5 Smart Year-End Tax Moves for Retirees

Once you turn 73 (or 75 if born in 1960 or later), the IRS requires you to start taking RMDs from tax-deferred accounts such as IRAs and 401(k)s. These withdrawals are taxed as ordinary income, and if you miss the deadline, the penalties add up quickly.

The penalty for a missed RMD is 25% of the shortfall  (reduced to 10% if corrected within two years). For retirees with large accounts, that can mean tens of thousands of dollars in penalties.

Example Scenario

Take, for example, a $2 million IRA with a 5% required distribution rate generating a $100,000 RMD. Missing or underpaying that amount could potentially trigger a $25,000 penalty before taxes.

RMDs can also push income into higher brackets, increase taxable Social Security benefits, and trigger Medicare IRMAA (Income-Related Monthly Adjustment Amount) surcharges. Sequencing distributions carefully, possibly coordinating with Roth conversions or charitable giving, can minimize these ripple effects.

Roth Conversions: Reducing Future RMDs and Taxes
Strategic Roth conversions can be one of the most powerful tools to manage both current and future tax exposure. Converting a portion of traditional IRA or 401(k) assets into a Roth IRA intentionally recognizes income now, ideally in a lower tax bracket, to reduce the size of future RMDs.

Roth Conversions can also:

• Lower future taxable income once RMDs begin
• Minimize IRMAA exposure by reducing future MAGI
• Increase family inheritance value, since Roth assets pass to heirs income-tax-free

Example Scenario

A retiree in the 22% bracket could convert $100,000 from a traditional IRA to a Roth before December 31, paying roughly $22,000 in taxes today but avoiding larger RMDs, and potentially higher taxes, later. Over time, the conversion may reduce future RMDs and create more flexibility for estate and healthcare planning.

*These figures are intended for explanatory purposes only.

Action Step:

Work with your CPA or financial advisor to model how your RMDs, Roth conversions, charitable giving, and Medicare thresholds interact. A well-timed conversion, especially in the lower-income years before RMDs begin, can minimize both today’s taxes and future required withdrawals.

A QCD allows IRA owners aged 70½ or older to donate up to $108,000 per year  directly to charity. This strategy satisfies RMDs while keeping the donated amount out of taxable income.

Why it matters: Unlike itemized deductions, QCDs lower your Adjusted Gross Income (AGI), which can reduce exposure to IRMAA, limit taxation of Social Security, and preserve other deductions.

Example Scenario

If your RMD is $100,000 and you direct $50,000 as a QCD to a qualified charity, only the remaining $50,000 counts toward taxable income.

*These figures are intended for explanatory purposes only.

QCDs must be completed by December 31, and the funds must go directly from the IRA custodian to the charity (not to you first).

While QCDs work well for many retirees, those with larger charitable goals or complex portfolios may benefit from more advanced strategies.

For retirees with more complex charitable goals, other vehicles can enhance both tax efficiency and estate planning. These include:

• Donor-Advised Funds (DAFs): You can contribute appreciated securities to a DAF, claim a charitable deduction in the current tax year, and then distribute the funds to charities over time. This strategy can help offset large RMDs or capital gains in high-income years.
• Charitable Remainder Trusts (CRTs): A CRT allows you to transfer assets into a trust, receive an immediate charitable deduction, and generate income for life or a set term, while also removing the assets from your taxable estate.

Timing note: Transfers of appreciated assets can take several business days to settle. Initiating gifts well before year-end avoids missed deadlines.

Investment income is one of the biggest drivers of unexpected tax creep in retirement. Managing when and how you realize gains or losses can keep you below critical tax and Medicare thresholds.

Tax-loss harvesting: Realizing losses allows you to offset capital gains dollar-for-dollar and up to $3,000 of ordinary income each year. If your realized losses exceed those limits, the unused portion carries forward indefinitely, allowing you to reduce taxable income in future years.

Capital gain harvesting: In lower-income years, such as early retirement before RMDs start, intentionally realizing gains can help fill lower tax brackets and reset your cost basis. This can reduce the size of future gains and keep your long-term tax bill lower.

Social Security coordination: Because more investment income can cause a larger portion of your Social Security benefits to become taxable and push you over IRMAA thresholds, the timing of when you realize capital gains or losses matters. Strategically spreading income across multiple years can help keep you below key tax and Medicare surcharge brackets.

State-specific considerations: In states like California, capital gains are taxed at ordinary income rates, unlike the preferential federal long-term capital gains rates. That means the marginal impact of each dollar of gain is higher, and careful timing of sales—such as pairing gains with harvested losses or charitable strategies—can meaningfully reduce state tax exposure.

Example Scenario

A retiree realizes $80,000 of long-term capital gains. By harvesting $40,000 of losses in the same year, they reduce their net taxable gain to $40,000. Assuming a combined federal and state tax rate of around 25–30%, this would save roughly $10,000–$12,000 in taxes.

If they had realized the gains without offsetting losses, the entire $80,000 would have been subject to tax, potentially pushing them into higher brackets and increasing their IRMAA exposure.

*These figures are intended for explanatory purposes only.

Healthcare is one of the largest expenses most retirees face, and it’s also one of the most overlooked tax levers. Premiums, income thresholds, and withdrawal strategies can meaningfully affect both your tax bill and your out-of-pocket healthcare costs in retirement.

Medicare premium brackets: Medicare premiums rise once your Modified Adjusted Gross Income (MAGI) crosses certain thresholds ($212,000 for couples and $106,000 for individuals in 2025). Even one dollar over these limits can trigger IRMAA surcharges, which can add hundreds of dollars to your monthly premiums. Your advisor should monitor your MAGI throughout the year to keep income just under IRMAA thresholds when possible.

HSA contributions: If you have not yet enrolled in Medicare, you can continue contributing to a Health Savings Account (HSA). HSAs are one of the few accounts offering triple tax advantages: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free. Note that once you enroll in Medicare, you can no longer make new HSA contributions.

Withdrawal sequencing: The order in which you draw from taxable, IRA, or Roth accounts can affect your AGI and, in turn, your tax brackets, Medicare premiums, and the taxation of Social Security benefits. For example, tapping taxable or Roth accounts before drawing heavily from IRAs can help keep income below key thresholds, preserving more flexibility in future years.

Example Scenario

A couple with $220,000 of projected MAGI would exceed the IRMAA threshold and face roughly $3,000–$4,000 in additional Medicare premiums for the year. By shifting $20,000 of their withdrawals to a Roth account, which does not increase MAGI, they can bring their income down to $200,000 and potentially avoid the surcharge entirely. Over a decade, that kind of planning can add up to tens of thousands of dollars in avoided costs.

*These figures are intended for explanatory purposes only.

Tax planning is not set-and-forget in retirement. In fact, it often becomes more consequential. RMDs, QCDs, charitable giving, capital gains, and healthcare costs all intersect at year-end, and the decisions you make in the next few weeks can shape your tax picture for years to come.

At Summitry, we help retirees design coordinated tax and investment strategies that reduce tax drag, protect Medicare benefits, and support legacy goals.

Download our Year-End Tax Guide for Retirees or schedule a consultation to make the most of this year’s remaining planning window.

This material is intended for general informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. It does not consider the specific investment objectives, tax and financial condition or needs of any specific person. An investor should consult with their financial professional before making any investment decisions. Investing in securities involves the risk of loss.