribution to avoid excise tax. Additionally, these plans are taxed at your normal tax rate.
The key is to keep your money in the accounts for as long as possible because if you take out a lot of money it is possible that you will move up into a higher tax bracket. You have to make sure you have a long-term plan that will allow you to minimize your taxable income. Alternatively, you can consider itemized deductions too.