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Retirement does not end your tax bill. It changes where taxes come from, when they are triggered and how much control you have over them. Instead of wages and payroll withholding, retirees may rely on Social Security, pensions, traditional IRA or 401(k) withdrawals, taxable investment income, capital gains and required minimum distributions (RMDs).<\/p>\n
A financial advisor can help you model withdrawal strategies<\/a>, Roth conversions and income timing decisions so your retirement income plan<\/a> is more tax-efficient.<\/p>\n<\/p>\n Planning for Taxes in Retirement\u00a0<\/p>\n Planning for taxes in retirement means coordinating all of your income sources so you do not accidentally push yourself into a higher bracket, increase the taxable portion of Social Security<\/a> or trigger Medicare<\/a> surcharges. The goal is not always to pay the lowest tax in one year, but to manage taxes over many years.\u00a0The following is a summary of the various sources of retirement income<\/a>, as well as their general tax treatment:\u00a0<\/p>\n Retirement Income SourceGeneral Federal Tax TreatmentTraditional IRA\/401(k) withdrawalsTaxed as ordinary incomeRoth IRA withdrawalsTax-free if qualifiedSocial SecurityUp to 85% may be taxablePension incomeGenerally taxed as ordinary incomeLong-term capital gainsTaxed at 0%, 15% or 20% depending on incomeRMDsTaxed as ordinary incomeQCDs from IRAsExcluded from AGI if rules are met<\/p>\n Next Steps: Planning for retirement can be overwhelming. We recommend speaking with a financial advisor. This free tool will match you with vetted advisors who serve your area.<\/p>\n Here’s how it works:<\/p>\n Answer a few easy questions<\/a>, so we can find a match.Our tool matches you with vetted fiduciary advisors who can help you on the path toward achieving your financial goals. It only takes a few minutes.Check out the advisors’ profiles, have an introductory call on the phone or introduction in person, and choose who to work with.<\/p>\n Enter your ZIP code to find your matches:<\/p>\n Find Your Advisor<\/p>\n How Retirement Income Is Actually Taxed<\/p>\n Retirement income<\/a> is not taxed all the same way. Traditional IRA<\/a> and 401(k)<\/a> withdrawals are generally taxed as ordinary income, while qualified Roth IRA withdrawals are tax-free. Pension income is typically taxed as ordinary income. Meanwhile, long-term capital gains from taxable brokerage accounts are taxed at capital gains rates.<\/p>\n Social Security follows its own rules. The IRS says up to 85% of Social Security benefits may be taxable once combined income exceeds $44,000 for married couples filing jointly, or $34,000 for many single filers. Combined income generally includes adjusted gross income, nontaxable interest and half of Social Security benefits.<\/p>\n This creates the so-called Social Security tax torpedo. Additional IRA withdrawals can cause more Social Security benefits to become taxable, effectively increasing the tax impact of that withdrawal<\/a>.<\/p>\n A Sample Scenario<\/p>\n As an example of how this can play out, assume a married couple receives $60,000 in Social Security and takes a $40,000 traditional IRA withdrawal in 2026. Their combined income is:<\/p>\n $40,000 IRA withdrawal + $30,000 half of Social Security = $70,000<\/p>\n Because their combined income exceeds $44,000, up to 85% of benefits may be taxable. Their taxable Social Security is calculated as:<\/p>\n 85% \u00d7 ($70,000 \u2212 $44,000) = $22,100 Their AGI becomes:<\/p>\n $40,000 IRA withdrawal + $28,100 taxable Social Security = $68,100<\/p>\n Using the 2026 married filing jointly standard deduction of $32,200, taxable income is:<\/p>\n $68,100 \u2212 $32,200 = $35,900<\/p>\n Their federal income tax would be:<\/p>\n 10% \u00d7 $24,800 = $2,480 So, the $40,000 IRA withdrawal created more than $40,000 of taxable income because it also caused $28,100 of Social Security to become taxable. The 2026 standard deduction<\/a> for married couples filing jointly is $32,200, and the 10% bracket applies up to $24,800 of taxable income for joint filers.<\/p>\n Strategies to Build Tax Diversification Before You Retire<\/p>\n The first step in planning for taxes in retirement is creating flexibility before withdrawals begin. If all of your savings are in tax-deferred accounts, every withdrawal may increase taxable income. A mix of taxable, tax-deferred and Roth<\/a> accounts gives retirees more control.<\/p>\n Here are some of the ways you can go about increasing diversification.<\/p>\n Strategy 1: Use a Three-Bucket System<\/p>\n A taxable brokerage account can provide access to long-term capital gains rates. A tax-deferred account<\/a>, such as a traditional IRA or 401(k), provides upfront tax benefits but creates taxable withdrawals later. Meanwhile, a Roth account can provide tax-free income if distribution rules are met. Having all three types of accoutns allows retirees to choose where income comes from each year.<\/p>\n Strategy 2: Consider Roth Conversions in Gap Years<\/p>\n The years after retirement but before RMDs begin can be a valuable period for tax planning<\/a>. RMDs generally begin at age 73, though future rules will raise the age for some younger retirees.<\/p>\n For example, assume a married couple retires at 62 with $55,000 of taxable income before a Roth conversion. After the 2026 standard deduction of $32,200, their taxable income is $22,800. The 12% bracket for married couples filing jointly extends to $100,800, based on 2026 brackets.<\/p>\n That gives them:<\/p>\n $100,800 \u2212 $22,800 = $78,000 of 12% bracket space<\/p>\n If they convert $50,000 from a traditional IRA to a Roth IRA, the conversion would stay within the 12% bracket. The estimated federal tax on the conversion would be:<\/p>\n $50,000 \u00d7 12% = $6,000<\/p>\n This may reduce future RMDs and create more tax-free Roth income later.<\/p>\n Strategy 3: Use an HSA as a Retirement Account\u00a0<\/p>\n Health savings accounts (HSAs) offer a triple tax advantage: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. In 2026, HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, with a $1,000 catch-up contribution for eligible individuals age 55 or older.<\/p>\n Some retirees save receipts for qualified medical expenses and allow HSA<\/a> assets to remain invested. Later, they can reimburse themselves tax-free for eligible expenses, creating another source of tax-efficient retirement cash flow.<\/p>\n Strategy 4: Use Dynamic Withdrawal Sequencing<\/p>\n Many retirees are told to withdraw from taxable accounts first, then tax-deferred accounts and then Roth accounts. That sequence can work, but it is not always tax-efficient. Instead of following a fixed order, retirees may draw from different buckets each year. <\/p>\n So, for instance, in a low-income year, it may make sense to take more from a traditional IRA or complete a Roth conversion. In a high-income year, Roth withdrawals or taxable account basis may help avoid higher brackets<\/a>.<\/p>\n For example, assume a retired couple needs $90,000 of spending income. In Sequence A, they take all $90,000 from a traditional IRA. After the $32,200 standard deduction, taxable income is $57,800. Federal tax is:<\/p>\n 10% \u00d7 $24,800 = $2,480 In Sequence B, they take $55,000 from a traditional IRA and $35,000 from a Roth IRA. Roth withdrawals are tax-free if qualified, so taxable income before the standard deduction is $55,000. Taxable income is:<\/p>\n $55,000 \u2212 $32,200 = $22,800<\/p>\n Tax is:<\/p>\n 10% \u00d7 $22,800 = $2,280<\/p>\n In this year, using Roth income alongside IRA income reduces federal tax by:<\/p>\n $6,440 \u2212 $2,280 = $4,160<\/p>\n Over 10 years, if the same pattern held, the difference could be $41,600, before considering investment returns, inflation or changing tax laws.<\/p>\n Strategy 5: Manage RMDs Before They Begin<\/p>\n Once RMDs start, retirees lose some control over taxable income. Roth conversions before RMD age may reduce future balances in tax-deferred accounts. Qualified charitable distributions (QCDs) can also help charitably-inclined retirees manage taxes after age 70 \u00bd.<\/p>\n A QCD allows eligible IRA owners to transfer money directly from an IRA to a qualified charity. The transfer can count toward an RMD but is excluded from AGI. For 2026, the QCD limit is $111,000 per person.<\/p>\n The order matters, though. If a retiree takes an RMD in cash first and then donates the money, the distribution is included in AGI. To get QCD treatment, the transfer must go directly from the IRA to the charity.<\/p>\n Strategy 6: Use the 0% Capital Gains Bracket<\/p>\n Long-term capital gains can be taxed at 0% when taxable income is below certain thresholds. For 2026, the 0% long-term capital gains rate applies to married couples filing jointly with taxable income up to $98,900.<\/p>\n For example, assume a married couple has $60,000 of taxable income after deductions. They could realize $38,900 ($98,900 \u2212 $60,000) of long-term capital gains at the 0% federal capital gains rate<\/a>. This can allow them to reset cost basis without paying federal capital gains tax, though state taxes may still apply.<\/p>\n Asset location can also help. Income-producing assets, such as taxable bonds or REIT funds<\/a>, may fit better in tax-deferred accounts because they often generate ordinary income. Broad stock index funds or growth-oriented assets may be more tax-efficient in taxable or Roth accounts, depending on the investor\u2019s goals.<\/p>\n Strategy 7: Watch IRMAA Thresholds\u00a0<\/p>\n IRMAA is a Medicare surcharge based on modified adjusted gross income from two years prior. For 2026, the first IRMAA threshold begins above $109,000 for single filers and above $218,000 for married couples filing jointly. The standard 2026 Medicare Part B premium is $202.90, while the first IRMAA tier increases the Part B premium to $284.10 and adds $14.50 per month to Part D.<\/p>\n Assume a married couple has a MAGI of $205,000. They are below the $218,000 IRMAA threshold. If they complete a $20,000 Roth conversion, their MAGI becomes:<\/p>\n $205,000 + $20,000 = $225,000<\/p>\n That pushes them into the first IRMAA tier. The extra monthly cost is:<\/p>\n Part B increase: $284.10 \u2212 $202.90 = $81.20 per person For two spouses:<\/p>\n $95.70 \u00d7 2 \u00d7 12 = $2,296.80 per year<\/p>\n If the Roth conversion is taxed at 24%, the tax is:<\/p>\n $20,000 \u00d7 24% = $4,800<\/p>\n The combined first-year tax and Medicare surcharge impact would be:<\/p>\n $4,800 + $2,296.80 = $7,096.80<\/p>\n This does not automatically mean the conversion is a mistake. But it shows why retirees should evaluate Roth conversions alongside IRMAA thresholds.<\/p>\n Frequently Asked Questions\u00a0Are Roth IRA withdrawals taxable in retirement?<\/p>\n Qualified Roth IRA withdrawals are generally tax-free if the account meets the five-year rule and the owner is at least 59\u00bd.<\/p>\n What is the best withdrawal order in retirement?<\/p>\n There is no single best order. A dynamic approach that coordinates taxable, tax-deferred and Roth withdrawals may reduce lifetime taxes.<\/p>\n Can Roth conversions reduce retirement taxes?<\/p>\n They can, especially during lower-income years before RMDs begin. However, conversions can also increase current taxes and potentially trigger IRMAA.<\/p>\n Do states tax retirement income?<\/p>\n Rules vary widely. Some states tax Social Security or retirement account withdrawals, while others offer exclusions or have no income tax.<\/p>\n Bottom Line Planning for taxes in retirement requires coordinating Social Security, retirement account<\/a> withdrawals, capital gains, Roth conversions, RMDs and Medicare surcharge thresholds. The best strategy often changes from year to year as income needs, account balances and tax rules shift. Building tax diversification<\/a> before retirement, using gap years wisely and dynamically managing withdrawals can help reduce unnecessary taxes. <\/p>\n Tips for Retirement Planning
Plus the lesser of $6,000 or 50% of benefits = $6,000
Total taxable Social Security = $28,100<\/p>\n
12% \u00d7 $11,100 = $1,332
Total = $3,812<\/p>\n
12% \u00d7 $33,000 = $3,960
Total = $6,440<\/p>\n
Part D surcharge: $14.50 per person
Total monthly increase: $95.70 per person<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/07\/iStock-622064048-18.jpg\")
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\nA financial advisor can help you with your long-term financial planning, including taxes you can anticipate paying in retirement. Finding a financial advisor doesn\u2019t have to be hard. SmartAsset\u2019s free tool<\/a> matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you\u2019re ready to find an advisor who can help you achieve your financial goals, get started now<\/a>. <\/p>\n