Top 5 Ways to Keep Taxes Low in Retirement

If you want to keep taxes low in retirement, a handful of strategies can be used while working or when retired to keep your tax bill reasonably small.

Top 5 Ways to Keep Taxes Low in Retirement 

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If you play your cards right, a taxable account can be nearly as good as a Roth IRA and better in some ways. In retirement, especially when retiring early, a taxable account can be a great primary source of spending.

#1: Build Up a Taxable Brokerage Account

There’s a clear tax benefit to having some Roth money at your disposal when retired. You won’t owe any taxes on money withdrawn from a Roth IRA or Roth 401(k).

#2: Make Roth Contributions While Working

Converting tax-deferred dollars to Roth dollars is a taxable event. It creates taxable income. So why would this be a good strategy to employ in retirement?

#3: Strategic Roth Conversions in Retirement

If you have little Roth money, millions of tax-deferred dollars, and enough taxable income to push you out of the 0% capital gains bracket and ACA subsidy, you might want to convert right up to the top of the 24% tax bracket, which is $364,200 in 2023.

This one isn’t as straightforward as you might think. There’s a lot more to determining a state’s retirement taxation status than simply looking at a table of tax rates for the various states.

#4 Live in a Low-Tax State

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