For our Feds, retirement brings both a steady pension and required minimum distributions (RMDs) — those IRS-mandated withdrawals from your retirement accounts once you reach a certain age. By thoughtfully combining these two income streams, you'll keep more of your hard-earned money while building a secure financial future.
Ready to make your pension and RMDs work together? Let's dig in.
Tax Bracket Management
Nobody likes tax surprises. When your pension and RMDs hit your tax return together, they can push you into a higher bracket faster than you might think. To make the most of your federal pension and RMDs, it’s essential to understand how these income sources interact with your overall tax picture.
Why Tax Bracket Awareness Matters
Your RMDs plus pension could cause you to pay more than you planned. Getting ahead of this means knowing where your income lands and which tax bracket you're targeting. Fortunately, there are ways to manage your taxable income strategically by carefully timing withdrawals and leveraging tax benefits.
Coordinating RMDs with Pension Income
You can't skip RMDs, but you can be strategic. Take them early in the year or spread them out monthly — whatever works for your tax picture. Remember those charitable deductions, too — they'll help offset the extra income.
Roth Conversion Opportunities
Think about turning some of your traditional retirement money into Roth dollars before reaching RMD age. Why? It's simple — Roth accounts don't have RMDs, and the growth is tax-free. The trick is converting when it makes sense for your tax situation.
Roth conversions can be a powerful tool for our Feds. By converting traditional retirement accounts to Roth IRAs, retirees can enjoy tax-free growth and eliminate future RMDs for the converted amounts. This can reduce taxable income in later years, providing significant tax savings.
Timing plays a significant role in the effectiveness of Roth conversions — especially with pending changes to tax laws.
The Tax Cuts and Jobs Act (TCJA) sunsets on December 31, 2025. These lower rates may disappear, making Roth conversions worth a close look. While Trump backed these cuts in his first term, planning ahead beats waiting on Congress. Either way, you're covered.
Steps for an Effective Roth Conversion Strategy
The sweet spot for Roth conversions? Those years before your RMDs kick in when your income might be lower. Run the numbers first — you don't want to bump yourself into a higher tax bracket accidentally. Focus on converting just enough each year to stay within your target bracket.
Learn more about your retirement benefits at our No-Cost webinars, featuring Ed Zurndorfer -
SECURE Act 2.0 Impacts
Tax planning and Roth conversions are just part of the story. Congress recently overhauled retirement rules with SECURE Act 2.0, bringing key changes for your 2025 planning.
Changes to RMD Start Age
The RMD timeline has shifted. If you were born between 1951 and 1959, your RMDs start at 73. For those born in 1960 or later, it's age 75. Your retirement savings have more time to grow before mandatory withdrawals begin.
Catch-up Contributions and Other Provisions
While the new RMD age gives you more flexibility, enhanced contribution limits offer additional ways to build your savings before withdrawals begin.
For 2025, the regular thrift savings plan (TSP) limit sits at $23,500. Turning 50 or older? Add another $7,500 in catch-up contributions, bringing your total to $31,000. Those ages 60 to 63 get an even bigger boost — an $11,250 catch-up that pushes your total TSP contribution limit to $34,750.
New Planning Considerations
The latest retirement rule changes mean more flexibility in your planning — especially with RMDs starting later. But watch your timing: how you coordinate your pension and retirement withdrawals still affects your tax bill.
Planning for a Secure Retirement
Smart pension and RMD planning help keep more money in your pocket. Our Feds can minimize tax liabilities and maximize financial security by proactively planning withdrawals, leveraging Roth conversions, and incorporating changes from SECURE Act 2.0.
Take the first step today: Reach out to the team at Serving Those Who Serve at [email protected] to develop a tailored plan for your retirement needs.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
