As retirement approaches, managing taxes becomes just as crucial as managing investments. Strategic planning before you retire can reduce your lifetime tax burden and stretch your savings further.
By making thoughtful moves in your 50s and early 60s, you can enter retirement with greater financial flexibility and confidence.
Consider Roth Conversions
One of the most effective pre-retirement strategies is converting part of a traditional IRA or 401(k) into a Roth account. While you’ll pay taxes on the converted amount now, future withdrawals from a Roth IRA are tax-free. This can be especially valuable if you expect to be in a higher tax bracket later or want to leave tax-free assets to heirs.
Converting gradually over several years helps spread out the tax impact over time. Doing this during years with lower income, such as after leaving full-time work but before taking Social Security, can be particularly advantageous.
For tips on optimizing government benefits, see Social Security Claiming Strategies That Could Save You Thousands.
Maximize Catch-Up Contributions
Once you turn 50, the IRS allows higher “catch-up” contributions to retirement accounts. In 2025, you can contribute an extra $7,500 to 401(k) plans and an additional $1,000 to IRAs. Taking advantage of these opportunities boosts retirement savings while also reducing taxable income.
These contributions are potent when combined with employer matches. By fully funding accounts in the years leading up to retirement, you can significantly increase your nest egg while enjoying current tax benefits.
For additional savings guidance, read How to Maximize Catch-Up Contributions to IRAs and 401(k)s.
Explore Charitable Giving Options
Charitable giving can provide both personal satisfaction and tax advantages. Donating appreciated stocks, for example, allows you to avoid capital gains taxes while still claiming a deduction for the full market value.
Another strategy is to bunch charitable contributions into a single year to exceed the standard deduction threshold, thereby maximizing your tax savings. Donor-advised funds also allow you to make a large charitable contribution in one year while distributing grants to charities over time.
Manage Your Retirement Account Withdrawals
The years just before retirement are an ideal time to plan how you’ll draw down savings. Thoughtful withdrawal strategies can help minimize taxes later. For instance, you might withdraw from taxable accounts first, allowing retirement accounts to continue growing tax-deferred.
Coordinating withdrawals with the timing of Social Security benefits, pensions, and other income sources ensures you don’t unintentionally push yourself into a higher tax bracket. By planning early, you’ll have more control over taxable income once required minimum distributions begin.
Don’t Overlook Healthcare Costs
Healthcare expenses are both a significant retirement cost and a tax-planning opportunity. Contributing to a Health Savings Account (HSA), if eligible, offers triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified expenses are also tax-free.
Even after retirement, using HSA funds strategically can reduce taxable withdrawals from other accounts. Setting aside money for healthcare now helps cover rising costs later while improving your overall tax efficiency.
For more on health and finances, read The Health-Wealth Connection After 50.
The Bottom Line
Tax planning isn’t just about the year ahead. It’s about positioning yourself for decades of retirement. By making smart moves such as Roth conversions, catch-up contributions, charitable giving, and strategic withdrawals, you can keep more of your money working for you. The earlier you start, the more flexibility and security you’ll enjoy in retirement.
