Many of us start thinking about retirement in the decades before the big day arrives. The further out you start thinking about it, the more financially prepared you may be for it.
As you start saving money and pondering your ideal retirement location, take a moment to consider the following information, as what you plan next may just depend on it.
The States That Do Not Tax Retirement Income
To ensure you can maximize your retirement income, it may help to be aware of the states that will not tax it. Out of the 50 states, 14 provide tax income exemptions. These are as follows:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
- New Hampshire
- Alabama
- Illinois
- Hawaii
- Mississippi
- Pennsylvania
Illinois, Mississippi, and Pennsylvania will also exempt income tax payments on your 401K, IRA, and pension income.
Best Tax Strategies for Retirement Income
If you do not live in one of the states that will not make you pay tax on your retirement income, you may be wondering how you are supposed to maximize your earnings to allow for comfortable golden years. Fortunately, there are plenty of suitable strategies, some of which you can learn below.
Talk to Retirement Income Planning Experts
Sometimes, it is not until your retirement years approach that you realize you do not have a plan for your lifestyle and finances once you no longer receive a steady income.
By talking to a retirement income planning expert, you can learn how to earn and save money in retirement and maximize your entitlements. Not all money-making and saving methods are well-known, so talking to specialists in this field may be one of the best decisions you make.
Look At Your Investments
If you have investments that have been making you money, looking at the tax implications may be worth your while. For example, any interest you earn on municipal bonds may affect your Social Security benefits.
Be Smart With Social Security
If you reach retirement age and still have an income, consider holding off receiving your Social Security benefits until you turn 70. You may be able to avoid paying taxes on the benefits and earn additional credits.
As your Social Security benefits can also depend on your income, you may like to look at reducing your adjusted gross income and making withdrawals from your Roth IRA, which is tax-free in your retirement years.
How to Prepare for Retirement
Preparing for retirement does not have to begin when you get close to the pre-set retirement age outlined by the government. It can start much sooner and even when you first join the workforce.
Preparing for a time when you will no longer hold a job can involve talking to financial advisors. It does not matter how old you are, they can advise you of the many potential options like annuities, IRA, 401K, life insurance, asset protection, and more.
Planning your retirement may also involve looking at passive income ideas like investments, setting up personal savings accounts, and even considering health savings accounts to cover any medical expenses you may encounter.
While several states do not tax retirement income, many do. As a result, you may need a helping hand to maximize your earnings to allow for a comfortable retirement. When you are ready to get retirement income planning underway, talk to the expert team at Wall Street Financial Group Inc.
Featured Image by Unsplash