Did you know that taxes are one of the three largest expenses for most retirees. According to financial security expert and author Pamela Yellen, retirees can legally pay ZERO taxes once they retire.

Yes, there was once a time when older folks actually received several tax breaks, but that’s not the case anymore.

For example, Congress, state and local governments are far more likely to increase taxes on retirees than to reduce them.

“Governments at all levels know that older Americans are where the money is,” says Bob Carlson, editor of Retirement Watch. “Governments need money, and they have no choice but to find ways to impose them on holder Americans.”

According to Yellen, having your money in a tax-deferred retirement account such as a 401(k), IRA or 403(b) is like “sitting on a tax time bomb,” who is the founder of Bank On Yourself.

She is also a financial investigator, and the author of two New York Times best-selling books, including her latest, The Bank On Yourself Revolution: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future.

Here are three tax traps Yellen said most people fail to consider:

Gambling that taxes will be lower – ­ “Most people we talk to think taxes ultimately must go up due to the aging demographics of our country and our unsustainable national debt, which recently passed $21 trillion for the first time,” Yellen says. “If tax rates do go up, and you’re successful in growing your nest-egg, you’ll simply end up paying higher taxes on a bigger number.”

Required minimum distributions (RMDs) – “You’ve probably been told you should expect to retire in a lower tax bracket, but many retirees complain that they’re actually in a higher tax bracket,” Yellen says. RMDs are one reason why. They mandate that retirees start drawing money from tax-deferred accounts around age 70½ – whether they want to or not – pushing them into a higher tax bracket.

The “Social Security tax torpedo” – “Many people are surprised to discover their income from various sources causes 50 to 85 cents of every Social Security dollar they receive to be taxed,” Yellen says. “RMDs can trigger a ‘tax torpedo’ that taxes up to 85% of your Social Security benefits. Financial planners and CPAs are seeing retirees’ tax rates double or more because of this!”

A legal way to lower your taxes without going broke

People can avoid these pitfalls by using a specialized form of dividend-paying whole life insurance to save for retirement, Yellen says. Advantages of this method, which she calls Bank On Yourself, include:

No RMDs to push you into a higher tax bracket.

Income you take from the policy is not included when the IRS determines how much tax you’ll pay on your Social Security income.

The income also doesn’t increase your Medicare premiums, unlike IRA distributions and tax-exempt bond income.

How is this possible? These retirement plans are funded with after-tax money, which grows tax-deferred and can be accessed tax-free under current tax law, she says.

“If you’re concerned tax rates will go higher long term, lean towards paying them today to eliminate unpleasant surprises,” Yellen says.

For more info visit www.bankonyourself.com