The Last Day of a Career
Tax planning for the years around retirement.
If most of your savings sit in pre-tax accounts like a traditional IRA or 401(k), almost none of it has been taxed yet. The day you start taking it out, it will be. How much depends on choices you still control, and most of them happen in the years right before and right after your last paycheck.
I'm a fee-only fiduciary. I plan the tax side of retirement first, alongside your CPA, then build the income your portfolio has to produce once the paycheck stops.
Start with the window.
The Window
The Paycheck Stops. The Tax Bill Doesn't.
Required minimum distributions eventually force money out of your pre-tax accounts, and that income is taxed whether you need it or not. The years between your last paycheck and those distributions are when you have the most say over your own tax bracket.
That's usually when Roth conversions are worth a look, spread over several years instead of crammed into one. Each conversion counts for the year it's finished in, by December 31, not by the April filing deadline.
Medicare looks back two years at your income, so each year's choices show up later in your premiums too. None of it's urgent the way a sales call is urgent. It's a set of doors that open in these years and quietly close.
The deadline
The years before RMDs.
The question to take to your advisor
"In the years before I'm forced to take that money, what's my taxable income actually going to be, and who's planning for it?"
Jones Fiduciary Wealth Management
What Gets Decided
The decisions that set your tax bill in retirement
Some of these are one-time choices. Others repeat every year. All of them are easier to get right with a plan than by default.
01
Roth conversions
Moving money from a pre-tax account to a Roth means paying the tax now so it can come out tax-free later. It mainly helps when the rate you pay now is lower than the rate you'd pay later, which is why the timing and size of each conversion matter more than the idea.
02
Required minimum distributions
At an age set by law, you have to start taking money out of most pre-tax accounts every year. The bigger those accounts are when distributions begin, the bigger the required income, and the tax on it.
03
Your pension election
If you have a pension, how you take it, as a lump sum or monthly income, with or without survivor benefits, is usually a one-time choice. Giving up a survivor benefit usually needs your spouse's written consent, and the whole decision deserves a real side-by-side comparison before you sign.
04
Company stock in your retirement plan
If your plan holds your employer's stock, a special tax election, called net unrealized appreciation (NUA), may be available when you leave, if the whole plan balance comes out within one tax year. Rolling everything into an IRA by default can cost you that option, so look before you roll.
05
When you claim Social Security
When you claim changes how much you receive, and along with your other income, how much of it is taxed. It belongs in the same plan as your conversions and withdrawals, not in a separate decision.
06
Which account you draw from
Taxable, pre-tax, and Roth money are taxed differently when they come out. The order you spend them in, year by year, is one of the quieter levers in retirement.
None of this is a recommendation for your situation. What applies to you depends on your own circumstances, and every tax decision should be made with your CPA.
How I Work Through It
Tax strategy first. The portfolio follows.
01
Read your return and your accounts
I start with your statements, your account agreements, and your last couple of tax returns. That shows how much of your savings has never been taxed, and what your bracket looks like before and after the paycheck stops.
02
Map the years, with your CPA
Then we lay out the next several years: when conversions might make sense and how big, and how they fit with Social Security, your pension, and Medicare. Your CPA is part of that conversation, because the person filing the return and the person planning it need to agree.
03
Build income that doesn't depend on selling at the wrong time
In retirement, selling into a downturn can make a temporary loss permanent. I build the income plan to reduce how often you'd need to do that. It's a design goal, not a guarantee.
Questions
What people ask before they retire
What is the best age to do Roth conversions?
There's no single best age. Conversions tend to make the most sense in years when your income is lower than it will be later, which for many people is the stretch between retiring and starting required minimum distributions or Social Security.
The right amount each year depends on your bracket, your other income, and Medicare.
Should I do Roth conversions the year I retire?
Usually not a large one. The year you retire often still includes a lot of earned income, which can make it an expensive year to add more. Conversions are more often spread across the years after, but your own numbers decide it.
When do required minimum distributions start?
At an age set by federal law, which has changed twice since 2019, with another change scheduled, and now depends on the year you were born. Your CPA or I can confirm the age that applies to you.
How does Medicare's look-back affect my taxes in retirement?
Medicare premiums can rise based on your income from two years earlier. So a large conversion or sale this year can raise what you pay for Medicare two years from now, which is one more reason to plan conversions over several years.
Should I take my pension as a lump sum or as monthly payments?
It depends on your health, your other income, your spouse, and what the lump sum would have to earn to match the payments. It's usually a permanent choice, and giving up a survivor benefit usually needs your spouse's written consent, so it deserves a side-by-side comparison before you sign anything.
What happens to company stock in my 401(k) when I retire?
If your plan holds your employer's stock, you may be able to elect a special tax treatment on that stock, known as net unrealized appreciation (NUA), generally if the whole plan balance comes out within one tax year after you leave. If it's all rolled into an IRA by default, that option is usually gone, so talk to someone before you roll.
What does it cost to talk to you?
Nothing. The first step is a free Curiosity Call. Bring your last tax return or just the question, and I'll tell you what I'd look at first.
Start With the Call
Plan the years before they start.
Bring your last tax return, a list of your accounts, or just the question that's been on your mind. There's no charge and nothing to sign, and I'll tell you what I'd look at first.
A year early beats a year late.
No charge. No pitch. Nothing to sign.
