
Is your retirement portfolio diversified to include tax advantaged strategies to hedge in case taxes increase in the future? Tax-free income streams are crucial for achieving financial security and peace of mind during your golden years. By strategically planning your investments now, (the sooner the better) you can enjoy a more prosperous and less stressful retirement.
David McKnight is the author of “the Power of Zero” which goes into greater detail about the tax advantaged strategies which can be used to achieve paying zero taxes during retirement. Why is this important? That’s simple, just check out http://www.USDEBTCLOCK.ORG and you’ll see that our national debt is out of control! Taxes are at the lowest levels in over 100 years. Unless congress decides to extend “The Cuts and Job Act” of 2017, the moratorium on taxes will expire at the end of 2025 and taxes will increase.
With an unpredictable economy and possibility for rising taxes, planning for tax-free retirement ensures that more of your hard-earned money stays in your pocket. Tax-free income provides financial stability and greater control over your cash flow in retirement.
Brightside Financial specializes in helping individuals and families create customized, tax-free retirement strategies. Here are some of the most impactful methods to secure a tax-efficient retirement:
- HSAs are a powerful tool for creating tax-free income. They offer a triple tax advantage:
- Tax-deductible contributions
- Tax-free growth
- Tax-free withdrawals for qualified medical expenses
- Leverage permanent life insurance (IRS Tax Code 7702). One of McKnight’s most popular strategies involves using a properly structured life insurance policy as a tax-free income source. These policies allow you to borrow against the cash value, creating a stream of income without increasing your taxable bracket. This strategy is very popular with wealth people who make too much to qualify for a Roth, but you don’t have to be wealthy to own one of these polices. But you do have to qualify for it with good health.
- Roth IRAs are essential for tax-free retirements. Contributions are taxed up front, but growth and qualified withdrawals are completely tax-free. McKnight recommends Roth conversions, which shift funds from traditional IRAs to Roth IRAs. This will minimize tax burdens over time, especially if taxes increase. If you choose not to convert a traditional IRA to a Roth IRA and tax rates increase in the future, it’s like having a silent partner…the government holding a stake in your retirement account. This partner reserves the right to increase their share with you (your tax rate) at any time, leaving you with limited control over your financial future.
- Invest in tax-free municipal bonds. Interest from the bonds is exempt from federal taxes and in some cases, state taxes. Adding municipal bonds to our portfolio can diversify your income streams while reducing your tax liability.
- Combine strategies for maximum impact. David McKnight recommends combining various tax-free strategies to build a resilient retirement plan. By integrating Roth IRAs, HSAs, cash value life insurance policies, and municipal bonds, you can create a well-rounded tax-free income portfolio.
At Brightside Financial, we specialize in creating tailored tax-free retirement strategies. We ensure your plan meets your unique financial goas while taking advantage of every available tax code.