Many of us started thinking about saving for retirement as early as our first jobs. Even though envisioning retirement could be challenging, you did your best to tuck away as much as you could for the future.

It’s what George and Judy Cressman of Woodbine, Georgia, did. They’ve been Thrivent clients since they got married in 1968. Through his years of working as a chemical engineer and a consultant, George diligently fed his retirement savings plans. Judy did the same in her career as a physical therapist.

“We had a nice mix of savings accounts here and there, as well as life insurance, when we were ready to retire,” George says.

While George worked until 74, the couple, now in their late 70s, started planning for retirement well before that with Thrivent Wealth Advisor Adam Hess in Savannah, Georgia. They worked through questions like: How much would they need? What would be their expenses? What role would Social Security play? How would taxes impact their hard-earned savings?

Their end goal: Create a practical plan that consolidates their multiple accounts and works in opportunities to help manage their tax liability in the future. One strategy was taking withdrawals from some retirement accounts before required minimum distributions (RMDs), which are taxable, kick in.

“We knew there would be mandatory distributions from our accounts, and we weren’t sure we’d need that cash flow,” George says. “My biggest concern with planning was wanting to be sure that if I die first, Judy would be taken care of.”

Understanding how accounts will be taxed is important, especially with the sunset date looming on the Tax Cuts & Jobs Act (TCJA) at the end of 2025, says John Brazel, advice services consultant at Thrivent. If Congress doesn’t act, Americans may be in for a tax hike in 2026.

“We’re speculating at this point because nothing is set in stone,” Brazel says. “But from a planning perspective, if you are in a position to make some moves this year and next year and realize taxes at 22% rather than 28%, for example, you definitely want to consider your options.”

Prepare for the TCJA sunset with expert guidance

As the potential sunset of the Tax Cuts & Jobs Act (TCJA) nears at the end of 2025, it’s a good time to connect with your Thrivent financial advisor to learn how to work tax efficiency into your financial plan. While Thrivent and its financial advisors do not provide tax or legal advice, they can partner with you and your tax and legal professionals to review your financial plan and help you maximize tax-efficient strategies.

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In your planning process, it’s important to understand cash flow; review what your stream of income will look like based on tax-now, tax- later and tax-never accounts; and determine the goal of each asset.

This knowledge can get you clear insight into your potential future tax liability and allows for time to make tax-smart changes. And this insight can help you avoid tax surprises down the road. In fact, according to the Thrivent Retirement Readiness Survey, the most valuable piece of advice current retirees would have given their younger selves would be to learn about tax implications for their retirement savings.

Income tax diversification, which saves money in the long-term, involves the process of investing in a variety of tax-advantaged accounts, or buckets. They include:

• Tax now: These are accounts with dollars from your paycheck you’ve already paid taxes on, like savings and checking accounts, and are typically used for short-term or current needs.
• Tax later: These are accounts funded with pre-tax dollars, and they grow tax-deferred, which means your tax liability comes when you withdraw the funds. These are typically designed for longer-term needs, like college and retirement.
• Tax never: These assets, funded with after-tax dollars, generally offer preferential income tax treatment on the accumulated value and distribution of funds. A Roth IRA is an example.

“Oftentimes we look at the growth of our assets as a goal,” Hess says. “It’s actually a tool. The goal is how you’re going to use that tool. Are you going to use it to supplement retirement income, to give to your grandkids, to travel or to bless other people through donations to nonprofits?”

Your goal for each asset impacts your tax efficiencies.

The transition from saving to spending can be challenging.

“There’s an emotional transition for someone who has saved for 40 or 50 years to now stop saving,” Hess says. “We’ll walk down the path of identifying your goals, and then using our proprietary software, we’ll look at your current tax scenario, tax bracket, what has changed and space you have to work with.

“Sometimes the goal of overall reducing taxes creates a larger tax bill on the front end, but that may be to your advantage down the road,” he says. This is especially true if the TCJA sunsets as expected.

One tax-efficient strategy to consider is life insurance, Hess says. It’s a versatile financial tool that can offer cash value that grows tax-deferred, potentially federal tax-free distributions and an income tax-free death benefit.*

“Sometimes this works well side by side with a Roth IRA, especially for the person who wants to make sure that if they die, there is money post-tax in the IRA, but also money in the life insurance for the kids and grandkids,” Hess says.

The Cressmans found life insurance to be a good fit for their situation. “We looked at multiple options and, in the end, settled on ones that offered cash benefits should I die, but in the longer run could potentially do an admirable job of gaining growth,” George says.

Other strategies to consider may include:

• If you’re still working and contributing to pre-tax retirement vehicles—like a 401(k)—it may make sense to move to a post-tax savings vehicle like a Roth 401(k) or Roth IRA, Hess says.
• Consider a Roth IRA conversion. You’ll pay taxes up front, but you’ll potentially save on taxes for RMDs later. A bonus is you’ll be converting at a predictable rate rather than an unknown future rate, Brazel says.
• A donor-advised fund, if you have surplus dollars you won’t need in retirement, can provide you with giving flexibility to support organizations and causes close to your heart, Hess says.
• With the potential sunset of the TCJA, if you’re currently in an RMD period, consider taking out more, Brazel says. For example, if you’re required to take $10,000, consider taking $15,000. It’s going to come out eventually, he says, so it may make sense to do it before taxes go up.
• If you’re taking your RMDs but don’t need the dollars, consider a qualified charitable distribution (QCD) instead, Brazel says. These dollars go directly to a charity of your choice, eliminating your need to recognize the income.

“You’ve heard the saying that death and taxes are the only things that are certain,” Hess says. “I’ll add that the one thing guaranteed with taxes is change. We can be proactive; it just depends on how aggressively you want to reduce or eliminate taxes.”

Donna Hein is senior editor of Thrivent Magazine.

Retirement may be in your near future, or you may keep working, but there’s a window of opportunity if you’re between the ages of 59½ and 73, or your RMD age. This is the time when you can withdraw dollars from your IRA without penalties or RMDs, enabling you to make strategic moves to maximize your tax efficiency.

You may consider:

• Taking distributions before the age you’re required to do so. With the sunset date looming from the TCJA at the end of 2025, you could benefit from lower tax brackets before the rates could go up. If you wait until your RMD age, taxes may be higher than they are today. You can repurpose the dollars in tax-advantaged ways like life insurance, which generally provides a federal tax-free death benefit* and tax-deferred growth potential.
• Doing a Roth conversion if you have assets sitting in a traditional IRA. It allows you to move money to a Roth IRA from a pre-tax IRA or tax-deferred retirement account, like a 401(k). While you will have to pay taxes at the time of conversion, the benefit is you won’t be taxed on withdrawals later.