If you’re within 5–10 years of retirement, this is the window that matters most.
Not when you’re 75.
Not when RMDs hit.
Not after you’ve already filed for Social Security.
Now.
Because retirement taxes don’t happen all at once — they unfold in phases. And the decisions you make in your early 60s often determine whether your 70s feel controlled or chaotic.
Let’s walk through what’s coming.
Social Security Isn’t Automatically Tax-Free
Up to 85% of your Social Security benefit can be taxable depending on your income.
The IRS uses a formula called “combined income”:
Adjusted Gross Income
- Non-taxable interest
- Half of your Social Security benefit
If you’re still drawing heavily from traditional retirement accounts, you may unintentionally increase the taxable portion of your benefit.
For pre-retirees, the question isn’t just when to claim — it’s how claiming fits into your broader tax picture.
Your 401(k) Balance Will Eventually Become Taxable Income
Traditional 401(k)s and IRAs are tax-deferred.
You received the deduction while working.
The IRS collects later.
At age 73, Required Minimum Distributions (RMDs) begin.
For many pre-retirees, this is the ticking clock:
Large tax-deferred balances =
Large mandatory withdrawals =
Higher taxable income in your 70s
That can:
- Push you into higher tax brackets
- Increase Medicare premiums (IRMAA)
- Increase Social Security taxation
The earlier you plan for this, the more control you have.
The “Gap Years” May Be Your Biggest Opportunity
This is the period:
- You’ve retired
- You haven’t started Social Security
- RMDs haven’t begun
For many households, these are the lowest-income years of adulthood.
This window can be used for:
- Roth conversions
- Strategic bracket fill-ups
- Long-term tax smoothing
- Reducing future RMD pressure
Most people miss this opportunity because they assume lower income automatically means lower taxes later.
That’s not always how it works.
Roth Accounts: Strategic Flexibility Later
Roth accounts provide something extremely valuable in retirement:
Control.
Withdrawals are tax-free (if qualified).
Roth IRAs have no lifetime RMDs.
This allows you to:
- Manage your tax bracket
- Avoid Medicare premium spikes
- Fund larger one-time expenses without creating tax problems
For pre-retirees, the key question is whether building or converting into Roth now reduces lifetime taxes later.
Brokerage Accounts May Be More Useful Than You Think
Non-retirement brokerage accounts are often the most flexible early-retirement income source.
You only pay tax on gains.
Long-term capital gains often receive favorable rates.
In certain situations, capital gains can even be realized at a 0% federal rate depending on total taxable income.
For pre-retirees, this account type can be used strategically before Social Security and RMDs begin.
State Taxes Matter — Especially If You’re Considering a Move
Pre-retirement is when relocation conversations start.
Some states:
- Don’t tax Social Security
- Don’t tax retirement distributions
- Have no state income tax
If you’re planning a move at retirement, the tax implications should be modeled before the move — not after.
What This Means for You (5–10 Years Out)
If retirement is approaching, here are the questions worth answering now:
- How large are your future RMDs projected to be?
- Are Roth conversions appropriate in the next few years?
- When should Social Security fit into your tax strategy?
- How will Medicare premiums be impacted?
- What does your after-tax retirement income actually look like?
Most people focus on hitting “the number.”
Pre-retirees should focus on what that number turns into after taxes.
The Bottom Line
Retirement taxes are not random.
They are the result of:
- Account structure
- Withdrawal timing
- Claiming decisions
- Coordination (or lack thereof)
The 5–10 years before retirement is when the biggest lifetime tax savings opportunities exist.
After that, options narrow.
If you’re in this window, this isn’t the time for autopilot.
It’s the time for modeling.
About the Author:
Eric Bottolfsen is a co-founder and financial planner at Allwealth Planning, an independent fiduciary firm focused on comprehensive planning for high-income professionals, business owners, and real estate investors. Eric works extensively with clients who own both short-term and long-term rental properties and helps them coordinate cash flow, tax strategy, insurance, entity structure, and estate planning into a single, intentional plan. He also personally owns long-term and short-term rental properties, giving him firsthand experience navigating the planning decisions real estate owners face beyond the purchase.
eric@allwealthplanning.com | 844-297-5266 | 1430 E Missouri Ave. Suite B-111 Phoenix AZ, 85014
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Limitations and Early Withdrawals: Some IRA's have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Retirement Plans: Distributions from traditional IRA's and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. Roth IRA: Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
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