Taxes can be a burden at any age. But when you're retired, they can really eat into your limited income, making it tougher for you to get by.

The good news, though, is that there are steps you can take to lower your tax burden in retirement. Here's how.

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1. Line up investment income that isn't taxable

You'll often hear that it's a good idea to set yourself up with dividend stocks for retirement, because that way, you'll own assets with the potential to generate ongoing income. The only problem with dividend stocks is that dividend income is often taxable. Municipal bond interest, however, is not, so you may want to consider this option if you're looking to minimize your IRS burden.

Municipal bonds are issued by cities, states, and other localities. The upside of these bonds is that the interest you collect is always tax-exempt at the federal level. And if you buy municipal bonds issued by your state of residence, you can avoid state and local taxes, too.

Furthermore, municipal bonds tend to be a more stable investment than dividend stocks. So if you're looking for an asset that won't cause you to lose sleep or pay taxes, you may want to focus on municipal bonds.

2. Move to state that doesn't tax Social Security

Social Security serves as a financial lifeline for many retirees. Now, if it's your only source of retirement income, you might manage to avoid federal taxes on your benefits. Otherwise, a portion of your benefits may be taxable, depending on your total income picture.

But you should also know that there are 12 states that tax Social Security benefits to varying degrees. And steering clear of the ones on this list could help you avoid added taxes on this pivotal income stream:

  1. Colorado
  2. Connecticut
  3. Kansas
  4. Minnesota
  5. Missouri
  6. Montana
  7. Nebraska
  8. New Mexico
  9. Rhode Island
  10. Utah
  11. Vermont
  12. West Virginia

It's worth noting that many of these states do offer exemptions for lower -- and sometimes moderate -- earners. But if you want to avoid having to think about state taxes on Social Security, then you may want to steer clear of these states.

3. House your savings in a Roth IRA or 401(k)

Ideally, you'll enter retirement having saved up a nice amount in your IRA or 401(k) plan. But if you want to avoid taxes on the money you remove from your nest egg, then you'll need to make sure you're saving in a Roth account.

Traditional IRAs and 401(k) give you a tax break on the money you put in, but then you're hit with taxes on withdrawals during retirement. So if you're still in the process of saving for your senior years, consider funding a Roth IRA or 401(k), or converting a traditional retirement savings plan to a Roth.

Don't pay more tax than you need to

The more tax-savvy you are, the less income you might lose to the IRS during retirement. Think carefully about the assets you invest in, the type of account you save in, and the state you decide to call home. All of these factors will play a huge role in determining what your tax burden looks like later in life.