Preparing for retirement requires a lot of adapting -- not just emotionally, but financially. The closer you get, the more important it becomes to look at your budget, your asset allocation and where your income will come from when you're creating your own paycheck.
It's also critical to make tax efficiency a priority in your planning.
Taxes can take a giant bite out of retirement income year after year. And yet, even people who have done a great job of investing and saving for retirement tend to overlook the tax planning that's necessary to hold on to more of their nest egg.
That may be because many people have been told their taxes are destined to go down in retirement. If you're spending less, you'll require less income, which means your taxes will be lower, right? Not always. Many people spend the same or more in retirement -- at least for the first few years, when they may be doing more traveling, spending time with family and friends, or taking up new hobbies. Also, required minimum distributions for many people can force distributions above and beyond their spending levels, which can increase taxable income and create a tax nightmare.
What can you do to soften the blow? Here are a few strategies to consider:
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