Keep More of What You Earn

A Roth IRA conversion involves moving money from a traditional IRA or 401(k) into a Roth IRA. While you pay taxes upfront on the converted amount, the money grows tax-free afterward, and there are no RMDs for Roth IRAs. Converting when you're in a lower tax bracket—like early in retirement—can save you significant money in the long run.

If you have investments in stocks or real estate, the sale of these assets could trigger capital gains taxes. Retirees often balance gains with capital losses (selling underperforming assets) to reduce their overall tax burden. Long-term capital gains (investments held for over a year) are taxed at a lower rate than short-term gains, so timing matters.

If you still have an HSA (Health Savings Account) in retirement, withdrawals for medical expenses are tax-free. Since medical costs usually rise with age, having a tax-free bucket for healthcare spending is a huge tax-saving tool.

Qualified Charitable Distributions (QCDs): 

If you're 70½ or older, you can donate directly from your IRA to a charity, and the distribution doesn’t count as taxable income. This can help reduce your taxable income while satisfying your RMDs.

Donor-Advised Funds (DAFs): 

These allow retirees to donate a large amount in one year for a tax break and then distribute the funds to charities over time. This can help reduce income in high-income years.

Not all states treat retirement income the same. Some states have no income tax, while others tax Social Security or pensions. If you're moving in retirement, tax planning takes into account the differences in state taxes to ensure you’re not caught off-guard by new tax rules.

Income-Related Monthly Adjustment Amounts (IRMAA) are surcharges added to your Medicare premiums if your income exceeds certain thresholds. Tax planning helps you manage your income to avoid crossing these thresholds, which can save you thousands in extra Medicare premiums.

Inheritance taxes and estate taxes could impact how much of your wealth is passed on to your heirs. Effective tax planning ensures that your beneficiaries inherit as much of your assets as possible, without a large chunk going to Uncle Sam.

Using trusts or other estate planning tools can help manage the tax implications of passing on wealth and ensure a smooth transfer of assets after your death.

The goal is to spread out your taxable income to avoid jumping into higher tax brackets. This involves managing when and how much you withdraw from retirement accounts and coordinating it with Social Security, pensions, and investment income to stay in a lower tax bracket for as long as possible.