Most CPAs focus on filing your taxes, not proactively reducing them. This means that many retirees miss out on significant tax-saving opportunities that could preserve more of their wealth.
 

With strategic tax planning, you can legally lower your tax bill, protect your retirement income, and even eliminate certain taxes altogether. Below are five key tax-saving moves that may have been overlooked, but there is still time to act on them.

 

1. Capital Gains Harvesting: Maximizing Gains While Minimizing Taxes
 

Many retirees are unaware that they can sell investments and pay no capital gains tax if they remain within the 0% tax bracket.
 

Understanding Capital Gains Tax Brackets for 2025:
 

For married couples filing jointly, capital gains remain tax-free if their taxable income is below $96,700. Single filers benefit from the same treatment if their income does not exceed $48,350.
 

Practical Application:
 

Consider a retired couple, John and Susan, whose annual taxable income consists of Social Security benefits and a small pension, totaling $62,000. They have $50,000 in long-term capital gains from investments. Since their taxable income is well below the threshold, they can sell up to $34,700 in gains without incurring any capital gains tax.

By repurchasing the same investments immediately, they effectively reset their cost basis, reducing future taxable gains.
 

This method allows retirees to strategically extract investment profits without increasing their tax burden.

 

2. Social Security: Rethinking the Timing of Your Claim
 

A common recommendation is to delay Social Security benefits to maximize payouts. However, in certain cases, claiming earlier can be a more beneficial strategy.
 

Advantages of Early Social Security Claims:
 

• Reduces reliance on personal assets, allowing investment portfolios to grow longer.
   

• Creates a predictable income stream, reducing the need for portfolio withdrawals.
   

• Provides flexibility for executing Roth conversions or capital gains strategies at a lower tax rate.
   

For example, a retiree who claims benefits at age 62 instead of delaying until 70 may preserve hundreds of thousands of dollars in personal savings by utilizing Social Security as an early income source. This approach is particularly valuable for those with health concerns or those looking to maximize investment compounding.

 

3. Leveraged Roth Conversions: Growing Wealth Tax-Free
 

Converting too much of a traditional IRA at once can trigger higher taxes. Instead, a gradual approach to Roth conversions allows retirees to shift funds at an optimized tax rate while preserving tax efficiency.
 

Key Benefits:
 

• Converts taxable funds into tax-free retirement assets.
   

• Reduces future required minimum distributions (RMDs), lowering overall tax exposure.
   

• Allows Roth balances to grow without tax liability for heirs.
   

For example, a 62-year-old with a $500,000 traditional IRA might consider converting just enough principal to a Roth—typically around 20%—to allow the entire amount to regrow tax-free over 20 years. This strategy minimizes future RMD obligations, keeps conversion taxes manageable, and ultimately eliminates the IRS’s claim on a the future $500,000 Roth IRA inheritance.  

*See our other article, "The Coolest Roth Conversion Idea You've Probably Never Thought Of..." 

 

4. Managing RMDs: How Annuities Can Optimize Distributions
 

At age 73 (or 75 for some younger retirees), the IRS mandates withdrawals from tax-deferred retirement accounts. These RMDs can inadvertently push retirees into higher tax brackets, increasing taxable income and Medicare costs.

The Role of Annuities in RMD Planning:
 

• Provides stable, guaranteed income that exceeds the required RMD amount.
   

• Preserves the remaining IRA balance for continued tax-deferred growth.
   

• Allows for structured withdrawals that align with long-term tax planning.
   

For instance, an individual with a $500,000 IRA could allocate roughly half that into a lifetime income annuity that guarantees enough annual income to satisfy the RMD on the entire $500,000 balance.  

This approach satisfies RMD obligations while ensuring a predictable income stream and freeing up the other half of the remaining IRA portfolio for more optimized growth.

 

5. IRMAA: Avoiding the Hidden Medicare Tax Increase
 

The Income-Related Monthly Adjustment Amount (IRMAA) is an additional charge imposed on Medicare Part B and Part D premiums for higher-income retirees. If modified adjusted gross income (MAGI) surpasses specific thresholds, Medicare costs can increase significantly.
 

2025 IRMAA Income Thresholds:
 

• Single filers: $103,000
   

• Married couples: $206,000
   

Preventing Unnecessary IRMAA Charges:
 

• Keeping Roth conversions within safe limits to avoid exceeding income thresholds.
   

• Harvesting capital gains within the 0% bracket to prevent taxable spikes.
   

• Utilizing tax-free income sources like Roth IRA withdrawals or HSA distributions.
   

For example, if a retiree's MAGI reaches $210,000 due to a large Roth conversion, their Medicare costs could rise by $1,500 per year. Instead, strategically converting just $40,000 rather than $50,000 to a Roth IRA keeps them below the surcharge threshold, maintaining lower Medicare premiums.

 

Final Thoughts: Is Your CPA Focused on Proactive Tax Planning?
 

Many CPAs concentrate on preparing returns and keeping this year's taxes as low as possible, rather than forward-looking and proactive tax strategies that could lower your overall aggregate tax liability throughout your entire retirement. 

True tax planning requires identifying opportunities that lower future tax burdens while maximizing retirement income. By implementing capital gains harvesting, optimizing Social Security timing, structuring Roth conversions efficiently, managing RMDs with annuities, and avoiding IRMAA surcharges, retirees can secure a more tax-efficient financial future.
 

For those seeking a personalized tax reduction plan, consider consulting with a financial professional who specializes in tax-efficient retirement strategies.
 

If you'd like to discuss any of the strategies outlined in this paper, schedule a free strategy session today to review your options.