The Insider’s Guide to Reducing Taxes in Retirement


Whether retirement is fast approaching or has already arrived, you’re probably looking for ways to maximize your income flow for the future. Minimizing the tax burden of your retirement accounts is an essential element of maximizing retirement income.

Your retirement assets are the key to the security, comfort and lifestyle you count on for your later years. You not only need to protect the assets themselves—you want to reduce the bite that taxes can take out of every aspect of your portfolio.

This is a especially important if you’re a high-income earner (HIE) or high-net-worth (HNW) individual. Earning and saving significant wealth is wonderful—as long as you don’t end up giving large sums of your hard-earned cash to Uncle Sam in retirement. Ouch!

If you don’t take advantage of the tax breaks and loopholes we’ll introduce here, your higher tax bracket can result in tax bills that consume a painful portion of your earnings.

The good news is that there are ways for high-income earners and high-net-worth individuals to lighten your tax load in retirement—legally and ethically—if you know what you’re doing.

This guide will help you understand tax considerations for common types of retirement funds and accounts, and learn key strategies for minimizing or limiting taxes on your income and portfolio.

Decumulation strategy is a fancy way of describing how you manage your retirement assets to minimize Uncle Sam’s cut. To win at this endeavor, you’ll need to understand the tax implications of Individual Retirement Accounts (IRAs), Social Security benefits, and Medicare taxes. You’all also want to take a look at how a Roth IRA can help you keep more money for yourself throughout your retirement

Some of these concepts—required minimum distributions, IRMAA brackets, the Social Security tax torpedo, and more—can be confusing or overwhelming. We understand! We help clients simplify and clarify their strategies every day to optimize their retirement income and assets, and we specialize in helping HIE and HNW individuals reduce their potentially significant tax burdens.

Let’s dive in and get a handle on these concepts, so you too can plan to lighten your tax load and maximize income in retirement!

Before we begin exploring the pros and cons of different retirement accounts and assets from a tax perspective, it’s vital to understand how your tax bracket affects your tax responsibility.

Every income range is associated with a tax rate. That income range is known as a tax bracket. Brackets tell us how much tax you must pay on your taxable income. Each bracket specifies a marginal tax rate—the tax you pay on the next dollar of taxable income.

The US tax system is progressive, taxing those with higher incomes more than those with lower incomes. Generally, the more you earn, the higher your tax bracket. At least, that’s the way it works in theory. In practice, there are plenty of tax breaks and loopholes that the wealthiest can take advantage of to lower their taxes. Famously, billionaire Warren Buffet has complained that his secretary pays more tax on a percentage basis than he does!

Currently, there are seven tax brackets. But it gets a little more complicated: each bracket specifies a minimum and maximum threshold of taxable income. Those thresholds depend on your filing status: Single, married filing separately, married filing jointly, or head of household.

Doing the math, that’s 7 brackets x 4 filing statuses = 28 possible tax brackets! The one you’re in is important because:

  • Tax brackets specify how much of your money you’ll send Uncle Sam for income taxes.
  • Many states and municipalities charge income tax using their own tax brackets. Once again, these can reduce your post-tax income.
  • Tax brackets may also affect your behavior if they motivate you to act to lower your income.

This is why it’s essential to minimize your taxable income. High taxable income can mean a whopper of a tax bill.

If you can reduce your net taxable income enough, you can lower your tax bracket, reducing your marginal taxation rate.

Now, let’s look at the most common tax-sheltered savings instruments, their tax pitfalls, and how to sidestep them!


Congress has created tax-advantaged individual retirement accounts that postpone taxes on the growth of your contributions. The two IRA types, traditional and Roth, help you cut taxes differently—and each offers special tax treatment that can help you grow your wealth faster.

TRADITIONAL IRAS A traditional IRA is pre-tax, which means you don’t pay income tax on the money you contribute each year, up to an annual maximum contribution. Traditional IRAs have age-related rules regarding contributions and withdrawals. For example, you may have to pay a penalty if you withdraw money before age 59 ½.

Distributions from traditional IRAs are subject to taxes based on your tax bracket at the time. That’s why many of the strategies discussed in this guide focus on minimizing taxes on these distributions, as well as the impact of distributions on your tax bracket.


Roth IRAs are similar to traditional IRAs, with the biggest distinction being how the two are taxed.

A Roth IRA is an individual retirement account to which you contribute after-tax dollars. While a traditional IRA allows you to contribute money before it’s taxed, the money you contribute to a Roth IRA is taxed before you contribute. The primary benefit of a Roth IRA is that your contributions (and the earnings on those contributions) grow tax-free, and can be withdrawn tax-free after age 59½ (if the account has been open for at least five years). So although you pay taxes on the money before it goes into your Roth IRA, all future withdrawals are tax-free.

There are income limits on Roth IRAs. Single filers can’t contribute to a Roth IRA if they earn more than $146,000 in 2024. For married couples filing jointly, the limit is $230,000 in 2024.

Roth IRAs are best when you think your tax bracket will be higher in retirement than it is right now.


Once you turn 73, a traditional IRA requires you to start taking Required Minimum Distributions (RMDs). You can take your annual RMDs in installments or all at once during the tax year.

When RMDs begin at age 73, you’ll calculate the amount you must withdraw using the tables in IRS Publication 590, which give estimates of your life expectancy.

You must take your first distribution by April 1 of the year following your 73rd birthday. Your second distribution must follow by December 31 of the same year, and every year after that.

These distributions are counted as ordinary income for tax purposes. In other words, as soon as funds leave your IRA account, they no longer enjoy the special tax treatment they had while sheltered in the IRA.


While RMDs are your friend because they provide income for your government-calculated life span (although we hope you’ll live much longer!) RMDs are not your friend in the sense that they’re taxable—and can increase your tax rate. 

When RMDs increase your net taxable income, your tax bill will be significantly higher. Large RMDs may even boost you into a higher tax bracket!

For example, if Jane’s RMD is $100,000 per year, and all her other income adds up to $44,000, her pre-RMD tax bracket was 12%, But post-RMD, she finds herself in the 24% bracket! That means every extra dollar in income is taxed at the 24% marginal rate.

On the other hand, let’s look at Sam, a high-net-worth (HNW) individual. His pre-RMD taxable income is $500,000, putting him in the 35% bracket. A $100,000 RMD puts him in the top bracket of 37%. The actual difference due to bracket creep is less than that in Jane’s case. He’s paying much more in taxes, of course, but bracket creep is less of a factor.

Regardless of your current tax bracket, it’s vital to explore ways to control your RMDs and keep taxes in check. If you’re a HNW individual and anticipate large RMDs from your traditional IRA, minimizing the impact of those RMDs is even more crucial.

reducing taxes in retirement


Here are some of the best ways to minimize the tax impact of your annual IRA income.


The gap years span from retirement to age 73, when RMDs begin. The gap’s key feature is that your income (and tax bracket) may be lower during these years until RMDs and Social Security benefits kick in.

The gap years provide an opportunity for planning that can reduce your taxes, increase the after-tax value of your investments, and help set a game plan for the rest of your life. The means to achieving these goals include postponing Social Security benefits and partially converting traditional IRA assets to a Roth IRA.


Social Security benefits can drop a “tax torpedo” on some higher earners. That’s why if you’re deciding when to file for Social Security, you should avail yourself of a multi-year strategy that can factor in tax rates and the potential benefits of delaying filing until age 70.
You pay Social Security taxes throughout your working career. The highest 35 years of earnings and the age at which you claim your benefits together determine how much you’ll receive each year.

You can claim benefits from age 62 to 70, with 67 currently representing the full retirement age (FRA) for people born in 1960 or later. The earlier you start receiving benefits (i.e., the Primary Insurance Amount, or PIA), the less you’ll collect from Social Security each year.

You’ll receive your maximum Social Security benefit if you wait until 70 to claim benefits. Your benefit increases by 8% a year between your FRA and age 70. On the other hand, your Social Security income is reduced by 35% if you claim your benefits at age 62. 

For most people, delaying Social Security is the best strategy because:

  • You’ll earn more annual income by waiting. You get a guaranteed increase of approximately 8% per year, currently the best risk-free
    return on the planet!
  • Taking early benefits raises your income (and your taxes) during the gap years, which reduces the effectiveness of the second gap strategy: partial Roth conversions.

While waiting is best, it’s often contingent on the other resources you have available to you, such as cash in savings accounts, investments in taxable accounts, money in a Roth IRA, a pension provided by an employer, RMDs from an inherited IRA, distributions from a business, or passive income from rental property. 

You could avoid the gap by working until age 73, but if you work and take Social Security benefits at the same time, you may trigger IRMAA (see next section)— that’s part of the Social Security tax torpedo. Many will also face higher state and local taxes.


High-income earners (specifically, those with a high modified adjusted gross income, or MAGI) must concern themselves with Medicare’s Income-Related Monthly Adjusted Amount (IRMAA). For our purposes here, a HIE in 2023 is anyone married and earning over $206,000 a year, or over $103,000 a year if single.

IRMAA is a surcharge that increases your Medicare Part B and Part D standard monthly premiums. It’s based on your MAGI from the previous tax year. MAGI is calculated by adding certain deductions—e.g., tax-free foreign income, IRA contributions, student loan interest, etc.—back to Adjusted Gross Income (AGI). 

IRMAA is calculated based on six graduated MAGI brackets. In 2022, the top bracket was $609,351 ($731,201 for joint filers). If you were in this bracket, your monthly Part B premium would balloon from the $174.10 base to $578.30, and your Part D premium would increase by $77.90/month. That’s an extra $7,874.40 annually in Medicare premiums. Ouch!


An excellent strategy for taking advantage of the gap years is to convert part of your traditional IRA to a Roth. You’ll pay taxes on the converted amount, but once that money has resided in the Roth IRA for the required time, it can be withdrawn tax-free (assuming you’re at least 59 ½ years old).

Converting some of your traditional IRA to a Roth IRA during the years between retirement and when you begin taking Socal Security and RMDs makes sense because your income is generally lower during that period. This means you’re in a lower tax bracket, so when you move it—and it’s taxed—it will be at a lower tax rate.

insider's guide to reducing taxes

You’ve saved taxes on that money at a lower bracket, rather than withdrawing it later from the traditional IRA when you might be in a higher tax bracket due to SSI and RMDs. Then, it can grow in the Roth IRA tax-free, for later tax-free withdrawal. 

Through conversions, you can also spread your tax payments across more years. Let’s say you want to convert $1 million into a Roth IRA. If you did that all in one year it would push you into higher tax bracket—say 35%. But if you convert that $1 million by $100,000 a year over ten years, it would keep you in a lower tax bracket—perhaps 22%. If later on your RMDs and SSI push you in the 32% tax bracket, you’ve saved 10% in taxes.

This strategy is even more powerful when you also postpone Social Security benefits until 70, thereby keeping your tax bracket lower for at least some of the gap years.

Conventional strategies overlook the potential benefits of such strategically timed Roth conversions.


You should account for a pension when planning your gap years. If possible, you’ll want to postpone pension income until age 70, but some pensions require an earlier payout.

A plan to reconcile pension income with Roth conversions and RMDs would ideally include making partial Roth conversions before taking a pension. In this way, you avoid having two sets of income simultaneously.

Here is an example of how this could work:

Paul is about to retire at age 60 with $1 million in his traditional IRA. His pension will begin at age 65. His Social Security options include annual benefits of $21,000 at age 62, $30,000 at 67, or $37,000 at 70.

After careful planning with our firm, Paul begins a strategy of partial Roth conversions at age 60. He continues to do conversions annually after his pension starts at age 65, but at lower amounts to remain in the lower tax bracket.

Once Social Security begins at age 70, Paul reduces the conversion amount by the amount of Social Security to keep the tax bracket lower. He stops conversions completely when RMDs start at 73.

In this way, Paul:

  • Decreased his taxable income during the earliest gap years
  • Minimized taxes on his eventual RMD and the yearly partial Roth conversions
  • Kept more money in his pocket and sent less to the government

Paul happened to be single, but if he’d had a spouse, the retirement plan would proceed from the household level—taking into account his spouse’s work income, 401k/pension income, Social Security benefits, and the asset value of her traditional IRA.

The object is to minimize household taxes by managing assets and income jointly during the decumulation phase.


Nothing beats doing good for others while doing well for yourself. Qualified Charitable Donations (QCDs) achieve this worthy goal by maximizing charitable impact while minimizing taxes. 

Beginning at age 70 ½ (not 73!), owners of traditional IRAs can start making QCDs directly from their IRAs to eligible organizations (i.e., operating charities and/or qualifying public charities), up to $100,000 per year.

The donations are neither taxable nor tax-deductible. However, once you reach age 73, you can fund QCDs from your RMDs and avoid taxes on the donated portion of your RMD. This also helps you avoid possible bracket creep and increased IRMAA. This directly reduces your income dollar for dollar—in other words, it’s not a deduction, it comes off the top. If you give $50,000, it reduced your taxable income by $50,000.

Waiting until age 70 1/2 to make QCDs makes a lot of sense from a tax perspective. First, you’ll have more taxable income at age 70, assuming you waited to claim your Social Security benefit until then. QCDs do not increase your taxable income.

Secondly, waiting until age 70 ½ compared to 60 allows your IRA to grow for another 10 years. You’ll have more money to donate, making a more significant impact on the charity while saving more money in taxes.

Third, by doing this you’re spending some of your IRA which will give you a smaller tax burden in future years also. This can help HNW individuals who are more interested in avoiding the taxes on RMDs than collecting the money. It reduces the amount of money you have to take out each year going forward because your RMD is based on a percentage of the account value.

Let’s say that over the course of couple of years you gave $100,000. If your IRA was $1 million, that donation brought it down to $900,000. How is that going to reduce your income in future years? In the first year of RMDs, 3-4% of the balance has to be taken out. In year one, if you gave away $100,000, 3-4% of that would be be $3,000-$4,000. So your donation not only reduced your income that year, it also reduced your RMD in the future.

QCDs can be more efficient than conventional cash donations for which you claim a charitable deduction. The reason is that QCDs reduce your Adjusted Gross Income (AGI), which positively affects several important calculations, such as the taxable portion of Social Security benefits and the credits/deductions for which you qualify. 

Moreover, QCDs provide tax benefits even if you don’t itemize deductions because they’re excluded from taxable income.


As crucial as RMDs are, they are but part of a complete retirement strategy. What if you aren’t charitably inclined or are unsure if you want to start giving away money early in retirement? Consider adding these items to your retirement plan: 

Realize capital gains to decrease taxes in retirement: 

By selling some of your profitable investments, you may be eligible for a tax rate as low as 0% (if you’re in the two lowest Federal tax brackets).

Capital gains are the profits on the sale of an asset. The taxes on long-term capital gains (i.e., on assets held for a year or longer) are lower than those for ordinary income. The 0% tax rate applies to a married couple filing jointly with taxable income less than $94,050 in 2024 ($47,025 if single).

Once Social Security and RMDs hit, your tax bracket increases, so if you’re going to need to sell them to use as income, selling some of these assets while the rate is at 0 percent makes sense.

It’s important to note that we’re not talking about retirement accounts here, which don’t bring capital gains. This applies to non-retirement assets—stocks, bonds, mutual funds, brokerage accounts. Also, if you sell an asset before it’s been held for 12 months, it’s a short-term gain and it’s taxed as ordinary income. This strategy only applies to long-term capital gains.

Postpone expenses:

If you have a business or rental property, it may make sense to postpone costs such as furnishings or painting until you take RMDs. This will enable you to reduce your income and taxes by claiming these expenses later. 

Delay Social Security while you’re still working: 

This makes sense since you already have work income, and Social Security would increase your tax bill even more.

Keep contributing while you work: 

You can continue (and deduct!) earned income to your IRA if you work past age 73, but other types of income—such as that from investments—can’t be contributed. These deductible contributions can provide a slight offset to the extra taxes you’ll face due to RMD income.

Prevent RMDs while working:
If you continue to work past retirement age and into your RMD era, RMDs plus a salary can bump you into a much higher tax bracket due to the progressive tax code.

You can avoid taking RMDs on a traditional IRA by rolling the entire IRA into your current 401k plan. While you’re still working, you don’t have to take RMDs from your active 401k or 403b plan (assuming you aren’t the business owner).

reducing taxes



A 3.8% Medicare surcharge tax applies to net investment income (NII) for individual taxpayers with a MAGI above $103,000 ($206,000 for joint filers). NII is income from interest, dividends, annuities, capital gains, rental income, and royalties. 

If you do trigger the Medicare surcharge, you want that 3.8% to be on a lower amount. You can reduce your NII by reviewing your investments’ tax efficiency. For example, consider moving some investments into tax-deferred accounts, such as your IRA or 401k.

Some investments produce higher dividends and income. For example, bonds tend to generate higher income than stocks. Therefore, when bonds are held in a brokerage account, they increase ordinary income every time they pay interest. However, if you put them inside an IRA or 401k, they won’t produce taxable income.

Tax-loss harvesting is another classic way to reduce capital gains. This strategy allows you to take losses to offset other gains, then replace those assets. A good example is the unrealized losses many people had in 2022’s significant stock market reduction. Let’s say you had $2 million in the market, which now is worth $1.8 million.

Unless you sell, you don’t get any benefit from the loss.

With this strategy, you would sell your losing positions—let’s say various stock funds—at a $200,000 loss. If you have $200,000 of gains somewhere else, this loss can offset those gains for a net zero gain. This could potentially save you about $30,000 in taxes.

The important next step in this strategy is that you want the proceds from the various stock funds to regain the value it lost, so on the same day you sell these assets at a loss, you buy another similar asset. So if you sell one mutual fund that’s down 20%, buy a different one that’s also down 20%, and you'll have an investment that should go back up in time. The key is to get back into something that will help you recoup those losses. You’ll get growth in the future and bear fruit later on (hence the “harvest” concept) but in the meantime you capitalize on the setback by using it to offset taxable gains.

Investing in tax-free state bonds can also reduce taxable income. These pay interest that is tax-free.

You can use installment sales to spread significant gains and minimize your adjusted gross income, and real estate like-kind exchanges can also defer taxable gains. Installment sales can be done when you have investment property or business. Typically, if you sell a business or investment property, you would pay tax on the entire gain in one year. But if you can structure an agreement with the buyer to acquire the investment over a period of, say, ten years, than you spread out that gain and therefore your taxable income.

For example, let's say you sell a business for $1 million. If all that comes to you this year, you’ll owe taxes on the whole amount AND be pushed into a higher tax bracket. If you structure the sell over ten years, you’ll be paid $100,000 a year for ten years and still get the $1 million—but stay in a lower tax bracket.

Real estate like-kind exchanges occur when you sell an investment property and buy another “like” investment within a certain period of time; this allows you to defer that gain. You get the benefits of putting the entire gain into another property without increasing taxes today. For example, if you paid the gains on a $1 million sale, you might retain $700,000; if you take the whole million and buy another, you defer that gain—until you sell the next property. But you can do this again and again, and continue to defer that gain. You can also buy something better that may appreciate more.


Recent changes to IRA inheritance rules can trip up non-spouse beneficiaries. Under the new regulations, these IRAs no longer have annual RMDs, but owners must empty the account within 10 years. 

That’s good because it gives the inherited IRA 10 years to grow tax-deferred. However, if you take no distributions during the 10 years, you’ll face a large tax bill when the deadline arrives. Also, the extra income could push you into a higher tax bracket and expose you to a larger IRMAA tax.

If you inherit a non-spousal IRA, plan a withdrawal strategy and timetable to reduce your tax liability.


Early planning is best since it gives you time to map out contingencies when the unexpected occurs (and it will!). If you’d like to speak to us, reach out by scheduling a free consultation where we can learn more about you, and see if we’re a fit.

At Calamita Wealth Management, we are fee-only, fiduciary, and independent financial planners. That means we’re never paid commissions of any kind, and we have a legal obligation to provide unbiased and trustworthy financial advice that puts your best interests first.

Our mission is to ensure your successful retirement by providing you with effective financial planning that is based solely upon what you want your life to be.


Todd Calamita is the founder and managing principal of Calamita Wealth Management, an independent, fee-only wealth management company that focuses on providing wealth management solutions to affluent individuals over 50 (and their families). Todd has more than 20 years of experience in the financial services industry and is passionate about helping people live a better life by designing and implementing customized financial plans that bring clarity and confidence.

Administration from Ohio University and a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University. He has authored a book, Plan Smart: Conquering 10 Common Money Traps, as well as numerous articles on wide-ranging personal finance topics, from taxes to retirement accounts. Todd has also been featured in a Financial Boot Camp TV series.

When he’s not working, you can find Todd spending time with his wife, Teresa, and their two sons, Colin and Cameron. He enjoys rock climbing, swimming and traveling, and he has a black belt in Tang Soo Do, a Korean martial art. To learn more about Todd, connect with him on LinkedIn.


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