Retirement & Taxes: What You Need to Know Before Retirement
Retirement is supposed to be all about relaxation—finally enjoying the freedom you worked so hard for. But one thing that catches many retirees off guard? Taxes.
From Social Security benefits to retirement account withdrawals, taxes can take a bigger bite out of your income than you might expect. The good news? With a little planning, you can keep more of your money and avoid unnecessary tax surprises.
Let’s break it down!
Are Social Security Benefits Taxable?Unfortunately, yes—your Social Security benefits might be taxable, depending on your total income. Here’s how it works:
If your combined income (wages, retirement withdrawals, and taxable investments plus half of your Social Security benefits) is between $25,000 and $34,000 for single filers ($32,000 and $44,000 for married couples), up to 50% of your benefits may be taxed.
If your combined income is over $34,000 for singles ($44,000 for couples), up to 85% of your benefits may be taxed.
how to reduce social security taxes
Delay Social Security if possible – The longer you wait (up until age 70), the bigger your monthly benefit—and it might help you avoid extra taxes in some cases.
Be strategic about withdrawals – Pulling money from a Roth IRA (which is tax-free) instead of a traditional IRA can help keep your taxable income lower.
Thinking About Moving? Keep Taxes in Mind!
A lot of retirees move to states with lower income or property taxes to stretch their savings. But before you pack up, check out all the tax factors—some states may have lower income tax but higher sales or estate taxes that could impact your finances.
selling your home? don’t forget about capital gains tax
If you sell your home and make a profit, you can exclude up to $250,000 in capital gains as a single filer ($500,000 for married couples). But if your gains go over that limit, you’ll owe taxes on the difference.
Working in Retirement? Here’s How it Affects Your Taxes & Benefits
If you plan to work part-time in retirement, be mindful of how extra earnings can affect your Social Security benefits and tax bracket:
If you haven’t reached full retirement age (FRA), earning over $23,400 in 2025 may temporarily reduce your Social Security benefits.
Once you hit FRA, your benefits won’t be reduced—but extra income could still push you into a higher tax bracket.
Required Minimum Distributions (RMDs): The Rule You Can’t Ignore
Once you turn 73, you’re required to start taking Required Minimum Distributions (RMDs) from most tax-deferred retirement accounts (like traditional IRAs and 401(k)s). These withdrawals count as ordinary income, which could increase your tax bill.
how to lower taxes on rmds
Convert to a Roth IRA – Transferring money from a traditional IRA to a Roth IRA (before RMDs kick in) can help reduce future taxable income. Bonus: Roth IRAs don’t require RMDs!
Make a Qualified Charitable Distribution (QCD) – If you don’t need your RMD for living expenses, you can donate up to $100,000 per year directly to a charity. That way, it won’t count toward your taxable income but still satisfies your RMD requirement.
Why Roth Accounts Are a Game-Changer in Retirement
If you want more control over your taxes in retirement, Roth accounts (Roth IRAs & Roth 401(k)s) can be a great tool.
why roth accounts rock
No RMDs During Your Lifetime – Unlike traditional IRAs, you don’t have to take forced withdrawals.
Smart for Tax Bracket Control – Need extra cash? Withdrawing from a Roth won’t push you into a higher tax bracket.
Tax-Free Withdrawals (as long as you’ve had the account for at least 5 years)
If you have both traditional and Roth accounts, you can mix and match withdrawals to help keep your tax bill as low as possible.
Final Thoughts: How to Keep More of Your Retirement Money
Nobody wants to give more to the IRS than necessary—especially in retirement! But by managing withdrawals, planning for RMDs, and using Roth accounts wisely, you can cut your tax bill and make your savings last longer.
Want personalized advice? A tax professional or financial advisor can help you create a plan that works for you.
XO, Jen
Disclaimer: This blog post is for informational purposes only and does not constitute tax or mortgage advice. Please consult with qualified tax and lending professionals for advice specific to your situation.
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Retirement is supposed to be all about relaxation—finally enjoying the freedom you worked so hard for. But one thing that catches many retirees off guard? Taxes.