Tax planning before retirement focuses on “tax diversification”—building a mix of taxable, tax-deferred, and tax-free accounts to control your future income brackets. In 2026, the landscape has shifted due to the full implementation of the One Big Beautiful Bill (OBBB) Act, which introduced new deductions and modified how high-earners must save.

Pre-Retirement Tax Planning: A Strategic Outline

Leveraging the 2026 “Senior Bonus” and Standard Deductions

  • The 2026 standard deduction has been set to $16,100 (single) and $32,200 (joint).
  • If you are nearing 65, the OBBB Act adds a new $6,000 “Senior Bonus” deduction ($12,000 for couples).
  • Note the phase-out: This bonus deduction begins to decrease if your Modified Adjusted Gross Income (MAGI) exceeds $75,000 (single) or $150,000 (joint).
  • Pre-retirement planning should aim to keep your final working years’ income structured so you don’t lose these valuable credits right as you transition to retirement.

The 2026 Roth “Catch-Up” Mandate for High Earners

  • If you earned more than $150,000 in 2025, the IRS now requires that your 2026 catch-up contributions (the extra amount allowed if you are age 50+) be made to a Roth 401(k) rather than a Traditional 401(k).
  • This “mandate” means you lose the immediate tax break on those catch-up dollars today, but they will be 100% tax-free when you withdraw them in retirement.
  • For those ages 60 to 63, a “Super Catch-Up” limit of $11,250 is available in 2026, allowing you to significantly bulk up your Roth reserves in the final stretch.

Strategic “Bracket Topping” and Roth Conversions

  • Use your final years of work to evaluate “gap years”—years where you might retire but haven’t yet started Social Security or RMDs (Required Minimum Distributions).
  • Plan to perform partial Roth conversions during these lower-income years to “fill” the 10% and 12% brackets. This moves money from taxable Traditional IRAs to tax-free Roth IRAs at the lowest possible tax cost.
  • By reducing your Traditional IRA balance now, you permanently lower the size of your future RMDs, which often push retirees into higher tax brackets against their will later in life.

Managing the “Tax Torpedo” and Medicare IRMAA

  • The Social Security Torpedo: Proactive planning involves calculating your future “provisional income.” If your pre-tax withdrawals are too high, they can trigger taxes on up to 85% of your Social Security benefits.
  • IRMAA Surcharges: Medicare premiums for 2026 are based on your income from 2024. If you had a high-income year just before retiring, you may face a “cliff” where your Part B and Part D premiums spike.
  • The Two-Year Lookback: Because of this lookback, your tax planning in the two years before you turn 65 is critical to keeping your initial retirement healthcare costs low.

Asset Location and Loss Harvesting

  • Asset Location: Move “tax-inefficient” assets (like high-yield bonds or actively managed funds) into your 401(k) or IRA. Keep “tax-efficient” assets (like index funds or municipal bonds) in your taxable brokerage accounts.
  • Tax-Loss Harvesting: In 2026, you can use up to $3,000 in investment losses to offset your ordinary salary income. Any excess losses can be carried forward into retirement to offset future capital gains.
  • Charitable “Bunching”: In 2026, non-itemizers can deduct up to $1,000 (single) or $2,000 (joint) in cash donations. For larger gifts, consider “bunching” several years of donations into a single high-income year before you retire to maximize the itemized deduction.

Source: Fidelity Investments, “7 Smart Money Moves for 2026”; UBS, “Year-end Priorities and a Preview of 2026”; Empower, “Roth 401(k) Catch-Up: New Rule for 2026.”