Show Notes:

Welcome to today’s Cardinal lesson where we delve into innovative strategies for tax-proofing your IRA/401K, focusing on individuals in their 60s and beyond. Whether you’re approaching minimum distributions or already there, this video is packed with valuable insights.

Questions? Email us at Hans@CardinalGuide.com, call us at (919) 535-8261, or visit our website at

H E Scheil & Associates doing business as Cardinal Advisors holds an insurance license in all 50 states and DC. Listed below is the license # in each individual state. Alabama 675461, Alaska 100118081, Arizona 1800012348, Arkansas 100104794, California 0K32569, Colorado 464622, Connecticut 2463129, Delaware 1119857, DC 2887040, Florida L087124, Georgia 159539, Hawaii 445296, Idaho 507076, Illinois 100333675, Indiana 721739, Iowa. 1002056691, Kansas. 272705345, Kentucky 738674, Louisiana 614407, Maine AGN249408, Maryland 100048542, Massachusetts 2006645, Michigan 0104206, Minnesota 40411912, Mississippi 15016382, Missouri 8325733, Montana 100126008, Nebraska 100224332, Nevada 1007341, New Hampshire 2315847, New Jersey 1557889, New Mexico 1800010640, New York 1382342, North Carolina 1000092550, North Dakota 2000136230, Ohio 1028975, Oklahoma 100190853, Oregon 100237062, Pennsylvania 589318, Rhode Island 2309277, South Carolina 1907911784, South Dakota 10017719, Tennessee 2252224, Texas 1963111, Utah 513447, Vermont 1038574, Virginia 129027, Washington 864498, West Virginia 100107166, Wisconsin 100192273, Wyoming 275179…(read more)

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Tax Proof Your IRA/401k

As the end of the tax year approaches, it’s important to consider ways to minimize your tax liability. One common way to do this is by contributing to a tax-advantaged retirement account such as an IRA or 401(k). However, simply making contributions to these accounts is not enough to fully tax-proof them. To take full advantage of the tax benefits they offer, there are additional strategies you can employ to maximize their potential.

One way to tax-proof your IRA or 401(k) is to ensure that you are contributing the maximum allowable amount each year. For 2021, the maximum contribution limit for an IRA is $6,000 ($7,000 for those aged 50 and over) and for a 401(k) it is $19,500 ($26,000 for those aged 50 and over). By contributing the maximum amount, you can lower your taxable income for the year and potentially reduce your tax bill. If you’re falling short of the maximum contribution, consider making a lump sum contribution before the end of the year to take advantage of the tax benefits.

Another strategy to tax-proof your retirement account is to carefully consider the type of account you are contributing to. Traditional IRAs and 401(k)s offer tax-deferred growth, meaning your contributions are made with pre-tax dollars and your investment grows tax-free until you make withdrawals in retirement. On the other hand, Roth IRAs and 401(k)s offer tax-free growth, meaning your contributions are made with after-tax dollars and your withdrawals are tax-free in retirement. Depending on your individual tax situation, contributing to a Roth account may be more advantageous, especially if you anticipate being in a higher tax bracket in retirement.

In addition to maximizing your contributions and choosing the right type of account, it’s also important to regularly review and rebalance your retirement portfolio. Over time, the allocation of your investments can shift, potentially resulting in a higher tax liability. By periodically rebalancing your portfolio, you can ensure that your investments are aligned with your long-term goals and risk tolerance, while also minimizing tax implications.

Lastly, it’s important to carefully consider the timing of your withdrawals from your retirement accounts. The age at which you begin taking withdrawals can have a significant impact on your tax liability. For example, withdrawals from traditional IRAs and 401(k)s are subject to ordinary income tax, and may also be subject to an additional 10% early withdrawal penalty if taken before age 59 ½. By strategically planning your withdrawals in retirement, you can minimize the tax impact and maximize the longevity of your retirement savings.

In conclusion, tax-proofing your IRA or 401(k) involves more than just making contributions to these accounts. By maximizing your contributions, choosing the right type of account, rebalancing your portfolio, and strategically planning your withdrawals, you can effectively minimize your tax liability and maximize the potential for your retirement savings. It’s important to consult with a financial advisor or tax professional to ensure that you are making the best decisions for your individual financial situation.