For many retirees living on a fixed income, taxes can quietly chip away at monthly cash flow. Required withdrawals, Social Security benefits and investment income can add up to a higher tax bill than expected. With thoughtful planning, however, it’s often possible to reduce taxes and keep more of your hard-earned retirement savings working for you.

Here are six tax strategies to consider.

1 Manage how you withdraw retirement funds

How you take money from retirement accounts can affect how much tax you pay each year.

Traditional IRAs and 401(k)s were funded with pre-tax dollars, so withdrawals are taxed as regular income. But Roth IRAs and Roth 401(k)s were funded with after-tax dollars, so qualified withdrawals are generally tax-free.

2 Consider a Roth IRA conversion

A Roth conversion moves money from a traditional IRA into a Roth IRA. You pay taxes on the amount converted in the year you convert it, but future qualified withdrawals from the Roth may be tax-free.

This strategy may make sense if you expect to pay higher taxes later in retirement than you do now. Because conversions can increase taxes in the short term, it’s important to evaluate whether this approach fits your situation.

3 Use investment losses to offset gains

If you sell an investment for less than you paid for it, the loss may help reduce taxes on profits from other investments. This approach is often called tax-loss harvesting.

One important rule to know: to claim a loss, you cannot buy the same or a very similar investment within 30 days before or after the sale.

4 Choose tax-friendly investments

Some investments create fewer taxable events than others. Index funds and exchange-traded funds often produce fewer taxable gains than actively managed funds.

Because of this, they may be a good fit for taxable accounts, especially for retirees looking to limit surprise tax bills.

5 Understand how annuities are taxed

Annuities can provide steady income in retirement. While money in an annuity can grow tax-deferred, taxes typically apply once payments begin.

In many cases, part of each payment is treated as a return of your original investment and is not taxed, while the remaining portion is taxed as income. Understanding how annuity payments are taxed can help you plan ahead.

6 Use gifting wisely

For retirees with larger estates, gifting can help reduce future estate taxes. Each year, you may be able to give up to a certain amount to each person without triggering gift taxes.

This strategy can lower the value of your estate over time, but it’s important to confirm current limits and rules before making gifts.

Tax planning can play a meaningful role in protecting retirement income and extending savings. Because tax laws and personal circumstances vary, it’s wise to work with a qualified financial or tax professional to create a plan that fits your needs.

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