By George McFadden

If you’re approaching or already in retirement, the fear of outliving your savings is real, especially when market shifts, unexpected medical costs, or inflation threaten to shrink your nest egg. Smart tax strategies can play a major role in saving taxes in retirement, helping you keep more of your hard-earned money.

This guide breaks down practical strategies to minimize your tax burden and preserve your wealth so you can retire with more confidence and less stress. 

Understanding the Tax Implications of Different Retirement Income Sources

Every dollar you receive later in life comes with its own tax rules, and understanding these rules can aid you in saving taxes in retirement. Here’s how each of your retirement income sources gets taxed:

• Social Security Benefits: Up to 85% of your benefits could be taxed, depending on your combined income
• Pension Income: This is often taxed as ordinary income, so if you live in a state with income tax, it could further reduce your take-home amount
• Traditional IRA and 401(k) Withdrawals: Every dollar you take out gets taxed as regular income.
• Roth IRA and Roth 401(k) Withdrawals: These qualified withdrawals come out tax-free, which can go a long way in helping your tax-planning efforts.
• Investment Income: Dividends, interest, and capital gains may be subject to different tax rates depending on the type of investment you have and how long you’ve held it.

Balancing these sources can help you avoid surprises, playing a pivotal role in saving taxes in retirement.

Strategies for Managing Required Minimum Distributions

Required minimum distributions (RMDs) refer to the minimum amounts of money you must withdraw from your tax-deferred retirement accounts once you turn a certain age. These distributions can push your taxable income higher than you’d like. Fortunately, smart tax planning can help lessen the impact.

Before RMDs kick in, you can convert part of your traditional IRA or 401(k) into a Roth. If you’re converting $20,000 annually, for instance, you can lower future RMDs and let growth in the Roth account accumulate without taxes.

You can even donate up to $108,000 (2025 limit) directly from your IRA to a qualified charity—an opportunity to satisfy your RMD without adding to your taxable income.

Tax-Efficient Withdrawal Strategies for Saving Taxes in Retirement

The order in which you tap retirement accounts is key to saving taxes in retirement, potentially cutting your tax bill by thousands over time.

A good strategy is to start with taxable accounts. That’s because funds in brokerage accounts (stocks, bonds, etc.) are taxed at capital gains rates, which are often lower than ordinary income rates. When you use these funds first, you can preserve tax-deferred growth elsewhere.

From there, you can withdraw from traditional IRAs or 401(k)s while aiming to stay within lower tax brackets. For example, if you’re in the 12% bracket, you can take out just enough to avoid jumping to 22% to reduce future RMDs and keep saving taxes in retirement.

Exploring Roth Conversions and Their Potential Benefits for Retirees

Shifting savings from a traditional IRA or 401(k) to a Roth IRA opens the door to long-term tax advantages. Once converted, your money grows tax-free, and qualified withdrawals remain untaxed, which is ideal for saving taxes in retirement. 

Converting during lower-income years lets you lock in today’s tax rates before RMDs or potential rate hikes (like those expected after 2026) take effect.

Retirement Protection Strategies Can Help You Plan a Stress-Free Future

Retirement should be a time of relaxation, not worrying about outliving your savings.

Retirement Protection Solutions can help you make sense of these tax-efficient strategies so you can focus on enjoying retirement. Whether you’re just starting to plan or looking to refine your approach, I’m here to help you save taxes in retirement. To schedule a meeting, call (216) 272-2333, email [email protected], or schedule online.

About George

George McFadden is the principal at Retirement Protection Solutions, a financial advisory firm in the Greater Cleveland area focused on guiding clients in the “Retirement Red Zone”—those nearing or entering retirement who need protection, reasonable growth, and guaranteed retirement income. With over 25 years of experience working alongside top financial advisors across the U.S., George saw a significant gap in traditional retirement planning. His mission is to fill that gap by helping clients protect their hard-earned savings and create a reliable retirement paycheck that lasts for life.

Many advisors offer a broad array of investment services that expose clients to market risk, often leaving those approaching retirement vulnerable. George’s value proposition is different: he emphasizes protection, ensuring clients don’t lose their principal, and offers guaranteed retirement income solutions to provide lasting confidence and peace. In partnership with Retirement Realized, George brings clients strategies that focus on safety and security, designed specifically for those who want to retire stress-free without relying on risky market-driven approaches. George is passionate about educating retirees on their income options, answering their questions, and separating fact from fiction. He believes the best benefit he provides to clients is a guaranteed retirement income that lets them sleep soundly at night.

Outside of the office, George enjoys golfing, biking, hiking, fly fishing, and boating. He is also deeply committed to supporting research for a cure for Type 1 Juvenile Diabetes, inspired by his daughter’s battle with the disease. To learn more about George, connect with him on LinkedIn.