This 'bucket strategy' could lower your taxes in retirement — here's how to maximize it
Why is tax planning crucial during the accumulation phase?
Tax planning is crucial during the accumulation phase because it allows you to strategically contribute to different account types, such as pretax, Roth, and brokerage accounts, to maximize tax diversification1. This helps in better managing your adjusted gross income in retirement and minimizing your lifetime tax burden.
What is the "bucket strategy" in retirement planning?
The "bucket strategy" is a retirement planning approach that divides retirement assets into three distinct buckets: short-term, intermediate-term, and long-term5. Each bucket serves a unique purpose and focuses on different investment types and time horizons to help ensure a stable and secure retirement5.
How can diversifying contributions reduce taxes in retirement?
Diversifying contributions across pretax, Roth, and brokerage accounts can reduce taxes in retirement by providing more flexibility in managing your adjusted gross income26. This allows for strategic withdrawals from different accounts, taking advantage of lower tax brackets and minimizing the overall tax burden.