Seven Ways to Reduce Taxes Before You Retire

On January 8, 2024 You may be able to reduce your taxes and increase your income before you retire if you follow these strategies:

• Maximize retirement contributions to tax advantaged accounts like 401ks, and IRAs. Be sure you take advantage of catch-up contributions when your reach 50 years old.
• Diversify your retirement savings accounts among taxable, tax deferred and tax-exempt accounts. It is much easier to manage your marginal tax rates in any one year if you can draw from different sources.
• Consider partial Roth conversions. The 2025 tax law made the Tax Cuts and Jobs Act rates permanent, so a 2026 rate increase is no longer scheduled, but you may still be better off paying some taxes now if you expect to be in a higher bracket later. Usually this is effective up to 22% federal rate but be sure to work with a fiduciary advisor or CPA to determine the amount of any Roth conversion from your traditional IRA.
• Review asset location. You may be better off placing a greater portion of your stock portfolio in taxable accounts to take advantage of long-term capital gains treatment while moving your bond investments to your IRA or Roth account to avoid taxes on interest income.
• Explore charitable giving strategies like Donor Advised Funds that provide immediate tax benefits while allowing for strategic giving over time. If you have ample income consider reducing your taxes (at age 73) by taking some or all of your Required Minimum Distribution from your traditional IRA as a Qualified Charitable Distribution.
• Develop a strategic estate plan. Gifting during your lifetime can significantly reduce your estate, this is especially important for estates that are approaching $5 million in assets. Various trusts can alleviate your estate tax burden while achieving your income and legacy goals.
• Stay informed. Tax laws can change and significantly impact your estate. Everyone’s financial situation is unique, so it is important that you consult with a qualified tax professional or financial advisor before implementing any specific strategy. Personalized advice can make a significant difference in the taxes you pay throughout your and your heirs lifetime. We specialize in San Diego retirement, sudden wealth, surviving spouse, wealth transfer, fee-only vs fee-based, and robo-advisor services.

The years leading up to retirement are a uniquely powerful window for tax planning. Your income is often still high, but you have more control over it than you will once you are drawing Social Security claiming and Required Minimum Distributions. Decisions you make now — how you save, when you recognize income, and which accounts you fund — shape your tax bill for decades. Taxes are also one of the largest expenses most retirees face, and one of the most controllable. Unlike market returns, which you cannot dictate, your tax strategy is something you can plan deliberately. A few thoughtful moves in your final working years can keep meaningfully more of your savings working for you throughout retirement. That is the spirit behind the strategies above — and the ones that follow. The goal is not to chase a single trick, but to build a coordinated, year-by-year approach through proactive tax planning.

Tax-deferred accounts like Traditional IRAs and 401(k)s give you a deduction today but tax every dollar as ordinary income when you withdraw it — and force withdrawals through RMDs. Taxable brokerage accounts are funded with after-tax dollars and are taxed on dividends and capital gains, often at lower rates. Roth accounts are funded with after-tax dollars but grow and come out entirely tax-free. Having all three "buckets" gives you the flexibility to choose, each year, where your income comes from — which is the key to controlling your tax bracket in retirement. If everything sits in pre-tax accounts, you lose that control once RMDs begin. Building that balance is rarely a one-year project. It often involves directing savings to Roth where it makes sense and using the lower-income years of early retirement for Roth conversions.

A Roth conversion moves money from a pre-tax IRA into a Roth IRA, paying tax now so that future growth and withdrawals are tax-free. Conversions tend to be most valuable in lower-income years, when you can convert at a modest tax rate — often the "gap years" between leaving work and starting Social Security and RMDs. Done well, conversions reduce the size of future RMDs (and the taxes they create), provide a pool of tax-free money to manage your bracket later, and can leave tax-free assets to your heirs. The art is converting just enough to fill a target bracket without spilling into a higher one or triggering Medicare planning surcharges. Because the right amount changes every year, conversions are best handled as part of an ongoing plan rather than a one-time decision.

If you are charitably inclined, giving can be remarkably tax-efficient withdrawal. Donating appreciated investments instead of cash avoids the capital-gains tax on the appreciation while still giving you a deduction. "Bunching" several years of gifts into one year — often through a donor-advised fund — can help you clear the standard deduction and itemize. Once you reach RMD age, Qualified Charitable Distributions let you give directly from your IRA. The amount counts toward your RMD and never appears as taxable income, which can also reduce the taxation of your Social Security and your Medicare premiums. These strategies let you support the causes you care about while keeping more of your wealth working toward your own goals — a genuine win-win when coordinated properly.

No single move is a silver bullet. The power comes from coordination: your account mix shapes your withdrawal options, your withdrawals shape your tax bracket, your bracket shapes your conversions and Medicare premiums, and all of it shapes what you leave behind. Pull one lever and the others move. That is why we do not hand clients a list of disconnected tips. We build a single, written plan that sequences these decisions year by year and revisit it as life and tax law change. Over a retirement, that steady coordination compounds into real, lasting savings. If your taxes feel reactive — something that happens to you each April rather than something you plan — that is usually a sign there is room to do better.

The most effective tax planning is not a single dramatic maneuver but a steady, year-by-year process. Each year you estimate your income, identify the "room" in your current bracket, and decide how much to convert, harvest, or give — filling lower brackets deliberately rather than letting income spike later when RMDs and Social Security arrive together. A typical cadence is a planning conversation early in the year, a mid-year check-in as your income firms up, and an execution pass in the fall before the December 31 deadlines. That rhythm keeps you proactive instead of scrambling. Over a multi-decade retirement, these small annual decisions compound into very real differences in lifetime taxes and how long your money lasts. The goal is not to win in any single year, but to pay the least over your whole retirement. That ongoing coordination is the heart of what integrated tax planning delivers — and it is hard to replicate without a plan that sees your full picture each year.

Begin by getting your full financial picture on paper: your accounts and their tax treatment, your expected income sources, and your goals. With that in view, you can see where the opportunities are — which years are lower-income, where the bracket "room" is, and which strategies fit. From there, prioritize. You do not have to do everything at once; often one or two moves — starting a Roth conversion plan, restructuring withdrawals, organizing charitable giving — make the biggest difference in the first year, with more to refine over time. The key is to shift from reacting at tax time to planning ahead, so each year’s decisions are deliberate. That habit, sustained over a retirement, is what produces meaningfully lower lifetime taxes. If you would like help building that plan around your numbers, a first conversation is the place to start.