• A Roth account is a straightforward way to save retirement money that won't be taxed.
• However, it's not the only way.
• You may need to use a combination of strategies to get the amount of tax-free income you want.

It's a sure bet that no one — regardless of age — enjoys handing over any of their income to the IRS.

In retirement, though, doing so can feel like even more of a sting. Assuming you've left work earnings entirely behind you, any amount owed to Uncle Sam comes from your retirement income and savings — both of which also are expected to fund your golden years for, oh, another two or even three decades.

The good news is that there are strategies to reduce what you end up paying in federal — and, perhaps, state — taxes, which, of course, translates into more money staying with you. But getting there can involve some work.

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"To generate, on a regular basis, tax-free income over a long period of time, you have to put a lot of planning in place," said certified financial planner Avani Ramnani, director of financial planning and wealth management at Francis Financial in New York.

For perspective: If you want your retirement savings to generate $100,000 a year in tax-free retirement income, and you want to adhere to the 4%-per-year withdrawal rule — in general, a rate that would make your money last for at least 30 years — you'd need at least a $2.5 million portfolio.

Of course, your own annual cash-flow needs may be higher or lower than $100,000. And, you may need to employ a combination of strategies, depending on the particulars of your situation.

A Roth account

If you can save money in a Roth version of an individual retirement account or 401(k) plan, you could set yourself up for a pretty straightforward way to get tax-free income.

While your contributions are not tax-deductible, as they may be with a traditional IRA or 401(k), distributions made after age 59½ are generally tax-free.

"The best way to end up with tax-free income is to pay the taxes first — and the best way to do that is to contribute to [a Roth account] throughout your working years," said CFP George Gagliardi, founder of Coromandel Wealth Management in Lexington, Massachusetts.

The maximum you can contribute in a year to a Roth IRA is $6,000 ($7,000 if you're age 50 or older). However, that amount starts phasing out at income of $125,000 for a single taxpayer and $198,000 for married couples filing a joint tax return and disappears at income of $140,000 (for singles) and $208,000 (couples).

Roth 401(k) accounts are more generous: There is no income cap, and you can contribute up to $19,500 in 2021 (plus another $6,500 if you're age 50 or older).

There are ways to get around the Roth IRA income cap. For instance, you could contribute to a traditional IRA and then convert the money to a Roth. There could be taxes owed on the conversion, but you would pay no tax on distributions down the road.

Health savings account

If you have access to a health savings account — which can only be paired with a high-deductible health plan — it can be used as as way to plan for some tax-free income in retirement.

Unlike with the similarly named health flexible spending account, you don't have to spend HSA money within a certain timeframe.

HSA contributions are tax-deductible, gains in the account grow tax-free, and withdrawals used to pay for qualified medical expenses are also tax-free and penalty-free. (At age 65, withdrawals can go toward anything without paying a penalty, although if the money is used for non-medical expenses, it would be subject to tax).

You can contribute $3,600 to an HSA in 2021 ($7,200 for family coverage). If you're age 55 or older, you can put in an extra $1,000. 

Municipal bonds

These bonds are issued by states, counties, cities and the like to fund public projects. And, the interest you earn on so-called munis is generally not subject to federal tax. If the bond is issued in your state of residence, it also may be tax-free at the state level, as well.

However, "if you buy munis for a state you don't live in, you'd have to pay state income tax for those," said Ramnani at Francis Financial.

So, for example if you live in New York and you buy bonds issued in California, you still have to pay state income tax on them, Ramnani said.

There also may be certain instances in which munis are subject to federal taxation, so it's important to know before assuming your earnings are tax-free.

Capitalize on long-term capital gains rates

Any gain on an investment held for more than a year is considered long-term and is generally taxed as such. (Otherwise, it's taxed as ordinary income.) The same goes for qualified dividends.

For long-term gains, the tax rate depends on your income. If you are a single tax filer with up to $40,000 in income ($80,000 for married couples filing jointly), the rate is 0%. If you can keep your income below those thresholds, those gains can be tax-free income.

Keep in mind, though, that taxes are just one consideration when it comes to any investment strategies in retirement.

"You have to think about portfolio allocation," Ramnani said. "Are you allocated in a way that is well-diversified and in line with your risk tolerance and goals?

"There can be competing objectives or considerations."

Life insurance or annuities

While permanent life insurance policies generally come with much higher premiums than term life insurance, part of the reason for that is the savings aspect of these policies

"The idea is that you pay those high premiums and some of it goes to the insurance piece and the other part goes into a savings and investment bucket," Ramnani saaid. 

Depending on the specifics, these so-called cash value life insurance policies can be used to produce retirement income that is not subject to taxes, said CFP Michael Resnick, senior wealth management advisor for GCG Financial in Deerfield, Illinois.

"But there is some additional complexity when distributing, so care should be taken," he said.

Similarly, annuities can provide an income stream in retirement. If you use after-tax money to fund one, just the interest is taxable, generally speaking. However, there are many different types of annuities, and they can be more expensive than other income-stream options. And, once you give your money to the insurance company that sold you the annuity, it can be hard to get it back after a short review period.

Depending on the contract, you could pay what's called a surrender charge if you no longer want the annuity or withdraw more from it than allowed. That fee can be pretty steep, especially in the early years of the contract.

What about Social Security?

Depending on how much you receive from Social Security and your other income, your benefits may be subject to tax — yet you may still be able to owe little to nothing to Uncle Sam.

The calculation basically involves adding one-half of your benefits to your adjusted gross income, as well as nontaxable interest (i.e., muni bonds). If that amount is $25,000 to $34,000 for a single tax filer ($32,000 to $44,000 for married couples filing jointly), then 50% is taxable. Below that range of income, it's not taxed; if it's above those amounts, 85% is taxable.

However, even if the calculation results in an amount that is subject to tax, you'd still get to subtract the standard deduction ($12,550 for singles and $25,100 for married couples, in 2021) from that. And, if you are at least age 65, you get a bigger standard deduction — an extra $1,700 for single filers and $1,350 per person for married couples.

In other words, your deduction or deductions may bring your actual tax burden down to zero or close to it if you do have income that's taxed.

Other stuff

There are, of course, other sources of income that could come your way in retirement and not be subject to taxes. 

For instance, if you get divorced, alimony (spousal support) is not taxable to the recipient if the divorce occurred after 2018. Also, if you receive a gift from, say, your parents, it is not taxable to you. 

Same goes for life insurance proceeds if you are the beneficiary on the policy. And, any gain on the sale of your primary home generally comes with an exclusion: Up to $250,000 is exempt if you are a single tax filer and $500,000 for married couples filing jointly.