Step 3 of Your Retirement Master Plan: How to Keep More of What You Earn

September 17

18 mins

Episode Description

Learn how to keep more of your retirement income through tax planning in step 3 of the 5 step retirement plan.

When people think about retirement planning, they usually focus on two big questions: How much do I need to spend? and How much will I make in retirement? Those are important, but there’s a third question that often gets overlooked—and it could make or break your plan: How much of your money do you actually get to keep?

That’s what Step 3 of creating your retirement master plan is all about: keeping more of your hard-earned money through smart tax planning.

Why Taxes Matter So Much in Retirement

During your working years, your income is pretty straightforward. You earn a salary, and taxes get withheld from your paycheck. In retirement, things look very different. You now have more control than ever before over what your tax bill will look like. That’s because you can decide when and how to pull money from your accounts.

Two factors play the biggest role here:

Timing – the year (and sometimes even the month) when you withdraw money.
Type – the type of account you take money from, like a traditional IRA, Roth IRA, brokerage account, or savings.

Making smart decisions with timing and type could mean saving thousands of dollars in unnecessary taxes over the course of your retirement.

The Power of Timing

Here’s a simple example: if you withdraw money on December 31st versus January 1st, that income falls in two completely different tax years. Just a week’s difference could completely change your tax outcome.

But timing isn’t just about the calendar—it’s about your retirement phases:

Before vs. after you stop working
Before vs. after age 65 (Medicare starts)
Before vs. after age 63 (Medicare looks back two years at your income)
Before vs. after you turn on Social Security
Before vs. after age 73 (required minimum distributions begin)
Married filing jointly vs. filing as a single survivor

Every one of these milestones creates “before and after” windows where your tax planning can make a huge impact. If you’re not planning around these, you might end up paying more than you need to.

The Role of Account Types

Not all withdrawals are created equal:

Traditional IRA/401(k): Taxable as income when withdrawn.
Roth IRA: Withdrawals are generally tax-free.
Brokerage Accounts: You’ll pay capital gains tax when you sell investments for more than you paid.
Savings Accounts: Withdrawals are tax-free, though interest earned is taxable each year.

The key is mixing and matching withdrawals across these account types in a way that minimizes taxes now and later.

Roth Conversions: The #1 Tax-Smart Tool

If there’s one strategy that makes the biggest difference in retirement, it’s Roth conversions. Converting part of your traditional IRA into a Roth lets you pay taxes now (often at a lower rate) in exchange for withdrawals later.

But there are three big myths I hear all the time:

“I can’t convert because I’m retired.”
You can always convert as long as you have money in a traditional IRA.
“I can’t convert because my IRA is too big.”
You don’t have to convert the whole thing. You can convert in small amounts over multiple years.
“More conversions are always better.”
Sometimes there is a wrong time & amount to convert. The best approach is to convert the right amount, at the right time.

This is what I call the Golden Rule of Roth Conversions: choose the right year and the right amount. Get that right, and you could save tens of thousands of dollars. Get it wrong, and you might pay unnecessary taxes you can’t undo.

A Real-Life Example

I worked with a couple who had room to do Roth conversions while staying in the 24% tax bracket. We created a plan to spread their conversions out over three years. But they decided to convert everything at once, thinking it wouldn’t matter.

Unfortunately, it did matter. Instead of keeping their conversions at the 24% tax bracket, much of their income spilled into the 32% and even 35% bracket. The result? I estimate they paid $23,000 more in taxes than they needed to.

That’s why timing and amount are so important. Tax planning in retirement isn’t a yes-or-no decision. It’s about making the right move at the right time.

Keeping More of What’s Yours

At the end of the day, Step 3 of your Retirement Master Plan is all about keeping more of what you’ve worked so hard to save. Taxes are one of your biggest expenses in retirement, but with careful planning, you can reduce their impact and free up more money to spend, share, and enjoy.

If you’d like to dive deeper into this, check out my book Retire Today: Create Your Retirement Master Plan in 5 Simple Steps, or head over to JeremyKeil.com to learn more.

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Step 3 of Your Retirement Master Plan: How to Keep More of What You Earn

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