Tax-Efficient Retirement Planning: Keep More of Your Money
- Morris & Pursley Financial Plans
- Apr 13
- 3 min read
Nobody wants to spend retirement worrying about taxes. That’s why tax-efficient retirement planning is one of the most important parts of your financial strategy. It’s not just about what you’ve saved—it’s about how you use it.
Here are five simple ways to keep more of your income, year after year.
Want to find hidden tax savings in your plan? Sign up for a free consultation.
1. Be Smart About When You Take Social Security
Did you know your Social Security benefit could be taxed depending on your income?
Withdrawals from IRAs, annuities, or part-time work can all increase your “combined income” and trigger taxes on up to 85% of your benefit.
Delaying your benefit gives you more control over how your other income sources are taxed.
We run custom reports for each client to help them make the most of their benefit—not just in size, but in tax savings too.
Learn more about how we help you optimize Social Security here.
2. Use Roth Conversions to Stay in Control
Roth conversions let you move money from a traditional IRA to a Roth IRA and pay taxes now—so you don’t have to later.
This strategy works especially well during low-income years, like early retirement or between jobs. By “filling up” a lower tax bracket today, you can:
Reduce future required minimum distributions (RMDs)
Lower your lifetime tax bill
Avoid triggering Medicare penalties
Not sure if a Roth conversion makes sense for you? Let’s look at your numbers together.
3. Coordinate Annuity Income with Other Accounts
Annuities can provide predictable income for life—but they can also impact your taxes if you’re not careful.
Here’s what to keep in mind:
Non-qualified annuities (funded with after-tax money) are partially taxable.
Qualified annuities (from IRAs or 401(k)s) are fully taxable as ordinary income.
The order you withdraw from annuities, IRAs, and other income sources matters. We create withdrawal strategies that smooth out your income and minimize tax spikes.
Here’s some helpful information on annuities.
4. Watch Out for Medicare IRMAA Penalties
IRMAA (Income-Related Monthly Adjustment Amount) is the Medicare penalty no one talks about—until they get hit with it.
It’s based on your income from two years ago.
Cross a certain threshold by even $1, and your premiums can jump.
With smart planning, you can keep your income under these limits and avoid paying more than necessary for Medicare.
We help clients look ahead, adjust their income sources, and plan withdrawals so they stay in control. Learn more about IRMAA.
5. Give to Charity, Reduce Your Taxes
If you’re 70½ or older and plan to donate to charity, you can do it in a way that reduces your taxes.
It’s called a Qualified Charitable Distribution (QCD):
Send funds directly from your IRA to a charity
It counts toward your RMD but doesn’t increase your taxable income
You give to a cause you care about—and save on taxes at the same time.
What Central Texan Retiree Need to Know About Tax-Efficient Retirement Planning
Tax laws can change, but the need for smart planning doesn’t. Whether you’ve just started your retirement or you're already taking withdrawals, it’s never too late to create a more tax-efficient plan.
Let’s work together to protect your income, reduce your tax burden, and help you retire happy.
Frequently Asked Questions
Q: How do I reduce taxes on my Social Security benefits?
A: The best way to reduce taxes on Social Security is to manage your other sources of income—like IRA withdrawals and annuity payments—so they don’t push your combined income above certain thresholds. Delaying benefits, doing Roth conversions early, and using tax-efficient withdrawal strategies can all help.
Q: Are annuities taxable in retirement?
A: Yes, but it depends on the type. Annuities purchased with pre-tax dollars (like in a traditional IRA) are fully taxable as ordinary income. Annuities funded with after-tax dollars are only partially taxable—just the earnings portion. The way you draw from your annuity also impacts your overall tax picture.
Q: What is IRMAA and how can I avoid it?
A: IRMAA stands for Income-Related Monthly Adjustment Amount. It’s an extra charge added to your Medicare premiums if your income is over a certain level. Planning when and how you take income from IRAs or annuities can help keep your income under IRMAA thresholds and reduce those extra costs.
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