Most people would love to be able to retire early. Understanding how to properly invest and save money is only part of the issue. To be successful, you must also be able to minimize you taxes for your retirement years to keep more of your retirement money in your pocket.
Here are some tips for your early retirement:
- Include taxes when estimating your retirement expenses: After you have retired it is very likely that you will continue to pay taxes, especially if you have a significant amount in tax deferred retirement accounts.
- Moving to a different state can mean serious savings: Income tax rates change from state to state, and some have no income tax at all. By changing location you can also save considerable amounts of money on housing costs and the general cost of living. If you are considering early retirement, you should weigh the benefits of moving to a different part of the country.
- A partial Roth conversion can lower your overall tax bill: A benefit of early retirement is being able to convert some of your pre-tax money to post-tax money while paying little tax. If you are not collecting Social Security yet, then your income will most likely be considered low, so converting some of your Roth can be done while staying in the low tax bracket.
It is a great achievement to be able to retire early. There are many factors that need to be considered before doing so, including the ones listed above. Make sure you are fully informed about what early retirement can mean for you, before you leave your workplace!