Pre-Retirement Tax Planning Strategies That Could Save You Thousands

Here’s a stat that honestly kept me up at night: the average American pays over $200,000 in taxes during retirement. Two hundred grand! I stumbled across that number a few years ago when I was helping my older sister figure out her finances, and it completely changed how I thought about the years leading up to retirement.

Look, I used to think retirement planning was just about stuffing money into a 401(k) and hoping for the best. Boy, was I wrong. Pre-retirement tax planning strategies can literally be the difference between a comfortable retirement and one where you’re constantly stressed about money.

So let me walk you through what I’ve learned — some of it the hard way.

Max Out Your Tax-Advantaged Accounts (Seriously, All of Them)

This one sounds obvious, but you’d be surprised how many people leave money on the table. If you’re over 50, the IRS lets you make catch-up contributions to your 401(k) and IRA. We’re talking an extra $7,500 for your 401(k) and $1,000 for your IRA in 2025.

I’ll admit, I didn’t start maxing out my contributions until I was 42. That’s years of tax-deferred growth I missed out on. Don’t be like me on this one.

Also, if your employer offers a Health Savings Account, treat it like a secret retirement weapon. HSA contributions are tax-deductible, they grow tax-free, and withdrawals for qualified medical expenses are also tax-free. It’s like the holy grail of tax-advantaged savings.

Consider Roth Conversions Before It’s Too Late

Okay, this is where things get kinda fun — if you’re a nerd like me. A Roth IRA conversion means moving money from a traditional IRA to a Roth IRA and paying taxes on it now. Why would anyone do that voluntarily?

Because in retirement, Roth withdrawals are completely tax-free. If you’re in a lower tax bracket right now than you expect to be later — or if you think tax rates are going up in the future — converting makes a ton of sense. The sweet spot is usually those years between early retirement and when Social Security or required minimum distributions kick in.

My sister converted a chunk of her traditional IRA during a year she took a sabbatical. Her income was lower, so the tax hit was way more manageable. Smart move, honestly.

Don’t Forget About Capital Gains Harvesting

Most people have heard of tax-loss harvesting, but capital gains harvesting is its lesser-known cousin. If your taxable income is low enough in a given year, you might qualify for the 0% long-term capital gains tax rate.

That means you can sell investments, lock in gains, and pay zero federal tax on them. It’s kind of wild when you think about it. The key is timing these sales during years when your income dips — maybe you’ve left a job early or you’re in that gap before pension payments start.

Plan Your Social Security Timing Carefully

Here’s something that tripped me up for a while. When you claim Social Security affects how much of your benefits get taxed. Up to 85% of your Social Security income can be taxable depending on your combined income.

Delaying benefits until age 70 increases your monthly check, but it also means higher taxable income later. There’s no one-size-fits-all answer here, which is honestly frustrating. You’ve gotta run the numbers based on your specific situation — or better yet, work with a tax professional who specializes in retirement income planning.

Bunch Your Deductions Strategically

With the standard deduction being so high these days, itemizing doesn’t always make sense. But here’s a trick: bunch your charitable donations and medical expenses into alternating years. One year you itemize with a big pile of deductions, the next year you take the standard deduction.

Donor-advised funds are perfect for this. You get the tax deduction upfront and then distribute the money to charities over time. It was been a game-changer for my own tax strategy.

Your Future Self Will Thank You

Pre-retirement tax planning isn’t glamorous. Nobody’s posting about Roth conversions on Instagram. But the people who take this stuff seriously end up keeping significantly more of their hard-earned money.

Every situation is different, so please customize these strategies to fit your life. And always consult with a qualified financial advisor before making big moves — this isn’t the place to wing it. If you found this helpful, head over to Deduction Desk for more practical tax tips and financial planning insights that actually make sense.