Many people think tax planning begins in February and ends when they file their tax return in April. In reality, that’s tax preparation. 
Tax planning is something different.
It’s an ongoing process of evaluating how today’s financial decisions may affect the income you keep throughout retirement. If you’re approaching retirement, or you’ve already retired, every withdrawal, investment decision, and income source can influence your tax picture.
 At Fisher Financial Group, LLC, our clients have done an excellent job saving for retirement. They’ve accumulated 401(k)s, IRAs, brokerage accounts, and perhaps a pension, along with Social Security benefits.  But what they haven’t always considered is how those pieces work together from a tax perspective. 
After all, your retirement could last 30 years or longer. The taxes you pay over those decades can have a meaningful impact on how much of your savings remains available to support your lifestyle. 
As a tax planning advisor in Northbrook, IL, it may be helpful to view taxes not as a once-a-year event but as another expense that deserves ongoing attention alongside investment management, retirement income planning, and estate planning.
Why Does Tax Planning Become More Important in Retirement?
During your working years, your paycheck largely determines your taxable income. Retirement is different. Instead of receiving one paycheck, you may draw income from several different sources, each with its own tax treatment.
 Your retirement income could include: 


Social Security benefits


Traditional IRA withdrawals


Roth IRA distributions


Pension income


Taxable investment accounts


Required Minimum Distributions (RMDs)


Part-time employment


Rental income


Your challenge isn’t simply generating income; it’s deciding where that income should come from each year.
What Are Some Common Retirement Tax Traps?
Many retirees don’t intentionally create tax problems. Instead, they occur because several financial decisions interact with one another. Some of the most common situations we encounter include: 





Retirement Tax Situation


Why It May Matter




Large Traditional IRA Balances


Future Required Minimum Distributions may increase taxable income.




Claiming Social Security


Additional income sources can affect how much of your benefit is taxable.




Roth Conversion Timing


Converting too much in one year may move income into a higher tax bracket.




Selling Appreciated Investments


Capital gains may affect your annual tax liability.




Medicare Premiums


Higher income may increase IRMAA surcharges two years later.




Business Sale or Bonus


One-time income events often deserve additional planning before the transaction occurs.




Widow or Widower Tax Changes


Filing status changes may result in higher taxes at the same income level.





None of these situations is necessarily good or bad. The key is understanding how one decision may influence another before moving forward.
What Is the Difference Between Tax Planning and Tax Preparation? 
The two terms are often used interchangeably, but they serve different purposes. Tax preparation documents what has already happened.
Your CPA gathers income information, completes tax forms, and files your return based on decisions you’ve already made. Tax planning looks ahead. It evaluates potential opportunities before the calendar year ends.
 Examples of tax planning might include:  


Deciding when to sell appreciated investments


Coordinating retirement account withdrawals


Evaluating Roth conversion opportunities


Reviewing charitable giving strategies


Increasing retirement plan contributions if you’re still working


Managing taxable income before Medicare enrollment 


A simple way to think about it: Tax preparation records the past. Tax planning helps inform future decisions.
Why Should You Review Taxes Before Year-End? 
Many people don’t think about taxes until November or December. By then, some planning opportunities have already passed. Reviewing your financial picture earlier in the year often provides more flexibility.  We always suggest to our clients that we do a mid-year review, which can allow you to evaluate the following: 





Mid-Year Review Area


Why It Can Be Helpful




Investment gains and losses


Time to consider capital gain or loss strategies before year-end.




Retirement income


Review whether withdrawals remain aligned with your tax goals.




Roth conversion opportunities


Estimate whether partial conversions fit within your current tax bracket.




Retirement contributions


Maximize available contribution opportunities before deadlines.




Charitable giving


Structure gifts before year-end rather than making last-minute decisions.




Cash flow


Coordinate spending needs with tax-efficient withdrawal strategies.





Waiting until December often limits your available choices. Planning earlier allows for more thoughtful conversations.
How Can Different Retirement Accounts Work Together?
Over the course of your career, you’ve probably accumulated savings in several places. You may have: 


A current or former employer’s 401(k)


One or more Traditional IRAs


A Roth IRA


Taxable investment accounts


Joint brokerage accounts


Trust assets  


Each account serves a purpose. The opportunity comes from viewing them as a single coordinated portfolio rather than several independent accounts. For example, you may unknowingly own similar investments in multiple accounts while paying unnecessary taxes simply because they’re located in less tax-efficient places.
What Is Asset Location? 
Most people focus on the investments that they own.
Asset location asks another important question: Where should those investments be held?
Many people aren’t aware that different investments produce different types of taxable income. That’s why it’s so important to coordinate where your investments are held, as they may improve the overall tax efficiency of your portfolio. 
Asset location doesn’t necessarily change your investment strategy.
Instead, it evaluates whether those investments are held in accounts that align with your broader tax strategy. 





Investment Type


Account Often Considered




Bond Funds


Traditional IRA or 401(k)




REITs


Traditional IRA




Broad Market ETFs


Taxable Brokerage Account




Growth Stocks


Roth IRA or Taxable Account




Actively Managed Funds


Traditional IRA




High-Growth Investments


Roth IRA





Let’s look at a hypothetical example:

Imagine you’ve spent decades building your retirement savings and now have assets spread across several different accounts:


Taxable brokerage account: $400,000


Traditional IRA: $900,000


Roth IRA: $300,000


At first glance, your portfolio may appear well diversified because you have money in multiple account types. However, if each account holds the same mix of investments, you could be missing opportunities to improve tax efficiency over time.
For example:


Would income-producing investments, such as bond funds or REITs, be better suited for your Traditional IRA, where current taxes on interest and distributions may be deferred?


Should investments with greater long-term growth potential be held in your Roth IRA, where qualified withdrawals are generally tax-free?


Are tax-efficient ETFs or long-term stock holdings more appropriate for your taxable brokerage account, where they may generate fewer taxable distributions?


The objective isn’t necessarily to change your investment strategy or take on more risk. Instead, it’s about determining whether each investment is held in the account where it may make the most sense from a long-term tax perspective.

Read our blog: “Are You at Risk of Running Out of Money in Retirement?”
How Can a Roth IRA Fit Into Your Retirement Tax Strategy?
One of the most common questions we hear is, “Should I consider a Roth IRA or Roth conversion?”
The answer depends on your overall financial picture, but it’s worth understanding why Roth accounts have become an important planning tool for many retirees.
Unlike Traditional IRAs, qualified withdrawals from a Roth IRA are generally tax-free. That means any future growth within the account can also be withdrawn without additional federal income tax, provided IRS requirements are met.
For someone planning for a retirement that could last 30 years or more, having a source of tax-free income may provide greater flexibility when deciding where retirement income should come from each year.
Another potential advantage is that Roth IRAs are not subject to Required Minimum Distributions (RMDs) during the original owner’s lifetime. This allows assets to remain invested longer if you don’t need the income, while also giving you another option when coordinating withdrawals with Social Security benefits, Medicare premiums, and your overall tax strategy.
One way to build Roth assets is through a Roth conversion, which involves moving money from a Traditional IRA into a Roth IRA. The amount converted is generally taxable in the year of the conversion, so timing becomes an important consideration.
While paying taxes today may not sound appealing, there are situations where doing so could make sense. For example, you may be in a lower tax bracket before Required Minimum Distributions begin, after retiring but before claiming Social Security, or during a year when your taxable income is temporarily lower than normal.
Whether a Roth conversion is appropriate depends on several factors, including:


Your current and expected future tax brackets


The size of your Traditional IRA balances


When you expect to begin taking retirement income


Your Social Security claiming strategy


Potential Medicare IRMAA surcharges


Estate planning objectives


Your time horizon


Rather than asking, “Should I convert my entire IRA?”, a better question is: “Would a partial Roth conversion support my long-term retirement and tax strategy?”
For many retirees, the answer isn’t all or nothing. A series of smaller conversions over several years may better align with their income needs and tax situation. Evaluating those opportunities as part of a comprehensive retirement plan can help determine whether a Roth strategy fits your overall financial goals.
How Does Charitable Giving Fit Into Tax Planning?
If charitable giving is important to you, the way you make those gifts may deserve as much attention as the amount you donate. Many retirees regularly support churches, schools, hospitals, and community organizations. There may be several ways to structure those gifts, including:  





Giving Strategy


Potential Planning Consideration




Cash Donations


Straightforward annual giving.




Appreciated Securities


May avoid realizing capital gains before donating.




Donor-Advised Funds


Allow charitable gifts to be distributed over time.




Qualified Charitable Distributions (QCDs)


Eligible IRA owners may satisfy part or all of their Required Minimum Distribution while supporting qualified charities.





 Charitable giving isn’t simply a tax discussion. It should be a part of your legacy planning and how your financial resources reflect what matters most to you.
 At Fisher Financial Group, LLC, we help individuals throughout the Northbrook area assess their overall financial situation rather than making decisions on an account-by-account basis. Whether you’re approaching retirement or already living on your savings, reviewing your tax strategy alongside your retirement income plan may help you make more informed financial decisions over the years ahead. 
If you’d like another perspective on how taxes fit into your retirement strategy, we’d welcome the opportunity to start that conversation.
Tax Planning Frequently Asked Questions
What is retirement tax planning?
Retirement tax planning evaluates how withdrawals, investments, Social Security, and other income sources may affect your taxes throughout retirement.
When should I begin tax planning before retirement?
Many people begin reviewing retirement tax strategies five to ten years before retirement, although planning can remain valuable throughout retirement.
How do Required Minimum Distributions affect taxes?
RMDs are generally taxable and may increase your annual income, potentially affecting Medicare premiums and the taxation of Social Security benefits.
Is a Roth conversion always a good idea?
Not necessarily. Whether a Roth conversion makes sense depends on your income, tax bracket, retirement timeline, and broader financial strategy.
Why does asset location matter?
Holding investments in different account types may affect how investment income is taxed over time.
Can tax planning help with retirement income?
Tax planning can help coordinate the sources of retirement income each year so that withdrawals align with your overall financial strategy.
Should I review my tax strategy every year?
Life changes, tax laws, investment values, and retirement goals evolve over time, which is why many retirees choose to review their strategy regularly.
 
          

About the author

Dan Fisher is a Registered Financial Consultant (RFC) and Federal Retirement Consultant (FRC) who has spent more than three decades guiding retirees and pre-retirees through tax-smart investing and income planning. As the founder of Fisher Financial Group, he brings a practical approach to helping clients make informed choices about their retirement.