Over dinner with friends who live in the Northeast, they expressed concern about how the recent tax changes may increase their federal income taxes. They’re right to worry. New rules limit the amount of property and state income taxes that can be deducted – and they live in a high-tax state.
Like everyone, I am a fan of legally minimizing your taxes. But I think – if you are retired or about to retire – you should concentrate less on minimizing taxes and more about increasing after-tax spendable income and your financial legacy to heirs. Sounds like a non-sequitur, but it isn’t.
As an example, you could invest your entire savings in high-quality municipal bonds and pay no taxes on interest earnings. But you would earn something like 2.5% in annual income. Wouldn’t it be an improvement if you paid some taxes and generated an income stream equal to, say, 6% after taxes.More