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Small Tax Planning Moves That Can Make a Big Difference

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How Proactive Tax Planning Can Help Create More Retirement Income Flexibility

Summer often brings a natural lull — tax season is behind you, and next April still feels far away. But this quieter stretch of the year can actually be one of the most useful times to revisit your tax situation. For many retirees and pre-retirees, taxes represent one of the most significant financial considerations they will navigate throughout retirement. While taxes are an unavoidable part of financial planning, proactive strategies may help individuals better understand their options and make informed decisions about their retirement income.

Tax planning is not just something to consider when preparing an annual tax return. It is an ongoing process that involves reviewing your income sources, retirement accounts, investment decisions, and long-term financial goals. With a clearer picture of your year-to-date income and still enough time to act before year-end deadlines, summer is a natural checkpoint along the way.

At Agemy Financial Strategies, we believe comprehensive retirement planning goes beyond simply accumulating wealth. It involves creating a thoughtful strategy designed around your goals, priorities, and the challenges that may arise throughout retirement.

Small, intentional planning decisions may help improve the flexibility of your retirement strategy over time.

Important Note: Tax planning involves complex rules that vary based on individual circumstances. This article is intended for educational purposes only and should not be considered tax, legal, or individualized financial advice. Please consult with your qualified tax and legal professionals before making decisions related to your specific situation.

Why Tax Planning Matters in Retirement

During your working years, managing taxes may look very different from how it does in retirement.

Many individuals receive predictable employment income, contribute to retirement accounts, and benefit from employer-sponsored plans that offer tax advantages.

Retirement often changes the way income is generated.

Instead of receiving a paycheck, retirees may rely on a combination of income sources, including:

Each source of income may have different tax considerations. The timing and coordination of withdrawals can influence your overall financial picture.

A thoughtful retirement tax strategy may involve evaluating questions such as:

  • How should retirement accounts be accessed over time?
  • Could Roth conversions be appropriate for your circumstances?
  • How might required minimum distributions affect future income?
  • How can you create greater flexibility among different account types?
  • How might changes in tax laws impact your retirement strategy?

The earlier these considerations are addressed, the more opportunities you may have to evaluate potential strategies.

Tax Planning

Why Summer Is a Smart Time to Revisit Your Tax Strategy

It may seem counterintuitive to think about taxes while you’re planning summer vacations, but mid-year is one of the most useful windows for tax planning all year. Tax filing season is behind you and next April is still a long way off, which makes now a good time to start lining up strategies to help reduce your 2026 tax bill.

A mid-year checkup can help you avoid being surprised by a potentially large tax bill later and may help uncover ways to save for the rest of the year. This year in particular, several recent law changes make a summer review especially worthwhile: the standard deduction for 2026 has risen to $16,100 for single filers and $32,200 for married couples filing jointly, and recent tax legislation increased the state and local tax (SALT) deduction cap to $40,000 (subject to income phaseouts) for tax years 2025 through 2028 — a change that may make itemizing worth a second look for some retirees. 

At the same time, starting in 2026, the value of itemized deductions is capped at 35% for those in the 37% tax bracket, which can affect how charitable giving strategies are structured. 

For retirees weighing Roth conversions, RMD timing, or charitable giving, a summer review offers a clearer picture of year-to-date income than you’ll have in January, plus enough runway to actually implement changes before December 31 deadlines arrive.

Small Tax Planning Move #1: Review Your Tax Bracket Each Year

One of the simplest tax planning steps is understanding your current tax situation.

Your taxable income can change from year to year based on factors such as:

Many retirees assume their tax situation will remain consistent throughout retirement. However, income levels can fluctuate significantly depending on life events and financial decisions.

Reviewing your projected income annually may help identify opportunities to evaluate before the end of the tax year.

For example, some individuals experience a period between retirement and the beginning of required minimum distributions when their taxable income may differ from future years. This timeframe may be worth reviewing with your financial and tax professionals.

Small Tax Planning Move #2: Evaluate Whether Roth Conversions May Fit Your Retirement Strategy

Roth conversions are one strategy many retirees and pre-retirees consider when evaluating their long-term tax planning options.

A Roth conversion involves transferring assets from a traditional retirement account, such as a traditional IRA, into a Roth IRA. The amount converted is generally included as taxable income for that year.

The potential benefit of a Roth IRA is that qualified withdrawals may generally be tax-free if certain requirements are met.

However, Roth conversions are not appropriate for everyone.

Before considering a conversion, it is important to evaluate factors such as:

  • Current and projected future tax brackets
  • Retirement income needs
  • Available funds to pay potential taxes
  • Time horizon
  • Estate planning considerations
  • Future changes in tax laws

A Roth conversion may be beneficial for some individuals depending on their circumstances, but it may also increase taxable income and should be carefully evaluated with qualified financial and tax professionals.

Small Tax Planning Move #3: Understand Required Minimum Distributions (RMDs)

Required minimum distributions (RMDs) are an important consideration for many retirement savers.

Generally, owners of traditional IRAs and certain employer-sponsored retirement plans must begin taking required withdrawals once they reach their applicable RMD age under current law.

RMD rules have changed in recent years, including updates from the SECURE Act and SECURE 2.0 Act. Because requirements may vary based on factors such as birth year, account type, and individual circumstances, it is important to review the current rules that apply to you.

RMDs can affect several areas of retirement planning, including:

Planning ahead may help you better understand how future required withdrawals could affect your overall retirement strategy.

Small Tax Planning Move #4: Consider Qualified Charitable Distributions (QCDs)

For individuals who regularly support charitable organizations, qualified charitable distributions (QCDs) may be a strategy worth discussing with a qualified professional.

A QCD allows eligible individuals to make a charitable donation directly from an IRA to a qualified charitable organization.

When eligibility requirements are met, QCDs may allow certain individuals to satisfy all or part of their required minimum distribution obligation while receiving potentially favorable tax treatment.

QCD rules, including age requirements and annual limits, are subject to change.

This strategy may be worth exploring for individuals who:

  • Give regularly to charitable organizations
  • Are required to take RMDs
  • Want to incorporate charitable giving into their retirement planning

As with any tax-related decision, coordination with your tax professional is important.

Small Tax Planning Move #5: Build Flexibility Through Different Account Types

Tax Planning

Tax diversification can be an important consideration when preparing for retirement.

Different types of accounts may receive different tax treatment, including:

  • Tax-deferred accounts such as traditional IRAs and many employer-sponsored plans
  • Tax-free accounts, such as Roth IRAs, when qualified withdrawal requirements are met
  • Taxable investment accounts

Having assets across different account types may provide additional flexibility when evaluating retirement income strategies.

For those still working and contributing, summer can be a good time to check in on how much you’ve set aside so far this year. For 2026, employees can generally contribute up to $24,500 to eligible 401(k) plans, with December 31 as the final date to make contributions. If you’re behind pace toward that limit — or toward any personal savings goal — mid-year gives you several months to adjust contributions gradually rather than scrambling in December. And if you’re 50 or older, don’t forget to factor in available catch-up contributions.

For example, having multiple sources of retirement assets may allow individuals to consider different approaches when determining how to meet income needs throughout retirement.

The appropriate strategy depends on your specific circumstances, goals, and financial situation.

Small Tax Planning Move #6: Review the Tax Impact of Investment Decisions

Investment decisions and tax planning are closely connected.

Certain investment activities may create tax considerations, including:

  • Selling investments with gains
  • Realizing capital losses
  • Receiving dividends
  • Rebalancing a portfolio

Tax-loss harvesting is one example of a strategy investors may discuss with qualified professionals. It involves selling certain investments at a loss to potentially offset capital gains, subject to applicable rules and limitations.

However, taxes should not be the only factor considered when making investment decisions.

Investment choices should continue to align with your broader financial objectives, risk tolerance, and retirement goals.

Small Tax Planning Move #7: Coordinate Retirement Income Withdrawals

Many retirees have multiple sources of retirement savings.

Determining how and when to access these accounts is an important part of retirement planning.

Potential income sources may include:

  • Traditional retirement accounts
  • Roth accounts
  • Brokerage accounts
  • Cash reserves

There is no single withdrawal strategy that works for every retiree.

A coordinated approach may involve reviewing:

  • Income needs
  • Tax considerations
  • Investment objectives
  • Legacy goals
  • Changing personal circumstances

Creating a retirement income strategy involves balancing today’s needs with future financial considerations.

Small Tax Planning Move #8: Consider How Income Decisions May Affect Other Retirement Expenses

Tax planning does not happen in isolation.

Certain retirement income decisions may also interact with other financial considerations, including healthcare costs.

For example, Medicare premiums may be affected by income levels through income-related monthly adjustment amounts (IRMAA).

Understanding how different financial decisions may influence multiple areas of retirement planning can help individuals make more informed choices.

This is why a comprehensive approach is often valuable when evaluating retirement decisions.

The Importance of a Comprehensive Retirement Strategy

Tax Planning

Tax planning is one important piece of a broader retirement plan.

Investment management, retirement income planning, estate considerations, charitable giving, and risk management all work together.

A decision that appears beneficial in one area may have additional considerations elsewhere.

For example:

  • A larger retirement account withdrawal may increase taxable income.
  • A Roth conversion may affect taxes in the year it occurs.
  • Delaying withdrawals may impact future required distributions.
  • Selling investments may create taxable events.

Understanding these connections may help you evaluate decisions within the context of your overall retirement goals.

Planning for the Retirement You Envision

At Agemy Financial Strategies, we believe retirement planning should be centered around more than account balances. It should reflect your lifestyle goals, family priorities, and vision for the future.

Tax planning is one component of creating a comprehensive retirement strategy.

By reviewing your options, staying informed about changing regulations, and working with qualified professionals, you can take proactive steps toward building a retirement approach designed around your unique circumstances.

Small planning decisions made over time may help create greater clarity and flexibility as you navigate retirement.

Start Building a More Confident Retirement Strategy

Tax laws and retirement regulations continue to evolve. Strategies that may be appropriate today may need to be reviewed as your circumstances and financial goals change.

At Agemy Financial Strategies, we help individuals and families evaluate retirement planning strategies designed around their unique goals and priorities.

If you are approaching retirement or are already retired, a comprehensive review may help you better understand your options and prepare for the years ahead.

Tax Planning

Disclosure: Agemy Financial Strategies, Inc. is a registered investment adviser. Registration with the SEC does not imply a certain level of skill or training. This material is provided for informational and educational purposes only and is not intended to provide tax, legal, or investment advice. Individuals should consult with qualified tax and legal professionals regarding their specific circumstances. Tax laws and regulations are subject to change. Investment advisory services are offered through Agemy Wealth Advisors, LLC.

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RMDs and Capital Gains: Planning for a Tax-Efficient Retirement Income

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One of the most critical aspects of retirement planning is managing taxes efficiently. Two key elements that can significantly impact your retirement income are Required Minimum Distributions (RMDs) and capital gains. Understanding these factors and implementing strategic planning can help you preserve more of your wealth and ensure your income lasts throughout retirement.

In this blog, we’ll explore what RMDs and capital gains are, why they matter, and how you can help plan your retirement income in a tax-efficient way.

What Are RMDs?

Required Minimum Distributions (RMDs) are the minimum amounts that the IRS requires you to withdraw from certain retirement accounts once you reach a specific age. The purpose of RMDs is to help ensure that individuals eventually pay taxes on their tax-deferred retirement savings.

Accounts Subject to RMDs

RMDs apply to the following account types:

  • Traditional IRAs
  • SEP IRAs and SIMPLE IRAs
  • 401(k), 403(b), and 457(b) plans
  • Other employer-sponsored retirement plans

It’s important to note that Roth IRAs do not have RMDs during the original account owner’s lifetime, making them a powerful tool for tax planning.

RMD Age and Calculation

Currently, the RMD age is 73 (for individuals turning 73 after December 31, 2023). Previously, it was 72. Your RMD is calculated based on your account balance as of December 31 of the previous year, divided by a life expectancy factor published by the IRS.

For example, if your IRA balance is $500,000 and your IRS life expectancy factor is 27, your RMD for the year would be approximately $18,518.

Consequences of Missing an RMD

Failing to take your RMD can be costly. The IRS imposes a 50% excise tax on the amount you should have withdrawn but did not. For example, if your required distribution was $20,000 and you did not take it, you could owe $10,000 in penalties. This makes careful planning crucial.

Understanding Capital Gains

While RMDs apply to tax-deferred accounts, capital gains typically apply to taxable investment accounts. Capital gains occur when you sell an investment for more than you paid for it.

Types of Capital Gains

  • Short-term capital gains: Gains on assets held for one year or less are taxed at your ordinary income tax rate, which can be as high as 37% at the federal level.
  • Long-term capital gains: Gains on assets held for more than one year are taxed at a lower rate, typically 0%, 15%, or 20%, depending on your taxable income.

For retirees, capital gains can be a powerful tool for supplementing income, particularly if planned strategically to help minimize tax liability.

Tax Considerations

Even though long-term capital gains rates are generally lower than ordinary income rates, selling investments indiscriminately can still push you into a higher tax bracket. Additionally, gains can affect other taxes, such as:

  • Medicare surtax: High-income retirees may be subject to a 3.8% Net Investment Income Tax.
  • Social Security taxation: Your capital gains could make more of your Social Security benefits taxable.

Why RMDs and Capital Gains Matter Together

Many retirees hold both tax-deferred accounts (like IRAs or 401(k)s) and taxable accounts (like brokerage accounts). Coordinating distributions and capital gains sales can help reduce your overall tax burden.

The Tax-Efficiency Challenge

RMDs are taxed as ordinary income. If you also sell investments in a taxable account, the combination of ordinary income and capital gains can push you into a higher tax bracket. Poorly timed withdrawals and sales can trigger unnecessary taxes, reducing the longevity of your portfolio.

Example Scenario

Imagine a retiree with $800,000 in a traditional IRA and $200,000 in a taxable brokerage account. Their RMD for the year is $30,000. If they also sell $50,000 worth of stocks in the brokerage account with $20,000 in long-term gains, their taxable income could jump, increasing the tax rate on both RMDs and capital gains.

Strategically managing these withdrawals can help reduce taxes, preserve more wealth, and provide more consistent retirement income.

Strategies for Tax-Efficient Retirement Income

Here are practical strategies retirees can use to help optimize withdrawals and manage taxes:

1. Consider Roth Conversions

Roth conversions involve transferring funds from a traditional IRA or 401(k) into a Roth IRA. Taxes are paid at the time of conversion, but future withdrawals, including RMDs, are tax-free.

Benefits:

  • Reduces future RMDs, potentially lowering taxable income in retirement.
  • Provides a tax-free income source for later years.
  • Can be timed in lower-income years to help minimize the conversion tax impact.

Example: Converting $50,000 from a traditional IRA to a Roth IRA in a year when your income is unusually low may result in paying taxes at a lower rate than you would in future years when RMDs increase your taxable income.

2. Strategically Withdraw from Taxable Accounts

Selling investments in a taxable account before reaching the RMD age can help you manage future RMDs more efficiently. This is sometimes called tax bracket management.

Advantages:

  • Helps allow you to take advantage of lower long-term capital gains rates.
  • Helps reduce the size of tax-deferred accounts, thereby reducing future RMDs.
  • Helps provide cash flow for early retirement without increasing ordinary income.

Tip: Work with your financial advisor to map out withdrawals and capital gains sales over multiple years, keeping your tax bracket in mind.

3. Charity Donations

Qualified charitable distributions (QCDs) allow retirees to donate directly from their IRAs to a qualified charity.

Benefits:

  • Counts toward your RMD, satisfying IRS requirements.
  • Excluding taxable income can help lower your overall tax burden.
  • Supports causes you care about while helping to reduce taxes.

Example: A $10,000 QCD reduces both your RMD and taxable income by $10,000.

4. Harvest Capital Losses

Offset capital gains with capital losses from your taxable accounts. This strategy, known as tax-loss harvesting, can reduce your taxable income.

Advantages:

  • Helps minimize taxes owed on capital gains.
  • Can be used to offset up to $3,000 of ordinary income per year.
  • Helps provide flexibility for future years’ gains.

Tip: Keep in mind the wash-sale rule, which prevents claiming a loss if you buy the same or substantially identical security within 30 days.

5. Consider Timing RMDs

If possible, retirees can strategically time withdrawals from tax-deferred accounts to manage taxable income.

Example:

If your RMD is $25,000 but your total income is close to a tax bracket threshold, you might take slightly less RMD and cover the rest from Roth or taxable accounts to avoid jumping into a higher bracket.
In some cases, spreading RMDs over multiple accounts or taking partial distributions in advance of RMD age (where allowed) can help reduce the annual tax burden.

6. Monitor State Taxes

State income taxes vary significantly and can impact both RMDs and capital gains. Retirees living in high-tax states may want to explore options such as:

  • Moving to a state with lower or no income tax.
  • Using tax-advantaged accounts strategically.
  • Consulting with a tax professional for state-specific strategies.

Balancing Income Needs with Tax Efficiency

Ultimately, retirement planning is a balancing act. You want enough income to cover living expenses, while helping minimize taxes and preserve your portfolio.

Key considerations include:

  • Income sequencing: Decide which accounts to draw from first: taxable, tax-deferred, or tax-free (Roth).
  • Brackets and thresholds: Stay mindful of tax brackets, Medicare premiums, and Social Security taxation thresholds.
  • Longevity risk: Ensure that withdrawals do not deplete your assets too early.

Working with a Fiduciary Advisor

Managing RMDs and capital gains can be complex, and the stakes are high. A skilled fiduciary  advisor can help:

  • Project future RMDs and taxable income.
  • Create a coordinated withdrawal strategy.
  • Implement Roth conversions, QCDs, and tax-loss harvesting efficiently.
  • Monitor and adjust strategies as tax laws and personal circumstances change.

At Agemy Financial Strategies, we’re experienced in helping retirees create tax-efficient income strategies that balance the need for cash flow with the goal of preserving wealth. Proactively planning can help you reduce unnecessary taxes, protect your portfolio, and enjoy a more secure retirement.

Key Takeaways

  1. RMDs are mandatory withdrawals from tax-deferred accounts and are taxed as ordinary income.
  2. Capital gains occur in taxable accounts and can be managed strategically to help minimize taxes.
  3. Combining RMDs and capital gains planning helps optimize tax efficiency and retirement income.
  4. Strategies like Roth conversions, charitable giving, tax-loss harvesting, and timing withdrawals can help reduce taxes and increase financial flexibility.
  5. Working with a financial advisor helps ensure a personalized, comprehensive approach to retirement income planning.

Tax-efficient retirement planning is not just about paying fewer taxes; it’s about creating a sustainable, predictable income stream for the life you envision. Understanding RMDs, capital gains, and strategic planning options can help you maximize your retirement savings, protect your wealth, and enjoy the lifestyle you’ve worked so hard to achieve.

Contact Agemy Financial Strategies

If you want to help ensure your retirement income is tax-efficient and sustainable, Agemy Financial Strategies can guide you. Our team provides tailored strategies to help retirees manage RMDs, capital gains, and other critical financial considerations.

Contact us today to schedule a consultation and start planning for a retirement that’s as smart as it is fulfilling.

Frequently Asked Questions (FAQs)

1. What is the difference between RMDs and capital gains?
Answer: RMDs (Required Minimum Distributions) are mandatory withdrawals from tax-deferred retirement accounts like traditional IRAs and 401(k)s, taxed as ordinary income. Capital gains occur when you sell investments in taxable accounts for a profit. Unlike RMDs, capital gains can be managed and timed strategically to help reduce taxes.

2. At what age do I have to start taking RMDs?
Answer: The current RMD age is 73 for individuals turning 73 after December 31, 2023. Previously, it was 72. RMDs are calculated annually based on your account balance and life expectancy factor published by the IRS.

3. Can I avoid paying taxes on my RMDs?
Answer: While RMDs themselves are generally taxable as ordinary income, you can help to reduce their impact through strategies like Roth conversions, charitable donations via Qualified Charitable Distributions (QCDs), or careful withdrawal planning that balances income across different account types.

4. How do capital gains affect my retirement taxes?
Answer: Selling investments in taxable accounts can help generate short-term or long-term capital gains. These gains may push you into a higher tax bracket, affect Social Security taxation, or trigger additional taxes like the Medicare surtax. Strategic planning can help minimize the tax impact while providing supplemental retirement income.

5. Should I work with a financial advisor to manage RMDs and capital gains?
Answer: Absolutely. Managing RMDs and capital gains can be complex, with multiple tax rules, income thresholds, and planning strategies to consider. A financial advisor can help create a personalized, tax-efficient plan that helps balance income needs, preserves wealth, and adapts to changing tax laws and personal circumstances.

Investment advisory services are offered through Agemy Wealth Advisors, LLC, a Registered Investment Advisor and fiduciary to its clients. Agemy Financial Strategies, Inc. is a franchisee of Retirement Income Source®, LLC. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC are associated entities. Agemy Financial Strategies, Inc. and Agemy Wealth Advisors, LLC entities are not associated with Retirement Income Source®, LLC. This content is for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. Any review, reliance or distribution by others or forwarding without the express permission of the sender is strictly prohibited. To the extent permitted by law, Agemy Financial Strategies, Inc and Agemy Wealth Advisors, LLC, and Retirement Income Source, LLC do not accept any liability arising from the use or retransmission of the information in this article.

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