Just as taxes are a huge burden for working Americans, they can also be a drain on seniors' limited resources. If you're worried about affording your golden years, it pays to set yourself up with a number of income sources that the IRS can't tax you on later in life.
The last thing you need as a senior is the stress of losing your limited income to taxes. Keep the above in mind as you do your financial planning for retirement so you're able to retain more income later in life.
Here are a few options that fall into this category.
1. Roth IRA or 401(k) withdrawals
When you house your retirement savings in a traditional IRA or 401(k), you get an immediate tax break for funding that account. The flip side, however, is that your withdrawals are subject to taxes during retirement. Roth IRAs and 401(k)s, though, work the opposite way. With these accounts, you don't get an immediate tax break for contributing money, but those funds are yours free and clear of taxes during your golden years. And while there are annual income limits that dictate Roth IRA eligibility, you can fund a Roth 401(k) regardless of what you earn, provided that option exists in your employer's plan.
2. Municipal bonds
Seniors are generally advised to favor less risky investments during retirement, which often means choosing bonds over stocks. And if you load up on municipal bonds, you won't have to pay taxes on the semiannual interest payments you receive from them. Municipal bonds are those issued by states, cities, and other localities. Their interest is always exempt from federal taxes, and when you buy those issued by your home state, you avoid state and local taxes as well.