Smart Tax Moves to Make Before You Retire

Planning for retirement is about more than saving — it’s also about strategically reducing your tax burden in the years leading up to retirement. For women, especially those leading their households or managing finances post-divorce, the tax decisions made in your 40s, 50s, and early 60s can have a significant impact on long-term financial security.

Whether you're catching up or planning ahead, these tax-smart strategies can help you protect what you’ve worked hard to build.

Why Taxes Matter More Than You Think

Many pre-retirees are surprised to discover that taxes don’t go away in retirement. In fact, if your income sources aren't managed properly, your tax bill could increase.

Income from Social Security, traditional IRAs, 401(k)s, pensions, and even capital gains from investments may be taxable — and without careful planning, you may pay more than necessary.

For women who are statistically more likely to live longer and experience retirement alone, preserving wealth through tax efficiency is essential.

Start Early: Retirement Tax Planning in Your 40s

If you're in your 40s, you may still be juggling family, career growth, or even recovering from a major life change like divorce. But this is also a powerful window to start building a tax-aware foundation.

Maximize Roth Contributions

If you're eligible, Roth IRAs and Roth 401(k)s offer tax-free withdrawals in retirement. In your 40s, you're likely earning more — making this the right time to pay taxes now and avoid them later when you might be in a higher bracket.

Consider a Backdoor Roth

If your income exceeds Roth contribution limits, speak to your advisor about a backdoor Roth strategy. This involves making nondeductible contributions to a traditional IRA and converting to a Roth.

Harvest Losses and Rebalance Strategically

Tax-loss harvesting in taxable investment accounts can offset gains and reduce your tax bill. Rebalancing with taxes in mind — especially around year-end — can optimize performance and efficiency.

Be Proactive About Filing Status

Women leading households should pay attention to filing status, dependent credits, and deductions. Strategic timing of income, such as bonuses or capital gains, can also improve your tax position.

Your 50s and Early 60s: The High-Impact Tax Planning Years

The years leading up to retirement are often your highest-earning years — and the most critical for tax planning. These years offer unique opportunities to reposition your assets and manage future taxes.

Leverage Catch-Up Contributions

Once you turn 50, you're eligible for higher contribution limits to 401(k)s, IRAs, and HSAs. This is one of the most powerful ways to reduce taxable income and build retirement savings quickly.

Explore Roth Conversions

If you expect to be in a higher tax bracket later — or want to control your tax exposure in retirement — consider converting some traditional IRA or 401(k) balances to a Roth. Doing so now allows your money to grow tax-free and be withdrawn tax-free later.

Evaluate Timing of Social Security

Delaying Social Security not only increases your benefit, but also gives you more time to control your taxable income and perform Roth conversions without bumping into higher brackets.

Plan for Required Minimum Distributions (RMDs)

At age 73 (or 75 depending on your birth year), the IRS requires you to begin withdrawals from traditional retirement accounts. These RMDs are fully taxable. Taking smaller, strategic withdrawals earlier can reduce their future impact.

Think Beyond Retirement Accounts

Capital Gains and Investment Income

Review your taxable investment accounts with your advisor. Holding appreciated assets for more than one year reduces your tax rate on gains. Selling investments in years with lower income — such as right after retirement — can further reduce your tax bill.

Health Savings Accounts (HSAs)

If you’re eligible for an HSA, it’s one of the most tax-advantaged savings tools available.

Contributions are tax-deductible, growth is tax-free, and qualified withdrawals are also tax-free — a rare triple benefit.

Use your HSA to save for future healthcare costs in retirement, especially long-term care.

Tax Planning for Single or Divorced Women

If you're recently divorced or single, you may face higher tax rates due to filing as head of household or single instead of married filing jointly. That makes tax planning even more critical.

Focus on:

• Adjusting withholding or estimated tax payments

• Evaluating income splitting opportunities (if still in settlement phase)

• Updating retirement account beneficiaries and estate plans

• Reevaluating contribution limits now that household income may have changed

Coordinate with a Financial Advisor and Tax Professional

Tax strategies should not be done in isolation. The best outcomes come from working with a financial advisor who understands your full financial picture and collaborating with a tax professional who can help execute.

This is especially important for women who:

• Manage complex household finances

• Are business owners or self-employed

• Have experienced a major life transition like divorce, remarriage, or inheritance

Final Thoughts

Tax planning before retirement is not just about minimizing taxes — it's about maximizing flexibility, preserving independence, and protecting your lifestyle.

Whether you're a woman in your 40s laying the foundation, or entering your 60s with retirement on the horizon, smart tax moves can provide peace of mind and long-term financial confidence.

For more tips like these, download my free ebook series that covers debt management, growing your income to save more, investing wisely and retirement planning. To learn what it's like to work with a financial advisor, you can book a free call with Life Story Financial.