If you’re within 5–10 years of retirement, proactive tax planning for pre-retirees is critical. Tax preparation isn’t just about filing correctly; it’s about positioning yourself strategically for the transition from money-earning years to money-distribution years.
The decisions you make now can directly affect your retirement income, Medicare premiums, Social Security taxation, and long-term tax liability.
Before you meet with your CPA this season, take time to review these five proactive tax moves that can potentially reduce your lifetime tax burden and improve retirement readiness.
1. Maximize Retirement Contributions (While You Still Can)
Your highest earning years are often your last working years, which also means your highest tax exposure.
Consider:
- Maxing out 401(k) or 403(b) contributions
- Taking advantage of catch-up contributions if age 50+
- Funding Traditional or Roth IRAs strategically based on current vs. future tax bracket expectations
Why it matters: Contributions today may reduce current taxable income while building assets that can be withdrawn later when you potentially could be in a lower tax bracket.
Important Update for High Earners (Starting 2026): If you earn more than $150,000, IRS rules under the SECURE 2.0 Act require that any catch-up contributions to employer retirement plans (401(k), 403(b), etc.) must be made as Roth contributions, not pre-tax.
What that means:
- You’ll still get the added savings.
- But you won’t receive a current-year tax deduction on catch-up amounts.
- The upside: those funds can grow tax-free and be withdrawn tax-free in retirement
Planning tip: If your income fluctuates around that threshold, this is a key item to review with your advisor before year-end to coordinate your contribution strategy and tax planning.
2. Evaluate Roth Conversion Opportunities
Pre-retirement years can be a sweet spot for Roth conversions, especially if income drops slightly or deductions increase.
A partial conversion strategy may:
- Reduce future Required Minimum Distributions (RMDs)
- Lower lifetime tax liability
- Provide tax-free income flexibility in retirement.
Key point: The goal isn’t zero tax today; it’s lower total tax over your lifetime.
3. Fully Fund Your HSA (If Eligible)
If you’re enrolled in a high-deductible health plan, an HSA is one of the most tax-advantaged tools available:
- Contributions: tax-deductible
- Growth: tax-free
- Withdrawals for medical expenses: tax-free
After age 65, HSA funds can even be used for non-medical expenses (taxed like an IRA).
Pre-retiree strategy: Treat your HSA like a stealth retirement account by paying current medical expenses out of pocket (if feasible) and letting the HSA grow.
Not sure which of these strategies applies to you? A coordinated tax and retirement income review can uncover opportunities specific to your situation. Request a Retirement Tax Readiness Assessment
4. Review Deductions and Timing Opportunities
Strategic timing can make a meaningful difference in your tax bill.
Look for opportunities to:
- Bunch charitable donations into a single year.
- Prepay deductible expenses when advantageous
- Offset capital gains with tax-loss harvesting.
Your CPA can only optimize what they see; planning and organization ahead of time make their job more effective and your outcome more efficient.
5. Confirm Withholding and Estimated Payments
Many pre-retirees experience income shifts in the following:
- Bonuses
- Stock compensation
- Business distributions
- Side income or consulting
- If withholding isn’t adjusted, you could face:
- Unexpected tax bills
- Underpayment penalties
- Cash-flow strain
A quick withholding review now can prevent surprises later.
Final Thought
Taxes don’t stop when you retire; they just change form. The more proactive you are in the final stretch before retirement, the more control you’ll have over how and when you pay them. Preparation isn’t just about compliance; it’s about strategy.
By taking a long-term view, you gain an advantage: while the IRS determines what is taxable, careful planning allows you to influence when you pay those taxes.
If you're within 5–10 years of retirement, this is the window where strategic tax decisions can have the biggest lifetime impact.
Schedule a pre-retirement tax strategy review before your next CPA meeting to ensure your retirement transition is optimized, not improvised.
Frequently Asked Questions About Tax Planning for Pre-Retirees
- When should I start tax planning before retirement? Ideally, 5–10 years before retirement. This allows time to implement Roth conversions, adjust contribution strategies, and manage capital gains strategically.
- Are Roth conversions worth it before retirement? They can be, especially in lower-income years. The goal is not to eliminate taxes today, but to reduce lifetime tax liability and future RMD exposure.
- How do taxes change after retirement? Income shifts from wages to distributions, Social Security, and investment income. Medicare premium surcharges (IRMAA) may also apply based on taxable income.
- What is the SECURE 2.0 catch-up contribution rule change? Starting in 2026, individuals earning over $150,000 must make catch-up contributions as Roth (after-tax) contributions rather than pre-tax.
- Should I fully fund my HSA before retiring? If eligible, HSAs are one of the most tax-efficient savings vehicles available. They can serve as an additional source of retirement income to help cover healthcare expenses.
- Why review withholding before retirement? Income sources often shift in pre-retirement years. Without proper adjustments, underpayment penalties or surprise tax bills may occur.
David Drumhiller, CFP®, BFA™, AAMS® is a financial advisor with nearly 20 years of experience helping individuals and families prepare for retirement. He specializes in tax-efficient retirement income planning and comprehensive wealth strategies. David holds Series 7 and 66 registrations and is licensed in WA, OR, and ID. A Washington State University graduate, he lives in Pullman with his wife and enjoys travel, barbecue, and Cougar Athletics.