Maximize Tax Savings in Retirement: 10 Year-End Strategies

As you near retirement, managing your tax burden becomes increasingly important. To ensure you make the most of tax-saving opportunities, consider these ten strategies before the year ends.

1. Bundle Deductions - If you expect your itemized deductions to exceed the standard deduction (which is $13,850 for single filers and $27,700 for married couples filing jointly in 2023), consider bundling deductions like property and income tax payments or large charitable contributions to maximize their impact in a single year.
2. Donate Appreciated Assets - For those who don't itemize, donating appreciated assets to charities can be a tax-efficient move. This helps you avoid capital gains tax that would apply if you sold the asset before donating it.
3. Harvest Capital Losses - Selling assets that have declined in value allows you to claim capital losses, offsetting gains and reducing your taxable income. Be cautious and assess your portfolio's changes before making these sales.
4. Roth IRA Conversion - Building a Roth IRA can provide flexibility in retirement income planning. Consider converting traditional IRA or workplace savings plan funds to a Roth IRA strategically, avoiding higher tax brackets and assessing your unique financial situation.
5. Utilize Flexible Spending Account (FSA) - If you have an FSA for medical expenses, review your balance. Spend any remaining funds by year-end to avoid forfeiting them. FSAs can cover medical and dental expenses, deductibles, copays, prescriptions, and more.
6. Balance Retirement Plan Distributions - Manage your retirement plan distributions wisely to balance pre-tax and after-tax accounts. This helps prevent moving into higher tax brackets and keeps your tax liability in check.
7. Understand RMD Rules - If you're turning 73 in 2023, be aware of required minimum distribution (RMD) rules. Starting in the 2024 tax year, RMDs must be taken by December 31. Visit IRS.gov to determine when your RMDs begin.
8. Employ Tax-Smart Charitable -Giving For those not itemizing deductions, explore options like qualified charitable distributions (QCD) from your IRA if you're 70^1/2or older. Gifting appreciated assets to charities can also reduce your tax burden.
9. Implement Tax Harvesting - If you're not yet collecting Social Security or subject to RMDs, consider selling appreciated assets to lower your future tax liability. Look for opportunities to offset capital gains by selling positions at a loss.
10. Manage Medicare Premiums - Strategically managing income streams can help you avoid higher Medicare Part B premiums. Stay below income thresholds or explore different premium tiers to maintain favorable Medicare premiums.

Remember, consult with financial and tax advisors to ensure these strategies align with your specific financial situation and goals. These year-end moves can help you make the most of your retirement finances and reduce your tax burden.