#1 Invest In Tax-Free Bonds

A lot of people, as they age, start to look towards diversifying their portfolios so that they will have fewer risks when they are in their golden years. This means that a large part of their portfolio will transform from stocks to bonds as they come with fewer risks than keeping the stocks.

This can also come with the perk that if you choose to change your stocks to bonds, you can also pay fewer taxes than you would on the stocks because some bonds are taxed differently and thus exempt from some of them. If you have federal bonds, then you would not have to pay income taxes at a state level.

Likewise, if you have local, municipal, or state bonds, then they are exempt from income taxes at the federal level, as well as possibly some local and state taxes in addition!

The only drawback to these less-taxed bonds is that they are going to have a lower interest rate. A good way to get around this is to make some calculations on the type of bonds you want to get, because it may be your case that getting the higher-interest bonds and paying the taxes will be more profitable in the long run!