Tax Advisor for Retirement Planning: Services and Examples

Taxes can change how much of your retirement income you actually get to spend. A tax advisor can model the consequences before you withdraw from an IRA, convert money to Roth or sell an investment. That is valuable information, given that Social Security, pensions, investments and retirement accounts can all interact on the same tax return.

If you’re approaching retirement with several account types, a financial advisor can work with your tax professional to compare withdrawal sequences. They can show how each could affect both your tax bill.

How a Tax Advisor Can Help With Retirement Planning

Tax preparation looks backward. Tax planning looks forward. A preparer reports the withdrawals, investment sales and other transactions that already happened. A tax advisor can model those decisions before you make them.

Services a tax advisor can provide include estimating tax liability, reviewing retirement-account withdrawals, planning withholding or estimated payments, identifying deductions and coordinating income from pensions, Social Security and investments.

Consider a hypothetical single 63-year-old retiree receiving:

• A $30,000 pension 
• A $20,000 traditional IRA withdrawal
• $24,000 in Social Security 
• $5,000 in taxable interest 

The pension, IRA withdrawal and interest create $55,000 of other income. Based on the Social Security taxation formula, up to 85% of benefits can be taxable once income exceeds certain thresholds. In this example, the full $20,400, or 85% of the $24,000 benefit, would be taxable. ¹ That produces about $75,400 of adjusted gross income before other adjustments.

A tax advisor could then test what happens if the retiree were to take a smaller IRA withdrawal, realize investment gains in another year or increase tax withholding.

Tax Planning for 401(k), IRA and Roth Withdrawals

Traditional IRA and 401(k) withdrawals are generally taxable to the extent they contain pretax money. Qualified Roth withdrawals generally aren’t. That gives retirees several different income sources to work with.

Suppose a single retiree already has $40,000 of taxable income before taking money from a traditional IRA. If they withdraw $80,000 in one year, taxable income rises to $120,000. The withdrawal itself crosses three tax brackets:

So, the $80,000 withdrawal would add approximately $16,846 in federal income tax in this simplified example.

Now, assume the retiree instead takes $40,000 in each of two years, with the same $40,000 of other taxable income each year. Taxable income reaches $80,000 annually, so none of the IRA withdrawal reaches the 24% bracket.

Spreading the $80,000 across two years therefore produces approximately $1,326 less federal income tax ($16,846 – $15,520) in this simplified example.

The reason is that taking the full $80,000 at once pushes $14,300 into the 24% bracket. Splitting the withdrawal keeps both years’ taxable income within the 22% bracket.

Keep in mind that actual results can differ based on deductions, Social Security taxation, investment income, filing status and changes in tax rates.

How Tax Advisors Evaluate Roth Conversions and RMDs

When pretax traditional IRA money is converted to a Roth IRA, the converted amount is generally included in income. The tradeoff is moving money into an account where qualified future withdrawals can generally be tax-free. That can make lower-income years between retirement and required minimum distributions (RMDs) particularly important.

Suppose you retire at 65 with a large traditional IRA. A tax advisor could compare converting $30,000 per year for several years with leaving the entire balance untouched until RMDs begin. Specifically, the advisor would compare tax on the conversion today against taxes that could otherwise apply to larger withdrawals later.

Under current law, RMDs generally start at 73 for people who reach age 73 before 2033. The applicable age rises to 75 for later cohorts covered by SECURE 2.0.

SmartAsset’s RMD Calculator can estimate future mandatory withdrawals using your age, retirement-account balances and expected investment return. That can help show how much taxable income a large pretax balance could eventually generate.

How Social Security, Medicare and Investment Taxes Fit Into the Plan

One retirement-income decision can affect several other calculations. For instance, taking a larger IRA withdrawal can increase adjusted gross income. That could cause more Social Security to become taxable, affect the taxation of investment gains and potentially influence Medicare premiums later.

Social Security illustrates this interaction clearly. The IRS starts by combining one-half of your benefits with your other income, including tax-exempt interest. Depending on the result, up to 85% of your benefits can be taxable.

Medicare uses a different calculation. Higher-income beneficiaries can pay an income-related monthly adjustment amount, or IRMAA, on Medicare Part B and Part D. Medicare generally looks back two years when determining that surcharge. For example, 2026 premiums generally use 2024 tax-return income. That means a large Roth conversion, IRA withdrawal or investment gain today could potentially affect Medicare costs two years later.

Imagine you’re deciding whether to sell appreciated stock and take a $75,000 traditional IRA withdrawal in the same year. Either transaction could be manageable separately. Together, however, they could push income into another tax bracket, make additional Social Security taxable or increase future Medicare costs.

When to Hire a Tax Advisor for Retirement Planning

Tax planning may become particularly useful when you’re approaching retirement, holding several account types, considering Roth conversions, beginning RMDs or planning a large sale of appreciated investments.

Different professionals also provide different services. A CPA may provide tax preparation and planning, depending on the practice. An enrolled agent is federally authorized to represent taxpayers before the IRS. Financial advisors may incorporate tax considerations into broader retirement planning, while the tax services they can provide depend on their credentials and firm.

Before hiring someone, ask whether they:

• Model retirement withdrawals and Roth conversions before they’re made
• Prepare tax returns or focus only on planning
• Coordinate with your financial advisor, CPA or estate attorney
• Charge hourly, fixed or ongoing fees

A tax advisor can model the tax consequences, while a financial advisor can use those results to help decide where retirement spending should come from and how much investment risk the portfolio needs to take.

Bottom Line

A tax advisor for retirement planning can help coordinate withdrawals, Roth conversions, Social Security, investments and RMDs before those decisions create taxable income. The goal isn’t necessarily to minimize taxes in one particular year. Instead, planning can help you compare the immediate tax cost of a decision with its effects on future income, Medicare premiums and the rest of your retirement plan.

Tips for Retirement Planning

• A financial advisor can help you better prepare for you retirement. They can offer a long-term planning strategy that is unique to your own situation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• A retirement calculator can help you estimate whether you’re on track with your own savings.

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