The big tax mistakes retirees make (and how to avoid them)

Mistake 1: ignoring the RMD time bomb

A career of diligently funding 401(k)s and IRAs builds a large tax-deferred balance — and a large future tax bill. Required minimum distributions eventually force big withdrawals, taxed as ordinary income, whether you need the money or not. Retirees who never draw down or convert during their lower-income years can get hit with outsized RMDs that push them into higher brackets for the rest of their lives.

Mistake 2: wasting the low-income years

Mistake 3: triggering hidden surcharges

In retirement, a spike in income doesn’t just raise your tax bracket — it can increase how much of your Social Security is taxed and trigger Medicare premium surcharges (IRMAA). A poorly timed large withdrawal, capital gain, or Roth conversion can quietly cost you on several fronts at once. Smooth, planned income avoids these cliffs.

Mistake 4: poor withdrawal sequencing

Draining one account type at a time, or pulling large sums in some years and little in others, tends to waste low brackets and create spikes. A blended withdrawal strategy across taxable, tax-deferred, and Roth accounts usually produces a lower lifetime tax bill than any “default” order.

Mistake 5: forgetting to plan for the survivor

When one spouse passes, the survivor often files as single — with lower brackets and a lower standard deduction — so the same income is taxed more heavily. Failing to plan for this “widow’s penalty,” and for how assets and estate pieces pass, is a commonly overlooked tax mistake that good planning addresses in advance.