How retiring baby boomers can avoid big tax liabilities

The baby boomer generation is facing a unique situation in retirement in which individuals are subject to high taxes with liabilities in their retirement accounts. To potentially avoid facing these large liabilities as you prepare to retire, follow these important tips for baby boomers.

Convert to a Roth IRA

There are several potential advantages to Roth IRAs that can help you cut your taxes in retirement. Contributions are made with after-tax money and withdrawals are not taxed. This differs from traditional IRAs in which pretax dollars are used for contributions and withdrawals are taxed as income. You might consider converting money from traditional IRAs to a Roth IRA during lower income years to provide tax-free distributions during retirement.

Plan as early as possible

It’s advised to plan early and plan with the big picture in mind. When you plan for retirement with a long-term 5-, 10- or 15-year outlook rather than a year by year perspective, you may have more success in staying on track with your spending and optimizing withdrawals to manage taxes.

Save money aggressively before you retire

The more you can save before your retirement, the better. You should contribute to your 401(k) up to the level that your employer matches and max out contribution to a Roth IRA if you qualify.

Take advantage of losses in your portfolio

If you suffered losses during the past recessions in 2002 and 2008-2009, you may be able to off-set gains that you have acquired the last few years to help with your tax situation. 

Upstream Investment Partners can help you enter your retirement without the burden of big tax liabilities by offering unique solutions fit for a wide range of clients. You can reach Upstream Investment Partners for a complimentary retirement planning consultation by calling their Lisle office at 630-599-7115. Upstream is located at 2443 Warrenville Road Suite 115, Lisle, IL 60532. 

Also, call to take advantage of their $79 tax preparation offer if you are age 50 or older. 


Upstream Investment Partners is independently owned and operated.  Securities offered through Sigma Financial Corporation, Member FINRA/SIPC.  Investment Advisory Services offered through Sigma Planning Corporation, a Registered Investment Advisor.

Roth IRA Conversion Disclosures: Please read the following important notes:

  • This material is provided for general and educational purposes only and is not intended as tax, legal, or investment advice (of for use to avoid penalties that may be imposed under U.S. Federal tax laws).  Please consult your tax advisor for advice regarding your personal tax situation.
  • Conversion from a traditional IRA to a Roth first requires paying taxes on any pre-tax contributions, plus any gains.  Additionally, the money used to pay these taxes cannot come from your traditional IRA without a 10% penalty, if you are under age 59-1/2. 

Converted amounts can be distributed without penalty after five years, beginning January 1 of the year of conversion and ending on December 31 of the fifth year.  Each conversion has a separate five-year holding period.  If you are under 59-1/2 and take a distribution of converted amounts prior to the five-year holding period you may be subject to the 10 percent premature penalty.  Distribution of earnings before completing a five-year holding period and attaining age 59-1/2 may be subject to tax and 10 percent penalty. 

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