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How Do I Protect My Retirement Plan From the IRS?

Protecting your retirement plan from the IRS takes forethought and careful planning, but is well worth the time.

If you are like many Americans concerned with preserving as much of their retirement funds as possible, you may be asking “How do I protect my retirement plan from the IRS?” This is an important question, because taxes paid to the IRS can substantially reduce the amount you’ve worked so hard to save. The best ways to protect your retirement plan from the IRS require forethought and careful planning, often decades before you plan to retire. In fact, the earlier you begin planning, the better.

Using a 401k and Roth IRA to Protect Your Retirement Plan from the IRS

One of the best ways to protect your retirement plan from the IRS is to use both a 401k and a Roth IRA to save for retirement. The 401k grows tax-deferred, so you’ll have to pay taxes on it when you make withdrawals from the plan, but the Roth IRA is funded with money that has already been taxed. At retirement, you’re able to make tax-free withdrawals from the plan.

Strategy for Using Your 401k and Roth IRA

A good strategy is to use both types of plans to make your tax burden lower once you retire. For example, if you need $80,000 per year after retirement, you could take $50,000 from your 401k and $30,000 from your Roth IRA. Only the $50,000 would be taxed, and depending on your filing status and the tax brackets at that time, you may be able to keep yourself from having to file in a higher tax bracket, while still withdrawing the necessary amount of money.

“How Do I Protect My Retirement Plan from the IRS if I am Less Than 59.5 Years Old?”