By Christian Dekker, CFP®
Many people expect retirement to feel simpler than working life. Instead, they’re often surprised by rising taxes, complex withdrawal decisions, and the stress of making their savings last without overpaying the IRS. Without tax-efficient retirement planning, retired people might find themselves facing high-stress financial challenges.
In this article, I take you through some tax-efficient retirement planning strategies that may help you enjoy a relaxing, well-deserved retirement.
Fill Lower Tax Brackets Intentionally
Tax-efficient retirement planning is an ongoing effort. If you accidentally make a large withdrawal (or more than one) that pushes you into a higher tax bracket, you could find yourself owing thousands more in taxes than you anticipated.
To avoid this situation, consider determining your target tax bracket for Medicare and income taxes before the start of the year. From there, you can withdraw or convert just enough to stay within that bracket.
Use Roth Conversions Strategically
For many people, their income varies from year to year. This can be true both before and after retirement. If you have a lower-income year (due to a job transition, being in early retirement, or both), you might consider converting traditional 401(k)s, IRAs, or other assets to Roth.
Doing this can help to reduce your future required minimum distributions (RMDs) and create tax-free income later in retirement.
Manage Required Minimum Distributions (RMDs)
Tax-free accounts (like Roth accounts) are not subject to RMDs, but tax-deferred accounts are. The age at which you must start taking RMDs depends on your birth year:
- Born in 1950: Must start at age 72
- Born 1951 to 1959: Must start at age 73
- Born 1960 or later: Must start at age 75 (begins in 2033)
Often it might be prudent to reduce the balance of your tax-deferred accounts before you must start taking RMDs. When you have to withdraw money from a tax-deferred account, your taxes, Medicare premiums, and Social Security taxes may increase.
Coordinate Withdrawals With Social Security
When you delay Social Security, you can increase your monthly benefit. When you draw from your retirement accounts during this waiting period, it’s possible to reduce the percentage of your Social Security benefits that may be taxable later.
Control Medicare Income-Related Monthly Adjustment Amount IRMAA Surcharges
If your earnings from two years ago exceed a certain threshold, you may owe an income-related monthly adjustment amount (IRMAA). This fee is added to premiums for Medicare Part B (medical care) and Medicare Part D (prescription drug coverage).
Part of a tax-efficient retirement planning strategy could involve striving to keep your retirement income below IRMAA thresholds. These are the thresholds and corresponding surcharges for 2026, but remember that the income listed is from 2024:
- $109,000 Single/$218,000 Joint: $81.20/Part B, $14.50/Part D
- $137,000 Single/$274,000 Joint: $202.90/Part B, $37.50/Part D
- $171,000 Single/$342,000 Joint: $324.60/Part B, $60.40/Part D
- $205,000 Single/$410,000 Joint: $446.30/Part B, $83.30/Part D
- $500,000 Single/$750,000 Joint: $487.00/Part B, $91.00/Part D
In seeking to avoid increasing your modified adjusted gross income (MAGI) and your possible IRMAA surcharge, consider using withdrawals from Roth accounts to fund spending.
Harvest Capital Gains Efficiently
Part of tax-efficient retirement planning involves strategically harvesting capital gains in a way that seeks to keep taxes to a minimum. In trying to manage taxes, consider waiting until lower-income years to realize long-term capital gains.
Preserve Flexibility
Deliberate asset location (spreading out across taxable, tax-deferred, and tax-free accounts) can help you maintain better tax control over time.
Plan for Longevity and Legacy
If you want to pass money to heirs while reducing their tax burden, consider passing on Roth assets rather than traditional assets.
Need Help With Tax-Efficient Retirement Planning?
At Thrive Wealth Management, LLC, we help each of our clients understand the importance of tax-efficient retirement planning. Putting in the work now can pay off when you retire and move to the next chapter of your life.
Want to discover how we can help with tax-efficient retirement planning? Get in touch online today. To schedule a meeting, call (215) 376-5530 or email christian@thrivewealth.com.
Frequently Asked Questions
What is tax-efficient retirement planning, and why does withdrawal timing matter?
Tax-efficient retirement planning generally focuses on seeking to reduce lifetime taxes by coordinating when and where retirement income is withdrawn. Timing withdrawals is significant because pulling too much from tax-deferred accounts in a single year can push retirees into higher tax brackets, increase Medicare IRMAA surcharges, and make more Social Security benefits taxable. A coordinated withdrawal strategy can help retirees manage income deliberately instead of reacting year by year.
How might retirees be able to reduce taxes when taking withdrawals from retirement accounts?
Retirees may be able to reduce taxes by spreading withdrawals across taxable, tax-deferred, and tax-free accounts, intentionally filling lower tax brackets, and using Roth conversions during lower-income years. Coordinating withdrawals with Social Security timing and managing required minimum distributions (RMDs) can also help limit unnecessary tax exposure and preserve long-term flexibility.
Who should consider working with a financial advisor for tax-efficient retirement planning?
Nearly anyone with multiple retirement accounts, fluctuating income, or concerns about taxes, Medicare premiums, or legacy planning can benefit from professional guidance. At Thrive Wealth Management, our advisors help clients model withdrawal strategies, manage RMDs, and align tax decisions with retirement income goals—so taxes become a controlled part of the plan rather than an unexpected burden.
About Christian
Christian Dekker, CFP®, is a Relationship Manager at Thrive Wealth Management, LLC, a boutique financial planning firm in Blue Bell, Pennsylvania, where he provides comprehensive financial planning and supports clients in pursuing their long-term goals. As a fiduciary, Christian delivers personalized advice, seeking to keep clients disciplined and accountable to their financial plans, especially through emotional moments. One of the most fulfilling parts of his job is helping clients reach major milestones, whether it’s retiring, purchasing a vacation home, or taking a dream family trip. He finds it rewarding to help clients realize dreams they once thought impossible.
Before joining Thrive, Christian began his career at MassMutual, assisting individuals and families with their financial goals and creating tailored plans. He earned his BBA in Financial Planning & Services from Temple University’s Fox School of Business and obtained his CERTIFIED FINANCIAL PLANNER® designation in 2022. Outside of work, Christian lives in Philadelphia with his girlfriend and three dogs. He enjoys running, playing baseball with his brother, watching movies, and cheering on the Philadelphia Eagles, following in the footsteps of his grandfather, an Eagles Hall of Fame member. To learn more about Christian, connect with him on LinkedIn.
Disclosure:
This material is provided for informational and educational purposes only, should not be viewed as an exhaustive discussion of the topics presented, and should not be construed as individualized advice for any reader’s personal circumstances. For guidance on how these matters may impact your financial plan or investment portfolio, please contact your Thrive Wealth Management, LLC representative. While the information presented is believed to be factual and up to date, Thrive Wealth Management, LLC does not guarantee its accuracy and, due to various factors, including but not limited to changing laws and regulations, this information is subject to change. All expressions of opinion reflect the judgment of the authors as of the date of publication. Thrive Wealth Management, LLC is not a law firm or an accounting firm, and no content contained herein should be construed as legal or accounting advice. Please consult with the qualified professional(s) of your choosing for legal and accounting advice.
Please visit https://thrivewealth.com/disclosure for additional information regarding the professional designations and credentials discussed. Professional designations and credentials do not guarantee success or any particular investment or financial outcome.
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