How Retirees Lower Taxes When They Withdraw From IRAs

The main ways to reduce what you owe on IRA money

When you withdraw from a traditional IRA, that money counts as income for the year you take it out — which can push you into a higher tax bracket and trigger taxes on Social Security benefits you thought were safe. You cannot avoid the withdrawal itself if you are over 73 (the current age for required minimum distributions), but you have real choices about how much to withdraw, when to withdraw it, and what to do with the money once it lands in your account. The difference between a careless withdrawal strategy and a planned one can save hundreds or thousands of dollars over your retirement.

The strategies that work best depend on your specific situation: whether you have other income that year, whether you are married or single, whether you have both traditional and Roth IRAs, and how much you actually need to spend. This guide walks through the main approaches retirees use, what each one requires, and which situations they work best in.

Key Takeaways

• Withdrawals from traditional IRAs are taxed as ordinary income, so taking money in a low-income year costs less in taxes than taking the same amount in a high-income year.
• Roth conversions let you move money from a traditional IRA to a Roth IRA and pay tax on it now, which can lower your tax bill in future years when you have required withdrawals.
• may have access to charitable distributions let you send IRA money directly to a charity and avoid counting it as income, but only if you are 70½ or older and the charity is may have access to.
• Bunching deductible expenses into one year while keeping IRA withdrawals low in that same year can let you itemize deductions and reduce your taxable income.
• If you have both traditional and Roth IRAs, the IRS counts all of them together when calculating taxes on conversions, so you cannot avoid tax by converting only from one account.

Timing withdrawals to match your lowest-income years

The simplest strategy is to take withdrawals in years when your other income is lowest. If you retired mid-year, took a year off between jobs, or had a spouse pass away (which changes your tax filing status), those years have lower taxable income — and a withdrawal that would push you into the 24% bracket in a normal year might only be taxed at 12% in a low-income year.

This works because the IRS taxes withdrawals at your marginal rate — the rate that applies to your last dollar of income. If you have $50,000 in other income and withdraw $20,000, that $20,000 is taxed at whatever bracket $50,000 to $70,000 falls into. But if you have $20,000 in other income and withdraw $20,000, the withdrawal fills the gap up to $40,000, which is often in a lower bracket.

The catch is that this only works if you have control over the timing. Once you turn 73, you must take a required minimum distribution (RMD) each year, and you cannot skip it to wait for a better year. But before 73, you can take withdrawals whenever you want — or not at all — which gives you real flexibility. Some retirees deliberately take larger withdrawals in years they know will be low-income, then take smaller or no withdrawals in years with higher income.

Converting traditional IRA money to a Roth to pay tax now instead of later

A Roth conversion means moving money from a traditional IRA to a Roth IRA. You pay income tax on the amount you convert in the year you do it, but then that money grows tax-free and you never pay tax on it again — including when you withdraw it in retirement.

This sounds backwards (pay tax now to avoid tax later?), but it saves money if you expect to be in a higher tax bracket later. Someone who converts $50,000 at age 62 when they have little other income might pay 12% tax on it ($6,000), but if they had waited until 75 when they have required distributions plus Social Security, they might have paid 24% tax on the same $50,000 ($12,000). The conversion locked in the lower rate.

Conversions also shrink your required minimum distributions. The RMD is based on the balance in all your traditional IRAs on December 31 of the previous year. If you convert $100,000 to a Roth, your traditional IRA balance drops by $100,000, and your RMD the next year is smaller — which means less income to report and potentially lower taxes on Social Security.

The IRS has a rule called the pro-rata rule that catches people trying to convert only the after-tax money in their account. If you have $100,000 in a traditional IRA and $20,000 in after-tax contributions (money you already paid tax on), you cannot convert just the $20,000 and avoid tax. The IRS treats all your traditional IRAs as one pool, and if 80% of it is pre-tax money, then 80% of any conversion is taxed. This rule applies to all your traditional IRAs combined, not each account separately.

Sending IRA money directly to charity to avoid counting it as income

If you are 70½ or older, you can instruct your IRA custodian to send money directly to a may have access to charity. That money does not count as income on your tax return — you do not report it at all — and you do not get a charitable deduction either. The benefit is that it lowers your adjusted gross income (AGI), which can prevent Social Security from being taxed and can lower Medicare premiums.

This is called a may have access to charitable distribution (QCD). The charity must be a may have access to organization (most nonprofits, religious organizations, and educational institutions may have access to; donor-advised funds and private foundations do not). The money goes directly from the IRA to the charity — it cannot go to you first and then to the charity, or the whole thing becomes taxable income.

You can direct up to $100,000 per person per year to charity this way. If you are married and both spouses are 70½ or older, each of you can direct $100,000. The money counts toward your required minimum distribution if you are subject to one, so if your RMD is $40,000 and you direct $40,000 to charity, you have satisfied your RMD without reporting any income.

The main limitation is that you must actually want to give to charity. This strategy only makes sense if you were going to donate anyway. If you are not a regular donor, the tax savings are not worth the loss of the charitable deduction you would normally claim.

Bunching deductions in one year to lower taxable income

If you itemize deductions (rather than taking the standard deduction), you can sometimes save money by bunching several years of deductible expenses into a single year, then taking the standard deduction in other years. In the year you bunch, your taxable income drops, which means a withdrawal from your IRA is taxed at a lower rate.

Common deductible expenses that can be bunched include charitable donations, state and local taxes (up to $10,000 per year), medical expenses over 7.5% of your adjusted gross income, and mortgage interest. If you normally donate $5,000 per year, you might donate $10,000 in one year, then nothing for two years. That year, your deductions spike, your taxable income drops, and a $30,000 IRA withdrawal might be taxed at 12% instead of 22%.

This works best if you have some control over the timing of the expenses — you can choose when to make donations, when to pay property taxes, or when to schedule elective medical procedures. It does not work if your expenses are fixed or unpredictable. And it only saves money if your bunched deductions exceed the standard deduction (which is $27,700 for single filers and $55,400 for married filers in 2024, though these amounts change yearly).

Splitting income with a spouse to use both tax brackets

If you are married and file jointly, you and your spouse share one tax bracket. But if one spouse has much higher income than the other, you might save money by filing separately — each of you uses your own bracket, and the lower-income spouse can withdraw from their IRA at a lower rate.

This rarely works because filing separately triggers other penalties: you lose the ability to claim certain credits, you cannot use the standard deduction if your spouse itemizes, and your Medicare premiums may be higher. But in specific situations — one spouse with a large pension and the other with little income, or one spouse with significant capital gains — it can be worth calculating both ways.

If you are considering this, work with a tax professional who can run the numbers for both filing statuses. The math is complicated and the difference can be substantial, but it only matters if you actually save money, not just in theory.

Delaying Social Security to reduce the tax hit from IRA withdrawals

Social Security benefits are taxed based on your "combined income," which includes half of your benefits plus all your other income (including IRA withdrawals). The more income you have, the more of your Social Security is taxed. If you delay claiming Social Security until 70, you have fewer years when you are taking both Social Security and large IRA withdrawals at the same time.

Someone who retires at 62 and starts Social Security immediately might have $30,000 in Social Security plus $40,000 in IRA withdrawals in the same year — a combined income that triggers taxes on the Social Security. But if they delay Social Security until 70, they might take $60,000 in IRA withdrawals at 62-69 (when they have no Social Security income), then take Social Security at 70 (when they might take smaller IRA withdrawals or none at all). The withdrawals and benefits are spread across different years, lowering the tax in each year.

This strategy only works if you have enough savings to live on without Social Security for several years. It also assumes you will live long enough to break even on the delayed benefits — generally around age 80 to 82. If you need the income now, this is not an option.

Frequently Asked Questions

Can I withdraw from a Roth IRA without paying taxes?

You can withdraw your contributions to a Roth IRA tax-free at any age. Withdrawals of earnings (the growth on your money) are tax-free only if you are 59½ or older and have held the Roth for at least five years. If you withdraw earnings before that, you pay income tax on them plus a 10% penalty. Roth IRAs have no required minimum distributions during your lifetime, so you can leave the money untouched if you do not need it.

What happens if I take out more than my required minimum distribution?

You pay income tax on the entire amount you withdraw, not just the RMD. The RMD is the minimum you must take; you can take more if you want. Taking more in a low-income year can be a deliberate strategy to reduce your tax bill in future years when you have higher income and larger RMDs.

Do I have to convert the entire balance of my IRA, or can I convert just part of it?

You can convert any amount you want, from a small portion to the entire balance. But remember the pro-rata rule: if you have $100,000 in traditional IRAs total and $20,000 is after-tax money, you cannot convert just the $20,000 and pay tax only on that. The IRS counts all your traditional IRAs together, so 80% of any conversion is taxed as income.

If I do a may have access to charitable distribution, can I also claim a charitable deduction?

No. The benefit of a QCD is that the money does not count as income, so you do not report it on your tax return at all. You cannot also claim a charitable deduction for the same money. The tradeoff is worth it if lowering your AGI saves you more in taxes than the deduction would have.

What if I made a Roth conversion and then the market dropped — can I undo it?

You can undo a conversion by doing a "recharacterization," but only within certain time limits and only if your IRA custodian allows it. The rules changed in 2018, and now recharacterizations are limited. Talk to your tax professional or IRA custodian about whether this is an option in your situation.