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When it comes to taxes, most of us have been taught to play one game: pay the least possible this year. By that measure, a year of low taxable income in retirement feels like a win. This usually happens after you exit your career but haven’t hit Social Security or RMDs yet. Many people here are enjoying the glow of that shockingly low tax bracket, which hasn’t been seen in decades.
The problem is that tax strategy is not a single-season sport. The real victory comes from minimizing your taxes over an entire lifetime. Consider these two definitions of winning on taxes:
- Wrong: Paying the least amount of legal taxes possible each year.
- Right: Getting as much income as possible through the lowest tax brackets.
Tax Bracket Whiplash
If you find yourself in this abnormally low tax window (specifically pre-Social Security, RMD, etc), we often want to leverage your low tax bracket for every cent we can. Soon enough, those other streams of income will be introduced, and your tax bracket will go up. This is a limited-time offer. Taxable income will look a lot like it did during peak earning years, and so will the tax brackets.
Strategies to Consider
A low tax year is an opportunity to potentially smooth out taxable income across your lifetime rather than letting it bunch at the top. That can look like:
- Partial Roth conversions – moving funds out of pre-tax accounts while rates are low.
- Harvesting gains – realizing investment profits in lower brackets to reset cost basis.
- Accelerating income – strategically pulling distributions forward to fill low brackets.
- Coordinating with estate goals – aligning conversions or sales with long-term family planning.
The common thread is deliberate use of today’s lower brackets to avoid tomorrow’s higher ones. The challenge is not knowing that taxes will rise in later years. It is knowing which levers to pull, how much to accelerate, and how to balance those moves against your broader plan. That requires context: liquidity needs, portfolio structure, estate intent, and personal objectives.
This is where a fully integrated financial team makes a difference. A CPA may see the tax return, a portfolio manager may see the investments, but an advisor who keeps the whole picture in view can help you act in that window, not regret it later.
Low tax years are not just a time to coast. It’s time to act. By taking advantage of them, you may avoid looking back at age 75 and wondering why you paid the government more than you had to.
