Many retirees are concerned about their “retirement number” or dollar amount they should have in their portfolio before they can retire. While there is nothing wrong with aiming for a dollar amount to have in your portfolio, shifting your perspective from a “number” to a “paycheck” so to speak, could greatly benefit how you plan for your retirement.
If you know what you want to spend in retirement, for example $10,000 a month, then consider other sources of income (Social Security & Pensions) to determine what you’ll actually need in your portfolio for retirement.
Why tax planning matters
Since greater emphasis is on retirement income, tax planning is essential. There are strategies to minimize both annual tax bills but also reduce the total lifetime taxes owed. Moreover, there are strategies you can employ that may produce completely tax-free income every year! These strategies are complex and each scenario must be reviewed to determine what is owed. This article is simply informational to explain that it is a possibility!
Tax-optimization strategies
There are many ways to optimize taxes owed during retirement which are outlined below:
1. Roth Accounts
Roth accounts (IRA & 401k) are contributed to with after-tax dollars and once your reach age 59 ½, withdrawals are totally tax free. Moreover, Roth 401k accounts offer greater contribution limits ($24,500 for 2026, plus an $8,000 catch up provision for those over 50) than IRAs ($7,500 for 2026), which can tremendously help retirement savings in later years and produce tax free retirement income.
2. Health Savings Accounts (HSAs)
Health Savings Accounts are designed to help pay for medical expenses while offering tax free growth. HSAs work like a qualified retirement account where you can make pre-tax contributions, invest the funds and use them to pay medical expenses. This creates a healthcare savings account for those who are eligible.
3. Qualified Charitable Distributions
Qualified Charitable Distributions (QCD) are great for those who are philanthropic. QCDs allow you to contribute a portion of your required minimum distribution from your IRA to a charitable organization and reduce taxable income. This is a great option for those who itemize their deductions or wish to give to charity.
4. Brokerage Accounts
Brokerage accounts are excellent savings tools as withdrawals are not taxed as ordinary income. Any gains are taxed when you sell the underlying holds but may receive favorable rates if they are long-term capital gains. Brokerage accounts are great tools for those who wish to retire before they are eligible for penalty free withdrawals or Social Security benefits.
Retirement income planning is diverse and each scenario is different. To review your goals and income needs, reach out to our team to schedule your consultation today!
Bibliography
Charles Schwab. (2026b, January 20). Reducing rmds with qcds. https://www.schwab.com/learn/story/reducing-rmds-with-qcds
Fidelity. (2025c, December 19). 401(k) contribution limits for 2025 and 2026. Fidelity Investments. https://www.fidelity.com/learning-center/smart-money/401k-contribution-limits
Fidelity. (2025c, August 11). What is an HSA and how does it work?. Fidelity Investments . https://www.fidelity.com/learning-center/smart-money/what-is-an-hsa#:~:text=HSAs%20can%20be%20used%20for:%20*%20Copays,an%20HSA%20provider%20*%20Invest%20your%20HSA
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