Your Guide to Tax-Smart Retirement Planning

Everyone has different goals in life, but one that’s universal is setting up a financially secure future. After years of working hard, making sacrifices and overcoming many challenges along the way, people want to be rewarded with a comfortable, meaningful retirement. 

While your investment strategy is a key driver of achieving financial independence, tax planning is just as important. Planning for taxes in retirement directly impacts your future cash flow, as the more money you can keep in your pocket now and the more tax efficiently it can grow, the more you’ll have available through your retirement years.  

Tax planning if you’re preparing for retirement

Before you reach retirement age, consider some of the important financial and emotional aspects that may have future tax implications and influence your decision-making process. 

1. Financial considerations

Leading up to retirement, it’s important to create a plan for financial readiness. Your Corient Wealth Advisor can help calculate how much money you’ll likely need to retire, and help create your personalized retirement savings strategy based on your specific circumstances and objectives. 

An advisor can also help you weigh the pros and cons of your decisions. For instance, you might consider the feasibility of paying off your mortgage before you retire. If you’re thinking about retiring early, not only should you consider your income requirements, but you may also need to explore private insurance since you won’t be eligible for Medicare if you retire before age 65. 

Finally, your advisor will stress-test your financial plan so you’re prepared for a diverse range of potential scenarios, both good and bad. 

2. Emotional considerations

A successful retirement and tax strategy also involves some emotional preparation. It’s important to define how you plan to spend your time, engage with others when you’re no longer working, and pursue a productive, satisfying life in retirement. 

There are different ways to approach the emotional changes ahead. Some people choose to wind down their careers by working part-time in the early years of retirement. This strategy may help keep you connected to others, give you a sense of purpose and accomplishment, and generate some income to support your retirement finances. Other people choose to quickly replace work habits and routines with new ones. It’s an ideal time to focus on health, hobbies and other areas you’re passionate about, but may not have had time to fully explore during your hectic work years. 

Tax planning if you’re entering retirement

With a smart overall retirement plan in place, it’s time to figure out how taxes could affect your finances. The goal is to identify attractive tax-planning opportunities and learn how to pivot from receiving steady paychecks to withdrawing tax efficiently from your investments. Here are two important things to consider: 

1. Cash flow and tax rates

A significant change that comes with retirement is managing cash flow and income in a manner that’s best for your tax rate and tax bracket. As a retiree, you’ll no longer receive regular paychecks. Instead, you’ll make withdrawals from your investment accounts to supplement income from Social Security and/or a pension. This shift from accumulation to decumulation isn’t easy and requires prudent oversight of your financial assets. 

Your Corient Wealth Advisor can help identify the best strategy for generating the required retirement cash flow in a tax-advantaged manner. For instance, after-tax accounts like trust or brokerage accounts can be managed to take advantage of favorable tax rates applicable to qualified dividends and long-term realized capital gains, or to benefit during market declines from tax-loss harvesting (i.e., selling some losing investments to help offset capital gains earned during the year from selling winners). 

Tax-deferred accounts like an IRA or 401(k) are taxed as ordinary income when money is withdrawn. If you’re starting retirement in a relatively low tax bracket, consider strategies to draw money from these accounts to take advantage of lower marginal tax rates, or create an annual strategy for Roth conversions that could save you taxes over the long haul. 

2. Retirement income decisions

Other elements of retirement tax planning include prioritizing when and how to elect to receive Social Security or pension benefits, and how to plan for IRA Required Minimum Distributions (RMDs). 

Although you may start receiving Social Security benefits as early as age 62, you’ll be entitled to a larger benefit amount if you defer to as late as 70 years old. Work with your Corient Wealth Advisor to see if waiting is appropriate for you. 

With a pension, you’ll need to decide whether to elect annual payments or a lump-sum rollover, as both have different tax, legacy and strategy implications. Depending on your family situation, you should also consider the need for survivor benefits. 

Once you turn 72, you’ll start taking RMDs from traditional IRAs. Your advisor can help you navigate potential solutions to manage and minimize RMD-related taxes, such as by utilizing Qualified Charitable Distributions (known as “QCDs”) or developing a Roth IRA conversion strategy prior to your turning 72. 

Keeping your emotions in check

As you consider various actions to take, remember that planning your retirement tax strategy can be emotionally difficult. Here are two areas where you may learn to focus on things you can control and navigate obstacles you can’t control: 

1. Withdrawing portfolio funds

Transitioning from a regular paycheck to withdrawing funds from investments can be psychologically challenging. It may require a major shift in mindset to become comfortable withdrawing investment funds and watching your nest egg gradually reduce overtime. 

If you haven’t yet created and committed to a retirement spending plan, you risk depleting your assets too quickly or spending to little and not living your retirement to the fullest. For many retirees, it’s valuable to keep a component of growth (e.g., stocks, equity funds) in your portfolio. It used to be common wisdom that retirees should be conservative since they typically have less time to recover from possible investment losses. While this may be true, it needs to be balanced by the fact that inflation will erode purchasing power over time and life expectancies continue to climbso holding investments with the potential to grow can mitigate the negative impact of inflation and allow you to maintain your retirement lifestyle. 

2. Managing stock market fluctuations 

Another component of retirement tax planning is handling the financial ups and downs of living on investment returns. You might control when you retire, but you don’t control how the stock market performs. 

Your Corient Wealth Advisor can help you prepare for market fluctuations. For example, what happens if the market declines sharply right before or after you retire? You need to make objective investment decisions without fear or other emotions. Obviously, this is easier said than done. That’s why it helps to work with a trusted advisor who, in difficult situations, can provide expert advice that empowers you to stay calm and make rational investment decisions. 

The bottom line 

You can’t plan effectively for retirement without planning for taxes. Consult your tax professional and an experienced wealth advisor who not only helps manage your investments, but also helps you make the many complex decisions needed to manage and minimize taxes in retirement. 

You’ve worked hard to accumulate your assets—are you ready to protect them throughout retirement? Contact your Corient Wealth Advisor today and get started on a comprehensive, tax-efficient financial plan that makes sense for your unique retirement needs and goals. 

ABOUT THE AUTHOR

CONTENT DISCLOSURE

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5221661 – February 2026