Retirement planning should always account for the impact of income taxes, because taxes can surprise many retirees. The last thing you want is for your carefully-planned budget to be interrupted by a surprise tax bill.

One way to plan is to simply save even more money than you think you will need. After all, no one ever complained that they saved too much for retirement! But another method involves investigating the different methods of generating non-taxable income in retirement, so that you don’t have to worry about taxes on that money at all.

Roth Accounts. With a Roth account, you deposit after-tax income into a Roth IRA or 401k during your working years, and then allow that fund to grow. When you reach retirement, you can take non-taxable distributions from the account. Of course, if you go this route you will give up the opportunity for certain tax savings during your working years that you normally earn with a Traditional retirement account. Of course, you can also open both types of account.

Municipal bonds. Municipal bonds are issued by cities and states, usually to fund certain public projects like schools or roads. Many states, along with the federal government, treat income from municipal bonds as non-taxable.

Health Savings Account withdrawals. If you’ve been wise enough to stash money in a health savings account during your working years, and then roll that account over each year until you reach retirement, you have a handy stash of money with which to pay medical bills. As long as withdrawals are used for qualifying healthcare expenses, that cash can be pulled from the account without adding to your taxable income. Plus, the contributions during your working years were taken from pre-tax income as well.

Life insurance payouts. Life insurance payouts are non-taxable. While you shouldn’t rely upon a payout as your primary retirement income, it might be something to consider with regard to making sure your spouse is secure in the event of your death .

Social Security benefits (to some degree). Social Security payments won’t be taxable unless your taxable income goes over certain thresholds. So if your other income is taxable, it’s possible your Social Security benefits also will be. But if you establish non-taxable income to complement your benefits, Social Security can also serve as non-taxable income.

If you’re concerned about the impact of taxation upon your retirement income, call us to schedule an appointment. We can help you explore the opportunities available to you, and decide upon the best way to establish non-taxable retirement income.