By Brent Matthew
As the year draws to a close, I find myself reminding clients of the importance of tax planning. Even if you already have a general retirement tax strategy in place, going over your taxes each year could minimize what you owe. Here are 10 year-end tax planning tips for retirees.
1. Review Your Required Minimum Distributions (RMDs)
When it comes to tax planning for retirees, some moves can wait until the new year. However, RMDs from qualifying accounts must be taken by December 31. There is an exception. If this is the year you turn 73, you may wait until April 1 of the next year to make your withdrawals.
While you can delay your first RMD until April 1 of the year after you turn 73, this means you’ll need to take two RMDs in that second year (the delayed first-year RMD by April 1, and the second-year RMD by December 31). This could push you into a higher tax bracket that year, so it’s worth considering taking the first RMD by December 31 of your age-73 year instead.
If you don’t take your RMDs on time, you may be fined up to 25% of the amount you were supposed to withdraw but did not.
2. Lower Taxable Income With Qualified Charitable Distributions (QCDs)
Qualified charitable distributions reduce taxable income while satisfying RMD requirements. If you are 70½ or older, you may transfer up to $100,000 from your traditional IRA to a qualifying charity.
When assisting clients with tax planning, I often recommend QCDs to those who don’t itemize deductions.
3. Time Withdrawals From Different Account Types
In most cases, the best way to manage tax brackets and extend the life of your portfolio is to withdraw funds from your retirement accounts in the following order:
- Taxable accounts
- Tax-deferred accounts
- Roth accounts
This strategy gives money in tax-free accounts as much time to grow as possible.
4. Explore the Possibility of Roth Conversions
With a Roth conversion, you move funds from a tax-deferred account to a Roth IRA. This option may reduce your future RMDs and allow tax-free growth.
When considering Roth conversions, I emphasize the importance of running projections on income levels, Medicare premium brackets, and other factors before making a decision.
5. Harvest Investment Gains and Losses
You may already be familiar with tax-loss harvesting, where you sell underperforming investments at a loss to offset capital gains taxes. If you currently have gains in the 0% capital gains tax bracket, it may be wise to harvest those, too.
6. Check Your Medicare Premium Bracket
If you’re a Medicare beneficiary with a relatively high income, you might owe an income-related monthly adjustment amount (IRMAA). This is an extra charge on Medicare Part B and Part D premiums.
With strategic tax planning, retirees may be able to reduce taxable income enough to avoid IRMAA.
7. Make Strategic Charitable Distributions
If you itemize deductions on your tax return, you may further reduce taxable income with qualifying charitable donations. If you’re close to the standard deduction, “bunching” your donations (combining multiple years’ worth into one) might help you exceed it.
8. Review Your Social Security Taxation
Social Security is an important factor in tax planning for retirees. Many people think of Social Security as tax-free income. However, depending on your income, up to 85% might be taxable. If you adjust your withdrawals (even if it’s late in the year), you might be able to lower your tax liability.
9. Manage Your Estimated Tax Payments
Many retirees owe estimated taxes. If your income is above a certain level, you may owe taxes on 401(k) and IRA distributions above the standard withholding amount. A key part of tax planning for retirees is adjusting withholdings to reduce the risk of penalties.
10. Review Opportunities for Gift and Estate Planning
Want to make tax-efficient gifts without using part of the gift and estate tax exemption ($13.99 million in 2025)? Gifts of up to $19,000 per recipient won’t count toward the lifetime exemption.
Looking for Assistance With Year-End Tax Planning for Retirees?
Tax planning for retirees can be complex, but with the right guidance, you could save thousands. At Scottsdale Wealth Advisory, I’ve helped countless clients save on their taxes while planning for the future.
If you have questions about our services, contact us online today. To schedule your complimentary financial coaching session, call (480) 247-9090, email info@SWAFirm.com, or book directly at calendly.com/BrentMatthew.
Frequently Asked Questions About Tax Planning for Retirees
What happens if retirees don’t take their RMDs by the deadline?
If you miss the December 31 deadline, the IRS may charge a penalty of up to 25% of the amount you should have withdrawn, though this can be reduced to 10% if you correct the error within two years. For example, if you were required to take out $20,000 and forgot, the penalty could be $5,000 (or $2,000 if corrected within two years). The only exception is the first RMD at age 73, which you can delay until April 1 of the following year. But delaying means taking two withdrawals in one year, which might bump you into a higher tax bracket.
How can charitable giving lower taxes in retirement?
If you’re 70½ or older, you can send up to $100,000 directly from your IRA to a qualified charity through a Qualified Charitable Distribution (QCD). This counts toward your RMD and lowers your taxable income. Even if you don’t itemize deductions, QCDs can be a smart way to give while reducing your tax bill.
Are Social Security benefits always tax-free?
No, not always. Depending on your total income, up to 85% of your Social Security benefits may be taxable. For example, if your retirement withdrawals or investment income push you past certain thresholds, more of your Social Security check could be taxed. By adjusting withdrawals from taxable, tax-deferred, or Roth accounts, you may be able to keep your income in a lower range.
About Brent
Brent Matthew is the founder and CEO of Scottsdale Wealth Advisory, a full-service fiduciary retirement planning firm serving pre-retirees and retirees across Arizona and multiple states. With a strong commitment to always putting clients first, Brent leads the firm in developing comprehensive, tax-efficient financial plans tailored to each family’s unique goals. He is responsible for researching investment, annuity, and life insurance strategies and building smart asset allocations that reflect both long-term growth and risk management.
Brent is driven by a core belief: “The success of this firm will be measured by the success of the families it represents.” That client-first approach has guided his work since the beginning. He is currently enrolled at the College for Financial Planning and is on track to earn his CERTIFIED FINANCIAL PLANNER® designation. He also holds his Series 65 license and Arizona Life and Health Insurance Producers License.
Outside the office, Brent embraces the Arizona outdoors with “lil B” and their two pomskies, Heimo and Kota. Whether he’s hiking, fishing, dirt biking, skiing, golfing, kayaking, or skeet shooting, Brent finds balance and joy in staying active. He’s also a fan of CrossFit, brunching, and cruising the Phoenix canal system on his beach cruiser—usually with classic tunes from the Marshall Tucker Band, Gordon Lightfoot, or Crosby, Stills & Nash playing in the background. To learn more about Brent, connect with him on LinkedIn.
Advisory services are offered by Scottsdale Wealth Advisory, LLC, an Investment Advisor in the State of Arizona. Insurance products and services are offered through Scottsdale Wealth Advisory, LLC. Scottsdale Wealth Advisory, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency, and is not engaged in the practice of law. Be sure to consult with a licensed financial professional to confirm the accuracy of the insurance product you are considering.