After working hard to build your retirement savings, don’t let taxes take a big bite out of them.
Chances are you contributed to a 401(k) or IRA as you saved for retirement. Now the time has come to use that money. Withdrawing from your retirement savings with an eye toward reducing taxes is important. Not only do taxes reduce your income, they can diminish potential future earnings and growth, which affects how long your savings may last.
“The important thing to keep in mind is that managing your withdrawals with taxes in mind can help boost your income in retirement,” explains John Sweeney, executive vice president of retirement and investing strategies at Fidelity.
Let’s start by reviewing the types of investment accounts and then some tax-efficient ways to withdraw from them. Of course, everyone’s situation is unique, so it is important to consult a tax professional.