Tax Strategies to Help You Keep More of What You’ve Saved | Allworth Financial

Retirement is an exciting new chapter, but it also comes with a unique set of financial considerations, particularly when it comes to taxes. After decades of saving diligently, the last thing you want is for unnecessary tax burdens to eat away at your hard-earned nest egg.

The good news? With some thoughtful planning, you can minimize your tax liability and keep more of what you’ve saved. Let’s take a look at some practical tax strategies to help you maximize your retirement income while staying compliant with the current 2025 laws and policies.

1. Be Strategic About Social Security Timing

Deciding when to claim Social Security benefits is one of the most important retirement decisions you’ll make—and it can have a significant impact on your taxes. Social Security benefits can be taxed depending on your income level. For 2025, up to 85% of your benefits could be subject to federal income tax if your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) exceeds certain thresholds:

• $25,000 for single filers
• $32,000 for married couples filing jointly

By delaying Social Security until age 70, you not only increase your monthly benefit but may also reduce your taxable income early in retirement. If you can rely on other income sources, such as savings or investments, delaying Social Security can be a smart tax move.

2. Manage Required Minimum Distributions (RMDs)

Starting at age 73 (under current 2025 laws), retirees must begin taking Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s. These withdrawals are taxed as ordinary income and can potentially push you into a higher tax bracket.

To minimize the impact of RMDs:

• Consider Roth Conversions Early: Converting traditional IRA or 401(k) funds into a Roth IRA before RMDs kick in can help spread out the tax liability. Roth withdrawals are tax-free in retirement, which can provide more flexibility later.
• Make Qualified Charitable Distributions (QCDs): If you’re over 70½, you can donate up to $100,000 directly from your IRA to a qualified charity. This satisfies your RMD requirement while excluding the donation from taxable income.

Planning ahead for RMDs can help you avoid surprises and manage your overall tax burden.

3. Take Advantage of Tax-Efficient Investment Withdrawals

Retirees often have multiple sources of income, from taxable accounts to tax-deferred accounts to tax-free accounts. The order in which you withdraw from these accounts can significantly impact your taxes.

A common strategy is:

• Withdraw from taxable accounts first (e.g., brokerage accounts) to take advantage of lower capital gains tax rates.
• Use tax-deferred accounts like traditional IRAs and 401(k)s next, keeping an eye on tax brackets.
• Save tax-free accounts like Roth IRAs for last, allowing them to grow longer and providing a cushion for unexpected expenses.

This approach can help you manage your taxable income and make the most of your retirement savings.

4. Leverage Tax Credits and Deductions

Retirees may qualify for tax credits and deductions that can reduce their overall liability:

• Medical Expense Deduction: If your unreimbursed medical expenses exceed 7.5% of your adjusted gross income, you can deduct them when itemizing. This can include long-term care expenses, which are increasingly common in retirement.
• Saver’s Credit: If you’re still contributing to a retirement account and meet the income limits, you may qualify for this valuable credit.
• Property Tax Deductions: If you own a home, keep an eye out for senior property tax exemptions or deductions offered at the state or local level.

Knowing which deductions and credits you qualify for can make a meaningful difference when filing your taxes.

5. Don’t Forget About State Taxes

While federal taxes are often the focus, state taxes can also impact your retirement income. Some states, like Florida and Texas, have no state income tax, while others may tax Social Security benefits, pensions, or distributions from retirement accounts.

If you’re considering relocating in retirement, research how the tax laws in your desired state align with your financial goals. Even if you’re staying put, understanding your state’s tax landscape can help you plan accordingly.

6. Plan for Healthcare Costs

Healthcare is one of the largest expenses in retirement, but it also comes with tax opportunities:

• Health Savings Accounts (HSAs): If you have an HSA from your working years, withdrawals for qualified medical expenses are tax-free, making this a valuable tool in retirement.
• Medicare Premiums and IRMAA: If your income exceeds certain thresholds, you may face higher Medicare premiums under the Income-Related Monthly Adjustment Amount (IRMAA). Careful income planning can help you avoid crossing these limits unnecessarily.

Being proactive about healthcare expenses can prevent surprises and provide additional tax benefits.

7. Work with a Professional

Taxes in retirement can be complex, especially when juggling multiple income sources, account types, and evolving tax laws. A financial advisor or tax professional can help you navigate these complexities and ensure you’re taking full advantage of available strategies.

They can also help with year-end tax planning, such as timing charitable donations, harvesting losses, or reviewing Roth conversion opportunities.

Final Thoughts: Keep More of What You’ve Earned

You’ve worked hard to save for retirement, and smart tax planning can help you make the most of it. By understanding the rules, exploring strategies like Roth conversions or tax-efficient withdrawals, and staying informed about changes to tax laws, you can minimize your tax burden and keep more of what you’ve earned.

If you’d like to discuss how to implement these strategies in your own plan, I’m here to help. Let’s work together to create a tax-savvy retirement strategy that protects your savings and gives you the financial confidence to enjoy this next chapter.