What strategies can help retirees preserve more of their wealth?

A solid estate plan can do more than help the beneficiaries of an individual’s estate. Estate planning can also help the testator preserve more of their assets once they retire. That’s because estate planning experts recognize many of the common pitfalls in this area. They also know many strategies that can help a testator keep more of their wealth once they retire. But what are some of these strategies that can help someone preserve more of their assets?

One step that retirees can take to help preserve assets is to take advantage of long-term capital gains. That’s because these types of capital gains aren’t taxed as high as other types of dividends. If a retiree’s income falls into the 10 to 15 percent tax bracket, these dividends aren’t subject to long term capital gains. However, if the retiree income falls into a higher tax bracket, these dividends could be taxed at a rate of 15 percent. Higher income brackets will see their dividends taxed at 20 percent.

Another strategy that can help a retiree keep more of their wealth is the use of a Roth IRA conversion. A traditional IRA consists of tax deferred assets while a Roth IRA contains assets that have already been taxed. If a retiree chooses to covert some traditional IRA assets into a Roth asset, tax will have to be paid on those converting assets. But once the assets have been in the Roth IRA for five years, they can then be withdrawn tax free.

A Roth IRA can also be used to help reduce estate taxes. However, any Florida resident who wants to reduce their tax profile may want to speak to an estate planning attorney in order to discover additional methods that can preserve their wealth.

Source: bankrate.com, “6 retirement strategies to minimize taxes and preserve your nest egg“, Accessed May 22, 2016