There are certain expenses that tend to cause seniors a lot of stress: healthcare, housing, and taxes. Taxes are unavoidable earlier in life, and they’re also a mainstay during retirement.

The good news, however, is that a few strategic moves could lower your tax burden tremendously at a time in life when that’s so important. Here are a few sources of tax-free retirement income you may benefit from.

1. Roth IRAs
Though Roth IRAs don’t offer tax breaks when you make contributions, the benefit is that any withdrawals you take during retirement will be yours to enjoy tax-free.

Investment gains in a Roth IRA are also tax-free.

Furthermore, the Roth IRA is the only tax-advantaged retirement plan to not impose required minimum distributions, giving you more flexibility with how you take withdrawals.

There is a catch with Roth IRAs: You can’t fund one directly if your earnings exceed a certain threshold that changes from year to year.

In 2020, you can’t contribute to a Roth IRA if your income exceeds $139,000 as a single tax filer, or $206,000 as a married couple filing jointly.

In 2021, these limits will increase to $140,000 and $208,000, respectively.

However, if your income renders you ineligible for a Roth IRA, you can always fund a traditional IRA and convert it to a Roth afterward. You’ll pay taxes on that conversion, but then you won’t have to worry about taxes later in life.

2. Roth 401(k)s
Though not every 401(k) plan comes with a Roth savings feature, this option is growing increasingly popular. And if your employer’s plan offers a Roth, it pays to take advantage.

Like Roth IRA withdrawals, distributions from a Roth 401(k) are completely tax-free in retirement. And unlike Roth IRAs, there are no income limits associated with Roth 401(k)s, so you can fund one directly, even if you’re a higher earner.

Furthermore, Roth 401(k)s come with higher contribution limits than Roth IRAs — $19,500 versus $6,000 for workers under 50, and $26,000 versus $7,000 for those 50 and over. That means you can build a more robust nest egg with a Roth 401(k), and then take that money out tax-free as a retiree.

3. Municipal bonds
Bonds are an appropriate investment for retirees because they’re relatively stable and provide steady income in the form of semiannual interest payments. But if you invest in corporate bonds — those issued by companies — your interest payments will be taxed.

That’s why municipal bonds may be a better choice for your retirement. Municipal bonds are those issued by cities and states and, like corporate bonds, they pay interest twice a year. However, municipal bond interest is always tax-exempt at the federal level. And if you buy municipal bonds issued by the state you reside in, you’ll avoid state and local taxes on your interest income, as well.

The less tax you’re liable for in retirement, the fewer financial concerns you’ll have. It pays to save for retirement in a Roth savings plan and put some money into municipal bonds. That way, you’ll enjoy tax-free income that makes your senior years more comfortable.

— Maurie Backman

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