Retirement should be a time of financial freedom—but without proper planning, taxes can erode your income and limit your lifestyle. As a financial advisor, I help clients navigate the complexities of retirement income and tax strategies to help ensure their savings can last and goals remain within reach.
Why Tax Planning Matters in Retirement
Retirement income often comes from multiple sources—Social Security, pensions, retirement accounts, annuities, rental income, and more. Each source is taxed differently, and without a clear strategy, retirees may pay more than necessary.
One strategy is tax diversification, which involves allocating assets across tax-deferred, tax-free, and taxable categories—what Ameriprise calls the Tax Control Triangle. This approach can give you flexibility in managing withdrawals and controlling your tax bracket year by year.
Pre-Tax Retirement Account Ownership: A National Snapshot
Understanding how Americans save for retirement helps frame the importance of tax planning:
- Traditional IRAs:
31% of U.S. households owned a Traditional IRA.1 - Access to Retirement Plans:
In 2013, almost 80% of full-time workers had access to employer-sponsored plans.2
Asset Location: A Strategic Tax Planning Tool
Beyond diversification, asset location can be a powerful strategy. It involves placing different types of investments in the tax-efficient accounts:
- Equities in non-qualified (taxable) accounts: Stocks benefit from favorable long-term capital gains tax rates and qualified dividends.
- Bonds in qualified (tax-deferred) accounts: Interest income is taxed as ordinary income. Holding bonds in traditional IRAs or 401(k)s can defer taxes and may reduce Required Minimum Distributions (RMDs).
Qualified Charitable Distributions (QCDs): A Giving Strategy with Tax Benefits
For charitably inclined individuals age 701/2 or older, QCDs can offer a unique opportunity to give while reducing your tax burden:
- Reduce Modified Adjusted Gross Income (MAGI): QCDs count toward your RMD but are excluded from taxable income.
- Avoid phaseouts of deductions for seniors 65+: Lower MAGI helps preserve deductions that phase out at higher income levels.
- Bypass the 0.5% AGI floor for charitable deductions: QCDs aren’t subject to the adjusted gross income floor.
- Simplify giving: QCDs allow direct IRA-to-charity transfers without itemizing.
Key Milestones to Keep in Mind
- Age 50: Catch-up contributions begin.
- Age 55: Penalty-free withdrawals from qualified plans if separated from employer.
- Age 591/2: In-service rollovers and penalty-free withdrawals.
- Age 701/2: QCD eligibility begins.
- Age 73: RMDs begin.
Retirement Tax Strategies to Consider
1. Catch-Up Contributions
2. Roth IRA Conversions
3. In-Service Distributions
4. Tax-Exempt Investments & HSAs
5. Deferred Compensation & Annuities
6. Asset Location
7. Qualified Charitable Distributions (QCDs)
The Role of a Financial Advisor
Tax planning in retirement isn’t one-size-fits-all. Itrequires a personalized approach that considers your goals, income sources, andlifestyle. As your financial advisor, I can help you:
- Assess your current tax diversification and asset location
- Model retirement income scenarios
- Coordinate with your tax professional
- Adjust your strategy as laws and life circumstances change
Final Thoughts
Planning for taxes in retirement is about more than reducing what you owe—it’s about what you keep. With thoughtful preparation, you cancreate a retirement income strategy that supports your lifestyle, help protect your savings gives you more confidence in your financial future.
2. Perspective article - Disclosure: The views expressed here reflect the views of Connell A. Lee as of November 10, 2025. Theseviews may change as market or other conditions change. Actual investments orinvestment decisions made by Ameriprise Financial and its affiliates, whetherfor its own account or on behalf of clients, will not necessarily reflect theviews expressed. This information is not intended to provide investment adviceand does not account for individual investor circumstances.
Ameriprise Financial cannot guarantee future financialresults.
AmeripriseFinancial, Inc. and its affiliates do not offer tax or legal advice. Consumersshould consult with their tax advisor or attorney regarding their specificsituation.
Asset allocation does not assure a profit or protectagainst loss.
Diversification does not assure a profit or protectagainst loss.
1. ICI Research Perspective February2024, Vol. 30, No. 1 The Role of IRAs in US Households’ Savingfor Retirement, 2023
2. Our Strong Retirement System: An American Success Story December 2013 ppr_13_strong_retirement_print
Ready to learn more? Get started by
requesting a complimentary initial consultation whenever it’s convenient for you.
Read more articles by Connell Lee