The order you tap your retirement accounts, when you claim Social Security, and how you structure withdrawals can quietly erode your income for years — but financial experts say there are concrete steps to reduce that tax burden now.

If you’re between 62 and 70, you’re likely facing a cascade of financial decisions with hard deadlines and lasting consequences. Your tax strategy in retirement deserves as much attention as healthcare coverage and enrollment windows, because getting it wrong can compound over time, affecting everything from healthcare premiums to your daily budget.

One of the most consequential decisions is which accounts to draw from first — and in what sequence. The order of withdrawals can directly affect your adjusted gross income, which in turn influences what you pay for other costs in retirement, including healthcare-related surcharges tied to income.

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According to an article from Merrill, there is a general framework worth considering. “For some people, it will make sense to consider tapping taxable accounts first, then tax-deferred and finally tax-free,” says Nevenka Vrdoljak, managing director in the Chief Investment Office for Merrill and Bank of America Private Bank.

“But, depending on your circumstances, this order may not be right for every person,” Vrdoljak adds. Your income level, filing status, and whether you’re still working part time all factor into the right approach. There is no universal playbook, which is why this decision deserves careful thought rather than a rushed guess.

Life Changes Can Shift Your Tax Picture

Retirement rarely happens as a single, clean event. It unfolds in stages, and each stage can shift your tax circumstances in unexpected ways.

“A number of life events,” says Vrdoljak, “could trigger a change in your tax circumstances: taking Social Security, staying employed past retirement age, returning to work part time, relocating to a more (or less) tax-friendly state or dealing with increased healthcare costs.”

Increased healthcare costs are particularly relevant for anyone navigating the transition into retirement-age health coverage. As those expenses shift, so can your deductions and your overall tax strategy.

Tax laws themselves can also change. “Your best bet is to check in regularly with your advisor and tax pro,” says Vrdoljak. “There’s no one-size-fits-all rule for managing taxes in retirement,” she says. “The most important thing to remember is that you don’t have to make these decisions alone.”

A qualified tax professional can help you model different scenarios and avoid missteps that compound over the years.

When Social Security Is Taxable — and When It’s Not

Your Social Security benefits may or may not be taxable, and understanding which category you fall into is essential for accurate planning.

TurboTax offers important guidance: “Pay attention to Social Security and other income amounts. If you worked for an employer or had net profits from self-employment before retirement, you’ll receive Social Security benefits in retirement. If during retirement you only have income from Social Security benefits, then you will not include those benefits in your gross income. In this case, your gross income will equal zero, and you won’t have to file a federal income tax return.”

If Social Security is your only income source, you may owe nothing in federal taxes. But the moment you add other income streams — a part-time job, required minimum distributions, investment income — your benefits may become partially taxable.

For cost-conscious retirees, this distinction makes a meaningful difference in annual budgeting.

Not All Traditional IRA Withdrawals Are Taxed the Same

Many retirees assume every dollar withdrawn from a traditional IRA will be taxed. That’s not necessarily the case.

TurboTax explains: “Traditional IRA contributions are usually made with after-tax dollars, so if you did not take a deduction for some or all of your contributions, the withdrawals you make from these non-deducted contributions are not taxable. That is because you already paid taxes on the money you put in the account, and you didn’t receive a tax benefit for those deposits. Similar to 401(k) plans, if you deducted traditional IRA contributions from your income in earlier tax years, you may want to limit your retirement withdrawals to reduce your potential tax burden.”

You need to know the history of your contributions — whether they were pre-tax or after-tax. The answer determines whether and how much you’ll owe when you start taking money out.

If you’ve been contributing for decades, it’s worth reviewing your records or consulting with a tax professional to get this right.

The Roth Advantage

For retirees who want predictability and simplicity in their tax picture, Roth accounts offer a significant advantage.

In the article by TurboTax, IRS enrolled agent Brittany Brown says, “Roth IRA withdrawals give the best of both worlds to retirees. You get regular retirement income and no income tax. This is important for seniors because there just aren’t a lot of tax credits or deductions available for people who have unearned income and no longer have dependents to claim.”

As deductions narrow and dependents age out, Roth withdrawals become one of the cleanest sources of tax-free income available for the 62-to-70 age group.

If you’re still working, you may have time to make a strategic shift. In an article from Bank Rate, Daniel Razvi, COO, Higher Ground Financial Group in Frederick, Maryland said, “If you aren’t retired yet, you can change your future contributions in your 401(k) to Roth instead of traditional, so you don’t compound an already huge tax problem.”

This move won’t help you today — Roth contributions are made with after-tax dollars — but it can significantly reduce your taxable income in future retirement years. For anyone who expects to remain in a moderate or higher income bracket through retirement, this is a strategy worth discussing with a financial advisor now.

Spend Less, Withdraw Less, Pay Less in Taxes

Bank Rate also advises a straightforward approach many people overlook: reduce what you’ll need in retirement before you get there.

“One of the best ways to cut your taxes is to reduce the amount you’ll need in retirement, keeping you in a lower tax bracket if you do take withdrawals from pre-tax sources such as traditional IRAs. This strategy also has the extra benefit of giving your money more time to compound.”

The less you need to withdraw, the lower your taxable income. And the lower your taxable income, the less you’ll pay in taxes — and potentially in income-linked costs such as healthcare premiums tied to your adjusted gross income.

Charitable Giving and Property Taxes

If you’re already inclined toward generosity, structuring donations wisely can yield meaningful tax benefits. Nationwide notes: “You can also potentially reduce your income taxes by making charitable donations to qualified organizations. Keep accurate records of how much you donate and to which organizations. You may be able to use those donations as a tax deduction at the end of the year.”

Nationwide provides specific guidance for the current tax year: “For tax year 2025, you’ll need to itemize deductions on your tax return to do so. If you make a donation of $250 or more, you’ll need paperwork from the charity confirming your gift. In addition to cash and other monetary gifts, you generally can deduct the fair market value of other property you donate.”

Record-keeping is essential. Without proper documentation, even legitimate donations may not qualify for deductions.

Nationwide also highlights one more lever for homeowners: “If you own a home, paying your property taxes before they’re due may reduce your taxable income. Be sure to talk to your tax preparer to determine whether this strategy makes sense for you.”

This is a timing strategy — accelerating a payment you’d make anyway to capture a deduction in the current tax year. It won’t work for everyone, but for homeowners in higher income brackets, the savings can be meaningful.

BOTTOM LINE: The tax decisions you make at the outset of retirement set the trajectory for your finances over the next decade or more — consult a tax professional and review your accounts before the windows close.

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