The Golden Tax Planning Window: Why You May Want to Pay More Taxes in Retirement

Why the years between retirement and Social Security or required minimum distributions may offer an opportunity to rethink when you pay taxes.

You’ve spent 30 or 40 years working, earning a paycheck, and paying income taxes.

Then you retire.

Your paycheck stops. Maybe you haven’t started Social Security yet. You’re living off money you’ve accumulated in a savings account or taxable brokerage account.

And suddenly, your income tax bill is lower than it’s been in decades.

That sounds pretty good, doesn’t it?

After all those years of trying to reduce your taxes, why would you want to do anything that makes them go up?

Well, those first few years of retirement might be some of the most valuable tax-planning years you’ll ever have.

And sometimes the best decision is to deliberately pay more taxes while you have the opportunity.

I recently wrote about this concept in Kiplinger. It’s called the golden tax planning window, and it comes down to understanding when you might be able to pay taxes at a more favorable rate than you’ll face later in retirement.

Meet Mike and Liz

Let’s look at Mike and Liz, an example couple I used to illustrate this concept. (note: Mike & Liz are composites of multiple real-life scenarios I’ve experienced over the course of my career).

They’re both 63 years old and recently retired. They’ve saved nearly $2 million for retirement, paid off their house, and plan to wait several years before collecting Social Security.

Most of their retirement savings are in traditional IRAs and 401(k)s.

That’s a situation I see quite often.

People have done a great job contributing to their traditional retirement accounts throughout their careers. They’ve benefited from tax-deferred saving, and their accounts have grown over time.

But they haven’t accumulated nearly as much money in Roth accounts.

Mike and Liz also have savings in a taxable brokerage account. They plan to use that money for their living expenses during their first few years of retirement.

Because they aren’t taking substantial distributions from their traditional retirement accounts and haven’t started Social Security, their taxable income could be relatively low.

From their perspective, everything looks great.

They have enough money to support their retirement, and their tax bill has dropped.

But when I look at a situation like theirs, I want to ask another question.

What happens to their taxes five, ten, or fifteen years from now?

Because that low tax bill they’re enjoying today may not last.

Why Your First Retirement Years May Be Different

During your working years, your paycheck generally creates a substantial amount of taxable income.

When you retire, that income disappears.

But other sources of income may not begin immediately.

You might wait to collect Social Security. You may have a pension that starts later. And if you have substantial savings in traditional retirement accounts, required minimum distributions may not begin for several more years.

That can create a period when your taxable income is substantially lower than it was while working—and potentially lower than it will be later in retirement.

That’s what people call the golden tax planning window.

The important thing to understand is that it isn’t a specific age.

It doesn’t automatically start at 62 or end at 65.

For one person, it might be the three years after retirement before Social Security begins. For another, it might extend until required minimum distributions start.

And for someone else, there may not be much of a window at all.

You have to look at your particular income situation.

The way to find that window is to project your taxes over time.

Instead of asking only what your tax return looks like this year, estimate what it could look like when Social Security begins, when pensions start, when required minimum distributions arrive, and when your household circumstances change.

Those projections won’t be perfect. Tax laws can change, investments can perform differently than expected, and your plans may change.

But they can help you identify years when recognizing additional taxable income might be worth considering.

Why Would You Want to Pay More Taxes on Purpose?

This is where Roth conversions come into the picture.

Let’s say Mike and Liz have a substantial amount of money in traditional IRAs.

They received tax benefits when they contributed to those accounts, but withdrawals from traditional IRAs are generally taxable.

Now suppose they’re in a relatively low tax bracket during their first years of retirement.

They could consider moving a portion of their traditional IRA money into Roth IRAs.

That transaction is called a Roth conversion.

The converted amount is generally included in their taxable income for the year. In other words, they deliberately increase their current tax bill.

Why would they do that?

Because qualified withdrawals from Roth IRAs can be tax-free later.

If Mike and Liz expect to face higher tax rates in future years, paying taxes on some of that money today could be advantageous.

But that’s an important if.

The decision depends on their current tax rate, projected future rates, the source of money used to pay conversion taxes, and the other financial consequences of increasing their income.

I also want to clear up a common misunderstanding.

Mike might say, “I’m retired. I can’t contribute to a Roth IRA anymore because I don’t have earned income.”

He’d be right that regular Roth IRA contributions generally require eligible compensation.

But a Roth conversion is different.

You don’t need earned income to convert eligible traditional retirement account money into a Roth IRA.

And you don’t need to convert the entire account.

You can choose a specific dollar amount to convert based on what makes sense for your financial situation.

That’s why I emphasize the golden rule of Roth conversions: find the right years and the right amounts.

Three Reasons Your Tax Bill Might Rise Later

When I’m evaluating whether a Roth conversion makes sense, there are three future changes I particularly want to consider.

1. Social Security begins

Mike and Liz plan to delay collecting Social Security.

Eventually, those benefits will start.

Depending on their other income, a portion of their Social Security benefits may be taxable.

That means the same additional IRA withdrawal or Roth conversion could have a different tax impact after Social Security begins than it would today.

Having some money available in Roth accounts may give them more flexibility in deciding where to take retirement income.

2. Required minimum distributions begin

Traditional retirement accounts generally become subject to required minimum distributions, or RMDs, once the account owner reaches the applicable age.

For people born in 1960 or later, the starting age is generally 75 under current law.

Now think about Mike and Liz.

They’re 63 and have nearly $2 million saved, much of it in traditional retirement accounts.

If they don’t withdraw much from those accounts for the next twelve years, the balances could grow substantially, depending on investment performance.

Larger traditional account balances can mean larger required distributions later.

And those distributions generally add to taxable income whether or not you need the money for living expenses.

By converting some traditional IRA money to Roth IRAs during earlier years, they may be able to reduce the balances that will eventually be subject to RMDs.

That doesn’t automatically make a conversion worthwhile. But it’s a reason to compare today’s tax rates with what their future distributions might create.

3. One spouse passes away

This is an issue married couples sometimes overlook.

When both spouses are alive, they may file their federal income taxes as married filing jointly.

But after one spouse passes away, the surviving spouse will generally eventually file as a single taxpayer.

The tax brackets for a single filer are narrower than those for a married couple filing jointly.

The surviving spouse’s income, however, may not decline by the same proportion.

They may still receive substantial retirement income, and distributions from inherited retirement assets may continue to create taxable income.

That can put the surviving spouse in a higher tax bracket.

People sometimes call this the widow’s tax penalty, although it’s not a separate tax or penalty.

It’s the effect of changing filing status and income.

When you’re planning for retirement as a couple, I want you to consider what the tax picture could look like for each spouse individually, not just while you’re both alive.

For some couples, that makes the years when they’re still filing jointly especially worth examining for potential Roth conversions.

Don’t Let the Tax Bracket Distract You From Healthcare Costs

There’s a complication I want you to pay particular attention to.

Suppose you’re 63, recently retired, and purchasing health insurance through the Affordable Care Act marketplace.

Your income may qualify you for premium tax credits that help pay for your coverage.

I’ve talked with people who were excited about making Roth conversions because their income tax bracket looked so favorable.

Then we reviewed their health insurance.

In some cases, they were receiving $20,000 or $25,000 a year in premium tax credits.

A large Roth conversion could increase their income enough to reduce or eliminate those credits.

Suddenly, the conversion that looked attractive from an income tax perspective might create a substantial additional healthcare cost.

That’s why I don’t want you to make the decision based only on your federal tax bracket.

The same principle applies after Medicare begins.

Additional income from a Roth conversion can affect Medicare premiums through the income-related monthly adjustment amount, commonly called IRMAA.

Medicare generally uses income from two years earlier to determine those additional premiums.

So a Roth conversion today could affect what you pay for Medicare in a future year.

That doesn’t mean you should automatically avoid conversions that affect ACA credits or Medicare premiums.

It means you need to include those costs when evaluating whether the strategy makes sense.

The goal is to make a decision based on the overall financial consequences.

Why Not Convert Everything at Once?

Once someone understands the potential benefits of Roth conversions, I sometimes hear the opposite question.

If conversions could help, why not just move everything into a Roth IRA?

Because converting too much can defeat the purpose.

Remember, the conversion generally creates taxable income.

If you convert a very large amount in one year, you could push yourself into substantially higher tax brackets and create additional costs.

You may end up paying more taxes on the conversion than you would have paid by spreading conversions across several years or leaving some money in the traditional account.

That’s why Roth conversion planning is about choosing amounts, not simply choosing accounts.

You might convert a certain dollar amount this year, reevaluate next year, and adjust the plan as your income and circumstances change.

And sometimes the right amount to convert is zero.

The important part is having a reason for the decision based on your current and projected future situation.

Find Your Own Golden Tax Planning Window

I want to give you three things to consider as you approach retirement.

First, look beyond this year’s tax return.

A low tax bill can be welcome, but it doesn’t tell you whether you’re making the most of your tax-planning opportunities.

Second, identify the income changes ahead.

When will Social Security begin? Will you receive a pension? When do your RMDs start? What could happen to your household’s taxes if one spouse passes away?

Those are the transitions worth including in your projections.

Third, compare your current tax situation with those future years.

If your projected tax rates are lower today, ask whether recognizing some additional income now could make sense.

That might involve Roth conversions, but the appropriate decision depends on your broader retirement plan.

In my book Retire Today, I organize that plan into five steps: Spend, Make, Keep, Invest, and Leave.

Tax planning fits primarily into the Keep step, but it also connects to the others.

Your spending needs influence how much income you require. Your Social Security decisions affect when income begins. Your investments and withdrawal strategy influence where that income comes from. And your tax decisions can affect what remains for a surviving spouse or other beneficiaries.

That’s why I want these decisions working together.

You may have spent your entire career trying to lower your annual tax bill.

As you approach retirement, it can be worth changing the question.

Instead of asking only, “How can I pay less in taxes this year?” ask, “When might paying taxes be more advantageous over the course of my retirement?”

That question is where your golden tax planning window begins.

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About the Author:

Jeremy Keil, CFP^®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retire Today blog and podcast, as well as the Mr. Retirement YouTube channel.

Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.

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Additional Links:

• Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
• “Just Retired? This Could Be Your Once-in-a-Lifetime Opportunity to Lower Your Lifetime Taxes” by Jeremy Keil, Kiplinger
• “Are Roth Conversions Still Worth it for Retirees in 2026?” Mr. Retirement YouTube Channel
• “Are Roth Conversions Dead in 2026?” Mr. Retirement YouTube Channel
• Create your retirement master plan in 5 simple steps

Connect With Jeremy Keil:

• Keil Financial Partners
• LinkedIn: Jeremy Keil
• Facebook: Jeremy Keil
• LinkedIn: Keil Financial Partners
• YouTube: Mr. Retirement
• Book an Intro Call with Jeremy’s Team

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