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The year before retirement is supposed to feel like the finish line. Instead, it can feel like a trap. For someone who has spent three decades building a portfolio worth $1.4 million, a projected six-figure federal tax bill during the retirement transition years can come as an unwelcome surprise. But in many cases, it isn’t a fluke. Large tax bills can result from concentrated withdrawals, Roth conversions, the sale of appreciated assets, or other income-recognition events that occur around retirement.

The good news is that there may still be time to act. A 61-year-old has a substantial planning window before required minimum distributions (RMDs) begin. Under current law, many people currently in their early 60s will not be required to begin taking RMDs until age 75. That creates an opportunity to evaluate income sources, reposition assets, and potentially reduce future tax burdens.

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Many people assume their tax rate automatically drops in retirement. For retirees with significant balances in traditional IRAs and 401(k)s, that is not always the case.

Once RMDs begin, those distributions are generally taxed as ordinary income. Based on a current balance of $1.4 million, an initial RMD at age 73 would be roughly $53,000 under today’s IRS life expectancy tables, and potentially higher if the account continues to grow. That income may be layered on top of Social Security benefits, pension income, investment income, or part-time work.

As a result, the years between retirement and the start of RMDs can represent a unique planning opportunity. For some households, taxable income during this period may be lower than it will be later, creating room to consider tax-management strategies.

The Case for Roth Conversions Before RMDs Begin

One strategy many retirees explore is a phased Roth conversion.

A Roth conversion moves assets from a traditional IRA into a Roth IRA. Taxes are generally due on the converted amount in the year of conversion, but future qualified withdrawals from the Roth can be tax-free.

For someone currently in the 22% or 24% federal tax bracket, a series of smaller annual conversions may reduce the size of future RMDs without pushing income substantially higher all at once. The optimal conversion amount depends on factors including filing status, expected future income, tax brackets, and Medicare considerations.

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Strategic Roth conversions may also help reduce future income-related Medicare premium surcharges (IRMAA) by lowering future RMDs. However, conversions themselves can increase taxable income and potentially trigger higher Medicare premiums in the near term if income exceeds applicable thresholds. That tradeoff is one reason careful planning matters.

Roth assets can also provide greater tax flexibility later in retirement, and qualified withdrawals are generally tax-free for both retirees and, in many cases, their heirs.

Tax Loss Harvesting and Asset Location Still Matter at 61

Tax-loss harvesting is often associated with market downturns, but it can also be useful when rebalancing a portfolio.

Selling investments at a loss may help offset realized capital gains elsewhere in the portfolio, potentially reducing current-year tax liability. While the impact varies, even relatively modest tax savings can compound over time.

Asset location is another frequently overlooked consideration. Investments that generate ordinary income, such as many bond holdings, are often candidates for tax-deferred accounts. Meanwhile, investments focused on long-term growth may be more tax-efficient in taxable brokerage accounts because of favorable long-term capital gains treatment.

The right approach depends on an investor’s tax situation, goals, and account structure, but thoughtful asset placement can improve after-tax outcomes without necessarily changing the portfolio’s overall investment strategy.

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Why This Is Not a DIY Problem

The strategies above are not complicated in concept, but the execution involves real tradeoffs. Converting too much in one year can push income into a higher bracket or trigger IRMAA surcharges that add thousands to Medicare Part B and D premiums. Converting too little leaves money on the table. Getting the sequencing right across four years, while managing Social Security timing, healthcare costs, and a draw-down strategy, requires someone who does this kind of planning regularly.

This is exactly the kind of situation where AdviserMatch’s no-obligation advisor matching service can help. The platform pairs people with fiduciary advisors based on their specific situation, so rather than cold-calling firms or relying on a general referral, someone in this position gets matched with an advisor who specializes in pre-retirement tax strategy and high-net-worth planning.

What to Bring to the First Conversation

Anyone approaching this situation should come to an advisor meeting with a clear picture of their full account breakdown: how much is in traditional IRAs or 401(k)s, how much in Roth accounts, and how much in taxable brokerage accounts. The split between these buckets is the starting point for any withdrawal or conversion strategy.

It also helps to have an estimate of expected Social Security benefits, which can be found through SSA.gov’s my Social Security portal, and a rough sense of expected annual spending in retirement. With those numbers in hand, an advisor can model different conversion paths and show, year by year, how the tax bill changes depending on the approach. That comparison, not a general rule of thumb, is what makes the difference between a strategy and a guess.

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Building Wealth Across More Than Just the Market

Building a resilient portfolio means thinking beyond a single asset or market trend. Economic cycles shift, sectors rise and fall, and no one investment performs well in every environment. That’s why many investors look to diversify with platforms that provide access to real estate, fixed-income opportunities, professional financial guidance, precious metals, and even self-directed retirement accounts. By spreading exposure across multiple asset classes, it becomes easier to manage risk, capture steady returns, and create long-term wealth that isn’t tied to the fortunes of just one company or industry.

Rad AI

RAD Intel is an AI-driven marketing platform helping brands improve campaign performance by turning complex data into actionable insights for content, influencer strategy, and ROI optimization. Positioned within the multi-hundred-billion-dollar digital marketing industry, the company works with global brands across sectors to improve targeting precision and creative performance using its analytics and AI tools. With strong revenue growth, expanding enterprise contracts, and a Nasdaq ticker reserved under $RADI, RAD Intel is opening access to its Regulation A+ offering, giving investors exposure to the growing intersection of AI, marketing, and creator economy infrastructure.

Arrived

Backed by Jeff Bezos, Arrived Homes makes real estate investing accessible with a low barrier to entry. Investors can buy fractional shares of single-family rentals and vacation homes starting with as little as $100. This allows everyday investors to diversify into real estate, collect rental income, and build long-term wealth without needing to manage properties directly.

Lightstone

Lightstone DIRECT gives accredited investors access to institutional-quality multifamily real estate opportunities backed by a vertically integrated operator with more than $12 billion in assets under management and a 40-year track record. With more than 25,000 multifamily units nationwide — including significant exposure to low-supply Midwest markets where rent growth has remained resilient — Lightstone is positioning investors to benefit from tightening housing supply, strong occupancy trends, and long-term rental demand. Through Lightstone DIRECT, individuals can co-invest alongside the firm, which commits at least 20% to each deal, offering exposure to professionally managed multifamily assets designed to generate durable income and long-term appreciation beyond the traditional stock market.

AdviserMatch

AdviserMatch is a free online tool that helps individuals connect with financial advisors based on their goals, financial situation, and investment needs. Instead of spending hours researching advisors on your own, the platform asks a few quick questions and matches you with professionals who can assist with areas like retirement planning, investment strategy, and overall financial guidance. Consultations are no-obligation, and services vary by advisor, giving investors a chance to explore whether professional advice could help improve their long-term financial plan.

Accredited Debt Relief

Accredited Debt Relief is a debt consolidation company focused on helping consumers reduce and manage unsecured debt through structured programs and personalized solutions. Having supported more than 1 million clients and helped resolve over $3 billion in debt, the company operates within the growing consumer debt relief industry, where demand continues to rise alongside record household debt levels. Its process includes a quick qualification survey, personalized program matching, and ongoing support, with eligible clients potentially reducing monthly payments by 40% or more. With industry recognition, an A+ BBB rating, and multiple customer service awards, Accredited Debt Relief positions itself as a data-driven, client-focused option for individuals seeking a more manageable path toward becoming debt-free.

Finance Advisors

Finance Advisors helps Americans approach retirement with greater clarity by connecting them to vetted, fiduciary financial advisors who specialize in tax-aware retirement planning. Rather than focusing on products or investment performance alone, the platform emphasizes strategies that account for after-tax income, withdrawal sequencing, and long-term tax efficiency—factors that can materially impact retirement outcomes. Free to use, Finance Advisors gives individuals with meaningful savings access to a level of planning sophistication historically reserved for high-net-worth households, helping reduce hidden tax risk and improve long-term financial confidence.

Immersed

Immersed is a spatial computing company building immersive productivity software that enables users to work across multiple virtual screens inside VR and mixed-reality environments. Its platform is used by remote workers and enterprises to create virtual workspaces that reduce reliance on traditional physical hardware while improving focus and collaboration. The company is also developing its own lightweight VR headset and AI productivity tools, positioning itself in the future-of-work and spatial computing space. Through its pre-IPO offering, Immersed is opening access to early-stage investors looking to diversify beyond traditional assets and gain exposure to emerging technologies shaping how people work.

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This article I’m 61 With $1.4 Million Saved and My CPA Just Told Me I’ll Owe Six Figures in Taxes the Year I Retire. Is That Really My Only Option? originally appeared on Benzinga.com

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