(A version of this article by Kimberly Lankford originally appeared in the September 2022 issue of Military Officer, a magazine available to all MOAA Premium and Life members. Learn more about the magazine here; learn more about joining MOAA here.)

After you stop working and are starting to withdraw money from your retirement savings, there are still steps you can take to help reduce your tax burden. And these steps can also have a ripple effect on other areas of your finances, such as your Medicare premiums and Social Security benefits.

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Consider state taxes again. When you stop working, the state taxes on retirement pay may be more important to you, and the good news is that the situation has improved.

“What we’ve seen recently is a lot of states using their COVID-era surpluses to fully exempt military pensions from state individual income tax — states like Indiana, Missouri, Nebraska, North Carolina, South Carolina, and Utah,” said Tim Vermeer, senior state tax policy analyst for the Tax Foundation.

To see how each state taxes military retirement pay, visit MOAA’s Military State Report Card and Tax Guide. But consider other taxes that may also affect you.

“People are often attracted to Texas because it doesn’t levy an individual income tax,” said Vermeer. “However, many are surprised to find that their property tax bills are higher than they expected. This is a trade-off.”

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Carefully tap retirement savings. If you have several buckets of retirement savings — such as tax-free money from a Roth and taxable money from tax-deferred accounts — be careful when choosing which account to tap, especially before you have to take required minimum distributions starting at age 72. This may be a good time to consult a tax professional when plotting your withdrawal strategy, said Lila Quintiliani, AFC®, ChFC®, program director, financial and benefits education for MOAA.

Balancing withdrawals from tax-deferred accounts and the tax-free Roth may keep you in a lower income tax bracket and could reduce your Medicare premiums. Most people pay $170.10 per month for Medicare Part B in 2022, but people whose modified adjusted gross income is more than $91,000 if single or $182,000 if married filing jointly pay from $238.10 to $578.30 per month in 2022 depending on their income (visit www.medicare.gov). Withdrawals from tax-deferred accounts, such as the traditional TSP or IRA, count in the calculation for the Medicare high-income surcharge, but tax-free Roth withdrawals do not.

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Reduce RMDs with charitable distributions. One strategy to help reduce your taxable income after you start RMDs is to make tax-free qualified charitable distributions (QCDs). You can give up to $100,000 from an IRA each year to charity, which counts toward your RMD but isn’t taxable. You must transfer money directly from the IRA to the charity (ask your IRA custodian for their procedure; the money can’t go to a donor-advised fund or private foundation).

Even though RMDs start at age 72, you can do QCDs after you turn 70½. You’ll get a tax benefit from your charitable gift, regardless of whether you itemize or not. The money stays out of your adjusted gross income, so it isn’t included in the income calculation for taxing Social Security benefits or the Medicare high-income surcharge. “QCDs can be really valuable because the distribution never shows up [in] your AGI,” said Col. Curt Sheldon, USAF (Ret), a CFP® professional and enrolled agent in Alexandria, Va., and Life Member of MOAA.

Kimberly Lankford is a financial expert based in Virginia and the spouse of a retired Army colonel.