If you retire with a large pre-tax balance, a pension, or deferred compensation, your biggest tax years may still be ahead of you. Required minimum distributions (RMDs), Social Security, and pension income tend to stack on top of each other in your 70s, which can push you into a higher bracket than you paid while working and trigger Medicare surcharges along the way.
Most of that tax is controllable if you plan it across years rather than one return at a time. For high-income retirees, five levers do most of the work:
- Withdrawal sequencing
- Roth conversions in the gap years
- Qualified charitable distributions (QCDs) after 70½
- Asset location
- Managing RMDs and IRMAA thresholds
Below, we walk through each one using 2026 federal figures, then cover how Ohio and Kentucky tax retirement income for households across Greater Cincinnati and Northern Kentucky.
| Strategy | Who It Fits | Estimated Annual Tax Impact (2026) |
|---|---|---|
| 1. Withdrawal sequencing | Retirees with taxable, pre-tax, and Roth savings, especially before RMDs and Social Security begin | $16,500 less federal tax when $100,000 of spending comes from a taxable account with $50,000 of gains instead of an IRA, for a couple in the 24% bracket |
| 2. Roth conversions in the gap years | Early retirees and pre-retirees with large pre-tax balances and several years before RMDs | About $17,800 saved on a $138,000 conversion taxed at a 19.1% effective rate now versus 32% later |
| 3. QCDs after 70½ | Charitably inclined IRA owners 70½ and older, especially those taking the standard deduction | $7,200 federal on $30,000 of giving in the 24% bracket, plus $825 in Ohio or $1,050 in Kentucky |
| 4. Asset location | Households with $500,000 or more in taxable accounts alongside IRAs | About $8,550 per $1 million moved from bonds to stock index funds in the taxable account |
| 5. Managing RMDs and IRMAA | Retirees near an IRMAA tier or facing large RMDs, including surviving spouses | $2,297 per couple by staying below the first IRMAA tier, and up to $13,872 at the top tier |
Table 1: Five tax levers for high-income retirees, with estimated annual impact at 2026 rates for married couples filing jointly. Figures are illustrative and assume the scenarios described below.
Step 1: Sequence Withdrawals Across Account Types
The traditional rule of thumb says to spend taxable accounts first, then pre-tax accounts, then Roth. At high income, a blended approach usually works better, because following the rule strictly can leave you with almost no taxable income early in retirement and far too much of it later.
The source of each dollar matters. Say you and your spouse are in the 24% bracket and need $100,000 for the year. Pulling it from an IRA adds $24,000 in federal tax. Selling $100,000 from a taxable account with $50,000 of built-in gains adds $7,500, since only the gain is taxed, and at the 15% long-term capital gains rate1. Above $250,000 of modified adjusted gross income (MAGI), the 3.8% net investment income tax also applies to that gain.
Sequencing is mostly about timing. The IRA dollars will be taxed eventually, so the goal is to choose which bracket each dollar lands in, year by year. Pensions and deferred compensation reduce your flexibility here, since pension payments are fixed and deferred comp usually pays out on the schedule you elected when you deferred. Map those fixed streams first, then fill the remaining bracket space with flexible dollars. Harvesting losses in your taxable account, covered in our tax-loss harvesting guide, gives you more room to work with.
Step 2: Use the Gap Years for Roth Conversions
The years between retirement and the start of RMDs and Social Security are often your lowest-income years. RMDs begin at 73 if you were born between 1951 and 1959, and at 75 if you were born in 1960 or later2, so a 62-year-old retiree may have a decade of room. Converting part of your pre-tax balance to Roth during this window lets you pay tax at rates you choose, and it shrinks the balance that will generate RMDs later.
Worked Example: A Hypothetical Cincinnati Couple, Both 65
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The example shows why conversions reward precision. The senior deduction phase-out and the shift in capital gains treatment both raised the effective cost, and one more dollar of income would have triggered an IRMAA surcharge two years later. Our Roth conversion guide covers how to size conversions across several years.
Step 3: Give Through QCDs After 70½
Once you reach 70½, you can send up to $111,000 in 2026 directly from your IRA to charity, and the distribution never enters your adjusted gross income5. After RMDs begin, QCDs also count toward your required amount. Each spouse can give up to the limit from their own IRA.
For most high-income retirees, a QCD beats writing a check. If you take the standard deduction, a cash gift produces no tax benefit at all. If you itemize, rules that took effect in 2026 reduce charitable deductions by a floor of 0.5% of AGI and cap their value at 35% for those in the top bracket6. A QCD sidesteps both. On $30,000 of annual giving in the 24% bracket, that is $7,200 in federal tax saved, along with lower MAGI for IRMAA and the net investment income tax.
Step 4: Put Each Asset in the Right Account
Asset location means holding each investment in the account where it is taxed least. Bond interest is taxed as ordinary income, so bonds generally belong in IRAs. Broad stock funds generate qualified dividends and long-term gains taxed at lower rates, so they fit well in taxable accounts. Your highest-growth holdings often belong in Roth accounts, where that growth is never taxed.
Consider $1 million in a taxable account. Held in bonds yielding 4.5%, it produces $45,000 of interest and $10,800 in federal tax at 24%. Held in a stock index fund yielding 1.5% in qualified dividends, it produces $15,000 of income and $2,250 in tax at 15%. That is $8,550 a year from rearranging what you already own. Keeping bonds in the IRA also slows the IRA's growth, which keeps future RMDs smaller.
Step 5: Plan Around RMDs and IRMAA Thresholds
Large pre-tax balances create large RMDs, and those RMDs stack on top of pensions, deferred comp payouts, and Social Security. The combination can push you over IRMAA thresholds, the income levels at which Medicare adds surcharges to Part B and Part D premiums. For 2026, surcharges start above $218,000 of MAGI for joint filers, and each tier works like a cliff: one dollar over the first threshold costs a couple $2,297 for the year. At the top tier, $750,000 and above, the surcharge reaches $13,872 per couple4.
Two details catch people off guard. Medicare uses your MAGI from two years earlier, so income at 63 sets your premiums at 65. And when one spouse passes away, the survivor files single with roughly half the bracket space and IRMAA thresholds, often on similar income. Coordinating RMDs, conversions, and QCDs keeps your income steady below the thresholds that matter to you. Our IRMAA article covers the tiers in more detail.
How Ohio and Kentucky Tax Retirement Income
Ohio moved to a flat 2.75% income tax in 2026 on income above $26,0507. Social Security is exempt. Pensions, IRA and 401(k) withdrawals, and Roth conversions are taxable. Ohio's retirement income credit tops out at $200 and phases out at higher incomes, so it rarely helps high earners. Municipal income taxes, including Cincinnati's, generally apply to earned income rather than pension or IRA income.
Kentucky's flat rate dropped to 3.5% in 2026, and Social Security is exempt there too8. Each spouse can exclude up to $31,110 of pension, annuity, and retirement account income per year, so a couple where both spouses have retirement income can shield $62,220 before the rate applies.
For a couple living mostly on pension and IRA income, Kentucky's exclusion generally wins at moderate income levels, while Ohio's lower rate wins as income rises, with the crossover in the neighborhood of $200,000 a year. Above the exclusion, each extra $100,000 of IRA income costs $3,500 in Kentucky versus $2,750 in Ohio. If you worked in Ohio and retire in Kentucky, federal law prevents Ohio from taxing your pension, or deferred comp paid in substantially equal installments over 10 years or more9.
Putting a Multi-Year Tax Plan to Work
None of these levers works as well on its own. A Roth conversion changes your IRMAA exposure. A QCD frees up room for the next conversion. Your withdrawal sequence determines how much capital gain you realize, which affects both. The largest savings come from projecting your income 10 to 20 years forward and deciding each year's moves against that projection.
That is the planning work we do at Journey Advisory Group. As fee-based fiduciaries serving $1 million-plus households across Greater Cincinnati and Northern Kentucky, with a team led by Eric Pettway, CFA,, we build multi-year tax projections into your investment strategy and coordinate with your CPA on execution. Our [LINK: CPA and financial advisor piece] explains how that partnership works in practice.
Schedule a Consultation with Journey Advisory Group
To see how these strategies could apply to your retirement, contact us at info@JourneyAdvisory.Group or call 800-749-7143. You can also visit JourneyAdvisory.Group to schedule a consultation with our team.
Disclosure
This material prepared by Journey Advisory Group, LLC is for informational purposes only. It is not intended to serve as a substitute for personalized investment, tax, or legal advice, or as a recommendation or solicitation of any particular security, strategy, or investment product. Facts presented have been obtained from sources believed to be reliable. Journey Advisory Group, however, cannot guarantee the accuracy or completeness of such information, and certain information may have been condensed or summarized from its original source.
SEC Registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the advisor has attained a particular level of skill or ability. Securities investments contain risks including the possible loss of principal. Neither asset allocation nor active management guarantee a profit or protection from loss.
Journey Advisory Group is a fee-based advisory firm and SEC-registered Registered Investment Adviser (RIA). Additional information about Journey Advisory Group's services, fees, and potential conflicts of interest is available in Form ADV Parts 2A and 2B, which can be obtained through the SEC's Investment Adviser Public Disclosure website at adviserinfo.sec.gov or by contacting the firm directly.
JAG does not provide tax or legal advice, and nothing contained in these materials should be taken as tax or legal advice.
References
- Tax Foundation. "2026 Tax Brackets and Federal Income Tax Rates." https://taxfoundation.org/data/all/federal/2026-tax-brackets/
- Internal Revenue Service. "Retirement Plan and IRA Required Minimum Distributions FAQs." https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
- Thomson Reuters. "Breaking Down the OBBBA's Social Security Tax Deduction." https://tax.thomsonreuters.com/blog/breaking-down-the-obbbas-social-security-tax-deduction/
- Kiplinger. "Medicare Premiums 2026: IRMAA Brackets and Surcharges for Parts B and D." https://www.kiplinger.com/retirement/medicare/medicare-premiums-2026-irmaa-brackets-and-surcharges-for-parts-b-and-d
- Capital Group. "Qualified Charitable Distributions." https://www.capitalgroup.com/advisor/account-resource-center/qualified-charitable-distributions.html
- Mercer Advisors. "Is a Qualified Charitable Distribution Still Worth It Under the New Rules?" https://www.merceradvisors.com/faq/is-a-qualified-charitable-distribution-still-worth-it-under-the-new-rules/
- Kiplinger. "Ohio Tax Guide." https://www.kiplinger.com/state-by-state-guide-taxes/ohio
- AARP. "What to Know About Kentucky State Taxes in 2026." https://www.aarp.org/states/kentucky/state-tax-guide/
- Legal Information Institute. "4 U.S. Code § 114: Limitation on State Income Taxation of Certain Pension Income." https://www.law.cornell.edu/uscode/text/4/114