Tax Tip: Minimizing Taxes on Retirement Funds

PHOTO: Tips for minimizing taxes on retirement funds.Getty Images
Tips for minimizing taxes on retirement funds.

Taxes may eat up more of your retirement savings than you anticipated -- but there may be ways to deal with that.

"It's very important to realize that when you retire, your taxes may very well go up," said Tom Wheelwright, CEO and founder of CPA firm ProVision.

"You don't have your business deductions. You don't have your employment deductions," Wheelwright said. "If you're really lucky, your kids have moved out. Right? And so you don't have them as dependents, and you may have paid off your house ... so you have a lot fewer deductions."

A little extra planning can go a long way toward reducing your post-retirement tax liability.

Internal Revenue Service spokesman Eric Smith said enrolling in a Roth IRA or a company 401k may be the answer -- particularly a Roth IRA, which, unlike a 401K, includes funds that already have been taxed.

"What you're essentially doing is putting in money up front," Smith said. "You're not getting a tax deduction, but the money grows tax free. And if you withdraw it properly, it's tax free."