Everyone hates paying taxes. It’s OK. Go ahead and admitit. You hate paying taxes, too.

Most of us have very little real control over when and how wepay taxes. We work for a company that pays us. They want to pay uson a regular basis and we want to get paid on a regular basis.

More important, they want us to add value and are willing tosweeten the salary deal should we add that value. Of course, thatsweetened salary means more taxes.

And we all hate paying taxes. But we know we need those taxes toget the salary that puts food on our table, clothes on our back,and a roof over our head.

If only there was at least a way to manage our earnings so thosetax bills didn't come all at once in any particular year.

Those of you with small businesses know there’s a way.

It doesn’t prevent taxes from being paid, but in can help eventhings out by having you avoid getting hit with an outlier tax billin any one year.

Here’s a rather interesting thought when it comes to executing aretirement strategy: Once you retire, it’s likerunning your own business. You determine how much to spend and,when it comes to your own retirement accounts, you determine howmuch to pay yourself.

Your retirement income can come from several sources, some ofwhich you have maximum control over, some of which you have modestcontrol, and some of which you have absolutely no control over atall.

What’s more, not all that income is taxed at the same rate, evenincome coming from assets over which you have total control.

That’s why, when you leave your company sponsored retirementplan, determining whether to roll the assets over into a traditionalpre-tax retirement plan or convert some portion of those assetsinto a Roth IRA can’t be taken lightly (see, “401k Rollovers: To Roth or Not to Roth – 7Fiduciary Questions,” FiduciaryNews.com, August 8,2017).

Retirement income you can’t control could include any pensionpayments you receive on a regular basis.

You have some control on the timing of Social Security payments,but you’ll eventually receive them just like any other pensionpayment. These payments may or may not trigger taxable events.

Then there are those payments you receive from your ownaccounts. Most of these will create tax liabilities, but onepopular type of account won’t.

Traditional savings accounts (like brokerage and bank accounts)are considered taxable accounts. They produce three types ofincome: interest, dividends, and capital gains. When managing ataxable portfolio, you will often consider the tax consequences ofthe various assets within that portfolio. This allows you tocontrol the tax impact in any given year.

For example, you might want to shun interest-bearing securitiesaltogether because these produce income at the highest marginalrate. Likewise, you may decide to take capital losses beforeyear-end to avoid paying taxes on the capital gains you amassedthroughout the year.

None of this calculus means a hill of beans for your IRAaccount. All income – interest, dividends, and capital gains – istaxed at the same rate.

Unfortunately, this is the highest marginal rate. When you beginmaking withdrawals from your IRA, you’re taxed it all came frominterest, even for income generated from sources normally subjectto lower tax rates.

The situation becomes more acute when you reach an age whereminimum distributions are required.

Then, the brilliant advantage of deferring taxes that made thetraditional IRA so attractive all of a sudden becomes a devastatingdisadvantage.

You now suffer the onus of the Uncle Sam’s “pay me later” clausein that arrangement. And you know how much you hate payingtaxes.

Thus was the customary way of looking at managing taxable andtax-deferred accounts during the retirement years. But this wasbefore the advent of the Roth 401k and Roth IRA.

The Roth counters the traditional “pay me later” clause with acompelling “pay me now” offer. Pay the taxes on the money now, andsave it tax free for the rest of your life.

Long-term, this can have a dramatic impact on one’s ability tolive a comfortable retirement.

Remember, “comfort” isn’t defined purely by “wealth.” It reallymeans “doing whatever I want, whenever I want, without anybodyinterfering with my right to do so.”

OK, this may sound a bit libertarian, but, philosophy aside, I’mpretty sure that, given the choice, living a retirement without theburden of taxation represents an ideal we’d all prefer.

While we can’t eliminate the tax beast, we can manage it. That’sthe real advantage of the Roth retirement vehicle.

During retirement, we’ll need to tap our retirement savingsplans to do what we want when we want to do it. These distributionscan have an impact on the taxes we pay, which means the “cost ofdoing business” goes up.

When this happens in retirement, just like when it happens inbusiness, we need to manage our resources in such a way as tomitigate tax-related costs.

Here’s a simple example to show you how it works. Let’s say youneed $10,000 more this year to fund your retirement activities.

If you take it from your traditional IRA, the entire amountpushes you into a higher income bracket.

You can opt to take it from capital gains in your taxableaccount, but you feel there’s too much upside potential in thestocks you’d need to sell so you don’t want to sacrifice theportfolio’s future investment growth.

If you had a Roth IRA, you could take that $10,000 out free andclear and not have a worry about taxes.

We normally think of the Roth IRA option in pure tax terms.Truth be told, it’s a tax-sneutral decision unless you think yourfuture tax rates will change (which means you have to predict whichway the wind is blowing in Washington DC and your state capitalwhen you retire and this is an awfully difficult prediction).

Looking instead at Roth IRAs as being a third type of account(in addition to taxable and tax-deferred savings account) thathelps better manage post-retirement taxes may be a more vitalview.

Indeed, this kind of “asset allocation” may have a moreimmediate impact on retirees than any other.