As 2026 enters its final months, retirees and pre-retirees have a limited window to make tax-planning decisions that could affect how much of their retirement savings they ultimately keep. Aaron Gaines, CFP®, founder of Gaines Capital Management, says retirees often focus on investment performance while overlooking another question: how and when their savings become taxable income.
“People spend 30 or 40 years asking, ‘How much can I accumulate?’” Gaines said. “In retirement, the question changes to, ‘How much can I actually keep and efficiently turn into income?’”
5 Tax Moves to Consider
Gaines identifies five areas to review before December 31, including evaluating Roth conversions. Lower-income years before required minimum distributions begin may provide opportunities to convert portions of tax-deferred retirement accounts to Roth accounts.
Conversions create taxable income, making timing important. Additionally, planning ahead for required minimum distributions (RMDs) can provide greater flexibility in managing taxable income. RMDs generally begin at age 73 under current rules.
Reviewing the enhanced senior deduction is also key. Taxpayers age 65 and older may qualify for an additional federal deduction of up to $6,000 per eligible individual, or $12,000 for qualifying married couples. The deduction is available through 2028 and phases out at higher income levels.
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Coordinating Income Sources
Coordinating Social Security and retirement withdrawals is another key consideration. Social Security benefits, pensions, IRA distributions, Roth conversions, and investment income can interact for tax purposes. Reviewing these income sources together may help retirees make informed withdrawal decisions.
It’s worth considering the broader context of retirement planning, where tax strategies can have a significant impact on overall financial well-being. By taking a proactive approach to tax planning, retirees can potentially minimize their tax liability and maximize their retirement income.
“Tax preparation tells you what already happened,” Gaines said. “Tax planning asks what we can still do before it happens.” Gaines Capital Management incorporates tax planning into The Gaines Plan, the firm’s coordinated approach to retirement income, investments, taxes, healthcare, and legacy decisions.
A Coordinated Approach
“Retirees shouldn’t have an investment strategy over here, a tax strategy over there and an income strategy somewhere else,” Gaines said. “Those decisions affect one another. The goal should be one coordinated retirement plan.”
Ultimately, retirees should prioritize tax planning and seek professional advice to ensure they’re making the most of their retirement savings. By doing so, they can potentially reduce their tax liability and enjoy a more secure retirement.
