Plan early to mitigate potential tax liabilities during retirement.
Evaluate pension and investment distribution strategies for tax efficiency.
Consult a financial advisor to navigate complex retirement tax rules.
Retirement Planning
Transition Into Retirement: Avoid Unnecessary Tax Expenses
Transition Into Retirement: Avoid Unnecessary Tax Expenses
Transition Into Retirement: Avoid Unnecessary Tax Expenses
Zoe Team and Drew Hendricks, CFP® (Zoe Network Advisor)
7 min read
Frequently Asked Questions
Frequently Asked Questions
Why is tax planning important for retirement?
Proper planning helps minimize unnecessary tax expenses, ensuring your savings last longer throughout your retirement years.
How can I avoid tax surprises in retirement?
Review your income sources and investment withdrawals with a qualified advisor to optimize your tax bracket exposure.
When should I start my retirement tax planning?
It is best to start well before retirement to allow time for adjusting your assets and distribution methods effectively.
Knowing where to take retirement income is a common issue. There are various retirement income sources, all with different rules and implications. Fortunately, my client managed her situation perfectly by contacting me before completing the paperwork, and I was able to save her over $2,200 in taxes just that year.
A few months ago, I opened my inbox to a startling email: “Hey Drew just wanted to let you know that I reached out to my 403b provider and am starting to take money out for the rest of the year.”
Despite meeting my client towards the end of her career, I was surprised to see she had suddenly decided to retire earlier than expected. Lucky for me, this decision gave me the opportunity to witness my favorite thing in this profession: guiding someone’s transition from work to retirement - without that necessarily being a part of our original plan.
My client probably thought of the catchy JG Wentworth commercial, “It’s my money, and I want it now!” when reaching out to her tax-sheltered annuity plan provider. Unbeknownst to her, the danger of this urgency is that many don’t generally consider what they owe the IRS. Fortunately, my client’s email was sent right before she completed the paperwork, and I was able to save her over $2,200 in taxes just that year.
Are You Making an Avoidable Mistake?
Knowing where to take retirement income is a common issue. There are various retirement income sources, all with different rules and implications. Whether you are taking your money from Roths, 401ks, annuities, rental properties, or social security, the proper planning of each of these can have incredible impacts on the financial component of your dreamed years.
Returning to my client’s example, she was about to make a widespread and avoidable mistake, and we prevented that by simply changing where she took her money.
Tax Loss Harvesting
403b, and most retirement plans through your employer require a mandatory 20% federal withholding for standard withdrawals. This client is in the 12% federal tax bracket, meaning she would be giving the IRS an interest-free loan until she files her 2023 return and recoups the overpayment.
In addition, she has several other types of accounts to pull from – one being a taxable brokerage account that she just recently started. One of the silver linings of this lovely bear market is the tax benefits of losses, and she’s got them.
What is tax loss harvesting? The IRS allows taxpayers to write off realized losses on up to $3,000 in capital assets annually. Any amount over $3,000 is carried forward to subsequent tax years. The result for my client is that we have eliminated that tax bill while she looks for a part-time job to keep her busy during the first few years of stepping away from teaching. Potentially this will bridge her the entire way so that she doesn’t have to trigger any taxable events for some years.
Have You Been a Part of This Story?
All advisors have handfuls of these anecdotes - their guidance and advice helped stave off some immediate consequences of impulsive decision-making. Other times the result isn’t so immediate and apparent.
The Escape Door - The Backdoor Roth
Here is another example. With a slight change to my most recent Zoe referral’s retirement savings plan, we projected a tax savings of about $1.2 MILLION in retirement. In this case, the client makes too much money to contribute to a Roth IRA (phased out for single filers from $129,000-$144,000, $204,000-$214,000 for joint returns). Additionally, in her mid-40s, she’s been contributing her entire working life to pre-tax or tax-deductible plans. Decades of compounding returns with tax-free distributions make finance hearts start beating. With the client making too much money, we have to do a “Backdoor Roth.”
We did this with a financial planning software called a Roth IRA calculator. The tool lays out the tangible financial differences between the two types of retirement planning vehicles. This calculator easily shows us that the long-term benefits of the backdoor Roth far outweighed the status quo of pre-tax/tax-deductible savings.
Common Tax Mistakes
Claiming Social Security benefits before your full retirement age and having earned income. Even though many people are aware of this fact, I still encounter people all the time who don’t know that if you earn more than a certain amount (
), your benefits will reduce by $1 for every $2 over that amount.
Taking large distributions from tax-deferred accounts for large purchases. Our goal is to avoid jumping to higher tax brackets and compounding the tax liability for clients. Many retire in the middle of the year and have earned income for that portion of the year. Consider financing the initial purchase and then paying off the following tax year(s) when you’ll only have income from your retirement assets.
Tip: Another tactic I employ, if the calendar permits, is taking a portion of the distribution in December and the remainder in January to break up the reporting years.
Poorly structuring the sale of a major asset – usually a business or real estate. Improper planning can lead to massive tax bills that otherwise would not have been incurred. Consider changing the payout from the sale of a business from a single year to a series of years to break up the tax liability and/or reduce it. For your primary residence, be aware of the rules to avoid capital gains taxes on the sale of the house where you must live for any two of the last five years to avoid the bill. A 1031 exchange is a powerful tax planning tool for investment properties to defer capital gains on real estate investments.
The Key to Avoiding Unnecessary Tax Expenses
The key to avoiding unnecessary tax expenses is to resist the urge to surprise your financial advisor and/or CPA and say, “Guess what I did last year?” Instead, discuss major events with these professionals beforehand. If your financial advisor cannot show their value, it might be time to consider hiring an advisor that can help you navigate the complexity of the U.S. tax code.
Remember to consider rules of thumb like
Talking to a financial advisor about your costs and goals.
Being careful where you take your money from.
Do not claim benefits before reaching your full retirement age.
Do not act impulsively.
If you need to, proceed with a backdoor Roth.
Knowing where to take retirement income is a common issue. There are various retirement income sources, all with different rules and implications. Fortunately, my client managed her situation perfectly by contacting me before completing the paperwork, and I was able to save her over $2,200 in taxes just that year.
A few months ago, I opened my inbox to a startling email: “Hey Drew just wanted to let you know that I reached out to my 403b provider and am starting to take money out for the rest of the year.”
Despite meeting my client towards the end of her career, I was surprised to see she had suddenly decided to retire earlier than expected. Lucky for me, this decision gave me the opportunity to witness my favorite thing in this profession: guiding someone’s transition from work to retirement - without that necessarily being a part of our original plan.
My client probably thought of the catchy JG Wentworth commercial, “It’s my money, and I want it now!” when reaching out to her tax-sheltered annuity plan provider. Unbeknownst to her, the danger of this urgency is that many don’t generally consider what they owe the IRS. Fortunately, my client’s email was sent right before she completed the paperwork, and I was able to save her over $2,200 in taxes just that year.
Are You Making an Avoidable Mistake?
Knowing where to take retirement income is a common issue. There are various retirement income sources, all with different rules and implications. Whether you are taking your money from Roths, 401ks, annuities, rental properties, or social security, the proper planning of each of these can have incredible impacts on the financial component of your dreamed years.
Returning to my client’s example, she was about to make a widespread and avoidable mistake, and we prevented that by simply changing where she took her money.
Tax Loss Harvesting
403b, and most retirement plans through your employer require a mandatory 20% federal withholding for standard withdrawals. This client is in the 12% federal tax bracket, meaning she would be giving the IRS an interest-free loan until she files her 2023 return and recoups the overpayment.
In addition, she has several other types of accounts to pull from – one being a taxable brokerage account that she just recently started. One of the silver linings of this lovely bear market is the tax benefits of losses, and she’s got them.
What is tax loss harvesting? The IRS allows taxpayers to write off realized losses on up to $3,000 in capital assets annually. Any amount over $3,000 is carried forward to subsequent tax years. The result for my client is that we have eliminated that tax bill while she looks for a part-time job to keep her busy during the first few years of stepping away from teaching. Potentially this will bridge her the entire way so that she doesn’t have to trigger any taxable events for some years.
Have You Been a Part of This Story?
All advisors have handfuls of these anecdotes - their guidance and advice helped stave off some immediate consequences of impulsive decision-making. Other times the result isn’t so immediate and apparent.
The Escape Door - The Backdoor Roth
Here is another example. With a slight change to my most recent Zoe referral’s retirement savings plan, we projected a tax savings of about $1.2 MILLION in retirement. In this case, the client makes too much money to contribute to a Roth IRA (phased out for single filers from $129,000-$144,000, $204,000-$214,000 for joint returns). Additionally, in her mid-40s, she’s been contributing her entire working life to pre-tax or tax-deductible plans. Decades of compounding returns with tax-free distributions make finance hearts start beating. With the client making too much money, we have to do a “Backdoor Roth.”
We did this with a financial planning software called a Roth IRA calculator. The tool lays out the tangible financial differences between the two types of retirement planning vehicles. This calculator easily shows us that the long-term benefits of the backdoor Roth far outweighed the status quo of pre-tax/tax-deductible savings.
Common Tax Mistakes
Claiming Social Security benefits before your full retirement age and having earned income. Even though many people are aware of this fact, I still encounter people all the time who don’t know that if you earn more than a certain amount (
), your benefits will reduce by $1 for every $2 over that amount.
Taking large distributions from tax-deferred accounts for large purchases. Our goal is to avoid jumping to higher tax brackets and compounding the tax liability for clients. Many retire in the middle of the year and have earned income for that portion of the year. Consider financing the initial purchase and then paying off the following tax year(s) when you’ll only have income from your retirement assets.
Tip: Another tactic I employ, if the calendar permits, is taking a portion of the distribution in December and the remainder in January to break up the reporting years.
Poorly structuring the sale of a major asset – usually a business or real estate. Improper planning can lead to massive tax bills that otherwise would not have been incurred. Consider changing the payout from the sale of a business from a single year to a series of years to break up the tax liability and/or reduce it. For your primary residence, be aware of the rules to avoid capital gains taxes on the sale of the house where you must live for any two of the last five years to avoid the bill. A 1031 exchange is a powerful tax planning tool for investment properties to defer capital gains on real estate investments.
The Key to Avoiding Unnecessary Tax Expenses
The key to avoiding unnecessary tax expenses is to resist the urge to surprise your financial advisor and/or CPA and say, “Guess what I did last year?” Instead, discuss major events with these professionals beforehand. If your financial advisor cannot show their value, it might be time to consider hiring an advisor that can help you navigate the complexity of the U.S. tax code.
Remember to consider rules of thumb like
Talking to a financial advisor about your costs and goals.
Being careful where you take your money from.
Do not claim benefits before reaching your full retirement age.
Do not act impulsively.
If you need to, proceed with a backdoor Roth.
Disclosures: Zoe Financial, Inc. ("Zoe Financial") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. Zoe Financial provides investment advisory services and access to independent registered investment advisers through its platform. The information provided by Zoe Financial is for educational and informational purposes only and should not be construed as personalized investment advice or as an offer to buy or sell any security. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. Clients should consult with their own financial, tax, or legal professionals before making any investment decisions. The material presented by Zoe Financial is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Material presented has been gathered from sources believed to be reliable, however Adviser cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. Past performance is no guarantee of future results. Zoe Financial does not provide legal or tax advice, and nothing contained in these materials should be taken as legal or tax advice. SEC Registration does not constitute an endorsement of Zoe Financial by the SEC nor does it indicate that Zoe Financial has attained a particular level of skill or ability. The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be appropriate for all clients. Before making any investment, each investor should carefully consider the risks associated with the investment, as discussed in the applicable offering memorandum, and make a determination based upon their own particular circumstances, that the investment is consistent with their investment objectives and risk tolerance. Lower expenses do not guarantee better investment performance. Certain information contained herein may constitute forward-looking statements. Due to various risks and uncertainties, actual events, results or the performance of a fund may differ materially from those reflected or contemplated in such forward-looking statements.
Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.
Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.
The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.
Explore the Zoe Wealth Platform with AI
Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.
In certain situations, you may be required to disclose that the content was “generated by AI.” Please confirm any specific disclosure or labelling requirements with Compliance.
(646) 680-9244
support@zoefin.com
666 Third Ave, 6th Floor
New York, NY, 10017
Copyright © 2026 Zoe Financial, Inc. | All rights reserved
Find an Advisor
Retirement Planning
Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.
Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.
The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.
Explore the Zoe Wealth Platform with AI
Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.
In certain situations, you may be required to disclose that the content was “generated by AI.” Please confirm any specific disclosure or labelling requirements with Compliance.
(646) 680-9244
support@zoefin.com
666 Third Ave, 6th Floor
New York, NY, 10017
Copyright © 2026 Zoe Financial, Inc. | All rights reserved
Find an Advisor
Retirement Planning
Disclosure: This page is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accounting, tax, legal or financial advisors. The observations of industry trends should not be read as recommendations for stocks or sectors.
Investment advisory services are provided by Zoe Financial, Inc. (Zoe Financial), an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Learn more about Zoe Financial on the SEC’s Investment Adviser Public Disclosure website. Brokerage services are provided by Zoe Securities LLC and Apex Clearing Corporation, members of the Financial Industry Regulatory Authority Inc. (FINRA) and Securities Investor Protection Corporation (SIPC). Learn more about Zoe Securities and Apex on FINRA’s BrokerCheck website.
The information in the visuals above is for illustrative purposes only and does not represent an actual user's account, balance, or return. Zoe Financial does not provide tax or legal advice.
Explore the Zoe Wealth Platform with AI
Some of this content may have been generated with the assistance of AI. Please review and sense-check all outputs, as AI tools can occasionally produce incomplete or inaccurate information.
In certain situations, you may be required to disclose that the content was “generated by AI.” Please confirm any specific disclosure or labelling requirements with Compliance.
(646) 680-9244
support@zoefin.com
666 Third Ave, 6th Floor
New York, NY, 10017
Copyright © 2025 Zoe Financial, Inc. | All rights reserved