Skip to main content

Year-End Tax & Financial Planning Opportunities

Year-end tax planning for retirees provides a chance to identify available avenues to think strategically and lower your taxes for this year, for the next year, and over your lifetime.

By S. Joseph DiSalvo and Marie Madarasz

In 2021 there was a significant amount of uncertainty about tax law – would President Biden’s sweeping tax proposal pass? As we sit down to gather our thoughts for year-end planning, it strikes us how much of last year’s proposed changes did not come to pass. The reality right now is we continue to have historically low federal tax rates and various planning opportunities available.

S. Joseph DiSalvo, ChFC®, and Marie L. Madarasz, AIF®S. Joseph DiSalvo, ChFC and Marie L. Madarasz, AIF, authors of “Income for Life, the Retiree's Guide to Creating Income from Savings,” specialize in coordinating a retiree’s income, investment and tax planning. They are members of Ed Slott’s Elite IRA Advisor Group, a prestigious study group which enhances their knowledge of IRA distribution planning. Both are strong advocates of financial education, seeking to teach others how to achieve sustained success and lifelong prosperity. www.IncomeForLifeBook.com

Marie Madarasz & Joe DiSalvo

Year-end tax planning for retirees provides a chance to identify available avenues to think strategically and lower your taxes for this year, for the next year, and over your lifetime.

Consider Tax-Loss Sales

At year-end, tax-loss selling may work to your benefit.

When we have a year like we had in 2022, where markets have been down sharply, you may very well have positions in your taxable accounts that are now at a loss. If you sell any losing holdings from your portfolio, those losses can be used to offset the equivalent amount in capital gains. If you have more losses than gains, you can use up to $3,000 annually to offset income tax. Your losses don’t expire if not used in the year they were harvested. Over time, good planning can help you amass a war chest of losses, and you can utilize them strategically to offset gains in the future, allowing for tax-free income! When harvesting losses, however, be aware of the wash sale rules.

Keep an Eye on Mutual Fund Capital Gains Distributions

If you hold mutual funds in a taxable account, keep in mind that even if your accounts are down in value for the year, you could potentially end up owing taxes on capital gain distributions. Even though you may not have sold anything yourself, the fund may have sold positions internally and realized a gain. This means you will be hit with a tax bill for the fund’s capital gain distribution.

One way you can plan for this is to call the fund and see if they have an estimate on capital gain distributions for 2022; most should by this time of the year. Another way to avoid the taxable gain distribution is to sell the fund prior to the “record date.” Be aware that dates matter here! Lastly, to avoid the tax bill on the passed along gain, you can offset the gain with any losses you may have harvested as explained above.

Hint: Consider holding mutual funds inside your retirement accounts where capital gain distributions won’t be subject to tax, and hold more tax-efficient investments, such as individual securities or index funds, inside your taxable accounts to avoid large taxable surprises at year end.

Roth Conversions

With a Roth IRA, qualified distributions provide tax-free income, any earnings are tax-free, and there are no RMDs (required minimum distributions) during the original owner’s lifetime.

Partial Roth conversions allow you to get more of your assets into the forever tax-free side of your balance sheet. If you were unable to contribute to a Roth IRA during your working years due to income limits, know that there are no such limits for Roth conversions. Neither is there a requirement for “earned income” like there is for Roth contributions, making them worth analyzing for retirees. Roth conversions do not have to be all or none – consider a partial Roth conversion.

With a Roth conversion, you’ll transfer money from a traditional IRA into a Roth IRA. This causes an immediate tax liability. However, when we are looking at a year like 2022, with markets declining by more than 15% on average, converting while accounts are down will allow all future appreciation on the conversion to be forever tax free! But like anything related to retirement accounts, consider it carefully! Doing partial Roth conversions effectively requires the understanding of your current tax bracket and what your estimated future tax bracket may be. Forward-looking planning by a financial professional is recommended before you pull the conversion trigger. Want to learn more? Download our Consumer’s Guide to Partial Roth Conversions.


Follow us on Instagram and Twitter!


Max Out all Retirement Saving Opportunities

Have you already maxed out your contributions to your 401(k) and now believe there is no additional opportunity to save in your retirement plan? For 2022, you can defer $20,500 into a 401(k), 403(b), etc., plus an extra $6,500 for investors age 50 and older. This limit includes your pre-tax contributions to the traditional 401(k)-side and any Roth contributions to the Roth 401(k) side.

But here is something that higher-income earners may want to consider if they would like to have a place for additional savings. Some plans let you exceed the $20,500 deferral limit with after-tax contributions. If your plan allows you to contribute after-tax money (not to be confused with Roth contributions which are subject to the contribution limit above), there is a larger window for getting savings into your plan.

The total IRS plan limit for 2022 is $61,000 per worker (or $67,500 for those age 50 and older). This total includes the sum of all matches, profit sharing, employee contributions and after-tax contributions. If you contribute additional dollars via after-tax contributions, you may have access to a mega backdoor Roth strategy, which means once the after-tax contributions are made, you move them (via an in-plan conversion) into the Roth side of your 401(k) (or if allowed, into your Roth IRA). This incurs an immediate tax liability on any growth of the after-tax contributions and accomplishes getting more dollars situated for future tax-free growth.

Hint: Every plan can have different rules. Before year-end, find out what opportunities your plan offers and learn how you can better utilize them to reach your savings goals.

Cash Flow Strategies

As you do your year-end tax planning, it’s also the perfect time to develop a cash-flow strategy for the upcoming year. Look ahead now to determine how much you’ll need to withdraw from your portfolio and from which account types you will withdraw from.

Keep in mind, the ideal way to reduce your tax burden might be to withdraw from multiple account types — Roth, taxable, and tax-deferred IRAs. The trick is to be strategic about this. Developing a plan to source your income in the most tax-efficient manner possible, both from a short-term planning perspective as well as the long-term planning perspective, allows you to control other taxes that are unique to a retiree, such as IRMAA surcharges and the amount of Social Security that is subject to taxation.

The Bottom Line

Year-end tax planning, from both a short-term and long-term perspective, will allow you to minimize your tax burden as a retiree and make the most of what you have for a lifetime and beyond.

About the authors: S. Joseph DiSalvo and Marie L. Madarasz

S. Joseph DiSalvo, ChFC and Marie L. Madarasz, AIF, authors of Income for Life, The Retiree's Guide to Creating Income from Savings, specialize in coordinating a retiree’s income, investment and tax strategies. They are members of Ed Slott’s Elite IRA Advisor Group, a prestigious study group which enhances their knowledge of IRA distribution planning. Both are strong advocates of financial education, seeking to teach others how to achieve sustained success and lifelong prosperity. www.IncomeForLifeBook.com


Once you're independent of an employer, you have four primary options for handling your 401(k) account. Our expert gives the details below.
age tech
●73% say one of the first things they will do when they inherit is to work with an advisor ● Most cited factors for retaining their family’s advisor are family satisfaction with their advisor and estate planning prowess