Tax Planning in Retirement: A Guide

Tax planning in retirement is the work of deciding which accounts to draw from, whether to convert savings to Roth, when to claim Social Security and how that income may affect Medicare premiums. Each choice changes your taxable income, so these pieces may work better when reviewed together.

Rules reflect information as of October 2026.

If you are 5 to 10 years from retirement, or recently retired, the tax questions often arrive all at once: which account to tap first, whether a Roth conversion makes sense, how Social Security is taxed, and why Medicare premiums can reflect income from two years earlier. This guide explains how those pieces connect. The Medicare piece is covered in more detail in our IRMAA brackets guide, and if a life event has already lowered your income, our SSA-44 checklist walks through how to ask Social Security to use newer income.

This guide is part of how we approach tax planning and retirement income planning. It is educational and does not recommend a strategy for any person.

Why do taxes often become a larger share of spending after work stops?

For many households, taxes feel larger in retirement because paychecks with withholding are replaced by withdrawals, benefits and investment income that you manage yourself. Taxes do fall for some retirees, so the result depends on your income sources and how they interact.

Withdrawals from traditional IRAs and 401(k) plans are generally included in taxable income, except for any part that was already taxed or that can be received tax-free, per the IRS retirement topics page on required minimum distributions. Part of your Social Security benefit may also be taxable. If part of your benefits may be taxable, the IRS says you may request additional withholding or pay estimated tax during the year, per IRS Topic 423.

The trade-off is control against responsibility. Having several income sources gives you choices about which to use each year, but it also means no employer is handling withholding for you. Our guide on how retirement income is taxed walks through these interactions in more detail.

In what order are accounts drawn from, and how may that change your tax bracket?

There is no single correct order. Drawing from taxable, tax-deferred and Roth accounts in different mixes changes the taxable income you report each year, which may move you into a different federal bracket. The IRS publishes each year's federal income tax rates and brackets, so check that page for current figures instead of relying on a number in an article.

Each account type carries a trade-off:

• Taxable accounts may let you choose which holdings to sell. The IRS says long-term capital gains may be taxed at rates lower than your ordinary income rate, per IRS Topic 409. The trade-off is that selling may realize gains and add to your income that year.
• Traditional IRA and 401(k) accounts may provide pre-tax savings that you can draw on as needed. The trade-off is that withdrawals are generally taxable income, and larger withdrawals may raise your bracket for that year.
• Roth accounts may provide tax-free qualified withdrawals, per the IRS Roth IRA page. The trade-off is that money generally has to be taxed first, through contributions or a conversion, before it can grow in the Roth account.

Many households blend these sources over several years to keep taxable income steadier, rather than drawing from one account until it is gone. The trade-off is that a blended approach takes more tracking and may not produce the lowest tax bill in every individual year. See our guides on tax bracket management and tax-efficient retirement withdrawal order for related ideas.

What can happen in the years between leaving work and RMDs?

The years after paychecks stop and before required minimum distributions (RMDs) begin may have lower taxable income for some households, which could create room for planned withdrawals or Roth conversions. This depends on whether you have other income, such as a pension, part-time work or Social Security.

A Roth conversion moves money from a traditional account to a Roth account and is generally taxed as income in the year of the conversion. Roth accounts do not require withdrawals while the owner is alive, per the IRS RMD comparison chart. The trade-off is that you pay tax now, and a conversion may raise your Medicare premiums two years later. Our Roth conversion planning guide and our article on multi-year Roth conversion plans explain how conversions are sometimes spread across years.

RMDs are the other side of this window. The IRS says RMDs generally start at age 73 for people who reach 73 before 2033, and at age 75 for people who reach age 74 after December 31, 2032, per section II.B.2.a of IRS Notice 2026-13. If a required amount is not withdrawn, the IRS says a 25% excise tax applies, or 10% if corrected within two years, per the IRS RMD comparison chart. Large traditional balances may produce larger required withdrawals later, which is one reason some households review conversions earlier.

How do Social Security taxes and Medicare premiums interact with taxable income?

Part of your Social Security benefit may be taxable when your other income is high enough, and the same income may raise your Medicare Part B and Part D premiums two years later. These are two separate tests that both draw on the same tax return, so one withdrawal or conversion can affect both.

For Social Security, SSA says you may pay federal income tax on your benefits if your combined income exceeds $25,000 per year filing individually or $32,000 filing jointly, per SSA's tax withholding page. The IRS describes the test as modified adjusted gross income (MAGI) plus one half of your benefits compared with a base amount for your filing status, per IRS Topic 423.

For Medicare, SSA uses the most recent federal tax return the IRS provides, which for 2026 premiums is generally a return filed in 2025 for tax year 2024. For 2026, higher premiums apply when MAGI is above $218,000 for married couples filing jointly or above $109,000 for other filing statuses, per SSA's Medicare premiums page. CMS has not yet announced 2027 figures, so this article does not state them. Our IRMAA two-year look-back guide explains the timing, and our article on Roth conversions and Medicare premiums shows how one decision can reach both.

The trade-off is that a lower premium is not always the better outcome. Paying a higher Medicare premium for a year may be reasonable if a conversion or withdrawal produces a larger long-term benefit, and the reverse may also be true. Our guide on how Social Security is taxed covers the benefit side in more detail.

What might this look like in a hypothetical year?

A planned Roth conversion adds to income in the year it happens, so the same conversion may be small enough to stay below an income threshold or large enough to cross it. The table below shows one way to think about that, using the first 2026 Medicare threshold for single filers as a reference point.

Hypothetical example for illustration only. The amounts are invented, assume a single filer who has not started Social Security, and ignore deductions and exact tax calculations. Medicare thresholds for later years may differ.

Source: SSA, Medicare premiums ($109,000 threshold for single filers, 2026 premiums, tax year 2024 income). Rules reflect information as of October 2026.

In this hypothetical, a smaller conversion could keep MAGI under the reference point, which may avoid a surcharge two years later. The trade-off is that less money moves to Roth in that year, so more may remain in the traditional account and be subject to RMDs later. A larger conversion does the opposite. Neither choice is right for every household, and the numbers that apply to you depend on your filing status, income and the thresholds in effect for the year.

What should I review before making retirement tax decisions?

Start with a list of every income source you expect in the next several years, then look at how each one affects your tax return. These questions are educational prompts, not individualized advice:

1. Which accounts do you hold (taxable, traditional, Roth), and what is the balance in each?
2. What income will cover spending in the years before Social Security or RMDs begin?
3. How might a Roth conversion, capital gain or equity compensation event change your income in a given year?
4. When might part of your Social Security benefit become taxable?
5. Which income years could affect your Medicare premiums two years later?
6. If a life event lowers your income, do you have the documents needed for a Form SSA-44 request?

Our Retirement Readiness Checkpoint is a place to start organizing these inputs.

Frequently Asked Questions About Tax Planning in Retirement

Sources

IRS: Retirement topics, Required minimum distributions and RMD comparison chart (reviewed October 28, 2026)

IRS Notice 2026-13, section II.B.2.a, applicable ages for RMDs

IRS Topic 423: Social Security and equivalent Railroad Retirement benefits

IRS Topic 409: Capital gains and losses, Topic 551: Standard deduction and Roth IRAs

IRS: Federal income tax rates and brackets

SSA: Request to withhold taxes and Premiums: Rules for Higher-Income Beneficiaries

Talk Through Your Retirement Tax Plan

I'm Patrick Thompson, founder of Sentient Financial in Laguna Niguel. I work with pre-retirees across South Orange County and virtually across the country, helping coordinate taxes, income, Social Security, Medicare and investments. See How I Work →

I offer a complimentary 20-minute Fit Call to learn what you are trying to solve and determine whether my planning approach is a good fit. If a life event has already lowered your income, start with our SSA-44 checklist.

Sentient Financial, LLC is a state-registered investment adviser in California. This information is for educational purposes only and does not constitute individualized investment, tax, or legal advice. Nothing here should be taken as a recommendation to buy or sell securities or to implement a specific strategy. Investing involves risk, including the potential loss of principal. Hypothetical examples are for illustration only and are not guaranteed. Tax and Medicare figures are as published by the IRS and the Social Security Administration. Rules reflect information as of October 2026.