Tax Strategies for Early Retirement

When retiring early, individuals often encounter a unique financial situation where income is temporarily lower before starting Social Security and required minimum distributions (RMDs). In this context, strategies such as Roth conversions and tax gain harvesting come into play. Roth conversions might be preferable as they allow users to utilize their lower tax bracket to pay taxes on converted amounts now, ensuring tax-free withdrawals later. In many scenarios, failing to sell appreciated taxable assets could result in those gains being tax-free for heirs or when donated, making Roth conversions the more beneficial approach.