5 Tax-Saving Moves To Make Before Age 72

Retirement planning is a critical aspect of financial planning, and it’s never too early to start. One crucial area to focus on is tax-saving strategies that can impact your retirement income. The decisions you make now will impact the future, and Harvest Wealth Partners is dedicated to helping you understand which choices may be beneficial as you pursue your financial goals. Below, we explore five practical tax-saving moves you should consider before reaching the age of 72. Contact our team to discuss your specific needs.

1. Roth IRA Conversion

Converting your traditional IRA to a Roth IRA might be beneficial. Traditional IRA distributions are taxed as regular income, while qualified withdrawals from a Roth IRA are tax-free1. By converting, you pay taxes now at your current rate, and future withdrawals in retirement could be tax-free. However, this strategy may not be suitable for everyone, as it could push you into a higher tax bracket in the year of conversion.

2. Charitable Contributions

Charitable giving can also provide significant tax advantages. If you’re 70½ or older, you can make a Qualified Charitable Distribution (QCD) directly from your IRA to a qualified charity, up to $100,000 annually. This strategy can satisfy your Required Minimum Distribution (RMD) without increasing your taxable income, providing a potential tax advantage over standard charitable deductions.

3. Delaying Social Security Benefits

While you can start taking Social Security benefits at age 62, delaying until age 70 can increase your benefits. Although this strategy doesn’t directly save on taxes, higher benefits can provide more income in retirement, which can help cover any additional tax costs.

4. Utilizing Tax-Efficient Investment Strategies

Investment strategies can also play a role in managing taxes. For instance, holding investments that generate qualified dividends or long-term capital gains in taxable accounts can take advantage of lower tax rates on these types of income. In contrast, investments that generate ordinary income, like bond interest, are more tax-efficient in tax-deferred accounts.

5. Strategic Withdrawals from Retirement Accounts

If planned correctly, strategic withdrawals from your retirement accounts can help manage your taxable income and potentially keep you in a lower tax bracket. It’s important to consider the tax implications of withdrawals from different types of accounts (e.g., tax-deferred, taxable) and sequence the withdrawals to manage taxes.

Contact Our Advisors to Discuss Your Strategy

At Harvest Wealth Partners, we understand the complexities of tax planning in retirement. Our team of experienced professionals can guide you through these strategies and more, providing personalized support throughout your financial journey. While the above strategies can be effective, it’s essential to consult with a professional who can provide guidance tailored to your specific circumstances.

Remember, retirement planning isn’t just about saving; it’s about strategizing to pursue a quality life after work. With the right tax-saving moves, you can potentially increase your retirement income and enjoy your golden years with confidence. Call today to discuss your potential for tax saving with a knowledgeable advisor.

Harvest Wealth Partners, LPL Financial, and Private Advisor Group do not provide tax advice or services.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.