Tax Planning for Retirees: What to Settle Before Required Distributions Begin

Tax planning for retirees is about timing. You choose which income lands in which year, so the same dollars meet fewer thresholds. The main pieces are the deductions available at 65, how Social Security is taxed, Roth conversions before required distributions begin, and Medicare premiums that rise with income. Each has limits.

That is the short version. This guide walks through the 2026 figures that matter most, how the pieces interact, and what to settle in the years before required minimum distributions (RMDs) begin. It is educational, and your CPA should confirm every number against your own return.

What does tax planning for retirees involve?

It starts with a simple fact: in retirement you decide how much taxable income to create each year. Paychecks no longer set it. Withdrawals from pre-tax accounts, Roth conversions, taxable-account sales, pension income, and Social Security each add to the total, and several of them interact.

That makes the question a timing question. Taking income in a low-income year can cost less than taking it in a year when it stacks on top of required distributions or pushes you past a Medicare threshold. Our post on the first ten years of retirement as a tax planning window covers why those early years carry so much weight. If you plan to stop work before 59½, the Rule of 55 also affects which accounts you can draw from first.

What deductions can retirees use in 2026?

Three pieces matter, as read from IRS guidance on October 20, 2026:

• The standard deduction. For tax year 2026 it is $16,100 for single filers and $32,200 for married couples filing jointly (IRS).
• The additional deduction for age 65 and older. It adds $2,050 for an unmarried filer or $1,650 per eligible spouse on a joint return.
• The senior deduction. For tax years 2025 through 2028, a person 65 or older may claim up to $6,000, or $12,000 on a joint return when both spouses qualify. It is available whether you itemize or not, and it phases out as modified adjusted gross income (MAGI) rises above $75,000 single or $150,000 joint (IRS).

The senior deduction is temporary and income-limited, so it is worth checking each year rather than assuming it applies. It also changes how a Roth conversion looks: extra income may reduce a deduction you would otherwise keep.

How is Social Security taxed?

Your benefits may be taxable when your provisional income, generally adjusted gross income plus tax-exempt interest plus half of your benefits, passes a base amount. Per IRS Topic 423, up to 50% of benefits may be included in taxable income between $25,000 and $34,000 for a single filer, or $32,000 and $44,000 for a married couple filing jointly, and up to 85% above those levels. These thresholds are not indexed to inflation, so more households cross them over time.

Our glossary entry on provisional income explains the formula, and the post on Social Security timing covers the claiming decision. The planning point is that other income you create, including conversions, can raise the share of benefits that is taxed.

Why do the years before RMDs matter so much?

Required minimum distributions start at 73, or 75 if you were born in 1960 or later (CRS summary, read October 20, 2026). Once they begin, the IRS sets a minimum you must take from pre-tax accounts, whether or not you need the money. The balance you carry into that year largely decides how large it is. Our post on RMD exposure shows how.

The years between your last paycheck and your first RMD are often the lowest-income years you will have. A partial Roth conversion in those years moves pre-tax money into a Roth account, at a cost you pay now. It may reduce later required distributions, but it also raises current income, so the trade-off belongs in a multi-year projection, not a rule of thumb. A qualified charitable distribution is another tool for people who give to charity and are 70½ or older.

How does income affect Medicare premiums?

Medicare Part B and Part D premiums rise in steps through the income-related monthly adjustment amount (IRMAA). For 2026, the standard Part B premium is $202.90 a month, and the first IRMAA step applies when MAGI on your 2024 return was above $109,000 single or $218,000 joint (CMS). Social Security generally uses your return from two years earlier.

That two-year lookback is why a large income year, such as a big conversion, a lump sum, or a sale, can raise premiums two years later. Our answer on what IRMAA is explains the tiers, and a life-changing event may let you ask for a reconsideration.

Does where you live matter?

Yes. Tennessee has no state income tax on wages or retirement income, so a conversion done as a resident carries federal tax only. Other states may tax retirement income or deferred pay earned while you lived there. Our page on retirement planning in Chattanooga covers what Tennessee changes and what a move does not settle.

What does this look like for a hypothetical couple?

Hypothetical example for illustration only. It is not a recommendation or a projection.

A couple in their early 60s plans to stop working at 63, delay Social Security, and live on savings for a few years. They hold mostly pre-tax accounts, with a smaller taxable account. Their questions are timing questions:

• Which years are low-income? The years after the last paycheck and before Social Security and RMDs begin.
• How much room is there? Before more income raises the taxed share of their benefits later, uses up a deduction, or crosses a Medicare threshold.
• Which accounts fund which year? So conversions, withdrawals, and any one-time income do not stack in the same year.

Their answers depend on balances, health, and plans, so another couple’s best path may differ. A written, multi-year projection shows the trade-offs. The withdrawal sequencing post explains the account-order question.

What mistakes do retirees commonly make?

• Waiting until RMDs begin. By then the pre-tax balance, and the required distribution, are already set.
• Stacking income in one year. A conversion, a lump sum, and a large sale in the same year can cross several thresholds at once.
• Ignoring the lookback. Medicare premiums respond to income two years earlier, so the cost shows up late.
• Planning in pieces. Each of these decisions affects the others, so reviewing one at a time can work against the whole.

What are the limits and risks?

Tax law changes, and several of these provisions are temporary or indexed. A Roth conversion cannot be undone, and its cost is paid in the year it happens. Projections rely on assumptions that may not hold. Results depend on your individual circumstances.

Sources and as-of date

These figures reflect the following sources as read on October 20, 2026:

• IRS: 2026 tax inflation adjustments
• IRS: New and enhanced deductions for individuals
• IRS Topic 423: Social Security and equivalent Railroad Retirement benefits
• IRS: Retirement plan and IRA required minimum distributions FAQs and Congressional Research Service, RMD rules
• CMS: 2026 Medicare Parts A and B premiums and deductibles

Tax law and indexed limits change. Confirm the current rules with your tax professional before acting.

What should you do next?

Whether any of this applies depends on facts in your own return. A good first step is the free Risk Analysis, which takes a few minutes and gives you something concrete to bring to a conversation. When you are ready to look at your own plan, schedule a consultation with Robert Boeck, and bring your CPA into the discussion early. The ongoing retirement tax planning service describes how that work runs year to year.