For many high-net-worth individuals, the biggest tax bill in retirement doesn’t come from lifestyle spending — it comes from Uncle Sam. Recent changes under SECURE Act 2.0 make proactive retirement tax planning more important than ever.
- Required Minimum Distributions (RMDs): A Delayed but Bigger Bite
The age to start taking RMDs from IRAs and 401(k)s has been pushed back to 73 (and eventually 75). While this delay sounds like a win, it can create larger account balances that trigger:
- Bigger forced withdrawals later in life, pushing you into a higher tax bracket.
- Medicare premium surcharges tied to higher income.
- A heavier tax burden on heirs if accounts aren’t strategically drawn down.
- The “10-Year Rule” for Inherited IRAs: A Trap for Heirs
Under SECURE Act rules, most non-spouse heirs must fully deplete inherited retirement accounts within 10 years. This can:
- Force children into higher tax brackets during their peak earning years.
- Accelerate wealth erosion if planning strategies aren’t used.
- Roth Conversions: A Golden Window of Opportunity
For many, the years between retirement and RMD age offer a “tax sweet spot” — when income is lower but RMDs haven’t yet begun. Strategic Roth conversions during this window can:
- Lock in today’s lower tax rates,
- Reduce future RMDs, and
- Provide tax-free growth for heirs.
- Catch-Up Contributions and High-Income Limits
Starting in 2024, catch-up contributions for high earners (over $145k) must go into Roth accounts. This means:
- No upfront tax deduction,
- But future withdrawals are tax-free.
Understanding whether to lean pre-tax or Roth contributions now is key for long-term planning.
- The Big Picture: Proactive Withdrawal Strategies
The biggest mistake is waiting until RMDs hit. By coordinating withdrawals, conversions, and charitable gifting strategies (like Qualified Charitable Distributions, or QCDs), you can:
- Smooth out lifetime tax brackets,
- Avoid “tax torpedoes” that spike income in retirement, and
- Leave a more tax-efficient legacy to your family.
✅ The Bottom Line: SECURE Act 2.0 changed the retirement tax game. Without planning, you (and your heirs) could face higher taxes than expected. With smart strategies — Roth conversions, withdrawal sequencing, and charitable gifting — you can stay in control of your wealth instead of letting the IRS dictate your retirement years.
