Are you a rich American retiree? Here are 5 tax return tweaks that can save you thousands in 2025

1. Be strategic about RMDs

One of the first tweaks is to be smart about withdrawing your required minimum distributions (RMDs). If you have a traditional 401(k) or IRA, the government penalizes you if you don’t start taking money out of them at 73.

There’s no avoiding RMDs if you have types of those accounts, but you can be strategic about it.

One option is to begin taking money out of your accounts when you're eligible at 59 ½, which is well before you're required to. This can allow you to withdraw funds slowly over time and reduce the size of your future RMDs. That’s helpful if your minimum distributions push you into a higher tax bracket or cause your Social Security ​​to become partly taxable.

If you don't need the money, you also can make a qualified charitable distribution, which is not taxable and allows you to support causes you care about.

Retire richer: The secret to building wealth faster

Most people miss out on key opportunities to grow their wealth. Partnering with the right financial advisor can help you secure a brighter future. Learn how to make your money work harder for you today.

Discover the secret

2. Avoid underpayment penalties

The last thing you want is to give the IRS even more money than is already required. Unfortunately, that can happen if you get penalized for underpaying your taxes.

Since paying taxes is mandatory as you earn income in the U.S., you must either make quarterly estimated tax payments or withhold taxes from your Social Security and retirement account distributions. Unfortunately, it's easy to underestimate the correct amount to send in or withdraw when you have income from different sources.

You can avoid this problem by paying the safe harbor amount each year, which is 90% of the taxes you owe for the current year. Calculating that can be a hassle, but you can pay either 100% of last year's tax liability, or 110% if your adjusted gross income is above $75,000 for single tax filers or $150,000 for married joint filers.

If you have variable income, paying 100% or 110% of last year's tax liability simplifies your life and allows you to avoid an unexpected penalty at year's end.

3. Consider a Roth conversion

Traditional IRA and 401(k) accounts require you to pay taxes on distributions and to take RMDs. Distributions also count in determining if you owe taxes on Social Security income.

Roth distributions, on the other hand, are tax-free and don't count when determining if you hit the income threshold at which Social Security benefits become taxable. You also don't have to take RMDs from Roths, so you can leave your money to invest for future generations.

There are some consequences to a Roth conversion you'll need to consider. It's a taxable event and could push you into a higher tax bracket, so you'd likely want to convert in years when your income is lower. You also must wait five years after your conversion to make tax-free withdrawals. However, that shouldn’t be a concern if you aren't taking money out anyway.

If you can overcome or manage these downsides, converting a good portion of traditional retirement account funds to a Roth IRA can offer significant tax benefits over the long term.

Diversify your portfolio by investing in art

When it comes to investing, a diversified portfolio can lead to better returns. Masterworks' art investing platform has turned a previously inaccessible asset class into an actual option for individual investors. Think of artists like Banksy, Monet or Warhol. Get priority access and skip the waitlist here.

Skip the waitlist

4. Keep making retirement plan contributions

You can always contribute to your retirement accounts if you're still working and earning an income. This allows you to keep accumulating wealth — ideally in a Roth IRA, where it can grow tax-free and be invested for the future.

5. Know the rules for capital gains

Finally, it's important to be strategic about capital gains when selling investments in taxable brokerage accounts. You should engage in practices like tax loss harvesting and can take advantage of favorable long-term capital gains tax rates by holding your investments for more than a year.

By making these tax tweaks, you can save thousands in 2025, which is more money you can enjoy later in life or leave for future generations.