{"id":158,"date":"2025-12-01T02:13:59","date_gmt":"2025-12-01T02:13:59","guid":{"rendered":"https:\/\/whiteoakwealtherie.com\/ideas\/?p=158"},"modified":"2025-12-01T02:13:59","modified_gmt":"2025-12-01T02:13:59","slug":"tax-efficient-retirement-strategies","status":"publish","type":"post","link":"https:\/\/whiteoakwealtherie.com\/ideas\/tax-efficient-retirement-strategies\/","title":{"rendered":"5 Tax-Efficient Retirement Strategies"},"content":{"rendered":"

By Michael Nedreski<\/span><\/i><\/p>\n

When you imagine <\/span>retirement<\/span><\/a> and the exciting next chapter of your life, taxes often aren\u2019t top-of-mind. Many people only start thinking about taxes in February, and once their return is filed, it\u2019s quickly pushed aside. But in retirement, staying mindful of taxes year-round is essential, especially as you shift from building your accounts to drawing from them. <\/span>Implementing tax-efficient retirement strategies<\/span><\/a> can help you make the most of your income, manage your tax obligations, and enjoy greater financial confidence. Here are five practical approaches to consider as you <\/span>plan your retirement<\/span><\/a>.<\/span><\/p>\n

1. Limit Your Exposure to the 3.8% Medicare Surcharge Tax<\/span><\/h2>\n

If you have a higher income and have investment income, you should be aware of the <\/span>3.8% Medicare surcharge tax<\/span><\/a>. (1)<\/span> This tax applies to individuals and couples whose earnings exceed certain limits, meaning they contribute more to Medicare and help support the healthcare system for everyone. Here\u2019s how it works:<\/span><\/p>\n

If you\u2019re single and make more than $200,000, or if you\u2019re married and together make more than $250,000, this 3.8% tax may apply to you. These income limits are based on your Modified Adjusted Gross Income (MAGI)\u2014that\u2019s your usual income with some deductions added back in, such as tax-free foreign income, IRA contributions, and student loan interest.\u00a0<\/span><\/p>\n

The surcharge tax affects what you earn from investments such as stocks, bonds, and real estate (which includes interest, dividends, annuities, gains, passive income, and royalties). The IRS calculates this tax on whichever is less: your total net investment income or the amount by which your income goes over those $200,000 or $250,000 thresholds.<\/span><\/p>\n

If your MAGI is near or above the thresholds, there are steps you can take to limit your exposure. First, you will want to review the tax efficiency of your investment holdings. It may be worthwhile to move less efficient investments into tax-deferred accounts and capitalize on tax-loss harvesting. Other moves you can make include investing in municipal bonds, which have tax-free interest, and taking capital losses to offset gains. Installment sales can spread out large gains and minimize your adjusted gross income, and real estate like-kind exchanges can also defer gains and their taxability.<\/span><\/p>\n

2. Utilize Roth IRA Conversions<\/span><\/h2>\n

Distributions from Roth IRAs are tax-free, so they are a great tool to have in retirement. However, many people cannot contribute directly to a Roth IRA because of <\/span>income limitations<\/span><\/a>. (2)<\/span> Instead, you have to convert traditional IRA funds to a Roth account by paying the related income taxes. You can take advantage of low-income years, such as when you have stopped working but are not yet collecting Social Security, to convert your funds to a Roth IRA so you\u2019ll have tax-free income later.\u00a0<\/span><\/p>\n

It is important to be mindful of tax brackets when you do conversions so you don\u2019t inadvertently push yourself into higher tax rates. As we mentioned above, be sure to consider the impact of that 3.8% Medicare surcharge tax. Another crucial item to be aware of is the <\/span>Income-Related Monthly Adjustment Amount (IRMAA)<\/span><\/a>, (3)<\/span> which increases your Medicare premiums if your income is above a certain limit. For 2025, if your Modified Adjusted Gross Income (MAGI) from 2023 is over $106,000 as an individual filer or $212,000 as a couple filing jointly, your premiums will increase. The higher your income, the higher the premium. This is where careful planning can help you manage these additional costs and make the most of your IRA conversions\u2014without unexpected expenses.<\/span><\/p>\n

Note: A Roth IRA conversion (sometimes called a backdoor Roth strategy) is a way to contribute to a Roth IRA when income exceeds standard limits. The converted amount is treated as taxable income and may affect your tax bracket. Federal, state, and local taxes may apply. If you\u2019re required to take a minimum distribution in the year of conversion, it must be completed before converting.<\/span><\/i><\/p>\n

To qualify for tax-free withdrawals, you must generally be age 59\u00bd and hold the converted funds in the Roth IRA for at least five years. Each conversion has its own five-year period, and early withdrawals may be subject to a 10% penalty unless an exception applies. Income limits still apply for future direct Roth IRA contributions.\u00a0<\/span><\/i><\/p>\n

This material is for informational purposes only and does not constitute tax, legal, or investment advice. Please consult a qualified tax professional regarding your individual circumstances.\u00a0<\/span><\/i><\/p>\n

3. Take Advantage of the 0% Rate on Long-Term Capital Gains<\/span><\/h2>\n

If the Medicare surcharge tax is irrelevant to you because your income is lower, then you may be able to take advantage of the 0% long-term capital gains rate. Profits on the sales of assets owned over a year are tax-free if your 2025 taxable income is below $48,350 for singles or $96,700 for married couples filing jointly. Once you exceed those thresholds, long-term capital gains are taxed at 15% until your taxable income for 2025 gets above $533,400 for singles or 600,050 for couples, at which point the tax rate goes <\/span>up to 20%<\/span><\/a>.<\/span> (4)<\/span><\/p>\n

Claiming more deductions or making deductible IRA contributions can help keep your taxable income within the 0% capital gains tax range while also providing their usual tax benefits. However, you will want to be strategic about taking tax-free gains as they can raise your adjusted gross income and affect the taxability of your Social Security benefits. Also, taking those gains may incur state tax liabilities as well.<\/span><\/p>\n

4. Be Strategic About Inherited IRAs<\/span><\/h2>\n

The IRS clarified rules for inherited IRAs in July 2024, addressing concerns about the 10-year rule introduced in 2020. Non-spousal beneficiaries must now take required minimum distributions (RMDs) annually if the decedent had already started RMDs. Additionally, the inherited IRA must be completely depleted by the end of the 10th year following the account holder\u2019s death.<\/span><\/p>\n

Key exceptions to the 10-year rule remain unchanged. These include surviving spouses, minor children, disabled or chronically ill beneficiaries, and those less than 10 years younger than the deceased. These groups can continue to use the stretch IRA approach, taking distributions over their life expectancy.<\/span><\/p>\n

For beneficiaries of account holders who passed away before their RMD age (currently 73), there is more flexibility. In these cases, beneficiaries are not required to take RMDs in years 1 through 9, allowing for strategic tax planning during the 10-year period.<\/span><\/p>\n

Being strategic about timing withdrawals is crucial to managing tax implications and minimizing overall tax liability.<\/span><\/p>\n

5. Donate Effectively<\/span><\/h2>\n

If you are charitably inclined, one of the best ways to save on taxes is through donations. You may be able to get a tax deduction on donations <\/span>up to 60% of your adjusted gross income<\/span><\/a>. (5)<\/span> If you have appreciated assets, the tax break could be even greater. When you donate an appreciated asset that you have owned for over a year, such as stocks, to a charity, you do not have to pay capital gains taxes on the appreciation, but you still get to claim the full value for your deduction. This allows you to avoid the capital gains tax altogether. If your assets have declined in value, it is best to sell them yourself and donate the proceeds so you can claim the loss when filing your taxes.<\/span><\/p>\n

Another strategy to consider is the use of a charitable lead annuity trust or a donor-advised fund, which allow you to take an up-front write-off that can help offset other income, such as from a Roth IRA conversion or withdrawal from an inherited IRA.\u00a0<\/span><\/p>\n

Your Partner in Tax-Efficient Retirement Planning<\/span><\/h2>\n

There are time-tested ways to <\/span>structure your retirement plan<\/span><\/a> to make it more tax-efficient, but successfully implementing tax-efficient retirement strategies requires careful consideration of many factors\u2014from income sources and investment choices to future withdrawals and tax laws. Navigating these details can feel complex, but you don\u2019t have to do it alone. Working with <\/span>an experienced financial advisor<\/span><\/a> allows every step to be aligned with your long-term retirement goals, giving you confidence in the plan you\u2019ve built.<\/span><\/p>\n

If you don\u2019t yet have a qualified advisor, I\u2019d welcome the opportunity to discuss how our team at <\/span>White Oak Wealth Partners<\/span><\/a> can guide you through these strategies. Take the first step toward a retirement designed for both stability and ease. To get started, contact us by calling 814-835-4551, emailing <\/span>MICHAEL.NEDRESKI@LPL.COM<\/span><\/a>,<\/span> or <\/span>scheduling an appointment here<\/span><\/a>.<\/span><\/p>\n

About Michael<\/span><\/h3>\n

Michael Nedreski<\/span><\/a> is F<\/span>ounder & Independent Wealth Coach<\/span> at White Oak Wealth Partners, a specialized financial lifestyle and wealth management firm serving entrepreneurs, business owners, executives, and their families. Mike has 30-plus years of experience in the financial services industry and is committed to serving his clients through holistic financial planning, disciplined investment strategies, and proactive personal service.<\/span><\/p>\n

A native of Erie, Pennsylvania, Mike began his career in the financial services industry in 1988. He has earned the Chartered Retirement Planning Counselor<\/span>SM<\/span> (CRPC\u00ae) designation conferred by College for Financial Planning (188-LPL). Mike is also an active member of the Financial Services Institute (FSI) and Financial Planning Association (FPA).<\/span><\/p>\n

When not working, Mike enjoys spending time with his wife, Amy, and their children. He volunteers in his community and at his church and his children\u2019s schools. An outdoors enthusiast, Mike loves hunting, fishing, golfing, and spending time near or on the water. He also enjoys working out and watching some of his favorite sports teams, the Pittsburgh Pirates and the Cleveland Browns. To learn more about Michael, connect with him on <\/span>LinkedIn<\/span><\/a>.<\/span><\/p>\n

_____________<\/p>\n

(1) IRS, 2025, July 1<\/span><\/p>\n

(2) NerdWallet, 2025, September 25<\/span><\/p>\n

(3) Kiplinger, 2025, August 8<\/span><\/p>\n

(4) Bankrate, 2025, August 22<\/span><\/p>\n

(5) Investopedia, 2025, February 26<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Thinking about retirement? It\u2019s also the perfect time to consider your tax plan. Here are 5 ways to stay ahead of taxes. <\/p>\n","protected":false},"author":2,"featured_media":159,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-158","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles"],"_links":{"self":[{"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/posts\/158","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/comments?post=158"}],"version-history":[{"count":1,"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/posts\/158\/revisions"}],"predecessor-version":[{"id":160,"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/posts\/158\/revisions\/160"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/media\/159"}],"wp:attachment":[{"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/media?parent=158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/categories?post=158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/whiteoakwealtherie.com\/ideas\/wp-json\/wp\/v2\/tags?post=158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}