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As many seniors learn, retirement can be as stressful and frustrating a time as any when it comes to paying taxes.
With 401(k)s , traditional and Roth IRAs, as well as Social Security benefits and working wages, there's plenty to calculate on a tax return.
So, how can the retirement crowd cut down on their tax bills? Analysts say it starts with managing your money.
"Retirees usually have a bit more control over their tax situation than other taxpayers," says Steven Gershon, a director at the Kansas City, Kansas, office of the accounting and financial service firm, CBIZ MHM. "That's because they can decide how much they might need to withdraw from their retirement plans to keep their taxes low."
Delay, Delay, Delay
Most experts agree that delaying withdrawals from a 401(k) or traditional IRA until the age of 70 1/2 years is best for taxpayers — letting these plans grow tax deferred.
Taxes on withdrawals from these plans are eventually taxed at ordinary income rates — but that can increase by more than 10 percent if withdrawals occur before age 59 1/2.
This is where a Roth IRA can help, says Mike Scholz, tax director at Wegner CPA. Funds there can be withdrawn by age 59 when needed, tax free, if they've been open for at least five years.
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