12 Don’ts (and Do’s) to Lower Your Taxes In Retirement

Dividend income and long-term capital gains

Qualified dividend income is taxed at zero percent, 15 percent or 20 percent depending on your tax bracket. If you can stay under the 15 percent tax bracket, your dividend income won’t be taxed. Long-term capital gains are also taxed at the same rate as dividends.

Diversify your after-retirement income

As you can see, it’s important to diversify your after-retirement income. Retirees can have income from Social Security, pensions, rentals, taxable brokerage accounts, tax-free Roth accounts, saving accounts, bonds and more.

Keeping your taxable income under the 15 percent tax bracket will help you minimize the amount of tax you pay for years to come.

Traditional IRA and 401(k) distributions

Withdrawals from your traditional IRA (deductible) and 401(k) are fully taxable. These retirement accounts helped lower your tax bill in your working years, but they will increase your tax liability once you start taking distributions.