Tax Planning for Retirees
Most retirees focus on growing their wealth. Fewer focus on keeping it. The reality is that taxes in retirement are often more controllable than people realize, but only if you plan proactively.
At Independence Wealth, tax planning is built into every retirement plan we manage. Eric Nelson, CFP®, works with retirees to reduce their lifetime tax burden through strategies that go well beyond basic tax preparation.
Why Tax Planning Matters in Retirement
In retirement, you have more control over your taxable income than at almost any other point in your life. You’re no longer receiving a fixed paycheck. Instead, you decide how much to withdraw, from which accounts, and when. Those decisions have a direct impact on what you owe the IRS every single year.
Without a deliberate strategy, retirees often overpay in taxes by drawing from accounts in the wrong order, claiming Social Security at the wrong time, or missing windows for Roth conversions that could reduce future required minimum distributions.
What Our Tax Planning Covers
Withdrawal Sequencing The order in which you draw from taxable, tax-deferred, and tax-free accounts matters significantly. We build a withdrawal strategy that minimizes your tax liability year by year while preserving the long-term health of your portfolio.
Roth Conversion Planning The years between retirement and age 73, when required minimum distributions begin, are often the best window for Roth conversions. We identify how much to convert each year to fill lower tax brackets without triggering unnecessary taxes or Medicare premium surcharges.
Required Minimum Distribution Management RMDs from traditional IRAs and 401(k)s are taxable and mandatory starting at age 73. Poor planning around RMDs can push retirees into higher brackets and increase the taxation of Social Security benefits. We build a strategy to manage this before it becomes a problem.
Social Security Tax Coordination Up to 85% of Social Security benefits may be subject to federal income tax depending on your combined income. We coordinate your Social Security claiming decision with your broader income strategy to reduce how much of your benefit gets taxed.
Medicare Premium Planning (IRMAA) Higher income in retirement can trigger Income-Related Monthly Adjustment Amounts, which increase Medicare Part B and Part D premiums. We monitor income levels and plan accordingly to avoid unnecessary surcharges.
Capital Gains Management For taxable investment accounts, we pay close attention to cost basis, holding periods, and annual harvesting opportunities to manage your capital gains exposure efficiently.
Why South Jersey Residents Work With Independence Wealth
Independence Wealth is a fee-based, independent fiduciary advisory firm based in Voorhees, NJ. Eric Nelson, CFP® has the breadth to address retirement planning holistically, not just the investment piece.
Tax planning at Independence Wealth is not a one-time conversation. It is an ongoing part of how we manage your retirement plan year after year.
Frequently Asked Questions
Do you prepare tax returns? No. We are not a CPA firm and do not prepare tax returns. Our focus is proactive tax planning, the forward-looking strategy that informs your financial decisions throughout the year. We are happy to coordinate with your CPA.
How is retirement tax planning different from regular tax preparation? Tax preparation is backward-looking; it records what happened. Tax planning is forward-looking; it shapes what will happen. The goal is to make decisions throughout the year that reduce your tax bill before it is finalized.
When is the best time to do Roth conversions? It depends but, the window between retirement and age 73 offers opportunities. During this period, many retirees are in lower tax brackets before RMDs begin. The right amount to convert each year depends on your current bracket, projected future income, and other factors specific to your situation.
Can tax planning really make a significant difference? Yes. For retirees with tax-deferred accounts, proactive planning around Roth conversions, withdrawal sequencing, and RMD management can reduce lifetime taxes.
How do I get started? Start with a conversation. No cost, no commitment, just a straightforward discussion about your situation and whether we’re a good fit.
Ready to Talk?
If you want to make sure you’re not overpaying in taxes throughout retirement, we’d welcome the conversation.