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Most retirees pay more in taxes than they need to, not because they’re doing something wrong, but because retirement changes the rules. The planning that worked while you’re working doesn’t translate once you stop working. Joe and Marie were in the exact same spot. They had saved well, they were already retired, collecting Social Security and had no debt. By all accounts, they were doing everything right, but they were still losing thousands of dollars to taxes each year unnecessarily.

And here’s the thing, their plan didn’t even need a complete overhaul, it just needed a smarter tax plan. My name is Danny Goodorf, a financial planner and owner of Goodorf Financial Group, a retirement planning firm that helps people over 50 reduce taxes and invest smarter. Today, I’m gonna walk you through how we help Joe and Marie make simple changes to take back control, changes that gave them more flexibility today and save them real money over the long term.

We’ll go step by step how we built their retirement tax plan. But first, let me show you the most important tax strategies that every retiree needs to be thinking about. The power isn’t just in knowing what these strategies are, it’s about how they all work together. The first one we’re gonna talk about is Roth conversions. And that means you’re converting money from a traditional IRA into a Roth IRA, paying taxes today to avoid them later.

and coordinating it with other tactics is what really makes it work. Second is tax loss harvesting. Selling investments at a loss may not sound helpful, but volatility in your investments can actually work to your favor. If you’re proactive, harvested losses can offset gains and give you more flexibility when layering in other strategies. Third is asset location.

This isn’t about how much you invest in stocks and bonds. It’s about which accounts you hold your investments in. Interest from bonds or high dividend stocks and a taxable account can quietly inflate your taxable income. But repositioning it can reduce taxable income without changing your overall portfolio allocation. Fourth is something we call qualified charitable distributions. Once you turn 70 and a half, you can give

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directly from your IRA to charity. It counts towards your required minimum distribution, but doesn’t show up as income on your tax return. It’s one of the cleanest ways to give to charity and reduce taxes at the same time. Fifth is giving appreciated investment shares. Even if you’re not 70 and a half yet, you can still make charitable giving more efficient by donating appreciated investments

to a donor advised fund instead of cash. You avoid the capital gains tax treatment and you still qualify for the full deduction while still having control on when you can gift and donate this money to charity. Sixth is Social Security taxation. As your income increases, more of your Social Security income becomes taxable, up to 85%. It phases in quickly and stacks on top of other income.

That’s what makes planning very essential. And seventh is Medicare premium planning. Just like we want to watch our income tax brackets, we also want to watch our IRMA brackets. Medicare premiums are based on your income from two years ago. Even a small increase can bump your monthly costs by hundreds or thousands of dollars per year. Each of these strategies can be valuable on their own, but that’s where most people stop.

The real magic is when you line them up together in the right sequence. And I’ll show you exactly how we did that for Joe and Marie in just a minute. But first, let me show you their starting point because what we found was even a surprise to them. Joe and Marie live in Ohio and have no debt. They’ve done a great job building their retirement foundation. They’re collecting their social security, which is about $63,000 per year between

Joe and Marie. Joe’s benefit is higher and it might have made sense for him to delay his benefit even longer. And we’ll see why that makes the most sense here in a little bit. They’ll also receive about $38,400 from pension income and they’ll have other rental income of $22,900. And to be able to meet their retirement spending goals, they need to take another roughly $43,000 from their investments.

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Their investment portfolios include $900,000 in a joint trust account and roughly half of that is basis and the other half is gain. And then they’ll also have a Roth IRA under Joe that has about $200,000. And then they’ll have a traditional IRAs and those balances are totaling roughly $860,000. They also will have about $100,000 in their bank accounts. This is kind of their excess cash savings.

And they also have a home that’s worth $500,000 and it’s completely paid off and no debt. So when we look at their overall situation, they have about $2.56 million in total net worth. Their monthly core expenses being everything that they want to do in retirement, healthcare, and all the traveling is about $12,500 per month they need to completely meet all of their needs and goals. Currently,

With their current plan, they were drawing about $34,000 from their IRAs each year to supplement their other income sources to meet their spending goals. This gave them a mix of withdrawals from tax deferred accounts and taxable accounts, what we call a pro rata strategy. That approach isn’t wrong, and sometimes it does work, but it wasn’t optimized for Jill and Marie’s situation.

They were paying more in tax than they needed to and missing the chance to be more strategic before required minimum distributions kick in at age 73. Here’s what we did. We evaluated multiple withdrawal strategies from pro rata withdrawals to draining only from the taxable accounts first to partial or even full Roth conversions at various thresholds. By the numbers, the best outcome came from

doing Roth conversions up to the second Medicare premium bracket. However, the benefit over converting up to the first bracket was minimal above that. In situations where you’d have to pay a lot more in taxes now just to gain a little bit later, I often lean towards the more conservative Roth conversion strategy. So we just targeted just up to the first Medicare premium bracket for the Roth conversion. The problem was that they were already pushing

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the limit of the first bracket based upon their current strategy. We needed to reduce some of the inefficiencies in their overall tax plan and how they were currently taking income, which would then create more room to do those Roth conversions so they’d be in a stronger position later when required minimum distributions kick in. So here’s what we found. Compared to their current path,

Their strategy would save them roughly $343,000 in future income taxes and increase their net legacy to their heirs by $234,000 and lower their future average tax rate by 3.9 % over the course of their retirement. Looking at it in present day dollars and that’s what it’s all about, they would save about $109,000 in tax savings and $130,000 in net

legacy. This gave them more control over how and when they pay their taxes in retirement and helped them avoid a much larger tax spike down the road. What we didn’t want to do is just layer Roth conversions on top of what they were already doing. That would push them into much higher tax brackets and trigger a necessary tax cost. They would also probably have less money overall

than our current strategy that we’re asking them to employ. They were already up against the limit. What we wanted to do first was reduce their current taxable income. And that’s what creates the space that we need to make this Roth conversion work and actually beneficial from the numbers perspective. The challenge with retirement tax planning is that none of these strategies operate in isolation. They all are intertwined. Pull one lever,

like reducing taxable dividends or changing where you give and it affects your ability to do something else like Roth conversions. While we were solving for Joan Marie’s Roth conversion strategy, your objective might be entirely different. That’s what makes this so powerful, but also why most people miss this opportunity. Let me walk you through the changes we made step by step, starting with their actual 2024 tax return and then comparing it

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to a more strategic plan for 2025. When we look at their tax return and our tax planning software, they had social security income of 63,500 and of that 53,975 was actual taxable social security income. They had their pension of 38,400 and they had IRA withdrawals of 34,000. So when we look at their other income sources,

They had that $22,900 on Schedule E, which is their rental income. And when we look at their trust account, their after-tax funds, they generated about $7,900 in qualified dividends, and they had $24,800 in total dividends, and they also had taxable interest of $4,100. So that’s how their current tax return looked when we walked through it.

Okay, and then on their capital gain side in their investment accounts, they had 4,300 of short-term gain and 27,700 of long-term capital gains in their plan. Now for their deductions, they were giving $22,000 to charity. Okay, so if we look at their deductions here, they actually were itemizing and they had 33,700 and of that, 22,000 was going to charity.

but they were getting very little benefit added over the standard deduction because the standard deduction is roughly $32,000 in that case. Okay. So we wanted to make sure that we were able to, know, for giving a charity, want to do it in the most tax efficient manner possible. So step one was addressing their bond holdings. Joe and Marie had about $360,000 in bonds that they held in their trust account. The first issue,

was that this generated about $16,000 in taxable dividends and taxable interest that was adding to their taxable income. What we didn’t want to change was their overall allocation between stocks and bonds. We wanted to keep that very similar to what it was. So instead of selling bonds entirely, we basically reallocated where those bonds were held. We shifted $180,000 of those bonds from the trust account to broadly purchased

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more stock investments that would pay a dividend and then increase those bond allocations inside their IRA by $180,000. This adjustment lowered their taxable dividends and interest by roughly $8,000. Okay. But we also needed to account for the dividends that we purchased in the other stock account through those new stock holdings. But

Even though we had higher dividends, this was a much more tax efficient way. And the new stock dividends generated about 3,200 in dividends. But because of the structure and everything else, we were able to lower their overall taxes because qualified dividends are taxed at that lower dividend rate, where that bond interest and bond income is taxed at ordinary income tax rates. Step two involved changing where Joe and Marie took their income from instead of

tolling $34,000 from their IRAs like they did in 2024. We shifted all of their investment withdrawals to their trust account and pause their IRA distributions for the year. We also accounted for cost of living adjustments. We boosted about $800 from Joe’s pension, about another $1,600 from Social Security. While we eliminated the $34,000 in IRA income,

we added back that $2,400 in cost of living. So the net adjustment amount was about $31,800 in taxable income. three, we addressed how they covered that $43,000 in withdrawals they needed to round out their monthly spending. So they were already producing about $20,000 in dividends and another $3,000 from mutual fund distributions. That income was already gonna show up on their tax returns.

So we used it to generate cashflow, that 20,000 left we still needed, which we plan to raise by selling investment shares. But instead of repeating their 2024 strategy, where they realized 4,300 in short-term capital gains, we plan to sell from those long-term capital gain positions, which are much more tax efficient. So selling about $20,000 in appreciate investments,

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could potentially create about only $10,000 in long-term capital gains since only half of the account is appreciation and the other half is basis. But we also are able to harvest about $10,000 in losses from other investments that were down, fully offsetting those gains. This gave us a very efficient starting point for generating the cash they needed. Step four was optimizing their charitable giving.

Don Marie had been giving about $20,000 per year to charity, but their total itemized deduction came to $33,700, barely above the $32,300 standard deduction. Their generosity was getting them very little in tax benefit. So in 2025, we took a different approach. We doubled up and gave $44,000 through a donor advice fund, which they could then distribute to charities

on their own timing. Here’s what made that so powerful. They gave the appreciated investments instead of cash and that gave them the flexibility to give that higher amount each year without taking extra money out of their checking account. By doing so, they avoided the capital gains tax on those donated shares. Next year, they will simply take the standard deduction and the cash they would have given can stay in their account.

They can use it either to reduce how much they would draw from their investments in 2026 or reinvest that cash at a higher basis. By stacking their giving into one year, they increased their deductions by $22,000 in that year. Step five was where everything came together. After adjusting their investment income, eliminating the IRA withdrawals and stacking their charitable giving, we brought Joe and Marie’s taxable income down from roughly 172,000

to $109,000. All right, if we look at a summary here for their 2025 tax return and how that would play out on their return, we can see we removed all the bond interest, okay? And then we have $10,000 in qualified dividends and total dividends of $20,000, okay? We have that taxable pension annuity, which is staying the same with a little increase and then the increased social security benefit. We had about $15,000 in capital gains.

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when we look at what gains we harvested versus what we took off from the losses. And then we had that Schedule E income of $22,900. And then we had the $44,000 of that charitable giving deduction, which made our total taxable income $109,000, which is down from that $176,000 from the previous year. And that’s what gives us the space we needed to now do

that $40,000 Roth conversion and still stay below that Medicare premium threshold. Now, they still have the same investment allocation. They still have the same amount of money coming in on a monthly basis to meet their retirement living expenses at $12,500. The only thing that we’ve done is we’ve been more strategic about how we take income and where we take income from in those gap years prior to when required minimum distributions are starting.

And here’s the important distinction. While we reduced the taxable income by over $60,000, the Medicare thresholds are based on income before deductions. So we just ended up with just over $40,000 of space to work with for the Roth conversion without crossing into the next Medicare bracket. Because we reduced so much ordinary income ahead of time, larger portion of the Roth conversion

stayed within that 12 % tax bracket, making the trade off far more valuable. Rather than adding the Roth conversion on top of their already higher income, which would have pushed them well into the 22 % bracket, we created the space first so that the Roth conversion can happen on their terms without unnecessary taxes or increased Medicare costs. You might be thinking, if they didn’t do the Roth conversion,

Couldn’t they just have stayed and kept their taxable income even lower? And yes, that is true. But if your goal is just to reduce this year’s taxes as much as possible without doing a Roth conversion, then what we did to this point still makes sense and still works. But in Joan Marie’s case, we didn’t add something new. We simply replaced part of that income with the Roth conversion. A strategic trade-off

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to build long-term flexibility. And it made sense because here’s what happens if they avoid the Roth conversion. Their IRA just continues to grow and required minimum distributions begin at 73 with even higher amounts of IRA distributions. And those withdrawals would stack on top of Social Security and capital gains, leaving them with less room to maneuver and higher taxes later. By doing the Roth conversion now on their terms,

They’re flattening their overall tax curve and avoiding a much bigger tax bite later on in retirement. Most people miss that part. Minimizing taxes this year isn’t always the goal. Minimize taxes over the lifetime of your retirement and keeping control of your income is the goal. The key takeaway is that Joan Marie didn’t need a complete financial overhaul. They just needed a smarter, more intentional tax plan. With the right strategy in place,

They’re now positioned to save over $340,000 in future taxes while maintaining full control over their retirement income. But tax planning just doesn’t work in isolation. That’s why we built our multi-client family office to coordinate your investments, your taxes, your estate, your healthcare, and your retirement income plan all on one system. If you’d like to learn more about that,

Click the video right here, which is your first 100 days with Gudorf Financial Group and how we go about taking clients through getting ready and prepared for retirement.