Every year it’s the same story: The final few months fly by and before we know it, a new year has arrived faster than expected. We’re now in the final quarter of 2026, and for retirees this is the perfect opportunity to do some financial pre-planning (before holiday prep takes over your schedule!).
In the next few weeks, make time to think about these two things:
- How much money will I need in 2027 to live the life I want to live?
- Where will my 2027 “paycheck” come from?
Why worry about these things now? When it comes to finances, future planning is everything. The choices you make now about how much income to take—and where that income will come from—can affect not only your 2027 tax bill but also your ability to manage taxes strategically in the years ahead.
And if you’re not retired yet, you can still get in on the benefits of planning! By thinking about where your money is going during your wealth-accumulation years, you can build a solid foundation for greater flexibility later, potentially giving your future self more control over how your retirement income is taxed.
Let’s take a look at some examples of how pre-planning in both life stages can have a major impact on your finances.
Want more personalized retirement planning guidance? Get in touch with us at Curio Wealth.
Smart Retirement Tax Strategies
When we help clients plan for retirement, one of the first steps is recreating the predictability of a paycheck. Although work income has stopped, monthly expenses haven’t. So we start by developing a clear picture of what needs to arrive in the bank account each month to support each client’s ideal lifestyle.
You can do the same, being careful to account for other expenses that don’t show up regularly every month, such as travel, vacations, home repairs, and other large purchases. By separating regular monthly spending from anticipated annual or occasional expenses, you can build a more realistic estimate of the income you might need throughout the year.
Beyond that, things get more complicated. Depending on what types of assets you have, your tax strategy will vary. It’s not always about avoiding taxes; sometimes it’s actually more advantageous to incur taxes. Here’s an example:
Imagine you have a few hundred thousand dollars in a savings account and transfer $5,000 each month to checking to cover everyday expenses. Because you can rely on those cash reserves for now, you don’t need to begin drawing from your IRA. And since you’re simply spending money already held in savings—not realizing investment gains or taking a retirement-account distribution—those transfers don’t create additional taxable income.
If you have money in an IRA, this situation can create a valuable Roth conversion opportunity.
With a traditional IRA, you may receive a tax deduction when you contribute, but the money you withdraw later is generally taxed as ordinary income. Over time, a growing IRA balance can mean larger taxable withdrawals—and, eventually, required minimum distributions—on top of Social Security, pension income, investment income, and anything else coming in. A Roth conversion means you would move some money from a traditional IRA into a Roth IRA and pay income taxes on the amount converted now rather than later.
For some people, this can be a worthwhile strategy during lower-income years. You’ll pay tax on the amount you convert today, but you may reduce future required distributions and create more flexibility around how you generate income in retirement.
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Real-life example: One client converted $80,000 from a traditional IRA to a Roth IRA and paid approximately $6,400 in federal income tax on the conversion—an effective tax rate of about 8%. Had they waited to withdraw that same $80,000 later, their other income was projected to put those additional IRA withdrawals in the 32% federal tax bracket. At that rate, the federal tax on $80,000 would be almost $27,000. By converting during a lower-income year, they potentially reduced the federal tax on those dollars by nearly $20,000. And now that the money is in the Roth IRA, it can continue to grow tax-free, with qualified withdrawals also tax-free. |
Is a Roth conversion right in every situation?
Thanks to current media hype, a lot of people are anxious to do Roth conversions these days. But the truth is, a Roth conversion isn’t always the right move, and timing is hard to predict. Unfortunately, bad timing could cost rather than save you money.
People often want to do Roth conversions while they’re still working, but that means the money you’re removing from the IRA is being taxed on top of your salary. That results in higher taxes than if you chose to wait. The best time to do a Roth conversion is when you’re currently in a fairly low tax bracket versus what your tax bracket will be in the future. It’s difficult to take into account all the factors that could go into that equation.
For married couples, one important consideration is how the tax picture could change when one spouse is eventually left to manage the household’s retirement assets alone. For example, married couples who file jointly generally have more room in the federal tax brackets to take taxable IRA distributions at lower rates. If your spouse dies years from now, you may decide to roll their IRA over into your own rather than take the full balance immediately. However, you’ll eventually be required to take it out, and because single filers generally reach higher tax brackets at much lower income levels than couples filing jointly, the same IRA withdrawal could be taxed at a higher rate.
That possibility does not mean a Roth conversion is automatically the right choice, but it is an important reason to look beyond this year’s tax bill and consider how today’s decisions may affect your future flexibility. At Curio, we try to find the “no-brainer” point where it really makes sense and provide you with all the necessary information you need to make the best decision.
Pre-retirement Planning
Even before retirement, there are things you can do to set yourself up for an optimal tax situation in the future. That means being deliberate about where your money is going as you’re still accumulating assets.
We’ve had some people come to us who have done a wonderful job saving—but they’ve put everything they have into retirement accounts because that’s the advice they’ve been given. While the saving strategy itself propels growth, it also creates a future tax problem: Those funds, combined with Social Security, a pension, and other potential sources, could add up to a significant amount of income that’s heavily taxed upon withdrawal as a result.
A better strategy is to put your money in different “buckets.” For example, you could spread it out across IRA accounts, 401(k)s, non-retirement investment accounts, Roth accounts, and even cash. Creating and filling a range of buckets when you’re younger will give you flexibility later in life, allowing you to pull money from different places to better manage your tax situation.
Make Your 2027 Plan Now
Good retirement tax planning isn’t just about reducing your tax bill this year. It’s about making thoughtful decisions today that give you more flexibility in the years ahead. Whether you’re already relying on your retirement savings for income or still building wealth during your working years, understanding how your income needs, investments, and different account types work together can help you make more intentional decisions about what comes next.
Our team of experienced financial advisors can help you make informed decisions with your broader financial future in mind. We begin by getting to know you—your priorities, lifestyle, goals, and vision for the years ahead—then build planning strategies around what matters most to you. There is no one-size-fits-all approach to retirement income or tax planning here. If you need help building and planning for the future, please reach out. We’d love to meet you!
