By Kenny Ginsburg, CFA®, CFP®
Founder, TrueStar Financial Partners LLC
Last updated: September 2026
Minimizing taxes in retirement usually requires looking beyond just your tax bill this year and taking a more holistic approach. The goal is to coordinate where your income comes from and when you recognize taxable income to help manage taxes throughout retirement.
The right strategy depends on several factors, including the types of accounts and assets you own, such as traditional IRAs and 401(k)s, Roth accounts, taxable brokerage accounts, and real estate. It also depends on your spending needs, Social Security and other sources of income, age, charitable giving, and estate and legacy goals. Retirement tax planning may also consider how your income affects Medicare premiums and whether estate taxes could apply to your situation.
Strategies may include determining which accounts to withdraw from first, completing Roth conversions during lower-income years, managing capital gains, planning for required minimum distributions, and coordinating charitable giving. A strategy that reduces taxes for one retiree may not make sense for another, which is why retirement tax planning should be based on your specific financial situation and goals.
TrueStar Tax Planning Framework:
Tax planning in retirement starts with the retirement you want. We look at your goals, spending, investments, and income sources, including Social Security and pensions, to understand how taxes fit into your broader plan.
That may mean recommending a step that increases your taxes in one year if it could improve your position over time. We weigh that tradeoff alongside your need for income, flexibility, and the life you want to lead. Taxes are an expense to plan for throughout retirement, rather than a decision to make in isolation.
What income is taxable in retirement?
Retirement itself does not determine whether your income is taxable. Instead, taxes generally depend on where your income comes from and how that income is treated under the tax code.
Common sources of taxable retirement income include withdrawals from Traditional IRAs and pre-tax 401(k)s, pensions, certain annuity payments, interest, dividends, capital gains, rental or business income, and potentially a portion of your Social Security benefits.
Traditional IRA and pre-tax 401(k) withdrawals are generally taxed as ordinary income, while qualified dividends and long-term capital gains may be taxed at different rates.
Not every source of retirement income is federally taxable. Qualified withdrawals from Roth IRAs and designated Roth accounts can generally be received tax-free. Interest from many municipal bonds is also generally exempt from federal income tax, although tax-exempt interest can still affect other calculations, including the taxation of Social Security benefits.
The mix of accounts and income sources you have can therefore make a significant difference in your retirement tax bill. Two retirees with the same amount of annual spending could have very different taxable incomes depending on whether their money comes from Traditional retirement accounts, Roth accounts, taxable investments, Social Security, pensions, or other sources.
How much will I pay in taxes when I retire?
How much you pay in taxes during retirement depends on several factors, including how much income you have, where that income comes from, the types of accounts you own, your filing status, and where you live.
For example, withdrawals from Traditional IRAs and pre-tax 401(k)s are generally taxed as ordinary income, while qualified Roth withdrawals generally aren’t taxable. Pensions, Social Security, dividends, capital gains, and other income may also be taxable, but each can be treated differently.
Your tax bill can also change throughout retirement. Required minimum distributions, Roth conversions, investment gains, changes in Social Security income, and large one-time transactions can all affect your taxable income in a particular year.
Rather than assuming you’ll be in a certain tax bracket throughout retirement, it can be helpful to project how your income and taxes may change over time and coordinate where your retirement income comes from accordingly.
Do I have to pay taxes on Social Security?
You may have to pay federal income taxes on a portion of your Social Security benefits depending on your filing status and your other income.
The calculation looks at what is commonly called your “combined income.” Generally, this includes your adjusted gross income, tax-exempt interest, and one-half of your Social Security benefits. This means even income that is otherwise exempt from federal income tax, such as municipal bond interest, can affect how much of your Social Security is taxable.
For a single filer, if combined income is between $25,000 and $34,000, up to 50% of Social Security benefits may be taxable. Above $34,000, up to 85% may be taxable.
For married couples filing jointly, if combined income is between $32,000 and $44,000, up to 50% of benefits may be taxable. Above $44,000, up to 85% may be taxable. Different rules apply to married couples filing separately.
Importantly, having “85% of your Social Security taxable” does not mean that you pay an 85% tax rate on your Social Security. It means that up to 85% of the benefit may be included in your taxable income and then taxed at your applicable income tax rates.
Because withdrawals from retirement accounts, investment income, Roth conversions, and other sources can affect this calculation, Social Security taxation should generally be considered as part of your broader retirement income and tax strategy.
Learn more about Social Security and retirement planning in our dedicated Social Security page.
How are 401(k) and IRA withdrawals taxed in retirement?
Withdrawals of previously untaxed money from a traditional 401(k) or IRA are generally subject to federal income tax as ordinary income. If you made after-tax contributions, part of a withdrawal may be tax-free. State tax treatment varies.
A withdrawal before age 59½ may also trigger a 10% additional federal tax unless an exception applies. For example, certain withdrawals from an employer plan after leaving that employer in or after the year you turn 55 may qualify for an exception; that particular exception does not apply to IRAs. Qualified withdrawals from Roth IRAs and Roth 401(k)s are generally tax-free, but each has its own requirements.
Are Roth IRA withdrawals tax-free in retirement?
Generally, yes, if the withdrawal is qualified: your first Roth IRA was funded at least five tax years ago, and you are at least 59½ or meet another qualifying condition. You can generally withdraw your direct Roth IRA contributions tax-free and penalty-free at any time.
Different rules apply to conversions. If you withdraw a converted amount before age 59½, a separate five-year period may determine whether the 10% additional tax applies. Your Roth IRA’s general five-year period is based on when you first funded a Roth IRA, rather than starting over at each institution.
Which accounts should I withdraw from first in retirement?
There is no withdrawal order that works for everyone. The decision depends on your mix of taxable, tax-deferred, and Roth assets; your pensions and Social Security; your spending needs; and how your income and tax rates may change over time.
Drawing from a taxable account first may leave room for IRA withdrawals or Roth conversions at a manageable tax rate. In another year, drawing from a traditional IRA may make more sense. A useful strategy considers the tax consequences over your retirement, rather than following a fixed account order.
Should I withdraw from my taxable account before my IRA?
Sometimes, but it is not an automatic rule. Selling investments in a taxable account may produce little taxable gain, a long-term gain, or a short-term gain. An IRA withdrawal may affect your tax bracket, the taxable portion of Social Security, and Medicare premiums.
It can also make sense to draw from an IRA before required minimum distributions begin, particularly if you expect higher taxable income later. If you give to charity, the choice between donating appreciated securities and making a qualified charitable distribution from an IRA deserves its own comparison.
Should I do Roth conversions before I retire?
A Roth conversion means moving eligible pre-tax retirement funds into a Roth IRA and generally paying income tax on the amount converted. It may be worth considering before retirement if you have a lower-income year, expect higher tax rates on future withdrawals, or want to reduce future required minimum distributions.
A conversion may be less attractive during a peak-earning year. The analysis should include the conversion’s effect on your full tax return, future income, and how you would pay the tax. Eligible funds from a 401(k) may also be rolled into a Roth IRA when the plan and distribution rules permit; conversions are not limited to traditional IRAs.
Should I do Roth conversions after I retire?
Retirement can create a useful window for Roth conversions, especially if earned income has fallen but required minimum distributions have not started. Whether to convert depends on your other income, spending needs, account balances, future tax expectations, and possible effects on Medicare premiums.
Conversions can still be considered after RMDs begin, but you must first take that year’s required distribution; an RMD itself cannot be converted. Roth IRA withdrawal rules also matter if you may need to use the converted funds soon.
How much should I convert to a Roth each year?
There is no universal annual amount. Start with your projected income and deductions for the year, then compare the tax cost of a proposed conversion with its potential benefit in future years.
That comparison may include your current and expected future tax rates, when you plan to claim Social Security, future RMDs, Medicare premium thresholds, and how much you need to withdraw for spending. It may be sensible to convert different amounts in different years—or nothing in a particular year.
Can a Roth conversion increase my Medicare premiums?
Yes. The taxable amount of a Roth conversion generally increases income used to determine whether you owe an income-related monthly adjustment amount, or IRMAA, on Medicare Part B and Part D premiums. Medicare generally uses tax return information from two years earlier, so the premium effect may appear later. Crossing a threshold does not necessarily make a conversion a poor decision, but that cost should be included in the analysis.
How do required minimum distributions affect my taxes?
A required minimum distribution, or RMD, generally forces you to withdraw money from a traditional IRA or eligible employer plan each year once the applicable rules require it. The previously untaxed portion is generally included in taxable income.
If you already planned to withdraw at least that much, the RMD may not change your spending plan. If it exceeds what you need, it can increase taxable income and may affect the taxation of Social Security or Medicare premiums. The distribution does not have to be spent; after taking it, you can generally invest the proceeds in a taxable account. A Roth conversion does not count toward your RMD; you must take the required distribution separately before converting additional funds.
How can I reduce my RMDs before they start?
Future RMDs generally depend on the prior year-end balance of accounts subject to the rules and an IRS life expectancy factor. Withdrawing from or converting part of a traditional retirement account before RMDs begin may reduce its future balance, though those steps can create taxable income now.
If you are at least 70½ and charitably inclined, a qualified charitable distribution from an eligible IRA can also reduce its balance. That choice should be weighed against your income needs and other ways to give. Roth IRA conversions are not limited to people who have already had a Roth IRA open for five years, although the timing can affect when Roth earnings may be withdrawn tax-free.
How can I reduce capital gains taxes in retirement?
You can consider which investments to sell, when to realize gains, and whether available capital losses can offset them. Investments held for more than one year generally qualify for long-term capital gains rates, while short-term gains are generally taxed at ordinary income rates.
If charitable giving is already part of your plan, donating eligible appreciated investments may avoid a sale and its associated capital gain; whether you receive a deduction depends on the applicable rules and your tax situation. Holding an investment for a potential basis adjustment at death is another consideration, but it should be weighed against concentration risk and your own need for the money. Borrowing against investments adds interest costs and repayment risk, so it should not be treated as a simple tax-saving substitute for selling.
How can charitable giving reduce my taxes in retirement?
The tax effect depends on what you give, where you give it from, and whether you itemize deductions. A qualified charitable distribution from an eligible IRA can be excluded from income and may count toward your RMD. Donating eligible appreciated securities can avoid realizing a capital gain on a sale and may qualify for a charitable deduction.
Cash gifts may also qualify for a deduction under the applicable rules. Comparing these methods can help you choose one that supports your charitable goals and fits your broader retirement tax plan.
What is a qualified charitable distribution (QCD)?
A qualified charitable distribution is a payment made directly from an eligible IRA to an eligible charity by an IRA owner who is at least 70½. Subject to the applicable annual limit and other rules, the eligible amount is excluded from federal taxable income and can satisfy all or part of an IRA RMD.
You cannot also claim a charitable deduction for the same QCD. Not every charitable organization or giving vehicle is eligible, so it is important to confirm eligibility before directing the payment.
Should I try to stay in a lower tax bracket in retirement?
Tax brackets are useful planning tools, but they should not dictate your retirement lifestyle on their own. A withdrawal that moves some income into a higher bracket does not cause all your income to be taxed at that higher rate.
If you can plan a large expense ahead of time, you may have choices about when and where to draw the money. The goal is to fund what matters to you while managing the tax cost across retirement—not to avoid a meaningful expense solely to stay below a bracket threshold.
How do I create a tax-efficient retirement withdrawal strategy?
Start by estimating your spending and income year by year, including Social Security, pensions, and any work income. Then map out the accounts available to fund the difference and the tax consequences of using each one.
From there, consider the timing of IRA withdrawals, Roth conversions, capital gains, charitable gifts, and future RMDs. Revisit the strategy as markets, tax rules, income, and your goals change. A tax-efficient strategy aims to manage taxes over time while providing the money you need to live your life.
