The Retirement Tax Planning Window: What Houston Energy Retirees Can Do Between Retirement and RMDs

By: Alex Bridges, CFP®, EA, ChFC®, RICP®

Many of the people I work with in The Woodlands, Spring, and Cypress spent 30 years in the energy industry. They retire in their late 50s or early 60s with most of their savings in a 401(k). Then they reach a stretch of years where their taxable income drops sharply.

That stretch is often called the retirement tax planning window. It starts when the paychecks stop and ends when required minimum distributions (RMDs) and Social Security push taxable income back up. For many retirees, how they use those years may affect their lifetime tax bill more than almost any other decision.

It is the period between your last working year and the year your RMDs begin. During that time, you control how much taxable income you report. That makes it unusual, because in most other years your income is set by a salary or by required withdrawals.

For an energy professional who retires at 58 or 60, this window can last ten years or more. The years may come with low tax brackets that are unlikely to return once RMDs and Social Security start together.

When do RMDs actually start now?

The SECURE 2.0 Act raised the age when RMDs begin. If you were born between 1951 and 1959, RMDs generally begin at age 73. If you were born in 1960 or later, they generally begin at age 75. The IRS explains the details in IRS Publication 590-B and its RMD FAQs.

A later start date gives you more time to plan. It can also let a pre-tax account keep growing untouched, which means larger required withdrawals later. For a large 401(k), those later RMDs may push you into higher brackets than the ones you were in while working.

Why does a large pre-tax 401(k) create a future tax problem?

Every dollar in a traditional 401(k) or IRA is taxed as ordinary income when it comes out. If the balance keeps growing until your 70s, RMDs stack on top of Social Security, any pension, and investment income.

That stacking can raise more than your federal bracket. It can affect how much of your Social Security is taxable, your Medicare premiums, and the taxes your heirs pay on inherited accounts. Spreading that income across your lower-income years can be a way to smooth the tax bill over time.

Should I do Roth conversions before RMDs begin?

For many early retirees, partial Roth conversions are the main tool used in this window. A conversion moves money from a traditional IRA to a Roth IRA. You pay ordinary income tax on the converted amount now, and qualified withdrawals later are generally tax-free. The rules are covered in IRS Publication 590-A, and conversions are reported on IRS Form 8606.

The usual approach is to convert just enough each year to “fill up” a chosen bracket rather than converting everything at once. Texas has no state income tax, so Houston-area retirees pay only federal tax on a conversion. That can make conversions more attractive here than in many other states.

Conversions are not right for everyone. They depend on your expected future bracket, how much cash you have outside retirement accounts to pay the tax, your health insurance situation, and your estate goals. Roth conversions also carry their own five-year rules, which matter most if you are under 59½.

How do Roth conversions affect my health insurance before Medicare?

This is where many early retirees get caught off guard. If you buy coverage through the ACA marketplace before 65, your premium tax credit is based on your modified adjusted gross income. A Roth conversion counts as income for that calculation, and the credit is reconciled on IRS Form 8962.

The enhanced premium tax credits expired after 2025. That brought back the cliff at 400% of the federal poverty level for 2026 coverage. Going one dollar over the limit can mean losing the credit entirely. For a couple paying full marketplace premiums, that cost can be larger than the tax on the conversion itself.

This creates a real trade-off. Some retirees keep income low enough to qualify for the credit during their pre-Medicare years and convert more after 65. Others with retiree medical coverage from a former employer may not face this constraint at all.

What is IRMAA, and why does it look back two years?

Once you enroll in Medicare, higher-income beneficiaries pay an Income-Related Monthly Adjustment Amount (IRMAA) on top of standard Part B and Part D premiums. The Social Security Administration generally bases IRMAA on your tax return from two years earlier.

So a large Roth conversion at age 63 can raise your Medicare premiums at 65. That isn’t a reason to avoid conversions. It means conversions planned around age 63 and later should take the IRMAA tiers into account.

If your income dropped because you retired, the SSA lets you ask for a reduction for a “life-changing event” using Form SSA-44. The SSA explains the process on its IRMAA page. Retirement from work is one of the listed qualifying events.

How does the new senior deduction fit into this window?

The One Big Beautiful Bill Act added a temporary deduction of up to $6,000 for each taxpayer age 65 or older, for tax years 2025 through 2028. It phases out at 6% of modified adjusted gross income above $75,000 for single filers and $150,000 for joint filers. The IRS summarizes the provision on its One Big Beautiful Bill provisions page.

For a retiree in their mid-to-late 60s, a large Roth conversion can reduce or eliminate this deduction. The deduction is also scheduled to end after 2028. That makes the years 2025 through 2028 slightly different from the years after it for conversion planning.

When should I claim Social Security if I’m doing Roth conversions?

Claiming Social Security later often goes hand in hand with using the tax window. Delaying benefits keeps your taxable income lower in your 60s, which leaves more room for conversions. It also increases the benefit you will receive later.

Once benefits begin, up to 85% of them may become taxable depending on your “provisional income,” as explained in IRS Publication 915. Converting before benefits start can mean smaller IRA withdrawals later, which may reduce how much of your Social Security is taxed.

The right claiming age depends on your health, your spouse’s benefit, and your other resources. It’s worth modeling in detail rather than defaulting to a rule of thumb.

What if I have company stock in my 401(k)?

Many longtime energy employees hold employer stock in their 401(k). If that stock has grown a lot, the net unrealized appreciation (NUA) rules may allow the growth to be taxed at long-term capital gains rates instead of ordinary income rates. This generally requires a qualifying lump-sum distribution. These rules are discussed in IRS Publication 575.

NUA has strict requirements, and the decision is usually one-time. Once the 401(k) is rolled to an IRA, the NUA opportunity is generally lost. Before you roll anything over, review the NUA rules with a qualified professional.

Can I use the Rule of 55 to fund the early years?

If you leave your employer in or after the year you turn 55, you may be able to withdraw from that employer’s 401(k) without the 10% early withdrawal penalty. This exception is described in IRS Publication 575. It applies only to the plan of the employer you left, not to IRAs.

For someone retiring at 57 from a Houston operator or service company, that matters. Rolling the whole 401(k) into an IRA right away could remove penalty-free access until 59½. Rollover timing deserves careful thought during this window.

Are there lower-income strategies besides Roth conversions?

Yes. Depending on your situation, a few other approaches may be worth looking at:

• Harvesting long-term capital gains in a year when taxable income is low enough that some gains may fall into the 0% long-term capital gains bracket.
• Choosing which accounts to spend from first (taxable, pre-tax, or Roth) to manage bracket placement year by year.
• Planning charitable giving, including Qualified Charitable Distributions from an IRA once you reach 70½. These can count toward RMDs later without adding to taxable income.
• Coordinating with a spouse’s timeline, especially if one spouse is still working or is several years younger.

These strategies interact with one another. A capital gain you harvest uses the same income room you might have used for a Roth conversion, so the order matters.

How can a fee-only financial advisor help with the retirement tax window?

Planning this window means projecting income, brackets, Medicare premiums, ACA credits, and Social Security across a decade or more. It also means reviewing each year as tax law and markets change. A one-time calculation is rarely enough.

As a fee-only Registered Investment Advisor, Tiverton Wealth, LLC owes clients a fiduciary duty under the Investment Advisers Act of 1940. The SEC describes that duty in its 2019 interpretation of the standard of conduct for investment advisers. As a CFP® professional, I am also bound by the fiduciary duty in the CFP Board’s Code of Ethics and Standards of Conduct. We do not earn commissions on the products we recommend.

For retirees in The Woodlands, Conroe, Tomball, and across Greater Houston, our work on the tax window is designed to help you see the trade-offs clearly. That includes deciding how much to convert, when to claim, and which accounts to draw from, depending on your circumstances.

About the Author

Alex Bridges is a CFP®, EA, ChFC®, and RICP® professional and founder of Tiverton Wealth, LLC, a fee-only Registered Investment Advisor in The Woodlands, TX. You can review my full regulatory background on the SEC’s Investment Adviser Public Disclosure website: Alex Bridges — IAPD record.

This article is provided by Tiverton Wealth, LLC for general educational and informational purposes only. It does not constitute personalized investment, tax, or legal advice, and should not be relied upon as a substitute for advice from a qualified professional familiar with your specific circumstances. Tiverton Wealth, LLC is a fee-only Registered Investment Advisor providing services only in jurisdictions where it is properly registered or exempt from registration. Investing involves risk, including the possible loss of principal, and no strategy can guarantee a profit or protect against loss. Past performance is not indicative of future results. Please consult with a qualified financial, tax, or legal professional before making decisions based on this content.

Frequently Asked Questions

What is the retirement tax planning window?

It is the period between retirement and the start of required minimum distributions. During that time, taxable income is often lower and more within your control. Many retirees use these years to evaluate Roth conversions, capital gains harvesting, and Social Security timing.

At what age do RMDs begin under SECURE 2.0?

RMDs generally begin at age 73 for people born from 1951 through 1959, and at age 75 for people born in 1960 or later. IRS Publication 590-B covers the details.

Can a Roth conversion increase my Medicare premiums?

It can. Medicare IRMAA is generally based on your tax return from two years earlier. A conversion at 63 or later may affect your premiums at 65 or later. If your income later drops because of a qualifying life-changing event such as retirement, Form SSA-44 lets you request a reduction.

Do Roth conversions affect ACA marketplace subsidies?

Yes. Converted amounts count toward the modified adjusted gross income used to calculate the premium tax credit. With the 400% of federal poverty level cliff back in effect for 2026, retirees buying marketplace coverage before 65 may want to coordinate conversions carefully.

Should I roll my 401(k) into an IRA as soon as I retire?

Not necessarily. A rollover may end access to the Rule of 55 penalty exception. It can also eliminate the option to use net unrealized appreciation treatment on employer stock. Review both with a qualified professional before rolling over.