If you are approaching retirement, it’s easy to focus on one question: How do we pay less tax this year? That matters, but it’s not the only question. A better planning conversation asks whether today’s choices create useful flexibility for the decades ahead.

Tax planning before retirement means looking at how your pre-tax, taxable, and Roth accounts may work together once regular paychecks stop. It also means coordinating withdrawals, Social Security, Medicare, charitable giving, estate goals, and investment decisions. The aim is not to avoid taxes at all costs. It’s to understand the tradeoffs and avoid letting one year’s tax bill drive a multi-decade plan.

At Ibello Wealth Management, we take a lifetime—or, depending on the client’s goals, a multigenerational—view. That’s the difference between simply minimizing this year’s taxes and making decisions that support long-term after-tax flexibility. This perspective is also crucial for retirement planning, since taxes don’t exist in a vacuum; they impact nearly every retirement decision.

Why a Smaller Tax Bill Today is Not the Whole Goal

A pre-tax contribution can be valuable. It may reduce current taxable income and give more money time to compound. But that money is generally taxable when it comes out, and a large pre-tax balance can create less choice later.

Required minimum distributions, or RMDs, are a good example. The IRS explains how RMDs work for traditional IRAs and many workplace retirement accounts. The applicable starting age depends on date of birth. Under current rules, it’s age 73 for many retirees and age 75 for people born in 1960 or later. The amount withdrawn generally becomes taxable income unless part of it represents after-tax basis.

That future income can interact with Social Security taxation, Medicare premiums, charitable strategies, and the tax picture of a surviving spouse. Paying less tax today may still be the right decision. It simply should not be assumed to be the best lifetime outcome without running the numbers.

A useful planning question: Are we minimizing taxes this year, or making a thoughtful decision about taxes across the rest of our lives (or our heir’s lives, should maximizing our financial legacy be the goal)?

Build Tax Diversification Before Retirement

The way I often explain tax diversification is simple: you want more than one door to walk through when you need retirement income. Those doors usually include:

• Pre-tax accounts. Traditional 401(k), 403(b), 457, TSP, and IRA assets may provide a current deduction or tax deferral, while withdrawals are generally taxable later.

• Taxable accounts. Brokerage assets can offer flexible access, different tax treatment for dividends and capital gains, and opportunities to manage gains and losses.

• Roth accounts. Contributions or conversions are made with after-tax dollars. If the requirements are met, qualified withdrawals are tax-free, and Roth accounts are not subject to lifetime RMDs for the original owner.

The goal is not to force equal balances into all three buckets. It’s to understand which doors you may want available, then build the mix intentionally. That may involve changing contribution elections, using a taxable account for additional savings, or reviewing whether Roth contributions or conversions fit the plan.

Use the 2026 contribution limits as a planning checkpoint

For 2026, the employee contribution limit for most 401(k), 403(b), governmental 457 plans, and the federal TSP is $24,500. The general age-50 catch-up is $8,000, while eligible participants ages 60 through 63 have a higher $11,250 catch-up. The IRA limit’s $7,500, plus a $1,100 catch-up at age 50 or older. See the IRS 2026 retirement contribution limits for eligibility and phase-out details.

If you are eligible for a health savings account, the IRS set the 2026 HSA limits at $4,400 for self-only coverage and $8,750 for family coverage. People age 55 or older may be eligible for an additional $1,000 contribution. An HSA can be useful in retirement planning because qualified medical withdrawals are tax-free, but eligibility and Medicare enrollment timing need to be reviewed carefully.

Look for the Years When Income Changes

The years immediately before and after retirement can be unusually important. A household may leave work before claiming Social Security or before RMDs begin. That can create a period when taxable income is lower than it was during the working years or may be later in retirement.

A lower-income year may create room for a Roth conversion, a planned capital gain, or a larger charitable gift. But lower income does not automatically mean a strategy should be used. The decision still has to fit cash flow, investments, Medicare, state taxes, legacy goals, and the household’s comfort with paying tax now.

A tax check can feel painful even when it supports a thoughtful long-term decision. That reaction is real. It should be acknowledged, then weighed against the plan rather than allowed to make the decision by itself.

Treat Roth conversions as a cost-benefit decision

A Roth conversion moves money from a pre-tax retirement account to a Roth account. The taxable portion is generally included in gross income for the conversion year, as described in IRS Publication 590-A. In return, the converted assets can continue growing in the Roth account, and qualified withdrawals may be tax-free.

The right question is not, “Should everyone convert?” It’s, “Would a conversion move this household closer to its goals after accounting for the current tax cost?” We would review current and projected brackets, cash available to pay the tax, RMDs, Medicare-related thresholds, investment allocation, time horizon, charitable intent, and beneficiary goals. If an RMD is due in the conversion year, it must be taken before converting.

Coordinate Withdrawals with the Portfolio

There is no universal withdrawal order. “Taxable first, pre-tax second, Roth last” may be a useful starting point in some situations, but it’s not a rule. A better approach may blend withdrawals from multiple accounts to fund spending, manage taxable income, rebalance the portfolio, and preserve flexibility.

For example, a household might use taxable assets for part of its spending, take a measured pre-tax withdrawal, and preserve Roth assets for a later year when income or expenses are higher. In another year, the mix could change because of a market decline, a major purchase, a charitable gift, or a change in tax law.

This is why tax planning and investment management should be connected. Our guide to how investment management changes after paychecks stop explains how withdrawals, risk, cash reserves, and taxes work together once a portfolio has to help replace income.

Pay attention to asset location and after-tax returns

Asset allocation is what you own. Asset location is where you own it. Two households can hold similar investments and have different after-tax experiences because those investments sit in different account types.

The placement decision should consider an investment’s expected growth, income, turnover, tax character, risk, liquidity needs, and legacy purpose. Tax-loss harvesting and gain management may also help in taxable accounts, but those decisions should support the investment plan rather than create unnecessary trading. The only returns that ultimately matter are the ones left after tax, inflation, and fees.

Watch Social Security and Medicare at the Same Time

Retirement income decisions often overlap. The Social Security Administration explains that up to 85 percent of Social Security benefits may be included in taxable income when combined income exceeds certain thresholds. That does not mean benefits are taxed at an 85 percent rate. It means up to 85 percent may be added to taxable income and taxed at the household’s applicable rate.

Medicare adds another layer. Income-related monthly adjustment amounts, known as IRMAA, can increase Part B and Part D premiums. Medicare generally uses modified adjusted gross income from the tax return filed two years earlier. For 2026, the first Part B income-related tier begins above $109,000 for an individual return and above $218,000 for a joint return, according to the CMS 2026 Medicare premium guidance. The thresholds change, so they should be checked each year.

A Roth conversion or large capital gain may increase Medicare premiums two years later. That extra cost does not automatically make the strategy wrong. It means the cost should be measured alongside the expected long-term benefit before a decision is made.

Bring Charitable Giving and Legacy Goals Into the Same Plan

Tax planning can also support the way you want to help people and organizations you care about. For IRA owners age 70½ or older, a qualified charitable distribution, or QCD, can move money directly from an eligible IRA to a qualifying charity. If the requirements are met, the amount may count toward the year’s RMD and be excluded from gross income. The 2026 QCD exclusion limit’s $111,000 per eligible individual, although a much smaller amount may be appropriate.

Legacy goals can also change how Roth conversions and withdrawals are evaluated. A person planning to spend most assets during retirement may reach a different answer than someone who expects to leave a substantial pre-tax account to children or charity. There is no standalone tax strategy. The recommendation depends on what the money is meant to do.

Review the Plan Every Year

Tax planning before and during retirement is not a one-time project. Income changes. Markets move. Laws change. Family priorities evolve. A practical annual review should ask:

• Has earned income, pension income, business income, or investment income changed?

• Are workplace-plan, IRA, and HSA contribution choices still appropriate?

• Is there a lower-income window worth modeling before Social Security or RMDs begin?

• Should withdrawals come from a different mix of taxable, pre-tax, and Roth accounts?

• Could capital gains, losses, or asset location be managed more intentionally?

• Will this year’s income affect Social Security taxation or Medicare premiums?

• Do charitable giving, beneficiary designations, or estate goals change the analysis?

• Are the financial advisor, CPA, and estate attorney working from the same facts?

The point is not to manufacture a tax move every year. It’s to make sure a useful opportunity is not missed and that one decision does not create a surprise somewhere else.

How Ibello Wealth Management Approaches Tax Planning

For families considering tax planning in Columbia, MD, the real value is coordination. We help clients evaluate how income, investments, retirement accounts, Roth conversions, distributions, capital gains, charitable giving, Medicare, and estate goals fit within the broader plan. You can see that full-picture approach in our wealth management services.

We do not prepare tax returns or replace a CPA or attorney. We help identify the questions, model the tradeoffs, organize the decision, and coordinate with the appropriate professionals. Our planning process is designed to give clients a steady hand and a clear next step as their lives and the rules change.

Ready to Talk Through Your Tax Picture?

If retirement is getting closer, now is a useful time to understand where your future income may come from and how the pieces fit together. Schedule a 20-minute introductory call to ask your questions, talk through what is on your mind, and decide if there is a fit.

No sales pitch. No pressure. No obligation.

Frequently Asked Questions About Tax Planning Before Retirement

What is tax planning before retirement?

Tax planning before retirement is the process of coordinating savings, account types, investments, income, withdrawals, Social Security, Medicare, charitable giving, and legacy goals before regular paychecks stop. The focus is not only this year’s tax bill, but the choices and tradeoffs that may affect the household over time.

Why does tax diversification matter in retirement?

Tax diversification gives a household more than one type of account to draw from. Having pre-tax, taxable, and Roth assets may provide more flexibility when managing spending needs, taxable income, market conditions, and legacy goals.

When might a Roth conversion be worth reviewing?

A Roth conversion may be worth reviewing when current taxable income is lower than expected future income, when a household has a long planning horizon, or when reducing reliance on future pre-tax withdrawals supports the broader plan. The current-year tax cost, available cash, Medicare effects, investment outlook, and legacy goals all need to be considered.

A Roth IRA conversion—sometimes called a backdoor Roth strategy—is a way to contribute to a Roth IRA when income exceeds standard limits. The converted amount is treated as taxable income and may affect your tax bracket. Federal, state, and local taxes may apply. If you’re required to take a minimum distribution in the year of conversion, it must be completed before converting. To qualify for tax-free withdrawals, you must generally be age 59½ and hold the converted funds in the Roth IRA for at least five years. Each conversion has its own five-year period, and early withdrawals may be subject to a 10% penalty unless an exception applies. Income limits still apply for future direct Roth IRA contributions.

How do required minimum distributions affect retirement taxes?

Required minimum distributions can add taxable income even when the full withdrawal is not needed for spending. The applicable starting age depends on date of birth, and the amount generally changes with the account balance and IRS life-expectancy factors, so RMDs should be modeled before they begin.

Can a Roth conversion affect Medicare premiums?

Yes. A Roth conversion generally increases modified adjusted gross income in the conversion year, and Medicare usually uses tax information from two years earlier when determining income-related premium adjustments. That does not automatically make a conversion a poor decision, but the potential premium effect should be included in the analysis.

How are Social Security benefits taxed?

Federal taxation of Social Security depends on combined income, which includes adjusted gross income, tax-exempt interest, and one-half of Social Security benefits. Up to 85 percent of benefits may be included in taxable income, but that does not mean the benefits are taxed at an 85 percent tax rate.

What is a qualified charitable distribution?

A qualified charitable distribution is a direct transfer from an eligible IRA to a qualifying charity after the IRA owner reaches age 70½. If IRS requirements are met, the distribution may be excluded from gross income and may count toward an RMD for the year.

Does Ibello Wealth Management provide tax advice?

Ibello Wealth Management and LPL Financial do not provide tax or legal advice. Ibello Wealth Management helps clients understand planning tradeoffs and coordinate financial decisions with the appropriate tax and legal professionals.

Compliance Note

This article is for informational purposes only and should not be considered individualized financial, tax, legal, or investment advice. Investing involves risk, including loss of principal. No strategy assures success or protects against loss.

Ibello Wealth Management and LPL Financial do not provide tax or legal advice. Tax and legal strategies should be reviewed with the appropriate professionals in the context of your personal situation.

Advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. Ibello Wealth Management and LPL Financial are separate and unrelated companies.

A Roth IRA offers tax deferral on earnings in the account. Qualified withdrawals of earnings are tax-free. Limitations and restrictions may apply. Traditional IRA account owners should review the income tax consequences in the year of conversion, Roth IRA withdrawal limitations, income limits for future Roth IRA contributions, and required minimum distribution rules before converting. If an RMD is due in the year of conversion, it must be taken before the conversion.