10 Legal Ways Wealthy Retirees Reduce Their Tax Bills

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Many Americans worry about whether they can retire comfortably — or whether retirement will happen at all. Wealthier people tend to have a different concern: how much of their savings will go to taxes.

According to a Northwestern Mutual survey of high-net-worth Americans, taxes on retirement assets are a major worry.

In the survey, 61% of wealthy respondents — defined as having at least $1 million in investable assets — said they already have a plan to lower the taxes they may owe in retirement.

Northwestern Mutual highlighted the most common retirement tax strategies named by those respondents.

These were the 10 most popular answers:

1. Making withdrawals strategically from traditional and Roth accounts to stay in a lower tax bracket (44%)
2. Using a combination of traditional and Roth retirement accounts (37%)
3. Planning charitable giving carefully, such as by bunching itemized deductions (27%)
4. Using a health savings account (HSA) or another tax-advantaged health care account (24%)
5. Using products such as permanent life insurance or annuities for their tax advantages (24%)
6. Doing Roth conversions before required distributions or Social Security begin (23%)
7. Making qualified charitable distributions from an individual retirement account, or IRA (22%)
8. Contributing to other tax-advantaged accounts such as a 529 plan (17%)
9. Using the basis paid into the cash value of permanent life insurance to help stay in a lower tax bracket (19%)
10. Using a Qualified Longevity Annuity Contract, or QLAC, to reserve money for later in retirement (17%)

How these retirement tax strategies work

Most of these tactics come down to two basic ideas: making the most of every tax-advantaged account available and managing withdrawals so taxable income stays as low as possible in retirement.

Roth 401(k) and Roth IRA accounts are especially useful for limiting taxes on retirement income. Contributions to Roth accounts are taxed before the money is invested. In retirement, qualified withdrawals are tax-free, unlike distributions from traditional retirement accounts and Social Security benefits.

Roth conversions can also matter for wealthy savers, since income limits prevent high earners from opening Roth IRAs directly. People with incomes of $168,000 or more for tax year 2026 can move money from traditional retirement accounts into a Roth IRA instead. That triggers taxes upfront, but it can create tax-free withdrawals later in retirement.

Health savings accounts offer another advantage beyond helping pay medical costs in retirement, which is important on its own. Fidelity estimates that a typical 65-year-old will need about $185,000 to cover health care expenses.

Contributing to an HSA can reduce taxable income now while building a tax-free source of money for future qualified medical expenses, including surgeries, prescriptions, and common drugstore items such as crutches, first-aid supplies, and feminine hygiene products.

Those HSA contributions should also be invested in the meantime.

After age 65, HSA funds can be used for any purpose. If they are spent on something other than an eligible medical expense, however, the withdrawal is taxed as income.

That mix of flexibility and control over what counts as income is a big part of the appeal.