Make Sure Your Income is Tax-Protected Asset Strategy

Taxes are highly important to consider when it comes to your retirement. You’ll likely have several sources of income in retirement that can be taxed, such as IRA distributions and Social Security benefits. But do you have any after-tax sources that you can use strategically in retirement to help reduce your tax bill? There may be a few options available to you, so know how they work.

Comparing Traditional and Roth IRAs

You might have contributed pre-tax dollars to a Traditional IRA during your working years. It’s important to know that when money is distributed from a traditional IRA, it’s taxed at ordinary income rates. In contrast, a Roth IRA is taxed with post-tax dollars. A Roth IRA can be an asset in retirement because its distributions are not taxed, unlike traditional IRAs.[1]

Using a Roth IRA

Even if you’re not eligible to contribute to a Roth IRA or haven’t contributed to one in the past, you can still utilize what’s called a backdoor Roth strategy. People with income over $144,000 and couples with income over $214,000 cannot contribute directly to Roth IRAs. Those who are able can only contribute up to $6,000 per year if under age 50, or $7,000 per year if over age 50.[2] But you should know that anyone has the option to convert any amount from a Traditional IRA, 401(k), or similar qualified retirement account into a Roth IRA, regardless of income.

If a Roth conversion sounds like it could work in your retirement plan, you would pay tax on what you convert and then be able to withdraw money tax-free later. Make sure it’s the right decision for your retirement before using this strategy because Roth IRA conversions are irreversible, meaning that it’s subject to regular Roth IRA limitations: money can’t be withdrawn penalty-free until five years after it’s converted, and typically not until age 59 ½.[3]

The Health Savings Account

Health Savings Accounts (HSAs) aren’t available for everyone, but if you do have access to one through your employer, consider taking advantage of one. With an HSA, contributions are not taxed, funds grow tax-deferred, and you can withdraw from it tax-free for qualified medical expenses. But first, know the penalties for using the HSA incorrectly. Before age 65, you can’t use its funds to pay for non-medical expenses without incurring a 20% penalty. However, at 65, you only have to pay taxes on withdrawals for non-medical expenses and won’t face the 20% penalty. Qualifying medical expenses include Medicare Part B and Medicare Advantage plans, prescription drugs, a portion of long-term care insurance premiums, dental, and vision care.[4]

There may be unexpected taxes in retirement that could put a strain on your budget. To offset the impact of your taxable income, a Roth IRA or an HSA can help you keep more of what you earn and get the most out of your savings. We can help you create a long-term tax minimization plan that works with your overall retirement plan. Sign up for a time to come speak to us to learn more.



Because investor situations and objectives vary this information is not intended to indicate suitability for any individual investor.

This is for informational purposes only, does not represent legal or tax advice does not indicate suitability for any particular investor, and does not constitute an offer to purchase or sell investments. This information is supplied from sources we believe to be reliable, but we cannot guarantee its accuracy.

There are retirement account risks that could diminish investor returns, such as, but not limited to: low interest rates, market volatility, withdrawal timing and sequence of returns risk, government policy uncertainty and increased longevity. Prospective investors should perform their own due diligence carefully and review the “Risk Factors” section of any prospectus, private placement memorandum or offering circular before considering any investment.

Content regarding social security is not associated with or endorsed by the Social Security Administration or any other government agency.

Asset protection plans should be developed and implemented well before problems arise. Due to the fraudulent transfer laws, asset transfers that occur close in proximity to the filing of a lawsuit or bankruptcy can be interpreted by the court as a fraudulent transfer. Proper structuring of these assets is imperative please seek proper legal and tax advice prior to engaging in re-titling/structuring of any assets. Please note that laws are subject to change and can have an impact on your asset protection strategy.

Advisory Services are offered through Asset Strategy Advisors, LLC (ASA), a SEC Registered Investment Advisor. Securities offered through registered representatives of Concorde Investment Services, LLC. (CIS) or RCX Capital Group, LLC (RCX), both members of FINRA/SIPC. Insurance Services offered through Asset Strategy Financial Group, Inc. (ASFG). ASA, CIS, RCX and ASFG are independent of each other. All research reports from third parties are for informational purposes only.

Share This Post With A Friend Or Family Member!