Why are the first years of retirement a tax planning window?

The years that look like a time to sit still

In your first years of retirement, your income usually drops. Your tax bill may be the smallest it’s been in decades, and nothing is forcing you to touch your accounts, so many people leave their money exactly where it is.

Why those years are valuable

That low-income stretch is exactly what makes those years useful. Once Social Security starts and the IRS begins requiring withdrawals from your retirement accounts in your seventies, your income climbs back up and the window closes.

What you can do while it’s open

Depending on your situation, these years can be a good time to:

• Move money from a traditional IRA into a Roth IRA while your tax rate is low.
• Sell investments and pay little, or sometimes nothing, in tax on the gains.
• Fill up the lower tax brackets on purpose instead of leaving them empty.

All three have the same goal: pay some tax now, while your rate is low, so your lifetime tax bill can be smaller. Which moves fit depends on your income and the rest of your plan.

Every year you don’t use the window, that year’s low brackets are gone. They don’t roll over.

How we handle it

At Sansone CPA & Financial, we coordinate your tax, investment, and retirement decisions so this window can be put to work while it’s open.