Written by Jonathan Vance, CFP®, EA
Retirement is one of the primary reasons people seek professional financial advice, and for good reason. Over time, we grow accustomed to the routines of working life: steady paychecks, employer-sponsored benefits, and predictable tax brackets.
However, as we approach the transition away from full-time work, the routines and rules that we felt comfortable with begin to change into unfamiliar territory.
At some point between ages 55 and 75, new questions begin to arise for pre-retirees and retirees. Questions like:
When I entered the financial planning profession, I assumed that financial planners knew black and white responses for all of these questions.
However, the more I learned, the more I began to understand how simply changing one variable could adjust the entire retirement equation. Whether it was the client’s spending needs, the specific types of accounts used for savings, or the age they chose to stop working, each factor could shift which recommendations were in their best interest.
In this post, I provide a practical overview of the key financial planning themes that you and/or your advisor should monitor as you approach, enter, and move through retirement. This is not meant to be a comprehensive review of every possible strategy or rule, but it should provide guidance on what to look for in the years ahead as you solve your own retirement equation.
During this age range, IRS regulations begin to loosen and provide paths to eliminate penalty provisions on retirement account withdrawals. First, the Rule of 55 allows you to access assets held within a 401k plan penalty free if you leave your employer during or after the calendar year you turn 55.
While you will still owe ordinary income taxes on withdrawals from a traditional 401k, the additional 10% early withdrawal penalty no longer applies.
This is especially important when considering rolling over 401(k) assets into an individual retirement account (IRA). Unlike a 401(k), you generally cannot access IRA funds penalty free until age 59.5.
Let’s suppose you choose to retire at age 56 and are relying on at least some of the funds in your 401(k) to fund your lifestyle. If so, it may be prudent to leave at least a partial balance in the 401(k) instead of rolling all of the funds over to an IRA.
Note: There are several IRS rules that allow you to get partial access to retirement account dollars penalty-free even before age 55. For the sake of this writing, we’re ignoring those as they have specific use-cases or provide less withdrawal flexibility.
After you reach 59.5, the 10% penalty falls off of traditional IRA distributions as well, often giving retirees a considerable boost in flexibility for income sources.
This is generally the age range where people start to think seriously about their investment asset allocation. Up until this point, your investment objective has most likely been to maximize your chance at future investment growth.
But now, assuming you need some of your retirement savings to help fund living expenses, your investment portfolio likely needs to play two roles moving forward:
Future growth AND current income.
I am not suggesting that you wait until your retirement date to seriously consider what the “right amount of risk” is for your situation. However, if you find yourself between 55 and 59.5 and haven’t asked that question yet, I would argue that now is the time to start.
Another critical consideration during this phase is long-term care planning. While it may feel premature, this is actually the ideal time to begin evaluating your options for hedging against the potential cost of a long-term care event.
After age 60, insurance companies often become far more selective with medical underwriting, and premiums tend to rise for long-term care coverage. Weighing the pros and cons of long-term care coverage prior to age 60 can provide the widest range of options and the most competitive pricing.
The goal is simply to stress-test your financial plan to make a confident, informed decision while your health and age provide the greatest advantage.
At first glance, ages 60 to 61 might seem uneventful. Aside from the ability to make super catch-up contributions to workplace retirement plans (available from age 60 through 63 under SECURE 2.0), there aren’t many new rules or milestones to navigate.
But don’t let the calm fool you, these years can serve as two of the most valuable “tax valley” years in retirement if you stop working during or prior to this window.
If you have no more earned income, have not yet started Social Security benefits, and are still years away from Required Minimum Distributions (RMDs), your taxable income may hit an all time low in this age range.
While it is tempting to enjoy a year of paying minimal taxes, it is often more strategic to look ahead at your future tax liability. If you anticipate being in a higher marginal tax bracket later in retirement, you may want to purposely accelerate income into these two years.
Common strategies for filling the tax valley include:
The goal is to pay taxes at a lower rate today to avoid paying them at a much higher rate in the future.
Note: Tax planning is complex and requires careful attention to information beyond current and future marginal tax brackets. The decision to accelerate or delay income should be driven by your personal financial situation, not based on general concepts and education.
This is the age range where we finally get to reap the benefits of the payroll taxes that have been getting deducted from our paychecks throughout our working years. Though it seems exciting to start getting “paid back” from our years of paying in, making a Social Security claiming decision should involve careful consideration of variables like:
While “tax considerations” often feel like a catch-all phrase, Social Security is uniquely complex from an income tax perspective.
Social Security benefits are means-tested for taxation, which means:
That covers federal tax, state tax rules also vary widely on benefits. Many states do not tax Social Security benefits (including Missouri), while others have their own means testing formula.
One of the reasons it’s important to understand your personal tax considerations prior to making a Social Security claiming decision is that additional income can trigger a double taxing effect.
For example, one dollar of IRA distributions usually creates one dollar of taxable income. Simple enough.
However, in some situations, that same distribution can also make an additional 85 cents of your Social Security benefit taxable.
Stated otherwise, this means a $1.00 traditional IRA withdrawal could effectively create $1.85 of taxable income.
At age 63, a lesser-known tax consideration begins: IRMAA, or Income-Related Monthly Adjustment Amounts. This is the means-testing formula that determines how much you’ll pay for Medicare premiums.
IRMAA uses a two-year lookback, so your income at age 63 affects your Medicare costs at age 65. Depending on where you fall on the spectrum, the stakes can be high (figures as of 2026, based on income in 2024):
Depending on your income and asset levels, this can elevate the importance of annual tax planning throughout retirement.
At age 70.5, a powerful tax planning tool becomes available: Qualified Charitable Distributions (QCDs). This allows individuals to donate up to $111,000 per year (as of 2026) directly from their traditional IRA to a qualified charity without recognizing the distribution as taxable income.
However, just because QCDs become available at 70.5 does not mean you should use them immediately. At this stage, Required Minimum Distributions (RMDs) have not yet begun. This means a QCD may not yet be serving its most strategic purpose: offsetting the taxable income you are forced to take later on.
For individuals with very large IRA balances or those who already make significant annual gifts, starting early can make sense. For many others, it is worth evaluating the timing to ensure you are getting the maximum tax benefit once mandatory withdrawals begin.
As I mentioned earlier on, this truly is an individual decision that should be based on your unique circumstances.
Between age 70 and your required beginning date (RBD), you will now be taking social security benefits, but may still have a “tax valley” compared to when required minimum distributions start. As such, it’s important to continue reviewing tax planning strategies that make the best use of these years.
The age when you must begin taking RMDs has shifted under SECURE 2.0. Your required beginning date depends on your birth year:
Once these mandatory withdrawals kick in, the flexibility to control taxable income from traditional IRAs begins to narrow.
It’s worth noting that RMDs are calculated using two key variables:
While the life expectancy factor gradually increases the withdrawal percentage over time, market performance can cause RMDs to fluctuate in less predictable ways.
For example, if markets decline late in the year and your IRA balance drops before December 31st, your RMD for the following year may be lower than expected. This could create another temporary “tax valley” that opens the door for additional planning opportunities.
In short, the planning doesn’t stop once RMDs begin. But by this point, there is often more predictability and less flexibility than there was in years past.
The transition from ages 55 to 75 is not a single event but a series of shifting windows. From the early flexibility of the Rule of 55 to the structured requirements of RMDs, each phase offers unique opportunities.
By asking the right questions and being proactive with all parts of your financial plan, you can set yourself up to move through these life stages while preventing unnecessary headaches down the road.
As a CFP® professional, I regularly see how these variables interact with the retirement equation for my clients. If you are preparing for retirement or are already retired, I write regular educational pieces designed to answer your questions about investments, taxes, and financial planning. Simply bookmark this tab and check back in for regular updates.
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