A successful retirement requires significant planning. You must employ a comprehensive strategy to ensure that your retirement funds last through your later years. Tax-free retirement income can be essential in this effort.
Here are some tax-free retirement income options you can incorporate into your retirement strategy.
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Setting up a Roth version of a retirement account or 401(k) plan can set you up to receive reasonably straightforward tax-free retirement income. Your contributions to such an account won’t be tax-deductible, but distributions made after 59 and a half years of age are usually tax-free.
With Roth accounts, you avoid taxes in retirement by paying them upfront during your working years. The maximum you can contribute in a year to a Roth IRA is $6,000, but if you’re age 50 or older, the maximum is increased to $7,000. Roth 401(k) accounts are more generous, allowing you to contribute up to $19,500 and an additional $6,500 if you’re age 50 or older.
Health savings accounts can only be paired with high-deductible health plans. They can be used as a way to acquire tax-free retirement income. And fortunately, with HSA accounts, you don’t have to spend the money within any specific timeframe.
Contributions made to HSA accounts are tax-deductible and gains in the account grow tax-free. Withdrawals from the account that are used to pay for qualified expenses are also tax and penalty-free. You can currently contribute $3,600 to an HSA account every year. This amount is increased to $4,600 if you are age 55 or older.
Life insurance policies are known to offer a death benefit at the time of the insured’s death, but many people aren’t aware that there is also a cash savings component included in most policies. Part of your premiums go to the death benefit and another portion helps build your cash savings. The money in these accounts can be leveraged tax-free in some cases.
Annuities provide an income stream in retirement in exchange for premium payments made now. If after-tax money is used to fund one, only the interest is taxable. Therefore, purchasing an annuity can lead to long-term tax savings during retirement.
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Taxes can make or break your retirement strategy. To ensure that you have planned appropriately, contact American Family Solutions. We will help you build an effective retirement strategy.
We are not connected with or endorsed by the United States government or the federal Medicare program. We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all your options. American Family Solutions is an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any comments regarding safety and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way to securities or investment advisory products. Insurance and Annuity product guarantees are subject to the claims-paying ability of the issuing company. No legal advice, options or recommendations are being made in respect to this proposal. You should consult your tax professional or attorney concerning such advice and opinions.