You worked hard to build your wealth. Tax planning helps make sure more of it goes toward your life, your family, and your goals instead of getting lost to avoidable tax bills. This is not about chasing loopholes. It is about timing, coordination, and knowing which move matters now versus later.
Tax Filing Is Not Tax Planning
Your CPA usually looks backward. Tax planning looks forward.
That distinction matters. Filing tells the IRS what happened last year. Planning helps decide what should happen this year, next year, and across retirement. If your advisor sends every tax question to your CPA, you may end up stuck coordinating between professionals instead of getting an integrated strategy.
Why Taxes Matter So Much in Retirement
During your working years, income may be high. Then you retire, and income may drop.
Later, required minimum distributions, Social Security, dividends, and other income can push taxes back up. That creates a planning window between retirement and RMDs where strategies like Roth conversions may be especially important.
The Core Tax Planning Moves
Roth Conversions
A Roth conversion moves money from a pre-tax account, like an IRA or 401(k), into a Roth account. You pay tax now with the goal of reducing future taxes.
This can make sense when today’s tax rate is lower than the rate you may face later. It can also help reduce future RMD pressure.
Withdrawal Sequencing
Where you pull income from matters.
Traditional IRAs, Roth accounts, brokerage accounts, pensions, and Social Security are all taxed differently. A strong withdrawal plan asks which account to use this year, not just how much to spend.
Tax Gain Harvesting
If you have long-term gains in a brokerage account, there may be years where realizing gains is useful. In some cases, federal capital gains tax may be reduced or avoided, but those gains can still affect other planning areas like healthcare subsidies.
Tax Loss Harvesting
When investments are down, selling at a loss may create tax benefits. That does not mean selling just because the market dropped. It means using downturns carefully as part of the bigger plan.
Charitable Giving
Charitable giving can be more powerful when it is planned. Donor-advised funds and other giving strategies may help align generosity with tax efficiency. Root’s tax checklist includes donor-advised funds and charitable giving as tax planning topics to review.
The Healthcare Tax Trap
If you retire before Medicare, your income can affect ACA subsidies.
That means tax planning and healthcare planning are linked.
For ACA marketplace plans, subsidies are based on modified adjusted gross income. Roth conversions can increase income, which may reduce subsidies. Keeping income low may help with healthcare costs, but it could also mean missing a valuable Roth conversion window.
There is no universal answer. The better question is:
What saves more over time: lower healthcare premiums now, or lower tax bills later?
Know Which Income Number Matters
Not all “income” is the same. Taxable income, adjusted gross income, and modified adjusted gross income can affect different parts of your plan. Health insurance subsidies may look at modified adjusted gross income, while Roth conversion planning often focuses on taxable income.
This is why tax planning cannot happen in a vacuum.
What a Tax Plan Should Review
A strong retirement tax plan should look at:
- Roth conversions
- Tax loss harvesting
- Tax gain harvesting
- Donor-advised funds
- IRMAA planning
- Estate taxes
- Healthcare subsidies
- Tax windfalls
- Real estate
- Filing strategy
- Withdrawals
- Charitable giving
- Savings strategy
Root’s tax planning checklist uses these areas to begin the conversation, not as a one-time review.
The Real Goal
The goal is not to pay the least tax this year. The goal is to reduce avoidable taxes over your lifetime while still funding the life you want.
A strategy that looks great on paper can be wrong if it ignores your travel, family, giving, health, or lifestyle goals. Tax planning should support your life, not become the whole point of the plan.
Wondering if it’s time to talk to an advisor about retirement planning? Learn more.