As retirement gets closer, most people go into “less is more” mode:
Less work. Less stress. Less junk in the garage.
And obviously… less taxes, right?
Well—not always.
If you’re retired or nearing retirement and sitting in the 22% or 24% federal tax bracket, one of the smartest moves you might be able to make is something that sounds completely backwards at first:
Deliberately max out your current tax bracket.
On purpose.
With a plan.
And without panicking.
When done correctly, this strategy can reduce lifetime taxes, soften future RMD headaches, protect heirs, and give you more control over healthcare costs. Let’s walk through why, but first -
What Does “Maxing Out Your Tax Bracket” Mean?
Every tax bracket has a ceiling. You can earn income up to that point before the IRS says, “Congratulations! Your next dollar is now taxed at a higher rate!”
Maximizing your bracket simply means intentionally recognizing income up to the top of your current bracket—usually the 22% or 24%—without spilling into the next one.
This can be done through:
- Roth conversions
- Strategic IRA and Inherited IRA withdrawals
- Capital Gain realization
Yes, it means paying some tax now.
But the real goal isn’t minimizing this year’s taxes—it’s minimizing lifetime taxes. Here are 6 reasons to consider maxing out your bracket.
Reason #1: Even with recent legislation, long-term tax rates are more likely to rise than fall
It’s true—Congress recently passed the One Big Beautiful Bill Act (OBBBA), which extended many of today’s individual tax brackets that were originally scheduled to expire. That legislation reduced the risk of an immediate tax increase and gave taxpayers a bit more short-term clarity.
But here’s the key point that often gets missed: The OBBBA didn’t eliminate long-term tax risk—it simply pushed it further down the road.
When you zoom out beyond the next few years, the forces pushing tax rates higher are still very much in place. Federal debt continues to grow, entitlement spending is expanding as the population ages, and the ratio of workers to retirees keeps shrinking. None of those trends point toward a future where tax rates broadly fall and stay low for decades.
That doesn’t mean taxes will spike next year. It does mean that assuming today’s relatively low tax brackets will remain intact for the next 10, 20, or even 40 years requires a lot of optimism.
From a planning perspective, this matters because retirement decisions aren’t short-term decisions. If you’re over age 60, there’s a very high likelihood that your traditional IRA will be fully taxed at some point over the next 40 to 50 years—either through your own withdrawals and RMDs, or through your heirs under inherited IRA rules.
So the real question isn’t whether today’s tax rates might get extended again someday. It’s whether you want to anchor part of your retirement plan to known tax rates today, or gamble that future lawmakers will keep rates as low—or lower—than they are now.
Maximizing the 22% or 24% bracket isn’t about predicting what Congress does or assuming disaster. It’s about recognizing that today’s rates are historically low by any long-term measure, and that locking in known rates during a limited planning window can reduce uncertainty later.
Good planning doesn’t require certainty about the future. It just requires acknowledging which direction the pressure is most likely coming from.
Reason #2: RMDs are a slow-motion tax ambush
At age 73, the IRS forces you to start withdrawing money from traditional IRAs and 401(k)s. These Required Minimum Distributions (RMDs) are taxable whether you need the money or not.
For diligent savers, RMDs can:
- Push you into higher tax brackets
- Increase Medicare premiums
- Trigger more taxation of Social Security
- Cause massive tax rate increases after the loss of a spouse that forces a change in filing status
By intentionally pulling money out earlier—during lower-income years—you reduce the size of future RMDs and keep more control over your tax picture.
“But Won’t I Have More Money If I Let It Grow First… Then Pay Taxes?”
This is the most common objection I hear, and honestly—it sounds logical.
“Why would I pay taxes now? If I let the money grow longer and pay taxes later, I’ll end up with more.”
Here’s the key nuance:
If you’re over age 60, it’s extremely likely that your traditional IRA will be fully liquidated at some point over the next 40–50 years.
Either by:
- You, through withdrawals and RMDs
- Or your heirs, under inherited IRA rules
So this isn’t an “if taxes get paid” question.
It’s a “when and at what rate” question.
If tax rates were guaranteed to stay flat forever, timing wouldn’t matter much. But retirement doesn’t happen in a vacuum. Over those decades:
- RMDs force income
- Social Security becomes taxable
- Medicare premiums rise with income
- Tax brackets change
- Heirs inherit IRAs during their peak earning years
Yes, the account balance may be larger later—but the IRS often owns a much bigger slice of it.
You’re not just letting your money grow—you’re letting the future tax bill grow right alongside it.
The goal isn’t the biggest account balance on paper.
It’s the most money you actually get to keep and spend.
Reason #3: Roth conversions let you lock in control
Roth conversions are one of the cleanest ways to “fill up” a tax bracket.
You move money from a traditional IRA to a Roth IRA, pay tax now, and then:
- The money grows tax-free
- There are no RMDs
- The account becomes far more flexible
Example:
A married couple with $130,000 of taxable income may still be firmly in the 22% bracket. That could allow room to convert an additional $30,000–$40,000 without moving into a higher bracket.
Do this consistently during the years before RMDs begin, and you can dramatically reshape your long-term tax picture.
Reason #4: This is especially important for inherited IRAs
Most people think about inherited IRAs only from the perspective of the people they’ll leave money to. And that’s important—but it’s only half the story.
Under current rules, most non-spouse beneficiaries must empty an inherited IRA within 10 years. There are no lifetime stretch distributions anymore for most heirs. That means taxes are no longer a slow drip—they’re compressed into a relatively short window.
If you’re planning to leave a large traditional IRA to your children, this creates a very real problem. Those distributions often land right in the middle of their highest earning years, stacking inherited IRA income on top of peak salaries and pushing them into much higher tax brackets. A significant portion of what you saved can end up going to taxes instead of your family.
This is where Roth conversions during your lifetime can dramatically change the outcome. By paying tax now—often at a lower rate—you leave behind assets that still must be distributed within 10 years, but can be distributed tax-free. Same rule. Completely different result.
But here’s the part that often gets overlooked.
“What if I just inherited an IRA?”
Let’s say you’re in your early 60s, still working or recently retired, and you’ve inherited a traditional IRA from a parent. You now have a 10-year clock ticking. Many people’s instinct is to wait—let the account grow as long as possible and deal with taxes later.
The problem? Later often looks like this:
- You’re still working or newly retired
- Your own RMDs may be starting
- Social Security may be taxable
- Medicare premiums may already be in play
- Taking a MASSIVE distribution in the 10th year
Now the inherited IRA distributions stack on top of everything else, often pushing you into a MUCH higher tax bracket than you expected.
In contrast, intentionally maximizing your tax bracket now—while you still have room in the 22% or 24% bracket—can give you far more control. By pulling inherited IRA dollars earlier, you may:
- Reduce the risk of large forced distributions later
- Avoid pushing yourself into higher brackets in the final years of the 10-year window
- Smooth taxes over time instead of creating a spike
- Have more money to contribute to your tax-deferred retirement accounts
In other words, inherited IRAs don’t just create planning challenges for your heirs—they create planning opportunities for you, if you’re willing to act early instead of waiting.
Whether you’re the one passing assets on or the one who just received them, the same principle applies:
Compressed timelines make proactive tax planning more valuable, not less.
Waiting often feels safer.
But with inherited IRAs, waiting is frequently what creates the biggest tax bill.
Reason #5: Medicare premiums are tied to income (and they’re sticky)
Medicare Part B and D premiums are based on your income from two years ago. Cross certain thresholds and premiums can jump—sometimes for multiple years.
Poorly timed RMDs can quietly trigger these increases.
Strategically recognizing income earlier can reduce the odds of Medicare surprises later.
Reason #6: You may be in a one-time tax window
Many retirees experience a “gap window”:
- Work income is gone
- Social Security hasn’t started
- RMDs haven’t kicked in
Income is low. Assets are high.
This window is often the best opportunity to optimize taxes using Roth conversions or controlled withdrawals. Wait too long, and the window closes quickly.
A Few Important Caveats
This strategy is not one-size-fits-all. It depends on:
- Current and projected tax brackets
- Size of retirement accounts
- Timing of Social Security
- State taxes
- Health and longevity
Also, Roth conversions are permanent. There’s no undo button.
This is a strategy worth modeling carefully—not guessing at.
Final Thought: This Isn’t About Paying More Taxes
It’s about paying taxes on your terms, at known rates, with fewer surprises later.
When done wisely, tax bracket “maximization” can lead to:
- Lower lifetime taxes
- Smaller RMDs
- More predictable Medicare costs
- A cleaner, more tax-efficient legacy
Which is a pretty good outcome for doing something that sounds counterintuitive at first.
Cetera Financial Specialists LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.