Most investors think about taxes once a year, in April. But the investors who keep the most of what they earn treat tax planning as a year-round decision, one that's tightly linked to how their investments are managed.
In our latest webinar, our own Jacob Wick, SVP and Head of Wealth at NorthCoast, sat down with Stephanie O’Donnell, SVP and Wealth Advisor at NorthCoast, and Adam Davis, Senior Manager of Tax Services at Focus Financial Partners, to walk through the tax planning strategies that matter most for investors and retirees today.
During the discussion, the panel explained why effective tax planning isn't about finding last-minute deductions. It's about making thoughtful decisions throughout the year that work together over the course of retirement.
Income Bracket Management: It’s About Timing, Not Just Minimizing
One of the biggest misconceptions in tax planning is that the goal is simply to pay less tax this year. As Adam Davis, Senior Manager of Tax Services at Focus Financial Partners, explained during the webinar:
"The most effective planning today looks at a client's lifetime tax picture, not just their return for the current year."
That perspective shifts the conversation from reacting to this year's tax bill to proactively managing taxes over decades. Coordinating investment decisions with tax planning may have a meaningful impact on after-tax wealth, especially for retirees and those approaching retirement.
Some of the most effective planning opportunities aren't found in complex strategies, but in how and when you coordinate them. The goal isn't to pay less tax this year, it's to control when you pay it, and low-income years often present the best opportunity to act.
These opportunities span the usual toolkit — Roth conversions, capital gain harvesting, Required Minimum Distribution (RMD) planning, IRMAA management, and charitable giving, but one that's often overlooked is the Net Investment Income Tax (NIIT), an additional 3.8% tax that applies to certain higher-income investors once adjusted gross income exceeds applicable IRS thresholds.
[Watch Clip: Why Tax Planning Isn't About Avoiding Taxes]
Retirement Income: More Complex Than Most Retirees Expect
Building directly on this foundational bracket management is understanding how tax pressure shifts later in life. Many retirees expect a lower tax bill, but multiple income streams stacking together can push taxes higher than anticipated.
“By the time RMDs arrive, many retirees find themselves pushed into higher brackets, paying more for Medicare through IRMAA, and exposing more of their Social Security benefits to tax,” Adam explained.
To smooth income over time and prevent these forced income events from creating a future tax spike, the years before RMDs become a valuable planning window.
Proactive financial planning can optimize:
- Roth conversions
- Strategic capital gain harvesting
- Thoughtful withdrawal sequencing
Roth Conversions: A Strategy for Flexibility, Not Just Tax Savings
Roth conversions are one of the most talked-about tax planning strategies, but they're also one of the most misunderstood. The goal isn't about avoiding taxes, but about controlling when you pay them.
Adam outlined three optimal windows for Roth conversions:
- Low-income years — such as the gap between retirement and when RMDs begin at age 73
- Market downturns when account values are temporarily lower
- The years before Required Minimum Distributions (RMDs) begin
Stephanie O'Donnell also emphasized during the conversation that Roth conversions aren't just about today's taxes. They can play an important role in legacy planning.
[Watch Clip: Roth Conversions Are About Flexibility, Not Avoiding Taxes]
Charitable Giving: QCDs vs. Donor-Advised Funds
For charitably inclined investors, two powerful tools dominate the conversation: Qualified Charitable Distributions (QCDs) and Donor-Advised Funds (DAFs). The right choice depends on your age, income, and philanthropic goals.
Qualified Charitable Distributions (QCDs):
- Available to IRA owners age 70½ or older
- Can satisfy all or part of an RMD without the distribution being included in taxable income
- May help manage Medicare IRMAA thresholds
Donor-Advised Funds (DAFs):
DAFs offer greater flexibility, particularly during higher-income years. They allow investors to:
- Contribute appreciated securities and receive an immediate charitable deduction
- Potentially avoid capital gains tax on appreciated investments
- Separate the tax deduction from the timing of charitable gifts
- Spread donations to charities over multiple years
Starting in 2026, a new 0.5% AGI floor limits the deductible portion of DAF contributions, a rule that doesn't apply to QCDs.
As Stephanie explained: “You can front-load 10 years of charitable contributions into the fund in the year it’s going to have the greatest tax impact and then maintain control over which charities receive those dollars.”
[Watch Clip: QCDs vs DAFs]
Private Investments: Understanding the Tax Complexity
As private equity, private credit, and real estate partnerships become more common in investor portfolios, the associated tax complexity is growing as well. These investments often come with surprises that investors don’t encounter traditional stocks and bonds.
Adam outlined in the webinar, common tax considerations investors should understand before investing in private markets:
- Phantom income: You may receive a K-1 showing taxable income without receiving any actual cash distribution — the economic return and the tax event don’t always land in the same year.
- Late K-1s: Tax documents from private funds frequently arrive after April 15, requiring investors to file extensions.
- Passive loss rules: Losses reported on a K-1 may not be deductible right away. In many cases, they can only offset income from other passive investments and are carried forward until the investment is sold.
- State tax complexity: A single private fund investing across multiple states may create filing obligations outside your home state.
The Takeaway
Whether you're planning for retirement, considering a Roth conversion, evaluating charitable giving strategies, or navigating the complexity of private investments, one theme carried through the entire conversation: tax planning works best as an ongoing process, not a once-a-year task.
As Jacob Wick concluded during the webinar:
"Tax planning is about timing and coordination. Whether it's RMDs, Roth conversions, or charitable giving, these decisions are most effective when they're connected to the broader plan."
Watch the full webinar on demand to hear the complete discussion and learn how these strategies may fit into your long-term financial plan.
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