Retirement Tax Planning

Retirement Tax Planning: The Complete Guide for Retirees and Pre-Retirees

Here's a number most people don't want to think about: in retirement, taxes may be the single largest expense you face. Not healthcare. Not housing. Taxes.

That's not a scare tactic — it's a planning reality. Most people spend 30 to 40 years building a retirement account and very little time thinking about what happens when they start taking money out. The IRS has been patiently waiting for that moment. How much they collect depends almost entirely on how well you planned for it.

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At Nelson Financial Planning, tax coordination isn't something that gets added to the plan at the end. It's built in from the beginning. Christina Lamb, an IRS Enrolled Agent, and Kristin Kalley, a CPA, are part of our advisory team and work as Certified Financial Fiduciaries with the rest of our advisory team to make sure the investment strategy and the tax strategy are always talking to each other. That combination is rare in this industry. And it matters significantly to what clients actually keep in retirement.

This guide covers the core concepts of retirement tax planning: what's at stake, what the most common mistakes look like, and how to think about each piece of the puzzle. The in-depth articles linked throughout this page go deeper on each topic.

REVIEWED BY

joel garris, kristin kalley, christina lamb certified financial fiduciaries orlando

Joel Garris, CFP®, Kristin Kalley, CFP®, CPA & Christina Lamb, IRS Enrolled Agent

Certified Financial Fiduciaries™ | Nelson Financial Planning

Joel has 25+ years of retirement planning experience. Christina is an IRS Enrolled Agent and Kristin is a CPA— one of the only financial planning firms in Central Florida.

The goal of retirement tax planning isn't to avoid taxes entirely. It's to pay what you owe - and not a dollar more. That requires strategy, coordination, and someone who actually understands the tax code.

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Why It's Different

Roth · IRMAA · RMDs · Withdrawals · Social Security

What Makes Nelson Different

In-Depth Guides

FAQs

small income increases can trigger large tax hits

Why Retirement Tax Planning is Different

During your working years, taxes were largely automatic. Your employer withheld them, sent them to the IRS, and you filed once a year to settle up. The complexity was manageable because most people had one or two income sources.

Retirement changes that entirely. Suddenly you're drawing from multiple accounts - a pre-tax IRA here, a brokerage account there, a pension or Social Security on top of that - each with different tax treatment. You're responsible for estimating and paying your own taxes. And the interactions between those income sources create ripple effects that catch a lot of people completely off guard.

Here's one that surprises people almost every time: in retirement, a seemingly small increase in income can trigger a disproportionately large tax hit. Adding $4,000 in interest income in a given year can — under current thresholds — cause an additional $4,000 of Social Security benefits to become taxable. Dollar for dollar. That's an effective marginal tax rate well above what most people expect.

Add IRMAA Medicare surcharges into the mix, and the stakes get even higher. We've seen clients pay $500 or more per month in additional Medicare premiums because of a single financial decision made without considering the income threshold.

This is why planning ahead matters so much. These outcomes are not inevitable - they're the result of a lack of coordination. When your advisor and your tax professional are the same team, working from the same plan, many of these surprises can be anticipated and managed.

$4,000

Adding $4,000 in interest income in a given year can - under current thresholds - cause an additional $4,000 of Social Security benefits to become taxable. Dollar for dollar.

$500+ / month

We've seen clients pay $500 or more per month in additional Medicare premiums because of a single financial decision made without considering the income threshold.

The Topics that Matter Most

Retirement tax planning is a broad discipline. Here's how Nelson Financial Planning's team thinks about key pieces.

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Roth Conversion Decision Checklist

12 questions to ask before converting your IRA - so you don't trigger an unexpected bill.

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Roth Conversions: The Window Most People Miss

For many retirees, the years between leaving work and age 73 - when Required Minimum Distributions begin - are the most valuable tax planning years of their lives. Income is often lower during this period than it will be once RMDs kick in. That creates an opportunity.

A Roth conversion means taking money from a pre-tax IRA, paying tax on it now, and moving it into a Roth IRA where it grows and can be withdrawn tax-free. Done at the right time and in the right amount, a Roth conversion can permanently reduce future RMDs, lower lifetime tax exposure, reduce IRMAA surcharges, and leave a more tax-efficient inheritance for your family.

Done without careful modeling? It can trigger a surprise tax bill, push you into a higher IRMAA bracket, and increase the taxable portion of your Social Security - all at once.

Joel Garris on the Dollars & Sense podcast:
"Run the numbers. The ripple effects on Medicare and Social Security are real. A conversion that looks good on the surface can cost you significantly when you factor in everything it touches."

The 12-question Roth Conversion Decision Checklist — available as a free download — walks through the key factors before converting, including MAGI exposure, IRMAA thresholds, and whether you can pay the tax bill from outside the IRA.

IRMAA: The Medicare Surcharge Most People Don't See Coming

IRMAA stands for Income-Related Monthly Adjustment Amount. It's a surcharge added to Medicare Part B and Part D premiums for beneficiaries whose income exceeds certain thresholds. The 2026 thresholds are $109,000 for single filers and $218,000 for joint filers.

Here's what makes it so consequential: the jump isn't gradual. Cross the threshold by a single dollar and your entire Medicare premium increases — for you and your spouse. There's no smooth ramp. It's a cliff.

Rob Field, Nelson's National Social Security Advisor and IRMAA Certified Planner, describes it this way:
"People are paying $500+ per month in additional premiums and they're genuinely blindsided. It's not because they were irresponsible — it's because nobody walked them through this before they made the income decision that triggered it."

What most people don't realize: tax-free municipal bond income is added back into MAGI for IRMAA purposes. So a portfolio strategy that was designed to minimize tax exposure can inadvertently create an IRMAA surcharge. This is exactly the kind of interaction that gets missed when the investment advisor and the tax professional aren't working together.

2026 IRMAA THRESHOLDS

Single Filers

$109,000

Joint Filers

$218,000

Cross the threshold by a single dollar and your entire Medicare premium increases — for you and your spouse.

Required Minimum Distributions: Forced Income You Have to Plan Around

Starting at age 73 (age 75 after 2032), the IRS requires that you begin taking distributions from most pre-tax retirement accounts, whether you need the money or not. These are Required Minimum Distributions - RMDs - and for people with substantial pre-tax savings, they can push income well above what was planned.

The stakes of a missed RMD are significant: a 25% penalty on the amount not taken, reduced to 10% if corrected within two years. But the more common problem isn't missing RMDs — it's not planning for them early enough. Large RMDs in your 70s and 80s can force you into higher tax brackets, trigger IRMAA, make more of your Social Security taxable, and disrupt an otherwise well-structured income plan.

Planning for RMDs starts years before they begin. Strategies like partial Roth conversions in your 60s, qualified charitable distributions (QCDs) after age 70½, and careful account sequencing can all reduce the long-term RMD burden.

Tax-Efficient Withdrawal Order: Which Account You Pull From First Matters

Most retirees have money in three different types of accounts: taxable investment accounts, pre-tax retirement accounts (Traditional IRA, 401(k)), and tax-free accounts (Roth IRA). The order in which you draw from those accounts — and in what amounts — can have a meaningful impact on lifetime taxes.

The conventional wisdom says to draw from taxable accounts first, then pre-tax, then Roth last (to maximize tax-free growth). But that's a general rule, not a strategy. The right withdrawal sequence depends on your Social Security timing, your IRMAA exposure, your expected estate, and the year-by-year interplay between all of your income sources.

This is not a calculation you do once at retirement and forget about. It needs to be revisited as tax laws change, as your income picture shifts, and as you move through different phases of retirement.

THREE ACCOUNT TYPES

Taxable investment accounts

Pre-tax retirement accounts
(traditional IRA, 401(k))

Tax-free accounts (roth IRA)

Social Security Taxation: More of Your Benefit May Be Taxable Than You Think

Up to 85% of Social Security benefits can be subject to federal income tax - depending on your combined income. What's counterintuitive is that even relatively modest additional income can trigger significant Social Security taxation because of the way the formula works.

The interaction between Social Security taxability and other income decisions - including Roth conversions, IRA withdrawals, and investment income - is one of the most important and most frequently overlooked areas of retirement tax planning. Managing it well requires knowing the thresholds, understanding how different income sources interact, and building a year-by-year income projection that accounts for all of it together.

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Certified Financial Fiduciaries sitting at a table during a meeting in Orlando

What Makes Nelson Financial Planning Different

Most financial planning firms outsource the tax work. A client's advisor manages the investments; a separate CPA or tax preparer handles the taxes. Those two professionals often never talk to each other — which means the investment decisions and the tax decisions aren't coordinated.

Nelson Financial Planning is built differently. Kristin Kalley is a CPA – a Certified Public Accountant with years of tax planning experience—and Christina Lamb is an IRS Enrolled Agent — a designation granted by the IRS itself, requiring passage of a comprehensive three-part exam covering individual tax, business tax, and representation. She is authorized to represent clients directly before the IRS. That combination of credentials is extremely rare in the financial service industry.

The result is a retirement plan where the investment strategy and the tax strategy are built by the same team, from the same set of numbers, toward the same goal: maximizing what clients actually keep.

No account minimums.
Legally required to act in your best interest - always.