Ask an Advisor: My husband and I are in our mid-50s and hope to retire in about ten years. What should our tax planning look like as we approach retirement?

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Ask an Advisor: My husband and I are in our mid-50s and hope to retire in about ten years. What should our tax planning look like as we approach retirement?

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Such a great question, and an important one that often goes unasked because most of us focus too much on the investment performance side. Most people treat taxes as something that happens to them every April. They file, they grumble, and they move on. What often gets missed is that the ten to fifteen years before retirement are the most valuable tax planning window of your financial life, and many of the opportunities inside it expire if you wait too long.

Let me break down where I’d focus when we help a couple in your situation.

Start with your account mix, not your investments. Pull up everything you own and sort it into three buckets: tax-deferred accounts like 401(k)s and traditional IRAs, tax-free accounts like Roth IRAs and HSAs, and your taxable brokerage. This ratio determines how much control you’ll have over your tax bill once the paychecks stop. Couples who saved diligently into 401(k)s for thirty years often arrive at retirement with nearly everything in the tax-deferred bucket. That means almost every dollar they spend in retirement gets taxed as ordinary income, and once required minimum distributions begin, the IRS decides how much comes out each year whether they need the money or not.

That leads to the single biggest opportunity for most couples in your situation: the low-income window. If you retire before claiming Social Security and before RMDs begin, you may have a stretch of years where your taxable income drops sharply. Those years are prime territory for Roth conversions, where you deliberately move money from tax-deferred accounts into Roth accounts and pay tax at the lower rates that window creates. Spread thoughtfully over several years, conversions can reduce your lifetime tax bill and shrink future RMDs. Rushed or oversized, they can push you into higher brackets and raise your Medicare premiums down the road. This is math worth running every single year, because your income, the tax brackets, and the markets all move.

Next, coordinate the pieces. Social Security timing, pension elections if you have them, and the order you draw from your accounts all interact. Claiming Social Security early can shrink your conversion window. The sequence you pull money from accounts changes how long your savings last. I’d encourage you to think of this as one connected plan rather than a list of separate tactics, because a smart move made in isolation can undo a smarter one elsewhere.

Give your taxable brokerage account some attention too. It’s the most flexible money you have. Harvesting losses in down markets, placing tax-efficient investments there while keeping bonds and REITs inside retirement accounts, and building up basis you can later draw at favorable capital gains rates all compound quietly over a decade.

And if you plan to retire before 65, put health insurance inside the tax plan as well. Your income in the years before Medicare can affect what you pay for coverage. That’s one more reason to design the withdrawal and conversion strategy as a whole instead of improvising year by year.

One caution. None of this is the answer for every couple in the same age range with the same retirement timeline. The right conversion amount, claiming age, and drawdown order depend significantly on your specific accounts, your state, your retirement date, and what you want the money to do. What I can tell you from working with couples in exactly your situation is that the ones who end up with the most control over their retirement tax bill started planning a decade out. Whether you have adult kids who will inherit your money also makes a huge difference in how you approach these decisions.

You have time, which is the good news. The window is open now, though, and low-bracket Roth conversion years don’t come back once they’ve passed. Your financial life will also continue to evolve as market conditions and tax laws change, so it’s worth asking whether figuring it all out on your own could end up costing you more than getting professional guidance.

Consider having a conversation with a fiduciary financial planner who specializes in situations like yours to see what opportunities you may be missing. Having a trusted sounding board and partner during this major life transition can provide valuable insights, help uncover blind spots you may not have recognized, and give you greater confidence that you’re making informed financial decisions.

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This article was originally published on Wealthtender and is intended for informational purposes only and should not be considered financial advice. You should consult a financial professional before making any major financial decisions. Wealthtender earns money from financial professionals, which creates a conflict of interest when these professionals are featured in articles over others. Read the Wealthtender editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.