Whether you dream of a travel-filled retirement or would prefer to relax and enjoy spending more time at home, you’re probably wondering what you can do to make your golden years as stress-free as possible. For many who have spent the last several decades in wealth-accumulation mode, withdrawing savings can trigger anxieties about the future. Some of the choices you make during the earliest years of retirement can significantly reduce—or accelerate—the speed with which you spend down your retirement savings. Moving to a State with No (or Low) Income Taxes As of 2020, seven states do not levy an individual income tax—Texas, Florida, Nevada, Alaska, Washington State, Wyoming, and South Dakota.1 Retiring in one of these states can save you up to 13 percent on each 401(k) or IRA withdrawal you make. There are certainly trade-offs to this approach, as low-income-tax states tend to have higher property taxes or fewer public services than high-tax areas; however, for those looking to preserve their nest egg, it’s worth looking into. In some cases, it can make sense to plan a move to a no-tax state shortly before you begin taking required minimum distributions (RMDs), as these RMDs will then be subject only to federal income taxes. And even if you’d prefer not to uproot your life to live in a new state year-round, you may want to investigate your options to see how many nights a year you’d need to spend in a no-tax state to claim residency. Deciding When to Take Social Security Benefits Another important factor in preserving your retirement savings involves when to take Social Security benefits. The earlier you claim, the less you’ll receive per month; waiting until age 70 to claim can mean maximizing your benefits.
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