How Recent Retirees Save Taxes in the “Gap Years”

Written by Stu Caplan | Oct 03, 2025

Drew is 62, recently retired, and about to enter what we call the “gap years.” These are the years between retirement and when Social Security and Required Minimum Distributions (RMDs) begin. For Drew, and anyone born after 1960, RMDs start at age 75. For many retirees, this period is a unique window to make intentional tax moves that can set the tone for the rest of retirement.

Roth Conversions: Simple in Theory, Strategic in Practice

On paper, Roth conversions look easy: move money from a traditional IRA to a Roth IRA, pay the taxes now, and enjoy tax-free growth in the future. The concept makes sense—especially when you expect future tax rates to be higher.

In practice, though, timing is everything. Convert too much in one year, and you risk:

Jumping into a higher federal or state tax bracket,
Triggering Medicare IRMAA surcharges that raise your monthly premiums, or
Increasing taxable income in a way that interferes with other strategies like charitable deductions or qualified business income rules.

Convert too little, and the problem just shifts down the road. By the time Drew turns 73 and RMDs kick in, the account could be so large that his required withdrawals push him into higher brackets anyway. This is where the planning—and the partnership with Drew’s CPA—matters most.

Projections, Not Guesswork

Instead of guessing at what might work, we sit down with Drew’s CPA and run side-by-side projections.

Together, we analyze:

How much room is left in his current tax bracket—so he can fill it with conversions without spilling into the next tier.
What different conversion amounts mean for his lifetime tax bill—sometimes a smaller annual conversion, repeated over a decade, saves more than one big move.
How conversions interact with his charitable giving plans—for example, whether bunching donations into a Donor-Advised Fund in the same year as a large conversion helps offset the tax hit.

For Drew, this collaboration transforms Roth conversions from a blunt instrument into a precise strategy. Instead of just paying taxes early, he’s reshaping his retirement income in a way that lowers lifetime taxes, smooths out RMDs, and creates flexibility for his heirs.

Direct Indexing: Tax Management on Another Level

Drew’s planning didn’t stop at conversions. He also had a sizable taxable portfolio that required careful attention. For him, a standard index fund wasn’t enough. Because of the size and complexity of his holdings, direct indexing—owning the individual stocks of an index rather than the fund itself—was the better option.

This structure provides two important advantages:

Systematic tax-loss harvesting: Instead of waiting for year-end, losses can be harvested automatically across hundreds of securities throughout the year. That creates a steady bank of tax assets that can offset future gains or even reduce ordinary income.
Customization: Drew could exclude companies he didn’t want to own and control when gains were realized—all while keeping his overall portfolio aligned with the market benchmark.

For Drew, direct indexing turned tax management from an afterthought into a proactive advantage.

The Bigger Picture: Moving From Reactive to Proactive

Drew’s story highlights a bigger truth: tax planning isn’t something you do once a year. Yet for many families, it still plays out that way—scramble in March, file in April, and move on.

The problem with that approach is simple: it’s backward-looking. You’re reporting what already happened, not shaping what comes next. For retirees with significant assets or multiple income sources, that leaves too much uncertainty—and often too much money on the table.

At Members’ Wealth, we approach tax planning as a year-round collaboration. We work side by side with CPAs to align strategies so clients don’t just file returns—they influence outcomes.

For Drew, that meant:

Using the gap years for carefully timed Roth conversions,
Leveraging direct indexing to harvest losses and tailor gains,
Coordinating charitable giving with tax projections, and
Structuring accounts in a way that supports long-term after-tax returns.

The result is more than lower taxes. It’s clarity. It’s flexibility. And it’s a retirement that isn’t left at the mercy of the calendar.

The Next Phase

Drew is just one example of how thoughtful planning in the gap years can transform retirement. These years don’t last forever, but the decisions made in this window can create benefits that compound for decades—for both retirees and their heirs.

If you’re approaching retirement or already in your gap years, now is the time to think ahead. The right coordination between your wealth advisor and your CPA can turn this window into one of the most valuable phases of your financial life.

Schedule a strategy session here and see how coordinated planning with your advisor and CPA can lower lifetime taxes and give you more flexibility in retirement.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon.

These examples are for illustrative purposes only and do not represent actual client experiences. Individual results will vary based on personal financial circumstances and tax laws.

About the Author – Stu Caplan, CFP®

Stu Caplan is Senior Wealth Strategist at Members’ Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions.

The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of industry experience, Stu and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations.

Stu received his MBA from The Robert H. Smith School of Business at the University of Maryland and his bachelor’s degree from the Eller College of Management at the University of Arizona. Stu resides in Bucks County, PA with his wife and two sons. He’s an avid golfer and is thrilled that his boys have embraced the game. He also volunteers his time as a board member of the PKD Foundation and Abrams Hebrew Academy.

To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453.

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