I’m a Financial Advisor: 4 Ways To Reduce Taxes Before Retirement Starts
Written by
Lydia Kibet
Edited by
Rebekah Evans
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Many people spend decades saving for retirement without ever asking themselves the most important question: how much of that money will the IRS take? What you do before retiring matters. Whether you’re in your 40s, 50s or early 60s, the moves you make now will determine how much you’ll owe in taxes.
GOBankingRates spoke to Andrew Latham, financial advisor and director of content at SuperMoney, who shared four tips to reduce taxes before you begin your golden years.
Max Out Your 401(k) Contributions
Contributing to your 401(k) plan, traditional IRA and other retirement accounts can help reduce your taxable income dollar-for-dollar. If you have a workplace retirement plan, you can contribute up to $24,500 in 2026, $32,500 if you’re 50 or older and $35,750 for those ages 60 to 63.
This is the single biggest lever most people have and they are not pulling it hard enough,” Latham said. “So if you are earning $120,000 and you max out at $24,500, the IRS only sees $95,500. At the 22% marginal rate, that saves you $5,390 in federal taxes this year alone.”
Add in an employer match and you’ll not only be lowering your taxes but also boosting your retirement savings at the same time.
Fund a Health Savings Account (HSA)
If you have a high-deductible health plan, you may be eligible to contribute to an health savings account (HSA). “[It’s the] Swiss Army knife of tax accounts and most people completely ignore it,” Latham said.
Individuals can contribute $4,400 or $8,750 if you have coverage for your family in 2026. “HSA contributions are tax-deductible going in, grow tax-free and when you pull it out for qualified medical expenses, you pay zero tax on it,” he said. This gives you a triple tax advantage. No other account does that.
Do Roth IRA Conversions in Low-Income Years
A Roth conversion can be a great long-term strategy to reduce taxes. And the best time to convert a traditional IRA to a Roth IRA is during your gap years — the years between when you retire and before Required Minimum Distributions (RMDs) start.
“If you have a gap year between jobs, take a sabbatical or your income just dips for some reason, that is the time to convert some of your traditional IRA into a Roth,” Latham explained. “You pay taxes on the conversion amount at your current lower rate and then everything grows tax-free from that point on.”
Tax-Loss Harvesting
Selling your investments at a loss often creates great tax opportunities like tax-loss harvesting. This lets you use the realized losses to offset realized gains elsewhere, reducing your taxable income.“If your losses are more than your gains after offsetting, you can deduct up to $3,000 per year against ordinary income, with any remaining losses carrying forward to future years,” Latham said. “Just make sure you’re reinvesting in something similar but not ‘substantially identical’ to avoid the wash sale rule.
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