Here’s a question worth asking yourself: is your retirement plan actually designed to minimize taxes, or did it just happen by accident? For most people, taxes are one of the largest expenses they’ll ever face in retirement — often larger than housing or healthcare — yet it’s the one expense people plan for the least.
The good news is that unlike market performance, taxes are something you could have real control over. Here are a few of the tax-efficient strategies we walk through with clients across Indiana, Ohio, and Michigan.
Understand How Your Income Sources Are Taxed Differently
Not all retirement income is treated the same by the IRS. Withdrawals from a traditional IRA or 401(k) are typically taxed as ordinary income, Roth withdrawals can be tax-free if certain conditions are met, and Social Security benefits may be partially taxable depending on your total income. Knowing how each piece is taxed is the first step toward building a more informed retirement income plan.
Be Strategic About Withdrawal Order
Many retirees draw down accounts in whatever order feels convenient, without realizing that the sequence can meaningfully affect their lifetime tax bill. Pulling from taxable, tax-deferred, and tax-free accounts in a deliberate order can help manage your tax bracket year to year, rather than letting one bad year of withdrawals push you into a higher bracket.
Consider the Timing of Roth Conversions
Converting traditional IRA funds to a Roth IRA means paying taxes now in exchange for tax-free growth and withdrawals later. Done at the right time — often in lower-income years early in retirement — a Roth conversion can meaningfully reduce your lifetime tax bill and future required minimum distributions. Done at the wrong time, it can create an unnecessarily large tax bill. Timing is everything, which is why this shouldn’t be a do-it-yourself decision.
Coordinate Taxes With Your Social Security Strategy
Because a portion of Social Security can become taxable based on your other income, your withdrawal strategy and your Social Security claiming strategy need to work together, not in isolation. Getting this coordination right is one of the more overlooked ways retirees can keep more of their benefit.
Don’t Forget State Taxes
Whether you’re retired in Indiana, Ohio, or Michigan, state tax treatment of retirement income can vary and can meaningfully affect your bottom line. If you’re relocating or splitting time between states, it’s worth understanding how each state treats retirement account withdrawals, pensions, and Social Security before you finalize your plan.
Rollovers Can Play a Role Too
If you’re consolidating an old employer plan, the way you handle an IRA or 401(k) rollover can also affect your tax picture, particularly if a Roth conversion is part of the conversation.
Build a Tax Strategy, Not Just a Tax Return
We often tell clients: we love taxes, because the tax code has rules that may offer opportunites if you understand them. A good accountant files your return. A good retirement plan is built with taxes in mind from the start.
If you’re paying 22%, 24%, or more in retirement, it’s worth a conversation. Learn more about our team or schedule a meeting to see what a tax-efficient retirement strategy could look like for you.
This content is provided for informational purposes only. Troyer Retirement and its representatives do not provide tax or legal advice. Individuals should consult with a qualified professional regarding their personal situation before making financial decisions.
Investment advisory products and services made available through Impact Partnership Wealth, LLC (“IPW”), a Registered Investment Adviser. Troyer Retirement is not affiliated with or endorsed by the U.S. Government or any governmental agency. Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA. 5791457 – 08/26
