When most people think about tax planning, they picture a mad scramble before April 15. But real tax planning—the kind that can save you thousands over your lifetime—happens all year long. And for high earners, professionals, and diligent savers, retirement doesn’t always mean lower taxes. In fact, for many, it can mean a bigger tax bill than they expected.
This guide breaks down a few strategies that could help you make smarter tax decisions tomorrow.
The Retirement Tax Surprise
One of the most common complaints Traci hears from retirees is: “I can’t believe how much I’m paying in taxes.”
Why does this happen?
During your working years, you may have wisely taken advantage of tax-deferred accounts like traditional 401(k)s and IRAs. These tools reduce your taxable income now, but they come with a future cost: every dollar you withdraw in retirement is taxed as ordinary income.
Most people assume they’ll be in a lower tax bracket once they stop working—but if you’ve been a disciplined saver or receive Social Security and pension income, your tax bracket might actually go up in retirement.
That’s why long-term tax planning isn’t just helpful—it’s essential.
Consider Roth Opportunities While You’re Working
One of the simplest ways to avoid a future tax surprise is to pay taxes now while your rates are predictable. Roth accounts let you do just that.
- Roth 401(k): Offered through many employers, this allows you to contribute after-tax dollars now, and take withdrawals tax-free later.
- Roth IRA: Similar benefits, with income limits for direct contributions.
Yes, you’ll pay taxes today—but in exchange, your investments grow tax-free, and qualified withdrawals in retirement come out completely tax-exempt, given certain conditions are met. This can bring massive relief during your retirement years when you’re living off your savings.
What’s a Backdoor Roth—and Should You Consider One?
If you earn too much to contribute directly to a Roth IRA, you may still be eligible through a strategy called the Backdoor Roth.
Here’s how it works:
- Contribute after-tax dollars to a Traditional IRA.
- Do not take a deduction for this contribution.
- Convert the funds to a Roth IRA.
This maneuver lets high-income earners benefit from Roth tax treatment, but it must be done carefully. Improper execution can result in unintended taxes or penalties, especially if you have other pre-tax IRA balances. That’s why it’s important to discuss this strategy early in the tax year with your CPA—not as a last-minute move in April.
The Triple Tax Advantage of an HSA
Another underutilized tax-saving strategy is the Health Savings Account (HSA).
If you have a high-deductible health plan, you can contribute pre-tax dollars to an HSA. If you don’t need the money immediately, you can invest those funds, and they’ll grow tax-deferred. Later, when used for qualified medical expenses, your withdrawals are tax-free too.
That’s why HSAs are often called “triple tax-free”:
- Tax-free contributions
- Tax-free growth
- Tax-free withdrawals (if used for qualified healthcare costs)
Used wisely, an HSA can become a powerful retirement tool—not just a place to cover your next doctor’s bill.
Make Tax Planning a Year-Round Conversation
The most effective tax strategies don’t come from reacting to what happened last year. They come from anticipating what’s ahead. Roth conversions, HSA investments, and Backdoor Roths all require timing, coordination, and proactive planning.
At The Meakem Group, we work closely with our clients and their CPAs to explore which strategies fit best with their goals, income, and retirement timeline. Tax planning isn’t just something you do in April—it’s something you build into your plan, step by step.
Need a second opinion on your tax strategy? Let’s talk about how you can reduce your lifetime tax bill while making the most of what you’ve worked so hard to build.
Call us at 240-743-4971 or contact us through our website.
Any opinions are those of The Meakem Group and not necessarily those of Raymond James. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Investing involves risk, and you may incur a profit or loss regardless of strategy selected.
Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.
Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
