One of the keys to paying the least amount of tax in retirement is to have just the right amount of money in tax-deferred accounts like your 401(k) and IRA when you reach retirement. This is called your ‘Ideal Number’.
Having this ideal amount of money in your pre-tax accounts allows you to take advantage of your standard deduction (the amount of money you don’t have to pay tax on each year) and stay under the IRS thresholds that trigger taxes on things like your Social Security and Medicare. The rest of your retirement savings should be in tax-free type accounts like Roth accounts.
For most people, it is a myth that taking deductions during your working years by putting money into traditional, tax-deferred accounts will save you money on taxes in the long run. The IRS has cleverly designed a system that will line their pockets with your hard earned money in retirement. Learn how to turn the tables on the IRS and pay them the least amount possible with ‘Divorce The IRS”.