Claims Pay a bill
Log in
  • ...
  • Resources
  • Investing & retirement
    • piggy bank

    Investing & retirement resources

    10 tips to help build tax-efficient retirement income plans

    woman reading from laptop

    Whether saving for retirement or drawing income from a nest egg, it’s important to consider strategies that can help minimize what’s lost to taxes. Tax efficiency can be complicated and it may be necessary to work with a tax expert. In the meantime, here are a few helpful tips for potentially optimizing tax-efficient retirement income.

    1

    Diversify where you save for retirement

    Review how much you’ve saved in tax-deferred accounts compared with tax-free accounts. If your marginal income tax rate today is lower than what it might be in retirement, consider saving more in Roth accounts now to provide tax-free income later.

    2

    Plan for Roth conversions

    Retirees could have a higher tax liability in the future for reasons such as delayed Social Security benefits and large required minimum distributions (RMDs). In this case, doing a conversion now could lead to a lower tax rate later. Consider the temporary senior deduction1 to convert with a lower tax impact through 2028.

    3

    Consider NUA for employer stock holdings

    Net unrealized appreciation (NUA) rules allow those holding employer stock inside their 401(k) or an IRA to potentially receive a more favorable tax treatment on the sale of those shares that have grown in value. Consult a tax advisor for details.

    4

    Optimize Social Security benefits

    If you have the financial flexibility, delaying Social Security benefits until later in retirement may generate a greater lifetime benefit. It may also reduce the likelihood of those benefits being taxed, especially if you continue working in retirement.

    5

    Consider the tax efficiencies of life insurance

    While the primary purpose of life insurance is death benefit protection, it can also create supplemental tax-free income, which may reduce the death benefit amount; withdrawals to basis and loans are tax free if the policy isn’t a modified endowment contract (MEC).

    6

    Optimize your health savings account (HSA)

    If you have a high-deductible health plan, you have access to an HSA. Contributions are tax deductible and withdrawals for qualified medical expenses are tax free. But many overlook the opportunity to invest HSA dollars for the long term. To allow savings to grow, consider paying expenses out of pocket now and keeping the receipts for HSA credit later.

    7

    Medicare surcharge avoidance

    Medicare premiums may increase as retirement income increases. Those seeking higher levels of income in retirement should consider utilizing income sources that aren’t included in modified adjusted gross income (MAGI), such as life insurance, Roth IRAs or a health savings account (HSA).

    8

    Consider possible tax-free income from long-term capital gains

    Selling capital assets to generate retirement income may result in less tax owed versus an investment product with ordinary income taxation. In 2026, married couples filing jointly with a taxable income amount of $98,900 or less will have a capital gains tax rate of 0%.

    9

    Satisfy required minimum distributions (RMDs) with a charitable donation

    For retirees who don’t have a financial need to take their RMDs, donating to a favorite charity directly from an IRA account could help reduce income taxes. In 2026, individuals who are 701/2 years old or older may use a qualified charitable distribution (QCD) to donate up to $111,000 to qualified charities directly from an IRA.

    10

    Leverage the new temporary senior deduction

    A temporary new tax deduction is created for individuals who are age 65 or over, regardless of whether they itemize. Individuals with a modified AGI up to $175,000 and joint filers with a modified AGI up to $250,000 may take an additional deduction of up to $6,000 annually (per person) through 2028.

    phone icon
    To understand more about tax-efficient retirement planning, contact a financial professional or tax advisor.

    Related topics & resources

    Learn about the different types of investments
    How much should I contribute to my 401(k)?
    Should you pay off debt or save?
    Nationwide investing & retirement programs
    More investing & retirement resources

    [1] The additional senior deduction is subject to income phaseouts.

    Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.

    Diversification, asset allocation and asset rebalancing do not assure a profit or protect against loss in a down market.

    Federal income tax laws are complex and subject to change. The information in this brochure is based on current interpretations of the law and is not guaranteed. Nationwide and its representatives do not give legal or tax advice. An attorney or tax advisor should be consulted for answers to specific questions.