Income tax in retirement is often an overlooked opportunity to help make your money last. Your retirement lifestyle often heavily depends on your income. Once you’re retired, you generally have fewer options to adjust that income. You can’t change jobs, take on more hours, or work toward a bonus. Your Social Security and any pension benefits are fixed. You can’t control the stock market or your rate of return.

But you do have some control over certain aspects of your finances. You can:

  • Employ an Invest and Protect strategy to help protect your investments from down markets.
  • Decide when to take Social Security for the greatest benefits to you and your family.
  • Plan how and when to tap your different savings accounts.
  • Create a strategy for managing taxes in retirement.

If you don’t plan well, you could end up paying taxes on all the distributions from your investments, which could drastically cut into your nest egg.

Ready to work with a team that specializes in retirement planning?

* - required


Taxes can take a big bite out of your retirement savings. The IRS will currently tax 50 percent of your Social Security benefits if your provisional income is between $32,000 and $44,000. If you are fortunate enough to have more than $44,000 in provisional income, the IRS will currently tax 85 percent of your Social Security benefits.

You can help protect your lifestyle by creating a plan that proactively manages your income and your income tax in retirement by including the following:

  1. Plan when to withdraw income from your taxable, tax-free, and tax deferred assets.
  2. Choose investments designed to reduce your tax burden, like some capital gains assets.
  3. Time and group your deductions. If you know your income will change at a given point, you can time your deductions accordingly. Grouping deductible expenses (e.g. medical costs) into one year may also help, as you can reach a threshold that gives you deductions you wouldn’t have received otherwise.
  4. Remember to account for your Required Minimum Distributions.


Required Minimum Distributions (RMDs) can have a big impact on your income tax in retirement. The IRS currently asks you to begin taking Required Minimum Distribution (RMD) from your retirement accounts at age 70½, and the percentage you must withdraw gets larger every year. To address this issue, you could include these withdrawals in your retirement plan, and check to see if they push you into a higher tax bracket. If they do, you may want to reduce the balances in your IRAs and 401(k)s while you’re in a lower bracket by making prudent withdrawals.

Download a free guide on taking your Required Minimum Distribution.


Planning a schedule for your distributions, choosing your investments well, timing your deductions, and preparing for your Required Minimum Distributions are good first steps in developing your retirement tax plan. But it’s also important to understand that your tax exposure can change throughout your retirement in response to your personal financial situation, economic influences like inflation, and any relevant changes in the tax code.

It’s a lot to keep track of, especially if you concur that the best tax planning is done in concert with the rest of your retirement and financial planning. We believe a comprehensive retirement plan better protects your retirement savings and your lifestyle. Retirement Planners of America can help. Our process is designed to consider your entire financial picture.

Schedule a meeting with a Retirement Planners of America advisor to discuss your options to fight inflation, protect your savings, and reduce your income tax in retirement.