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I’m a Financial Advisor: 5 Ways You’re Paying Too Much in Taxes in Retirement

In your retirement years, you may think you no longer have to worry about taxes because you’re no longer working a traditional job, but that is not the case. If you don’t think about your tax situation, and plan for it strategically, you can find yourself paying more than you need to at a time when you should be conserving your income.

Find Out: 9 Strategies Americans Are Using To Minimize the Taxes They Pay on Retirement Savings

Read Next: 4 Genius Things All Wealthy People Do With Their Money

Derek Mazzarella, a certified financial planner (CFP) and retirement advisor with Gateway Financial Partners, and the author of the book “Just Retire Already,” explains four ways you might be paying too much in taxes in retirement.

You’re Not Optimizing the Location of Your Investments

The first area Mazzarella sees retirees paying too much in taxes is what he calls “the tax location of their investments.”

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A lot of retirees have interest earned from bonds and keep those in an investment account, where you’re paying tax at your regular income tax rate, he explained.

“Whereas if you had [those funds] in a retirement account, you’re delaying taxes on that. So there’s an opportunity there to defer taxes and minimize your taxable account based on putting the right types of assets in the right accounts.”

Ultimately you want to have more individual stocks and ETFs in your investment accounts and more interest-earning assets in your retirement accounts, he said.

Learn More: The 7 Worst Things You Can Do If You Owe the IRS

You’re Not Holding a Mix of Tax-Advantaged Accounts

Another way people pay too much in taxes in retirement is by not saving in a mix of all three types of tax-advantaged accounts, he said.

“You can pull different tax levers when you need them. So having the mix of the Roth IRA, a traditional IRA and an investment account [is important] because when you have all three you can manipulate your tax bracket fairly easily.”

For example, he said, if in one year you need more income you can take more from the Roth IRA and pay fewer taxes.

You’re Spending From Your Taxable Accounts First

The other way retirees pay too much in taxes is when they decide to spend from their taxable accounts first, such as a traditional IRA or 401(k) and from their Roth IRA last, he said.

“But generally having a blend of the three at some point in retirement will help.”

Additionally, he said, if you can push back taking Social Security benefits, you may have an opportunity to do a Roth conversion. A Roth conversion is ideal when your income, and thus tax bracket, is lower, so perhaps in your first couple of years of retirement, Mazzarella said.

Once you start taking your required minimum distributions (RMDs), then it may make more sense to take money out of your 401(k) or traditional IRA, he said.

Figuring out if, and when, to do a Roth conversion is part of a conversation you want to have with your accountant or financial planner, he urged.

“Roth conversions can be ideal when the market’s down,” he said. “Any advisor is going to tell you to wait out the growth anyway. Now the growth is going to come back and the market will rebound and growth is going to be tax free.”

You’re Not Factoring In Depreciation on Property and Other Discounts

Another way you could pay too much in taxes is by forgetting to deduct the depreciation of your home or investment properties on your tax return.

One note on that, however, he said, is in the case of a spouse passing away, he advises clients to get an assessment done on their house.

“Then the client can lock in that half step up on the value of the house.”

Lastly, he said, some cities and counties offer such discounts as reduced property expenses for residents over a certain age or under a certain income threshold, so make sure you research and apply for those things.

You’re Not Considering the Tax Implications of Your Medicare Premiums

One final area that might not seem like it’s tax-related, but which he considers to be, is your Medicare premiums.

“I look at your Medicare premiums as a tax too, because it’s based on your earned income,” he said.

Since Roth IRA dollars, loans from either real estate and life insurance are not counted in that calculation of your Medicare premiums, if you have those three tax buckets, “You can manipulate your tax bracket and if you keep it under the lowest bracket, you can reduce your Medicare premiums.”

If your past two years’ earnings were significantly higher, however, than your post-retirement income, or there was a death in the family or disability, there is an IRS form you can fill out to challenge them basing your Medicare premiums on those earnings.

By being proactive with your retirement accounts, you can reduce the amount of taxes you’ll pay and hold onto the bulk of your income.

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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: 5 Ways You’re Paying Too Much in Taxes in Retirement