Helping Retirees Tackle Year-End Tax Planning: Easiest to Hardest
Episode 53
Helping Retirees Tackle Year-End Tax Planning: Easiest to Hardest
Published on Sept 23rd, 2026
Episode Summary
Episode 53 of Retirement Tax Matters ranks the year-end tax data-gathering process for $2M to $8M retirees from easiest to hardest. Garrett Crawford, CFP® and Adam Reed begin with the simplest numbers to update for a fall income tax projection, including Social Security cost-of-living adjustments, fixed pensions, recurring IRA distributions, and realized year-to-date capital gains. The conversation moves into medium-difficulty data points like estimating remaining brokerage dividends, tracking ordinary versus qualified yield, and evaluating potential itemized deductions such as charitable giving or out-of-pocket medical expenses exceeding 7.5% of Adjusted Gross Income. The hardest category focuses on complex variables like Schedule E rental property expenses, donor-advised fund timing, Roth conversion execution, and calculating estimated tax payments. Estimating your December 31st income before year-end allows you to make informed financial choices rather than waiting for spring tax filing when planning windows have closed. Utilizing an annual tax-return-driven framework gives retirees a systematic way to gather numbers, optimize tax brackets, and avoid unexpected tax bills next April.
Key Tax Planning Questions
Question 1: What is the difference between year-end tax planning and what my tax preparer does?
This is one of the biggest points of confusion for retirees, especially for those who have spent decades handing their financial documents over to a CPA or tax preparer.
The traditional tax preparation process is backward-looking. Every spring between February and April, you gather your 1099s, W-2s, and tax documents, fill out your preparer's organizer, and deliver that information to their office. Their primary job is compliance: taking historical data, reporting it accurately on Form 1040, and calculating what you owe or what your refund will be for the year that just ended. While a good tax preparer might offer an idea or two for the upcoming year during your review, their main role is accurately reporting what has already happened.
Year-end tax planning is completely different because it is forward-looking. Instead of waiting for spring tax filing, you build an estimate in the fall of where your taxable income will land on December 31st while the calendar is still open. Gathering those numbers before year-end gives you the opportunity to make deliberate financial decisions before the planning window closes. Knowing your projected income for the current year allows you to evaluate proactive moves, such as determining whether it makes sense to execute a Roth conversion to fill up a lower tax bracket, harvest capital gains in a taxable brokerage account at lower rates, or defer income into the following tax year.
Estimating where your income lands on December 31st is not always simple, and it is rarely an exact science. Fluctuating market investments, late-year portfolio rebalancing, or unexpected life events like buying a new car or handling a family emergency can all shift your final numbers. That is why we prefer waiting until later in the fall, usually October or November, to run these projections. The closer you get to year-end, the more your actual income becomes known, which significantly shrinks your margin for error. Year-end tax planning involves a mix of math and educated guesses, but taking the time to run those numbers late in the year is how you make far better financial choices for your retirement.
Question 2: What happens if I need extra income before the end of the year?
For retirees in the $2M to $8M asset range, having a dedicated cash cushion is one of the best ways to insulate your tax plan against late-year surprises. When sitting down with clients in October or November to build an income projection, getting known cash needs out of the way early helps lock in baseline numbers. But unexpected personal expenses still happen. A sudden $20,000 roof leak in December is a controllable personal surprise. Sourcing those funds from cash reserves or high-basis brokerage positions keeps your taxable income steady without disturbing executed Roth conversions or pushing you over a Medicare IRMAA threshold.
On the other hand, there are market-driven surprises that sit outside your control. Sudden sector swings, such as a sharp drop in technology stocks, might force you to rebalance a portfolio before year-end. In those moments, investment risk management takes priority over tax planning. Realizing capital gains to protect your overall balance sheet might shift your end-of-year tax numbers, but managing portfolio risk is still the right long-term financial decision.
These competing forces show why year-end tax planning is an educated estimate rather than a perfect science. Even with personal expenses and market variables you cannot control, running a fall income projection is still one of the best ways to make informed decisions. Dialing in your numbers late in the year gives you the framework to control what you can, buffer against what you cannot, and keep more money working for your family.
Full Episode Transcript
Adam: Good morning, and welcome to Retirement Tax Matters. I'm Adam Reed. This is Garrett Crawford, our resident CFP® professional. This morning's episode is a part two of last week's episode, where we talked about pre-retirees and things to be mindful of. We are big on year-end tax planning. Maybe this is a good time to go ahead and plug that to get it out of the way. If you go to our website, retirementtaxmatters.com, down in the description we have a freebie for you: the year-end tax planning checklist, which goes hand-in-hand with a lot of the things we are talking about right now. It is a huge asset and a great tool to have in your toolbelt for anybody thinking about doing their own financial planning or tax planning at the end of the year. Super helpful. Not only that, but you also get the subscription newsletter each week where Garrett brings great insights. Join over 500 other people getting that weekly newsletter.
Garrett: Give it to all your friends for Christmas.
Adam: Print it off and send it out, or go ahead and sign them up. Put their email address in, whatever you want to do. No rules around here.
Garrett: How to win friends and influence people: just sign them up for a retirement tax planning newsletter update. I think that would be a great idea.
Adam: Merry Christmas.
Adam: So last week was for pre-retirees, with a checklist of things for them to be mindful of. This week we are focusing on those who are in retirement. That is kind of all of our content, but we thought this would line up well with this time of year, taking some of these income projections you are making and walking through what we think are the easiest numbers to get on paper and updated, what are the next hardest, and then what are the hardest numbers. This way people can be aware of things to be thinking of, things that might take more time to gather, things that are easier to update real quick, and other things to do down the road. It is a good time of year to do it. We have college sports and the NFL, and there are power rankings everywhere. What is the easiest? What is the hardest? We are power ranking retirement income and tax planning numbers.
Garrett: People talk about the CFP college football rankings, but maybe this is the CFP® professional tax planning rankings.
Adam: It is funny. I get an ESPN notification from time to time, and it will say something about CFPs. I am like, "Oh, I need to click on that. I wonder if it is a CE credit or something." Then I am like, "Oh wait, that is sports. College Football Playoff is not certified financial planner."
Garrett: Which, in our neck of the woods here in Tennessee, we also have the CFA designation, which is an elite one, but that is also code for Chick-fil-A in Tennessee. So there is a lot of confusion in the financial world.
Adam: Chick-fil-A, college football, and financial planning. Right. What else does a man need? So without further ado, let us jump into this. As a precursor, we are not going to do a deep dive into each topic or each number, but rather a broad overview of, "Hey, be mindful of these things." These things are probably pretty easy to update, these things are a little bit harder, and these are probably the hardest. So Garrett, give us tier one, the easiest numbers that are easy to knock out whenever you are doing an update for a client.
Garrett: Yeah, so I have a list here in front of me, and I am going to read it so I stay on track today. The way I frame this is for all you people who are retired, you need to be doing this year-end tax planning. It is what I do with every client of mine. If you don't work with a financial planner, it is still an exercise that we preach every single week: you need to estimate what your income is going to be on December 31st so that you can make informed financial planning decisions before it is too late, which is tax time next year. The way I am framing this is thinking about when I log into my laptop with my clients in the room, on the phone, or on a Zoom call, and we are using my software called Holistiplan to build a tax estimate for this year. I am doing a lot of these fall 2026 income tax projections. It is kind of boring for a lot of you, but it is basically just a bunch of lines. If you go back and look at the episode, I forget what the episode number was, but we will link it, about the $6 million retiree where we go through and use the tax planning software, you can get a feel for what I am talking about when I refer to building an income estimate. When I log into that, there are some fields that are really easy for me and a client to get, and then there are other ones where it is really hard to type numbers in. This ranking that I am about to jump into, easiest to hardest, is based on those lines in that tax planning software that have a hierarchy of values that are harder and easier to get to. Let us start with what Adam asked: the easiest.
Adam: Drum roll.
Garrett: Updating Social Security amounts from one year to the next. If you are retired, there is a good chance that you and your spouse, if you are married, are both on Social Security. I just have to memorize one number. It comes out every October, and I am waiting with a lot of anticipation next month to see what it will be for 2027. For right now, all I do is look at the 2025 tax return for a client. I multiply those family benefits by 1.028, which increases it by 2.8% for the cost of living adjustment, and Social Security is ready to go. As long as nobody died, as long as there wasn't a divorce, and as long as nobody signed up for Social Security this year, almost always that is as hard as it gets. Take last year's number and increase it by the 2.8% cost of living adjustment. So we have that locked in. The second one is a little bit more difficult, but not terrible, and that is a couple of lines: IRA distributions, and pensions and annuities. For IRA distributions, for anybody who is retired and has ongoing periodic withdrawals, maybe you have $4,000 a month set up from your IRA, it is very easy for me. I just log in, look at our clients, and see what the recurring schedules are. I go into the IRA distribution line and multiply it by 12 months. If it is $4,000 a month gross, I go in and type $48,000 a year from this person's IRA. I look at the federal tax withholding and put that in there. It is simply looking it up and typing it in. One thing that takes just a little bit more effort is looking at required minimum distributions. But for all intents and purposes, it is pretty easy. You calculate it for the IRA based on the December 31st, 2025 value, add up all the different IRA account balances, and come up with a required minimum distribution. You look at it and see they are taking out $48,000, but their RMD this year is going to be $58,000, so we just build in an extra $10,000 that they are going to have to withdraw. It doesn't get into complexity unless maybe you are going to do a QCD because you are older than 70 and a half. But for the most part, IRA distributions and RMDs that are scheduled and known about are pretty easy. Then it comes to pensions that you have at work. I would say those are, for the most part, straightforward. I may have to ask a client to remind me: does their pension have a cost of living adjustment, and when does that cost of living adjustment happen? Here in Tennessee, we have a lot of people who are part of the Tennessee Consolidated Retirement System, and that happens midway through the year. As a tax planning person, I am like, "Please make that January." It would make it a lot easier. But they do a July to June fiscal year for the pension program. We update that number, and if you have an annuity, usually those are fixed amounts and easy to get in there to know what is taxable. The third thing I would say is easy is figuring out year-to-date capital gains. If we are managing assets, it is super easy, but even if we are not and a client has separate accounts, we are just asking them to log into their account, or we log into our advisor side of accounts. We go to each non-IRA account, a brokerage account or a taxable account, and we log in to look at the cost basis to see if they have a realized long-term or short-term capital gain. We are going to talk about capital gains a little bit more later, but sales that have already happened up until September of 2026 are very easy to log into each account, note down, put into the tax planning software, and be ready to go. So Social Security, IRA distributions, pensions, annuities, and year-to-date capital gains are fairly easy.
Adam: As a general rule of thumb, so don't take this to the bank or say, "Adam said this, so it is true for everybody," I think those are also the bedrock of a lot of people's retirements. They are probably the most substantial numbers that you want to get right. From there, we think about how to fine-tune them. Sure, there are going to be some other numbers that maybe won't be as large, but when you are dealing with IRMAA thresholds and different marginal tax brackets, these are the things that can make or break what you are doing, even though what we just talked about is the bulk of income planning for a lot of people.
Garrett: Yeah, you add all those up, and for most people, you are 80% there with the final numbers. We are just trying to fine-tune it above that.
Adam: That 20% can make a big difference when you are fine-tuning around certain thresholds and places you are trying to land. So what would you say is the medium level, one step up from that undergraduate level? We are not quite to the doctorate level yet, but the graduate level. What do people need to be mindful of?
Garrett: I am going to start with this one. Sometimes I wonder how people do this if they don't have portfolio management software. It is just difficult. For the clients whose assets we manage, we use a portfolio management system software called Orion. You can't have that as an individual person, or if you did, it would not be cost-effective. But cutting to the chase, determining how much interest and dividends have been paid out year to date is tricky. I know you can go through your transaction history and find that, but I have found there is more friction to it, and it takes longer. Estimating interest usually isn't the biggest deal, you might have some cash in a CD that you can ballpark, but it is dividends from a very large brokerage account that get complicated. If you are like a lot of retirees right now, you are probably using exchange-traded funds or maybe individual stocks. My hunch is most of you listening use ETF index funds, and you get dividends paid out from an ETF investment. These ETFs will pay out periodic dividends, it could be quarterly or semi-annually. When you are trying to fill out an income estimate for the end of the year, it is a two-part process. You need to look at how many dividends and interest have been paid out by your brokerage account, your savings account, and your CDs from January 1st up until today, September 17th, when we are recording. That timeframe is set, meaning it is not going to change from January 1st to September 17th, but you are going to have to make a good estimate from September 18th until December 31st. That hinges on whether you are going to make any changes or withdrawals, though probably not enough to impact those last four months, which is why we say to wait until the fall to make this estimate. What I like to do, being 17 days into September, is take all the dividends and interest that were paid out from an investment account, add all that up, and divide that by about 8.6. That gives me a monthly amount, and then I multiply that by 12, which gives us a good annual estimate of those paying dividends. The other part that is tricky is that dividends can either be qualified or ordinary income. If they are qualified, they qualify for lower long-term capital gains rates. If they are ordinary, they are taxed at whatever your marginal tax rate is. Even I am not perfect at this, but I usually underestimate how many qualified dividends there are going to be rather than overestimate. Some of that comes down to tracking how long you have owned those positions and whether those dividends are qualified. I know my portfolio management software system can default to ordinary, and by the end of the year when I see a tax form, they have been reclassified to a qualified dividend. I would say that is a medium difficulty event, but it really is transactional. The fewer accounts you have, the more manageable it is. The second one isn't as complicated, but when I go through the tax planning lines, you get to this question of standard deduction versus itemized deductions. I would say most people in America, probably above 90%, take the standard deduction on their tax returns. But Adam, I know the people we are talking to on this channel are not the average American. They usually have bigger portfolios, they are retired, they are generating dividends and interest, and they like to optimize.
Adam: Mm-hmm.
Garrett: There is a better chance than not that we need to evaluate if an itemized deduction is going to make sense for the year. One easy example is if you go to church, tithe, or give to your church every single month. Those people can give a lot of money and easily exceed the standard deduction amount. Making sure that you are factoring in your giving to a church, a qualified charity, or the United Way to see if you are getting above that itemized deduction range is important. If you are in September of 2026, knowing if you are going to itemize or take the standard deduction could definitely influence your end-of-year financial planning. Another one I had recently involves the unfortunate part of retirement: the cost of healthcare at some point can go way up. If you are in a situation where you are paying out of pocket for extended care or nursing care, if those medical costs exceed 7.5% of your AGI, that becomes an itemized deduction. Don't forget about that. If you are a spouse and have a partner in extended care, part of this tax planning for the end of the year is understanding that you have lots of itemized deductions, which could allow you to get money out of an IRA at a lower tax cost. So those are the medium ones.
Adam: We have got the undergraduate degree taken care of and the graduate degree done, so it is time for the doctorate program. What are the things that may be above and beyond just normal planning? Looking at the list earlier, some of those things you could ignore and not do and still be fine, but what are some of the levers you can pull and things you can do to really optimize? To be honest, I feel like for a lot of the people who interact with our content, this is the meat and potatoes that gets them excited: "Oh yeah, I have heard of that," "I want to implement that this year," or "Tell me a little bit more about that."
Garrett: Yeah, and as you talked about it, I was thinking about how we are in 2026, the age of AI, and data is everywhere. Some of those things I just mentioned in the easy and medium tiers are areas where AI is going to enable DIYers and people like you and me, Adam, to spend less time searching for those things to aggregate that information into tax planning software. But this doctorate category is where things aren't just black or white. You pull some levers, and it impacts something else. We were joking the other day when our MacBooks updated to the new OS 27 software, and we typed a couple of questions in just to test it out. The very first sentence said, "I am not a financial advisor," and then it gave its basic definition. It is interesting seeing these AI chatbots realize when they are out of their depth and say, "Hey, go talk to somebody." These are probably the areas where that is most important. To start, Adam and I don't work with people in the $2 million to $8 million space who are real estate syndicates with 20 different properties all over the country; that is not our niche client. That could be you, and there is probably somebody out there who speaks your language, but that is not our focus. However, a lot of our clients will have one, two, or three rental properties, and a big part of their tax return is going to be a Schedule E. On a Schedule E, you list those different rental properties, your gross rental receipts, and then a whole section where you list expenses from those properties all the way down to net rental income. You get into depreciation, amortization, mortgage interest, and all these different things. I have found that this is an area where I am very quick to say, "Hey, let me pull in a CPA or your tax preparer," because managing depreciation, determining how much to take this year versus next year, or accounting for projects like home improvements that raise rental rates gets complicated. The idea that you will always know everything about the rental property can be difficult. If you have rental properties, you might entrust a management company to take care of it so you don't have to think about it, but that doesn't excuse you from needing this planning session in the fall to make sure you know what you are doing from a financial planning perspective. What I have enjoyed in the past is that the first year working with a client is very much an orientation: "Hey, I need to see how your rental properties are working." It may take one or two tax returns before I see the ups and downs, but by year three and beyond, there is a familiarity where we start to get comfortable making proactive financial planning decisions because we have an idea of where all the depreciation is and whether they are paying off the mortgage. Schedule E is a difficult one to plan around because if you don't plan around it right, there can be huge missed opportunities or huge surprises. Maybe all those expenses on a rental property actually negate all your rental income, making Schedule E show a zero, or you might have a suspended passive loss for future income. Or you may have paid off that rental property, have no mortgage interest, enjoyed sky-high rents with low expenses, and ended up with so much extra income that it triggers an extra IRMAA tier. Manipulating Schedule E takes some skill. The second one I will jump down to is donor-advised fund (DAF) implementation. We have done an episode on donor-advised funds, but building on that medium level where we look at itemized deductions, if we know itemizing is a possibility for this year, maybe we go all in. If we have a lot of unrealized long-term capital gains, we might actually want to pull even more long-term capital gains off the table and increase the donor-advised fund giving opportunity so that you can carry that giving into future years. That could be a big win, but it depends on your situation. Optimizing your charitable giving using a donor-advised fund or a QCD from an IRA is a big deal, and it can be difficult to see how everything links together. Then our favorite hardest category is Roth conversions. You have to get all these other lines correct in the tax planning software to see how much room you have left in that 24% tax bracket. I just ran one this morning before work for a high-income client. There was $26,000 left in the 24% tax bracket, and when we flipped over to long-term capital gains, there was still another $90,000 in unrealized long-term capital gains that they could take to stay under the 24% tax bracket and stay in the 15% long-term capital gains rates. Part of year-end tax planning is seeing how all these other spaces are filled up and what room that leaves for a Roth conversion or pulling money out of a capital gain. I am getting winded here, Adam, but let us jump to the last hard one. It is maybe not the biggest impact, but we are trying to prevent surprises from happening to people. Anytime you show up next April and have a $35,000 tax bill that you weren't expecting, that never feels good, even if you know you owe it. At the very bottom of my year-end tax planning software, it helps me see how much federal withholding has been sent to the IRS throughout the year. When we do those end-of-year donor-advised fund contributions, Roth conversions, Schedule E optimizations, or pull more money out of the IRA, we are wildly swinging the amount of tax that is due at the end of the year. We may end up requesting an additional estimated tax payment to make all that happen. The cool part is seeing all the planning happen, getting the estimated tax payments right, and then when April comes around, everything works out smoothly. Those are the hard ones for retirees.
Adam: Typically our episodes drill down into one specific topic, but today we covered a lot of ground. I think it was really smart of Garrett when we built our website, retirementtaxmatters.com, to include different topic categories on there. Is that under episodes, or what does that tab say?
Garrett: If you go to retirementtaxmatters.com, one of the menu items at the top says "Topics" or "Episodes." Once you click into episodes, there will be a yellow button that says "Topics." I have a section that looks like a frequently asked questions table, but I have categorized every episode we have ever done into 12 categories. If you want to know about Roth conversions, every episode is listed under the Roth conversion category. If you want to know about income tax optimization, click on that one and you are good to go.
Adam: That would be a great place to go if you heard a topic here and want to do some more digging on it. The thing that kind of stinks about Spotify, Apple, and YouTube is that we can't categorize everything on those platforms. But if you check out the website, you can sign up for the end-of-year tax planning checklist and dig deeper into topics you are interested in. If you look through our website and don't see a topic you want, send us a message or leave a comment on YouTube saying, "Hey, I would love to hear a topic or more information on this." We love to interact with you guys and answer questions. Maybe we will leave you with this today: go down in the comments and let us know what is easiest and what is hardest for you as you are making these income tax projections. We would love to engage with you guys. We appreciate you all following along, and hopefully, you feel like you got some good value today. We are building a library and wanting to build a community of people who love to nerd out about taxes as much as we do, and it has been a lot of fun to see the growth over the last year. Check us out on Apple, Spotify, and YouTube, and check out the website down below in the description. My name is Adam Reed, this is Garrett Crawford, CFP® professional, and we are Retirement Tax Matters.
Garrett: See you next time.