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Retirement Plan Move That Cut Your Tax Bill

After-tax contributions to an HSA or a traditional IRA before this year's April 18 tax deadline can help reduce your taxable.
Retirement Plan Move That Cut Your Tax Bill (Photo by: CNN)

After-tax contributions to an HSA or a traditional IRA before this year’s April 18 tax deadline can help reduce your taxable.

After-tax contributions to an HSA or a traditional IRA before this year's April 18 tax deadline can help reduce your taxable.

Retirement Plan Move That Cut Your Tax Bill

The Last-Second Tax Move

It may be 2023, but taxpayers still have time to make last-minute retirement contributions that could lower their 2022 tax bill. While most tax-saving moves must be done by Dec. 31 to count for that year’s return, certain retirement maneuvers related to traditional and Roth IRAs can be done several months into the next year. For these transactions, tax year 2022 actually doesn’t end until April 18, 2023—or even later for some.

Many of the taxes that people pay during their working lives, such as FICA taxes, are actually meant to help fund their own retirement. For most Americans, 6.2 percent of their income will go directly toward Social Security, while 1.45 percent will go toward funding Medicare. The taxes you pay towards the programs now provide cash assistance and medical insurance for individuals who have already retired.

Retirees are required by law to pay taxes on the money they take out from traditional retirement accounts, such as IRAs. You may be able to avoid taking money out of your traditional retirement account until age 72, but that’s when required minimum distributions kick in. At that point, you must pay taxes on the amounts you withdraw, which will reduce the value of your pre-retirement savings.

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