Retirement tax planning strategies are rarely about answering one question.
As you work towards determining what an effective tax plan is for you during retirement, you find that you will end up juggling many variables. As you increase one variable, many others are affected by that change. Quickly, you find that you must understand how all those variables interact with each other over the short-term and the long-term. The tax plan becomes complicated and is further complicated by the changing of tax laws.
That interaction is why Blue Heron CPAs uses what we call the Blue Heron Retirement Tax Map.
The goal is not simply to minimize this year’s tax return.
The goal is to make more informed tax decisions across retirement and seek to decrease the expected lifetime tax burden of every individual.
Every retirement tax planning package engagement is analyzed across 12 areas. Not because every client needs a strategy in all 12, but because we want to understand how the pieces interact before recommending what to do next.
Why retirement requires a different kind of tax planning
During your working years, taxes can be relatively predictable. You earn a paycheck, taxes are withheld, you contribute to retirement accounts, and you file a tax return. The more money you make, the more taxes you likely pay. Often the focus is on paying the least amount of tax each year.
Retirement changes the equation.
Your income may now come from several different places:
- Social Security
- pensions
- traditional IRAs
- Roth IRAs
- 401(k)s and other retirement plans
- brokerage accounts
- interest and dividends
- real estate
- annuities
You have stopped earning money, creating a situation where the money you have is the money that will have to grow and be lived on in the future. The change from earnings to retirement also creates a situation where your assets can be estimated and forecasted into future years which has significantly reduced variability of your future tax liabilities.
That creates opportunities, but it also creates tradeoffs.
At Blue Heron CPAs, we believe one of the most important questions in retirement tax planning is not simply:
“How much tax can we save this year?”
It is:
“How does the decision we make this year affect the rest of the retirement tax map?”
Here are the 12 areas we evaluate.
1. Your Current Tax Bracket
We start with where you are today.
What income are you already expecting this year? What federal tax bracket are you likely to fall within? More importantly, what happens to the next dollar of income?
The tax you would incur on your next dollar of income creates your marginal tax rate. Understanding the impact of tax for every dollar of income together creates your effective tax rate. If your marginal tax rate is lower than the effective tax rate of a band of income in your future, in some cases we would want to recognize that marginal tax in order to mitigate the need to recognize the higher effective tax rate in the future.
In simpler terms, if a retiree is temporarily in a lower tax bracket after stopping work but will experience higher income in the future, recognizing additional taxable income may deserve consideration. If income is already unusually high because of a property sale, business transaction, large capital gain, or other event, that same strategy may look completely different.
We don’t want to look at the tax bracket in isolation, though.
The current bracket is simply our first coordinate on the Retirement Tax Map.
2. Future Required Minimum Distributions
RMD rules can be straightforward but are some of the most complex from a tax planning perspective. Everyone should understand what their personal requirements are for each retirement account they hold, especially if it is not an Individual Retirement Account.
From the planning perspective, we also want to know what the IRA may look like five, ten, or fifteen years from now. To analyze this properly, we also must consider how life-changing events impact not only the holder but also the beneficiary of the account. To say the least, it is difficult to quantify exactly how RMDs affect tax planning but having an overall plan towards mitigating the risks of RMDs becomes the focus of retirement tax planning.
Traditional retirement accounts generally grow tax deferred. Though there are some exceptions, the IRS calculates RMDs using the prior year-end account balance and an applicable life-expectancy factor for many IRAs and defined contribution accounts. If the retiree allows the tax-deferred account balances to increase, the RMD then would also increase which creates greater income exposure in future periods.
Another point is that a retiree may have relatively little taxable income at age 65 but substantially more taxable income later once RMDs are layered on top of Social Security, pensions, investment income, and other sources.
By analyzing the impact of additional income and what marginal tax rate that income could be realized within, it helps identify whether additional income should be realized in current years.
3. Roth Conversion Opportunities
Once we understand today’s tax rate and tomorrow’s potential costs, we can begin evaluating Roth conversions.
A Roth conversion generally moves money from a pre-tax retirement account into a Roth account and causes previously untaxed amounts converted to become taxable income in the year of conversion.
That makes the decision fundamentally a tax-rate comparison of multiple periods. This also allows an individual to create income towards a goal rather than being reliant on employer wages to fill your tax bracket.
Roth conversions are based on a simple premise:
“Would recognizing income today potentially result in a better long-term result than leaving the money in the traditional retirement account and paying tax later?”
Roth conversions typically create the answer for what we should be doing because of planning but getting to that analysis result is complicated. Most people believe Roth conversions should begin with an arbitrary rule such as “fill the 12% bracket” or “never trigger IRMAA.” We believe that you should understand the cost of your choices in deciding on what creates value for you and your future.
In planning, you must model the conversion alongside the rest of the Retirement Tax Map.
4. Social Security Taxation
Social Security introduces another valuable layer and is often the most missed objective in planning.
The IRS does not simply tax all Social Security benefits or exclude all of them. The taxable portion depends partly on the taxpayer’s other income, and up to 85% of Social Security benefits can become taxable under the federal rules. This is based on a formula they call your provisional income calculation.
That means an additional dollar of IRA income can sometimes create more than an additional dollar of taxable income because it may also cause another portion of Social Security to become taxable.
As an illustrative example, imagine an RMD triggering $20,000 of income associated with the IRA withdrawal but it also creates $10,000 additional income associated with your provisional income calculation and Social Security benefits becoming taxable. Within the 12% bracket, you now pay tax on $1.50 for every $1.00 you withdraw which means you’re actually paying 18%.
This can affect the effective marginal tax rate on:
- Roth conversions
- IRA withdrawals
- capital gains
- investment income
- other retirement income
At the same time, if you no longer have an RMD, would your provisional income calculation drop to $0? That is an important question because occasionally retirees are in a situation where they could create significant income with their Social Security benefits and pay $0 tax on those benefits. This planning tactic could be worth thousands of dollars each year.
For retirees receiving Social Security, we therefore model the taxability of those benefits alongside other income decisions rather than treating Social Security as a separate issue.
5. Medicare IRMAA
Not every cost created by taxable income appears on the tax return.
IRMAA is your Income-Related Monthly Adjustment Amount.
IRMAA is not a tax. It smells like a tax, acts like a tax, but we don’t call it tax; therefore, many people breeze by IRMAA as something they don’t get involved in.
Higher income can result in additional Medicare Part B and Part D costs, these added costs are your IRMAA. Medicare generally determines IRMAA using tax-return information from two years earlier. For example, 2026 Medicare premiums are generally based on 2024 tax information. If you’re low income, IRMAA might be $0 but higher income years could create a situation where you’re paying another $12,000 or even more for Medicare that you weren’t expecting.
Importantly, our goal is not necessarily to avoid IRMAA. There are situations where intentionally recognizing income and paying an IRMAA surcharge may still create a better lifetime result.
We simply want the cost included in the decision before the transaction occurs and people to be educated on the cost whether now or in the future.
6. Capital Gains
Retirement accounts are only part of the picture.
Many retirees also have brokerage accounts containing stocks, mutual funds, ETFs, and other investments with unrealized gains.
We may evaluate whether there are years in which realizing gains makes sense, whether gains should be spread across years, and how those gains interact with:
- ordinary income tax brackets
- Social Security taxation
- IRMAA
- deductions
- charitable strategies
- cash needs
As an illustrative example, imagine a case where recognition of $200,000 of capital gains this year would relieve you from $7,200 of IRMAA in a future year. There are some crazy planning scenarios with unrealized gains that aren’t commonly thought through as the triggering of significant tax has always been taught to be deferred.
A capital-gain decision can look different once it is placed on the full Retirement Tax Map.
7. Qualified Charitable Distributions
For charitably inclined retirees, Qualified Charitable Distributions can become an important part of the map.
Generally, an IRA owner who has reached age 70½ can make an otherwise taxable IRA distribution directly to an eligible charity and potentially treat the distribution as a QCD. A qualifying QCD may be able to also satisfy all or part of an IRA owner’s RMD. This is an area where talking with a qualified professional is very important to make sure you’re performing the operations of the charitable giving properly.
The distinction is important because a QCD can produce a significantly different tax result than simply receiving an IRA distribution and separately writing a check to charity. This planning tool is often utilized as an operational function when someone is already contributing to charity within our planning.
QCD planning can be especially relevant when we are also analyzing Social Security taxation, IRMAA, RMDs, and income-sensitive deductions.
8. Charitable Giving
Charitable giving is often an operational focus in planning. Giving in certain ways may be more tax efficient than just giving cash.
How much do you normally give? Are you writing checks? Giving appreciated securities? Using a donor-advised fund? Taking the standard deduction or itemizing?
The objective is not to increase charitable giving simply to generate tax deductions.
Instead, if someone already intends to give to charity, we want to see if there is a more tax-efficient way to make the gift you already intend to make.
The answer can vary substantially based on age, account type, investment basis, income, and the rest of the Retirement Tax Map.
9. The Enhanced Senior Deduction
This is a newer opportunity that started in 2025 and exists through 2028 currently. Based on the limited time period, the Enhanced Senior Deduction is a temporary planning variable for taxpayers aged 65 and older.
Qualifying taxpayers aged 65 or older may receive an additional deduction of up to $6,000 per eligible individual, or up to $12,000 when both spouses on a qualifying joint return are eligible. The deduction is subject to an income-based phaseout that makes understanding your income and tax planning valuable.
A deduction phase-out means that as your income increases within an income range, the deduction decreases. If your income were to decrease or not show up on the tax return, the deduction could increase, meaning less tax paid.
Because this deduction is currently temporary, we also do not assume today’s rules will remain in place indefinitely.
It becomes another variable on the map rather than the sole reason for making a long-term decision.
10. Estate and Beneficiary Taxation
Retirement tax planning analysis should not necessarily stop when the taxpayer dies and often the question is “Who eventually pays the tax?”
For clients who expect to leave significant assets to children, grandchildren, or other beneficiaries, we want to understand how those beneficiaries may eventually be taxed as well. There is an important distinction between estate planning and tax planning.
Blue Heron CPAs is not replacing your estate attorney. Legal questions involving wills, trusts, asset protection, beneficiary designations, and estate documents should be coordinated with the appropriate legal professionals.
The setting up of accounts, determining beneficiaries, along with other investment decisions are typically left to a financial advisor and their expertise.
Blue Heron focuses on the tax side of estate and tax planning. Unfortunately, a good amount of this planning revolves around someone passing away, which isn’t always fun to think about. The small overlap we have with other professionals is that we will ask questions that are investment-related and financial advisor controlled such as:
What types of assets are likely to pass to beneficiaries?
How much may remain in traditional retirement accounts?
How much may remain in Roth accounts?
Then we help determine what the potential income-tax consequences to the people inheriting those assets might be.
It means beneficiary taxation belongs on the map when we seek to control the total amount of your assets that will end up in the Federal Treasury and reduce your lifetime tax burden.
11. State Residency
Where you live can materially change the analysis.
Blue Heron CPAs works extensively with Florida retirees for tax planning, and Florida does not impose an individual personal income tax which takes many of the state planning focuses off the table.
If there is a state tax component to planning it is often one of the more important ones.
Someone moving into Florida may have part-year filing requirements elsewhere. Income from property or businesses located in another state may continue to create state filing obligations. A client considering moving away from Florida may also face a very different future tax environment.
For someone transitioning into retirement and simultaneously changing states, residency can affect when certain transactions are most efficiently completed. A couple of common scenarios we see that create large differences revolve around which state residency period to take your retirement account withdrawals, when to recognize capital gains, and whether waiting a year might remove state tax completely from a taxable event.
State taxation therefore gets incorporated into the same multi-year analysis rather than addressed after the federal planning is already complete.
12. Multi-Year Cash-Flow Needs
The final part of the Retirement Tax Map may be the most important and it is completely based on you, the taxpayer.
The money necessary to live is something you determine and it should be important to the person performing your planning.
You may need $80,000 this year and $140,000 next year. You may be buying a house, replacing a vehicle, helping a child, taking a major vacation, or planning for another significant expense.
A strategy that produces an attractive lifetime tax projection but leaves someone without enough accessible cash is not a useful retirement strategy.
So we ask:
How much money do you expect to need?
We can help you identify where it should come from. We can help identify which accounts should be utilized. Retirement tax planning should revolve around the taxpayer’s wants and needs. This is money you have worked your entire life for.
Our focus becomes:
How does withdrawing that money change the rest of the map?
Is there a better way to distribute and recognize income?
Cash flow connects tax planning with the actual life the retirement assets are supposed to support.
The Retirement Tax Map Is About Interactions
The real value of the Blue Heron Retirement Tax Map isn’t any one of these twelve categories.
It is seeing them together.
Doing nothing could leave a larger traditional IRA producing larger future RMDs.
What we hear from clients is that they wish they had learned these mechanisms of taxation earlier. It often doesn’t matter if the taxpayer’s net worth is $400,000 or $10,000,000, there is an opportunity to learn a tax concept.
From our experience doing tax planning for many clients, proper tax planning has the largest impact on lower net worth as a percentage of wealth and the ability to make their accumulated assets go further. For those with larger account balances, the larger tax savings we encounter. In both cases, education about taxes becomes an opportunity for you, the taxpayer.
Taxes are a very large part of retirement, one of the largest costs most will pay over the rest of their life. It is a complicated puzzle to put together. There is rarely one variable. There are multiple tax systems interacting across multiple years.
The purpose is to understand the available choices, quantify the important tradeoffs, and make informed decisions.
A Tax Return Looks Backward. The Retirement Tax Map Looks Forward.
Tax preparation tells us what happened.
Tax planning asks what happens next. These are two distinct services.
For retirement clients, we believe both matter.
The Retirement Tax Map allows us to use information to evaluate the years ahead developing current and future brackets, future RMDs, Roth conversion opportunities, Social Security, IRMAA, capital gains, charitable planning, deductions, beneficiary taxation, residency, and ultimately the cash you need to enjoy retirement.
The crystal ball we must use cannot accurately predict every tax law Congress passes. We can’t predict exactly what investment markets will do. You can’t perfectly predict your future expenses. Together, we can discuss the possibilities though and help determine the risk profile you would like to take on while being educated in your decisions.
You can understand the decisions available today and how they may affect tomorrow.
That is the purpose of the Blue Heron Retirement Tax Map.
If you are approaching retirement or already retired and would like to better understand how these pieces fit together, Blue Heron CPAs can help you build a retirement-focused tax plan around your individual circumstances.
Disclaimer
This article is for educational purposes only and should not be treated as personalized tax, investment, legal, or financial advice. The article is written from the perspective of a Florida individual and other states may have different laws. This article has not been updated since the date of writing. Links are provided to easily confirm where the information came from. Use it to help you ask better questions about your situation. For advice tailored to you, consult a qualified tax professional.
About Nathan Gauger, CPA
Nathan Gauger is the Managing Partner of Blue Heron CPAs and focuses on retirement tax planning—helping retirees make confident decisions around Roth conversions, RMDs, Social Security timing, and Medicare-related costs like IRMAA. His goal is simple: make sure your tax plan supports the life you want in retirement, not just the return you file this year.
Ready to talk? If you’d like help reviewing your tax situation or building a retirement-focused plan, the simplest next step is to Schedule a Discovery Call.