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Returning Member

Retired for 2 years

I'm 68 and my wife is 70. We are getting hammered by taxes since we don't have any deductions and in two years my Wife's RMD will kick in.

At this point we will be paying even more taxes.  I'm thinking deferring the taxes was a bad idea.

6 Replies
Opus 17
Level 15

Retired for 2 years

You need to talk to a financial planner, not this forum.  Deferring the taxes on your retirement (401k, traditional IRA) amplifies your savings power at the beginning but subjects you to taxes later.  


If you were to do a Roth IRA conversion now, you would pay the taxes now rather than later.  For example, if you think tax rates will rise in 2026 when the Trump tax plan reverts, you would want to do some Roth conversions in 2022-2025, pay the taxes now, then you can withdraw in the future tax-free.


A financial planner may have other ideas, as well.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Level 15

Retired for 2 years

Generally speaking, ignoring considerations about leaving tax-deferred retirement accounts to beneficiaries, you'll want to make taxable distributions from retirement accounts so as to spread the taxable income out somewhat evenly over your life expectancies so as to minimize the amount of this income that falls into higher tax brackets.  For amounts beyond that which you need to spend, that can be done by doing Roth conversions as Opus 17 suggests.  A common approach is to do Roth conversions so as to fill out your current tax bracket.  Also as Opus 17 indicates, though, the tax brackets are scheduled to increase back to their former levels in 2026, so you may want to convert more than what would fill up your current tax bracket up through 2025.  However, keep in mind that if you are enrolled in Medicare Part B or D, Medicare IRMAA is based on your AGI so you'll want to factor in any IRMAA increase as if it was an increase in your tax rate.  A good tax planner should bring up all of these points.


For others who might read this thread, deferring taxes is not necessarily bad, but it's  not uncommon that one's marginal tax rate in retirement will not be substantially lower than when one is working.  This is particularly true when an individual first starts to work, when taxable income is lower and the deferral is less beneficial, and would likely benefit more from Roth contributions instead of traditional tax-deferred retirement contributions.  Planning how and when to take requirement distributions should probably start much earlier than age 68 or 70.  Age 50 to 55 would be a reasonable time to start.  This gives a much longer timeframe over which to realize the taxable income, providing the opportunity to reduce the amount realized in any given year to avoid the income falling into higher tax brackets.

Level 15

Retired for 2 years

Also be aware that more of your Social Security benefits may be taxable as your income goes up.  If you have extra cash, consider making a Qualified Charitable Distribution when it's RMD time.

Level 15

Retired for 2 years

At age 72, RMD is required.

If you have a large Traditional IRA get used to a big tax bill, and then Medicare and Part D surcharge and net investment income surcharge for being well off in your old age.

There's nothing you can do about it.

Your friends in Congress are still searching for even more ways to confiscate your IRA distribution.

Do not complain, when compared to what other financially strapped fellow citizens are going through.


Returning Member

Retired for 2 years

Thanks,  I will get the help if a financial planner but it looks like I will be paying a lot of taxes.

Level 15

Retired for 2 years

@gnelson9 - as noted by many in this thread, the challenge is that once you are 72, you can't stop the income from RMD and social security! One of the ways of reducing the RMDs is to covert SOME of the Traditional IRA to a Roth in the years between retirement and commencing SS and RMD.  In these years your taxable income may be rather low compared to your working years and the years when you receive SS and RMDs.   You may be able to reduce your tax burden, but it's not really for this form, but rather for a financial planner...


The other thing to watch for, and really can't do anything about, but the year after the first spouse passes, the surviving spouse has to file 'Single" which has a higher tax brackets for what could be very similar income as when both were alive and were filing "joint"  It's one of those 'gotcha's from the IRS! 



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