Shift Your Retirement Savings Into Tax Free Gear

Taxes changed a lot after the One Big Beautiful Bill Act passed. The new law kept our lower tax brackets permanent, but it also added some temporary tax perks that will end after 2028 and 2029. For retirees looking at their finances in 2026, these changes give us a special timing window to plan your retirement income, as long as you carefully balance the long-term benefits against a few temporary tax traps.

A Great strategy right now is a Roth IRA conversion

This means moving your money from a traditional retirement account into a Roth IRA. You pay income taxes on that money the year you move it, but after that, the money grows completely tax-free. Plus, you won't be forced to take mandatory withdrawals later in life, giving you total control over your taxable income in retirement.

Why pay taxes now instead of later?

It usually comes down to leaving money to your heirs. Under today's rules, anyone who inherits a traditional IRA (besides a spouse) must take all the money out within 10 years. If your children inherit this money during their highest-earning years, those mandatory withdrawals can push them into a much higher tax bracket. By moving your money to a Roth IRA now at a lower tax rate, you pass your savings to them tax-free, saving your family a lot of money overall.

However, this strategy requires careful planning. The money you move counts as regular taxable income for that year. This sudden spike in income can accidentally cause you to lose the new senior deduction or the increased state and local tax deduction. It can also temporarily raise your Medicare premiums.

⭐5 Star Tip: 

Be sure you understand the tax consequences before effecting a Roth conversion.

Avoiding Tax Traps

To avoid these traps, many families spread their conversions out over several years instead of doing it all at once. This helps you stay within your current tax bracket. It is also best to pay the tax bill using cash you have outside of your retirement accounts so you don't shrink your tax-free growth potential.

Everyone's financial situation is different. Balancing today's tax savings with your long-term family goals takes careful planning. Please talk with us or your tax professional before making any conversions

👉 Are you looking for a fee-only advisor to work with? Book your free discovery call and get started.

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John Piershale, CFP®, AEP®

Fee-Only and Fiduciary Advisor

NAPFA-Registered Financial Advisor

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This article is for educational purposes only and is not legal or tax advice. Please consult an attorney or tax advisor regarding your personal situation. Piershale Wealth Management, LLC is an Investment Adviser registered with the State of IL and in other jurisdictions where exempt from registration. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.