Tax Moves Financial Experts Say Pre-Retirees Should Make Right Now

The years before retirement are a critical window for tax decisions that will determine how long your savings last — and experts say most people don’t have a single playbook to follow.

How you manage withdrawals, which accounts you tap first, whether you shift contributions to Roth vehicles, and how you handle deductions can collectively shape your financial future for decades. Your tax picture in retirement will look fundamentally different from the one you managed during your working years, and the decisions you make before you stop drawing a paycheck carry outsized weight.

Here is what financial experts say you should be doing now.

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The Withdrawal Order Question

One of the most critical decisions pre-retirees face is determining which accounts to draw from and in what sequence. The order can directly affect your tax bracket, the longevity of your portfolio, and how much of your wealth continues to grow tax-advantaged.

In an article from Merrill, Nevenka Vrdoljak, managing director in the Chief Investment Office for Merrill and Bank of America Private Bank, lays out a general framework.

“For some people, it will make sense to consider tapping taxable accounts first, then tax-deferred and finally tax-free,” says Vrdoljak. “But, depending on your circumstances, this order may not be right for every person.”

That caveat is essential. For someone with substantial pre-tax assets in traditional 401(k) or IRA accounts, drawing from taxable brokerage accounts first allows tax-deferred and tax-free accounts more time to compound. But the right sequence depends on your projected income, tax bracket, and the mix of account types you hold.

If you’re approaching retirement with a heavy concentration in tax-deferred accounts, every withdrawal will count as ordinary income — and that could push you into a higher bracket, particularly once required minimum distributions begin.

Shift Contributions to Roth Before the Problem Grows

If you haven’t retired yet, you still have a window to reshape your tax exposure. One of the most actionable strategies involves redirecting how your current 401(k) contributions are structured.

In an article for Bankrate, Daniel Razvi, COO of Higher Ground Financial Group in Frederick, Maryland, puts it bluntly: “If you aren’t retired yet, you can change your future contributions in your 401(k) to Roth instead of traditional, so you don’t compound an already huge tax problem.”

Traditional 401(k) contributions reduce your taxable income today but create a fully taxable liability when you withdraw in retirement. Roth contributions are made with after-tax dollars, meaning qualified withdrawals in retirement come out tax-free.

For pre-retirees who expect to be in a similar or higher tax bracket in retirement, or who want to manage their taxable income more precisely once they stop working, building a larger Roth balance now can provide valuable flexibility later.

Why Roth IRA Withdrawals Matter So Much

For those who already have a Roth IRA, the tax advantages in retirement are significant. According to TurboTax, IRS enrolled agent Brittany Brown emphasizes that benefit directly.

“Roth IRA withdrawals give the best of both worlds to retirees. You get regular retirement income and no income tax. This is important for seniors because there just aren’t a lot of tax credits or deductions available for people who have unearned income and no longer have dependents to claim.”

Once you leave the workforce, many of the deductions and credits that reduced your tax bill during your earning years — dependent exemptions, certain itemized deductions, education credits — simply vanish. Having a source of tax-free income through a Roth becomes one of the few remaining levers you can pull to control your annual tax liability.

Know How Your Traditional IRA Is Taxed

Not every dollar withdrawn from a traditional IRA is taxed the same way.

As TurboTax explains, traditional IRA contributions are usually made with after-tax dollars. If you did not take a deduction for some or all of your contributions, the withdrawals you make from those non-deducted contributions are not taxable. That is because you already paid taxes on the money you put in the account and did not receive a tax benefit for those deposits.

However, if you deducted traditional IRA contributions from your income in earlier tax years, those withdrawals will be taxable. TurboTax advises that in such cases, you may want to limit your retirement withdrawals to reduce your potential tax burden.

For pre-retirees doing the math on how much income they’ll need and from which sources, distinguishing between deducted and non-deducted IRA contributions is a detail that can meaningfully affect how much you owe.

Social Security and Your Tax Bill

Social Security income adds another layer of complexity. According to TurboTax, if during retirement you only have income from Social Security benefits, then you will not include those benefits in your gross income. In that case, your gross income equals zero, and you won’t have to file a federal income tax return.

But for most pre-retirees with investment accounts, pensions, or part-time work, total income from all sources will likely push a portion of Social Security benefits into taxable territory. That makes it all the more important to understand how each income stream interacts with the others.

Life Changes Can Upend Your Plan

Tax planning in retirement is not a set-it-and-forget-it exercise. Vrdoljak notes that “A number of life events” could trigger a change in your tax circumstances: “taking Social Security, staying employed past retirement age, returning to work part-time, relocating to a more (or less) tax-friendly state or dealing with increased healthcare costs.”

Any one of these events can alter your income, your deductions, or both. Tax laws themselves can change as well.

Vrdoljak’s counsel is straightforward: “Your best bet is to check in regularly with your advisor and tax pro.”

“There’s no one-size-fits-all rule for managing taxes in retirement,” she says. “The most important thing to remember is that you don’t have to make these decisions alone.”

For someone navigating the transition from accumulation to preservation, that regular professional review is not optional — it’s essential.

Cut Spending Now, Stay in a Lower Bracket Later

Reducing your spending before retirement doesn’t just improve your savings rate — it can also lower the amount you’ll need to withdraw from pre-tax accounts, keeping you in a lower tax bracket.

As Bankrate advises, one of the best ways to cut your taxes is to reduce the amount you’ll need in retirement, keeping you in a lower tax bracket if you do take withdrawals from pre-tax sources such as traditional IRAs. This strategy also has the extra benefit of giving your money more time to compound.

Running projections based on lower spending levels — and the correspondingly lower withdrawal rates — can reveal how much additional runway a leaner budget creates.

Charitable Giving and Property Tax Timing

Two additional strategies can help reduce taxable income before and during retirement, according to Nationwide.

Charitable donations to qualified organizations may be deductible. Nationwide advises keeping accurate records of how much you donate and to which organizations. For tax year 2025, you’ll need to itemize deductions on your tax return. If you make a donation of $250 or more, you’ll need paperwork from the charity confirming your gift. In addition to cash and other monetary gifts, you generally can deduct the fair market value of other property you donate.

Nationwide also notes that if you own a home, paying your property taxes before they’re due may reduce your taxable income — though they recommend talking to your tax preparer to determine whether this strategy makes sense for your situation.

BOTTOM LINE: From withdrawal sequencing to Roth shifts to expense reduction, every pre-retirement tax decision compounds — and the experts agree that professional guidance, reviewed regularly, is the surest way to protect what you’ve spent a career building.

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This article was created by content specialists using various tools, including AI.

This story was originally published March 19, 2026 at 4:02 AM.