Tax Planning for Retirement
Draw down your accounts in the right order and convert to Roth early to keep your retirement tax bill low.
TL;DR
- Spend from
taxable, then tax-deferred, thenrothaccounts last. - Convert to Roth in the low-income years before
RMDsstart at 73. - Watch
combinedIncomeand IRMAA lines that taxes and premiums hinge on.
The Withdrawal Order
Taxable FirstSpend brokerage money early to use low gains rates.
Long-term gains: 0%, 15%, 20%Tax-Deferred NextDraw traditional IRA and 401(k) money as ordinary income.
Fills your lower bracketsRoth LastLet tax-free accounts keep compounding as long as you can.
Roth grows untaxed, no RMDBlend to SmoothMix sources some years to avoid a bracket spike.
Top up income without jumping a bracketThe Roth Conversion Window
The Gap YearsIncome often dips between retiring and age 73.
Retire to RMDs = low-tax windowFill the BracketConvert just enough to reach the top of your current bracket.
Convert up to the next bracket lineShrinks Future RMDsMoving money to Roth lowers later required withdrawals.
Less in traditional = smaller RMDsPay Tax From CashCover the conversion tax from savings, not the IRA itself.
Keep the full balance in RothManaging RMDs
Know Your Start AgeRequired withdrawals begin at 73, or 75 if born in 1960+.
Age 73 or 75Take It on TimeWithdraw by December 31 each year to dodge the penalty.
Miss it = 25% penaltyGive via QCDA direct IRA gift to charity counts and skips your income.
QCD up to $111,000 in 2026Roth Has NoneYour own Roth IRA never forces a withdrawal.
Roth IRA = no lifetime RMDWatch the Thresholds
Social Security TaxOther income decides how much of your benefit is taxed.
Up to 85% taxableMedicare IRMAAHigh income raises Part B and D premiums two years later.
Income now = premium in 2 yearsCapital Gains 0%Low taxable income can mean no tax on long-term gains.
Stay under the 0% gains lineThe Senior DeductionAge 65+ gets an extra deduction through 2028.
Up to $6,000 per personTips
- Run a
rothConversioncheck each fall, converting just enough to fill your current bracket without spilling into the next one. - After 70 1/2, send RMD money straight to charity as a
QCDto satisfy the requirement while keeping it out of your income.
Warnings
- A large
rothConversioncan lift your income over a Medicare IRMAA line and raise your premiums two years later. - Missing a required distribution triggers a steep 25%
RMDpenalty on the amount you failed to withdraw.
In Practice
See how a retired couple uses a low-income year to move money into Roth at a low rate.
You are 66, married filing jointly, with $40,000 of taxable income and a large traditional IRA. The 12% bracket runs up to $100,800 for 2026.
- Find the room: $100,800 - $40,000 = $60,800 left in the 12% band.
- Convert $60,800 from the traditional IRA to a Roth IRA.
- Tax on the conversion: about $60,800 x 12% = $7,296.
- That $60,800 now grows tax-free and cuts your future RMDs.
You move $60,800 into Roth at 12% instead of a higher rate later.
Low-income years before RMDs are the cheapest time to convert.
FAQ
A common tax-efficient order is taxable brokerage accounts first, then tax-deferred accounts like a traditional IRA, then Roth accounts last. Taxable accounts get low long-term gains rates, while spending Roth last lets its tax-free growth run as long as possible. Your own bracket and goals can shift the order.
Often the gap years between retiring and starting RMDs at 73, when your income dips. Convert only enough to fill your current bracket without jumping to the next. You pay tax now at a low rate, and the converted money then grows and comes out tax-free while shrinking future required distributions.
It depends on your combined income: adjusted gross income, plus tax-free interest, plus half your benefits. Below $25,000 single or $32,000 joint, none is taxed. Above $34,000 single or $44,000 joint, up to 85% is taxable. Managing withdrawals helps keep more of your benefit tax-free.
From age 70 and a half, a QCD lets you send up to $111,000 in 2026 straight from an IRA to charity. It counts toward your required distribution but never lands in your taxable income, which can also keep your Social Security and Medicare costs down. It beats taking the RMD and donating separately.