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You might assume you’ll be in a lower tax bracket when you retire. And you may be right, at least initially, since there’s often an income gap between retirement and age 73, when you start taking required minimum distributions (RMDs) from tax-deferred retirement accounts.

When those taxable withdrawals begin, alongside taxable Social Security benefits, you could suddenly find yourself in a higher tax bracket than when you were working. That, in turn, can increase your tax bill on capital gains, since the rate is determined in part by your ordinary taxable income.¹ But by planning in advance, you can help minimize your tax liability in retirement.

How do retirement tax brackets affect your tax planning? Federal income tax brackets currently range from 10% to 37% of your income after adjustments and deductions. In retirement, your income sources could include RMDs, company pensions, and annuities, all of which are subject to income tax. Moreover, many retirees pay income tax on some of their Social Security benefits.

The challenge is that income from RMDs and Social Security could potentially put you into a higher capital gains tax bracket—up to 20% currently. Bottom line: If you’re planning on taking significant retirement income from your investments, a relatively small increase in income could lead to a substantial capital gains tax bill.

Although long-term capital gains are not taxed as regular income, they do count toward determining how much of your Social Security benefits will be taxed—which can then increase your capital gains tax.

Federal and state tax rules are always changing. Your financial advisor and tax advisor can help you stay informed, as well as design a dynamic strategy that maximizes your after-tax income in retirement.

When most people think about capital gains tax strategies, they think about tax-loss harvesting, the important process of strategically selling losing assets to offset gains in any given year.

But in retirement, it’s also important to consider how your income from RMDs, pensions and Social Security can impact your capital gains tax as well.

Say you’re a married couple filing jointly. For tax year 2025, on taxable income up to $96,700, you’ll pay zero capital gains tax on investments held for more than a year and realized in 2025. (High-earning filers must still pay a 3.8% net investment tax.) At the other extreme, a couple filing jointly with over $600,051 in taxable income will pay a 20% capital gains tax.

If you have substantial net worth, you might think of your Social Security benefit as a minor piece of your retirement income. However, if you’re a high earner who delays Social Security benefits until age 70, your monthly check in 2025 could be as high as $5,108.

Beyond the dollar amount, Social Security provides guaranteed, inflation-protected income for life. It also minimizes the danger that a market downturn could deplete your investment income.

But it’s worth noting that these assets are subject to income tax. Exactly how much depends on your combined income after adjustments, including investment income plus half of your Social Security benefit. A married couple could owe taxes on up to 85% of their Social Security benefit.

Delaying benefit claims until age 70 is the first step toward minimizing Social Security taxes. At that point, the goal becomes reducing overall taxable income to protect investment gains, as discussed above.

Retirement taxes may be higher than you think. Minimizing them takes long-term planning, potentially including strategic RMD withdrawals, Roth conversions and charitable distributions. Get in touch with a �۶���Ƶ Advisor and learn how our experience in retirement planning can help you navigate a changing tax landscape.