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  • Steve Sexton


Steve Sexton of Sexton Advisory Group shares his best tips for diversifying tax allocation in retirement.

Diversifying your tax allocation in retirement is just as important as diversifying your investments to ensure you're comfortable in your golden years. Beyond funding your 401(k) or Roth IRA, here are some of my practical tips to minimize taxes in retirement. For more guidance on retirement planning, please reach out to our office at and/or 800- 560-2611 to schedule a complimentary discovery session.

Fund a life insurance contract

Proper tax planning takes into account reducing your taxes while you're alive, as well as after you pass away. Funding a properly structured permanent life insurance contract can help many individuals accomplish both. First, life insurance allows you to build up cash inside the policy, that can be withdrawn tax-free. Second, a life insurance contract also allows individuals to transfer assets to beneficiaries tax-free.

Utilize investments that provide a qualified dividend

A qualified dividend is a dividend that falls under capital gains tax rates that are lower than income tax rates on ordinary dividends. Qualified dividends are taxed as capital gains at rates of 20, 15 or 0%, vs. higher rates of 10-37% for ordinary dividends. The difference between ordinary and qualified dividends can be significant when tax time rolls around.

Understand how things are taxed

Educate yourself on basic knowledge of how things are taxed and how you can set up your investments to receive tax breaks. For example, certain real estate investments allow you to write off depreciation, which deducts the cost of buying and improving a property over its useful life and lowers your taxable income in the process.

Fund a 401(k) or Roth IRA

Lastly, consistently fund your 401(k) or Roth IRA monthly, which will offer you tax deferred or tax-free growth on contributions and earnings. I recommend meeting with a financial planner to ensure you're optimizing these accounts as best as possible.

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