Shape your retirement tax exposure while you're still working

Even if you're still working, there are ways to help your retired self at tax time.

Tax experts say long-range planning to diversify your tax picture should begin long before the retirement twinkle is in the eye.

"Most people are programmed to throw all their savings in a 401(k), but they don't think about having to pay the piper on the back end," said Anthony Truino, an adviser with Barnum Financial Group, an office of MetLife. "When they are getting closer to retirement, they need to evaluate their company match, cash flow, what they already have in various accounts, and build from there."

Ideally, clients would arrive at retirement with a significant pool of assets not subject to ordinary income tax, said Michael Goodman, founder and president of Wealthstream Advisors.

"Generally speaking, I'd like to see clients with roughly a 50-50 spread" between retirement and nonretirement accounts, he said, referring to clients who won't be in either the highest or lowest tax brackets in retirement. There are plenty of exceptions, of course. If the clients were both teachers who will have taxable pensions, for example, he would aim for a higher percentage of liquid assets in taxable accounts, he said.

It's too late to alter your 2014 contributions to 401(k) plans (unless you are self employed), but if you're eligible you can still add to a Roth IRA before the April 15 tax-filing deadline to get more money into an account that won't be subject to taxes at withdrawal. With a Roth, contributions don't get a tax deduction, but the money grows and is generally withdrawn tax-free in retirement.

If you're not eligible to contribute to a Roth (joint returns must have modified adjusted gross income below $183,000 and single filers must be below $116,000), be sure to choose investments for your taxable savings that are tax efficient, such as low-cost index funds, said Goodman.

"You don't know for sure how much wealth clients will accumulate by retirement, and you never know where tax rates are going to be," he said. One client couple has about 90 percent of savings in tax-deferred accounts. They aren't eligible because of their incomes to contribute to Roth accounts, so Goodman is urging them to save more in their taxable accounts, even if it means easing up on their 401(k) contributions.

Partly retired clients, meanwhile, could be in the sweetest spot of all, experts said.

If you're working part time doing some consulting, for example, you could be eligible to contribute to a Roth IRA for the first time in years. Or if you have a lot of savings in taxable accounts, a Simplified Employee Pension Plan, or SEP-IRA, could make sense. A Solo 401(k) plan could be even better, though those plans have to be established by Dec. 31 of the tax year for which you are claiming the deduction.

Don't forget the Retirement Savings Contribution Credit (known as the Saver's Credit), which is a credit of up to 50 percent on up to $4,000 in contributions, depending on your income and tax-filing status.

If you're a business owner, you might also consider constructing a defined benefit pension plan, said Nate Wenner, a principal and regional director with Wipfli Hewins Investment Advisors.

These pension plans are far more complex and costly to operate than IRAs, so be sure to exhaust other options first.