When you’re retired—or close to it—tax planning becomes more important than ever. That’s because taxes don’t affect just one part of your financial life. They touch everything: your income, your Social Security, your Medicare costs, your savings, and even what your family may owe after you’re gone.
With the 2026 tax numbers now available, this is a good time to step back and look at how tax planning fits into the bigger picture of retirement. In this lesson, we walk through the Seven Worries and explain how taxes interact with each one.
Why Taxes Matter More in Retirement
During your working years, taxes were usually straightforward—you earned a paycheck, taxes were withheld, and you moved on. In retirement, things are different. You’re drawing from multiple sources of income, many of which are taxed in different ways, and you’re working with a finite pool of savings that has to last the rest of your life.
The goal isn’t just to pay as little tax as possible this year. The real goal is to manage taxes over your lifetime, so you keep more of what you’ve saved and avoid unpleasant surprises down the road.
Understanding the 2026 Tax Brackets
One of the biggest misunderstandings we see is how tax brackets actually work. Many retirees assume that if they’re “in” a certain bracket, all of their income is taxed at that rate. That’s not how it works.
Your income fills up the lower brackets first, then moves upward. That’s why your effective tax rate—what you actually pay overall—is usually much lower than your highest bracket.
For retirees over 65, this is especially important because of:
- Larger standard deductions
- Additional senior deductions
- Partially taxable Social Security benefits
All of these can significantly reduce how much income is actually taxed.
Social Security and Taxes
Social Security is one of the most common sources of confusion. Depending on your total income, anywhere from 0% to 85% of your Social Security benefit may be taxable—but never more than that.
Many retirees overestimate how much tax they’ll owe on Social Security. The key is understanding how it fits together with your other income sources, such as IRA withdrawals or part-time work. With proper planning, Social Security taxes can often be managed more efficiently than people expect.
Medicare and IRMAA Surprises
Medicare premiums are also tied to your income through something called IRMAA (Income-Related Monthly Adjustment Amount). Medicare looks back at your income from two years ago to determine whether you’ll pay higher premiums.
This can catch people off guard, especially after retirement, Roth conversions, or one-time income events. While IRMAA isn’t always avoidable, knowing it exists allows you to plan intentionally—and in some cases, appeal it if your income has dropped due to retirement or another life-changing event.
IRAs, 401(k)s, and Lifetime Tax Planning
Traditional IRAs and 401(k)s are powerful savings tools, but they come with a catch: the money hasn’t been taxed yet. That means some of your retirement account balance belongs to the IRS.
The key questions become:
- When should you pay the tax?
- How much should you take out each year?
- How do Required Minimum Distributions (RMDs) affect future taxes?
Thoughtful planning can help smooth income, reduce large tax spikes, and minimize the IRS’s role as a “silent partner” in your retirement.
Estate Planning and Taxes for Your Heirs
While federal estate taxes affect very few families today, many retirees unintentionally leave their children a tax problem through inherited IRAs. Under current rules, most beneficiaries must withdraw inherited retirement accounts within 10 years, often pushing them into higher tax brackets.
Planning ahead can help reduce the tax burden on your heirs and preserve more of your legacy for the people you care about.
Long-Term Care and Tax-Free Benefits
Long-term care planning isn’t just about care—it’s also about taxes. Benefits from long-term care insurance are generally tax-free, which can make a significant difference if care is ever needed.
Without planning, long-term care costs are often paid from after-tax dollars, adding financial strain at an already difficult time. Understanding how long-term care fits into your tax plan can help protect both your savings and your family.
Bringing It All Together
Taxes don’t exist in isolation. They affect:
How much income you can safely spend
What you keep from Social Security
What Medicare costs you
How long your savings last
What your family receives after you’re gone
That’s why retirement planning works best when all seven worries are considered together, not one at a time.
If you want to better understand how taxes fit into your overall retirement plan—and how the new 2026 numbers may affect you—this is a conversation worth having.
