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Tips for Maximizing Your Retirement Savings and Decreasing Taxes

Holding a job is never fun, but it should pay off at some point or another. After you’ve worked for twenty or thirty years, you should be able to retire and begin enjoying a work-free life. However, you must remember that a good retirement requires plenty of planning and many years of saving.

Maximize Your Savings and Decrease Taxes

By planning early and saving as much as possible, you’ll be able to rest assured knowing you’ll have plenty of money to travel the world, buy luxurious items and avoid returning to work in the future. Below, you will find tips for maximizing your retirement savings, while simultaneously decreasing your taxes.

Maxing Out Your 401k

The mass majority of American workers will have access to a 401k. This will typically be sponsored by your employer and they should be willing to match your contributions. Remember that you can allocate a large quantity of your paychecks directly to your 401k account. This is generally a good idea. By depositing more of your pre-tax dollars to your 401k, you’ll be able to increase your retirement savings, while also reducing the amount that you’ll be forced to pay in income taxes.

Also, you will normally be able to use your 401k to invest. Your 401k money will begin working for you almost immediately.

Be Cautious Of Short-Term Profits

Investing your money in stocks can be a great way to increase your retirement savings. However, you must always be aware of the tax repercussions. In 2013, the federal government implemented new laws that increased the top tax rate for investment income to nearly forty percent. However, you need to remember that this will only impact investors that sell their stocks within a year of buying them. If you hold the investment for at least a year, the tax rate will decrease by nearly twenty percent.

Be cautious of short-term investments to avoid heavy taxes.

Opening An IRA

If you truly wish to maximize your retirement savings, while reducing your taxes, you’ll want to open an IRA. Whether you opt for a gold backed IRA or a Roth IRA, you’ll be provided with an abundance of tax benefits. The tradition and Roth IRAs will provide the consumer with very generous tax breaks.

Nevertheless, most experts will agree that the Roth variety is more beneficial in the long run. While the Roth IRA doesn’t deliver tax breaks for contributions, withdrawals and earnings are normally free of taxes. Therefore, the Roth IRA can help improve your return on investment, while allowing you to gain access to your money without having to pay taxes on that gain.

Passing On Stocks

It is vital to remember that your retirement isn’t just about you. You’ll also want to go above and beyond to make sure you’re able to provide your children with a substantial amount of money when you pass on. The best way to achieve this goal is by passing on stocks and not cash. This is vital for several reasons. First and foremost, long held stocks can result in heavy tax burdens. However, if you pass those stocks onto your loved ones, the cash basis can be reset and the capital gain taxes will decrease noticeably.

Try to avoid passing cash to your loved ones. Give them stocks and they’ll benefit more!

Diversify Your Income Sources

While you’re at it, you’ll want to diversify your income sources. Take your social security benefits, open an investment brokerage account, and rely on a tax-deferred retirement account. By drawing income from several sources in a strategic manner, you’ll be able to decrease your taxes and make your money go much further. Never keep all of your money in a single account, as this may result in higher tax costs in the long run.

It’s Your Turn

You’ve learned plenty of wise money moves here, which is great…but will you act on them? They say that knowledge is power. I disagree. The actions based on knowledge equals power. If you do nothing, you’ll gain nothing.

Want to increase your future income and reduce your tax hit?

  • Invest in your 401k
  • Don’t seek out short-term gains
  • Invest in a Roth IRA
  • Think about your heirs (leave them with investments that will continue to grow)
  • Diversify your income sources

What will you do to maximize your retirement savings and decrease your taxes?

Money Retirement


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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