Tax Bracket Planning In Retirement

When most people think about retirement planning, they focus on savings, Social Security timing, and maybe which accounts to draw from first. But one of the most important — and often overlooked — parts of a successful retirement plan is managing your tax bracket.

This isn’t about avoiding taxes altogether. It’s about being smart with how and when you show income — because in retirement, you have more control over your tax bracket than ever before.

Why Your Tax Bracket Matters

Every dollar you withdraw from a traditional IRA or 401(k) counts as taxable income. But that doesn’t mean you have to withdraw everything at once. By strategically filling up your current tax bracket (without crossing into a higher one), you can smooth out your tax liability over time — and avoid big tax spikes later.

For example, if you’re in the 12% federal bracket, it may make sense to take just enough from your IRA each year to fill the rest of that 12% bracket, even if you don’t “need” the money right now. You can save it, reinvest it in a brokerage account, or even do Roth conversions with it.

This approach can reduce your Required Minimum Distributions (RMDs) later and potentially lower your future Medicare premiums, too.

Retirement Income Is Not All Taxed the Same

Another reason tax bracket planning is so important? Not all income is taxed equally.

• Social Security may or may not be taxable depending on your income level.

• Capital gains in a brokerage account may qualify for 0%, 15%, or 20% tax rates.

• Withdrawals from Roth accounts are generally tax-free.

• IRA and 401(k) withdrawals are taxed at ordinary income rates.

If you're not paying attention to the mix of accounts you're drawing from, you could accidentally bump yourself into a higher bracket or trigger taxes on income that could've otherwise been avoided.

A More Personalized Approach

At Ramsey Financial, we don’t just help you build wealth — we help you spend it wisely. Part of that means looking at which accounts to withdraw from first, whether Roth conversions make sense, and how much income to show on paper each year to stay within your ideal tax bracket.

And we’re not doing this alone — we work closely with our clients’ tax professionals and estate attorneys to make sure your financial decisions are coordinated, not conflicting.