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Who woulda thunk it? Good ‘ol Benjamin Franklin was wrong.

Franklin famously said, “In this world, nothing is certain except death and taxes.”

Well, it turns out that while none of us can avoid death, you can avoid some taxes in retirement and retirement planning. And that is a good thing, because creating a retirement plan that avoids taxes to the extent possible is smart. For example, some work 401(k)s and individual IRAs can definitely be taxed as retirement income.

What to do? Plan accordingly. By being tax-savvy and playing your cards right, you can reduce your tax bill significantly during retirement. In fact, certain types of retirement income are entirely tax free.

Let’s take a look at some of those tax-free retirement options.

1. Some Social Security payments

Social Security benefits are often seen as the foundation of people’s retirement income, and in some cases, they just might be tax free. If, for example, you do not have other savings and you, or you and your spouse, live off of your Social Security payments, those proceeds are indeed tax free.

But if your income exceeds certain levels, then some — or maybe most — of your Social Security payments will be taxed. The calculations works this way:

• Individuals with a combined income of $25,000 or more will pay tax on at least 50% of their Social Security benefits. The amount maxes out at 85% as you go up the income scale.
• For joint filers, the magic tax number is when you earn at least $34,000. You will start to pay taxes on your benefits at that point, but not before.

2. Roth IRA and 401(k) withdrawals

Roth IRAs and 401(k)s are another essential building block for many retirement plans, and one big reason has to do with taxability of such investments.

With a Roth account, you contribute after-tax dollars, but in return, your money grows tax free, and withdrawals in retirement are completely tax free, as long as you’re over 59 1/2 years old and the account has been open for at least five years.

The lack of taxes on Roth withdrawals makes them one of the most tax-efficient ways to fund your retirement. Click here to check out our favorite Roth IRA brokers and start saving today.

3. Income from municipal bonds

While municipal bonds are about the least sexy investment there is, the fact that they are another great source of tax-free retirement income makes them immediately far sexier.

Muni bonds are issued by state and local governments to fund public projects, and the interest they generate is exempt from federal taxes. Similarly, if you buy bonds issued in your state, you might also avoid state income taxes on the interest. This can be a big win for retirees in high-tax states like California.

Aside from the tax benefits, municipal bonds offer investors the added bonus of being very safe and low risk. This makes them a reliable source of tax-free income during retirement.

4. Lump-sum life insurance payouts

No, relying on a life insurance payout is not a real retirement strategy, but it can still happen, especially as you age and go deeper into retirement and old age. The good news is that if you receive a lump-sum life insurance death benefit payment at some point during your retirement, those proceeds are typically tax free. And given that most life insurance payments run into the hundreds of thousands, if not millions of dollars, the tax savings here are really quite significant.

So yes, while death is certainly still an inevitability, taxes in retirement are not.

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