Retirement Tax Planning: An IRS Enrolled Agent and Fiduciary Financial Planner Discuss Roth IRA Conversions, Retirement Tax Strategies, and More

By David Lundberg, MBA, MSCJ, Marine Veteran, Flat-Fee Fiduciary Financial Planner. Headquartered in North Carolina, Arizona, and virtually nationwide where appropriately licensed.

Why do so many retirees end up paying more in taxes than they expected? Why does a Roth IRA conversion sound simple on paper but feel confusing in practice? What happens, tax-wise, when one spouse passes away first?  Why do long term capital gains matter? Estate and Legacy Planning overlooked accounts? These are some of the questions we hear most often from both individuals and married couples approaching retirement. So instead of answering them alone, we sat down with someone who spends her entire career living inside the tax code.

Linda Reader is an IRS Enrolled Agent and the owner of TaxRez, serving individuals, families, small businesses, trusts, and partnerships. She has been in the tax profession for 28 years, has served as a master instructor and district trainer mentoring other tax professionals, and works with clients across the country, including a large base in North Carolina and Arizona, the same two states where we are based.

Retirement is one of the few seasons of life where nearly every financial decision becomes interconnected. Retirement taxes, Roth IRA conversions, Social Security taxation, Medicare, Required Minimum Distributions, legacy planning, and retirement income all begin to overlap in ways that rarely show up on a single tax return. A decision made in one area can quietly affect several others years later. That is exactly why these questions deserve more than a quick answer.

Linda’s personal motto is simple. Making sense out of the nonsense. That is exactly what this conversation is about.

A Note About This Conversation:We filmed a full video conversation with Linda covering tax preparation versus tax planning, Roth IRA conversion misconceptions, retirement tax surprises, state tax differences between North Carolina and Arizona, and legacy and inheritance planning. If you prefer to watch the full conversation, you can see it here: Retirement Tax Conversation with Linda Reader, IRS Enrolled Agent (YouTube). This article organizes that conversation around the questions married couples ask us most.

What Is an IRS Enrolled Agent, and Why Does That Matter?

An Enrolled Agent, or EA, is a tax professional certified directly by the Internal Revenue Service, sanctioned under Treasury Department Circular 230. Enrolled Agents are authorized to represent taxpayers before the IRS, similar to what a CPA or tax attorney may do, and Linda's authorization extends as high as tax court.

Linda explained that the difference between an Enrolled Agent and a CPA is fairly simple. Her practice is focused primarily on tax preparation, tax planning, and IRS representation. While many CPAs may carry broader accounting or financial reporting responsibilities in addition to book keeping tax work. She spent years working alongside a CPA firm early in her career, where the CPAs often focused more on financials and book reporting while she prepared the tax returns and focused on the futre.

She holds licensure to work in all fifty states and has clients as far as Spain, France, Dubai, Peru, and Brazil. She was born and raised in Western North Carolina, lived in Arizona for more than fifteen years, and returned home to North Carolina full time about three years ago. She still maintains a large client base in Arizona.

That dual footprint, North Carolina and Arizona, mirrors our own firm's structure closely, which is part of why this conversation felt like such a natural fit.

Why Is Tax Planning Different From Tax Preparation?

This is one of the most important distinctions Linda makes with every client, and it may be one of the most misunderstood ideas in personal finance. Tax preparation, as Linda describes it, is about the moment. It takes the information from a given year and compiles it into a return. It only reflects what has already happened.

Tax planning is different, It looks forward. It is the work of trying to change the outcome of what happens next, rather than simply reporting what already occurred.

Linda hears often from younger clients that they feel too young to need tax planning. Her response is direct. If you had a balance due this year, that alone is a signal that planning could help avoid the same surprise next year. Retirement, she noted, is one of the single largest tax planning opportunities most married couples will ever have together.

Our Planning Perspective: This distinction is exactly why we built our process around coordinated planning rather than a single annual tax return. A tax return is like looking in the rearview mirror. It shows you clearly where you have already been. Retirement planning is looking through the windshield, trying to understand what the road ahead may actually require. When your tax professional and your financial planner are both working from that forward-looking view, the entire retirement income picture becomes far more coordinated.

Why Do So Many Retirees Pay More in Taxes Than They Expected?

According to Linda, one of the most common surprises she sees is Social Security taxation and RMDs. Many retirees assume their Social Security benefits will not be taxed. That assumption is often incorrect. Depending on other income sources, up to 85 percent of Social Security benefits may become taxable.

She also pointed to the widow tax as a recurring surprise. When a spouse passes away or a couple divorces, the surviving or single individual moves into a different tax bracket structure, loses half of the married standard deduction, and may find that income that once felt comfortable suddenly creates a larger tax bill.This is where retirement tax preparation and long-term retirement planning begin to overlap. Having tax diversification of of say IRA, Roth IRA, and Brokerage Accounts. 

Our Planning Perspective: This is one of the reasons we model surviving spouse scenarios directly inside coordinated retirement plans. Seeing the widow tax on paper, well before it becomes a lived reality, allows couples to plan around it rather than be surprised by it later.

Why Are Roth IRA Conversions So Often Misunderstood?

Roth IRA conversion strategy is one of the most frequently discussed, and most frequently misunderstood, pieces of retirement tax planning for married couples. Linda offered a clear, plain-language explanation of what a Roth conversion actually is. It involves moving money from a tax-deferred account, such as a 401(k), traditional IRA, or TSP, into a Roth IRA. The amount converted becomes taxable income in the year of the conversion. Once inside the Roth, the money can grow tax-free, and qualified withdrawals after age 59 and a half and the five-year rule come out completely tax-free.

She noted that Roth conversions have become a mainstream topic only in the last three to five years. Before that, Roth accounts were often treated as an afterthought that few people fully understood. The biggest misconception she encounters is the assumption that converted money was already taxed simply because it originated as a contribution. In reality, tax-deferred contributions were never taxed going in, which is exactly why the conversion itself creates a taxable event.

She also emphasized a point worth repeating. She does not tell clients how much to convert. That decision belongs with a financial planner who can model the long-term impact. Too often, she sees clients who were told to convert a specific dollar amount without ever seeing a break-even analysis or a visual of the long-term tax tradeoff.

Timing matters just as much as the decision itself. A conversion completed in a lower-income year, such as the gap between retiring and claiming Social Security, may be taxed very differently than the same conversion completed during peak earning years. The tax bracket a couple occupies in the year of conversion directly determines how expensive that conversion becomes, which is why Linda and our team both caution against treating Roth conversions as a one-size-fits-all strategy.

A Roth conversion strategy is not automatically good, and it is not automatically bad. The real question is always whether the long-term benefit, tax-free growth, tax-free withdrawals, and potentially lower Required Minimum Distributions later, justifies the tax cost paid today. For some couples in a low-income retirement window, filling a lower tax bracket with conversion income may make sense for several years running. For other couples still working, or facing a large capital gain or other unusual income event in the same year, a conversion in that particular year may create more cost than benefit.

This is exactly why Linda encourages clients not to guess and not to convert a round number simply because it was suggested. Modeling several conversion scenarios side by side, rather than choosing one dollar amount in isolation, allows a couple to actually see the tradeoffs before committing to them. A conversion strategy should also be evaluated across more than just this year's tax bill. The real impact often plays out over ten, twenty, or thirty years, through reduced future RMDs, altered Medicare IRMAA exposure, and a different legacy composition for whoever eventually inherits the accounts.

Our Planning Perspective: This is precisely why we never present a Roth conversion as automatically good or automatically bad. The real question is always whether the long-term benefit justifies the short-term tax cost for that specific couple. Modeling several conversion scenarios side by side, using visual retirement planning software that shows Roth conversions, retirement income, Social Security taxation, and RMDs all together, often creates a level of clarity that a spreadsheet alone cannot. Seeing the full picture, rather than one isolated number, is what allows a couple to make that decision with confidence instead of assumption. Many retirees ultimately benefit from having money in taxable, tax-deferred, and tax-free accounts because it creates greater flexibility when generating retirement income. 

Why Does Marriage Change the Roth Conversion Math?

Linda pointed out that married couples filing jointly benefit from a higher standard deduction and wider tax brackets compared to single filers. That means a conversion of the same dollar amount is often taxed less favorably for a single person than for a married couple.

She has seen this play out directly with clients who remarry later in life and use that window to convert more aggressively while filing jointly, taking advantage of the more favorable married tax structure before it potentially changes.

Our Planning Perspective: This is another reason coordinated planning matters for both spouses together, not separately. The filing status itself becomes part of the strategy, not just a background detail on the return.

Why Long-Term Capital Gains Deserve More Attention

Long term capital gains (in the non-qualified brokerage account) are often one of the most overlooked opportunities in retirement tax planning. A long-term capital gain generally occurs when you sell an investment for a gain; such as a stock, ETF, or mutual fund that you've owned for more than one full year. During our conversation, Linda explained that ordinary income such as wages, IRA withdrawals, and short-term investment gains are generally taxed at ordinary income tax rates. Long term capital gains receive their own, often more favorable, tax treatment. Depending on a household's taxable income, some retirees may even qualify for the 0% federal long-term capital gains tax rate, while others may fall into the 15% or 20% brackets. As Linda shared, this separate tax structure can create meaningful planning opportunities that many people simply aren't aware of until they sit down with a qualified tax professional.

Our Planning Perspective: At Awaken Financial Designs, we believe long-term capital gains should be evaluated alongside Roth IRA conversions, retirement income withdrawals, Social Security taxation, Required Minimum Distributions (RMDs), and other retirement tax strategies; not in isolation. A well-timed long term capital gains strategy may help improve tax efficiency over time, especially when coordinated with the rest of a retirement income plan. Rather than making decisions one year at a time, we believe retirees often benefit most from viewing their tax strategy across many years, allowing each piece of the plan to work together instead of independently.

What Happens Tax-Wise When One Spouse Passes Away?

This was one of the more emotionally direct parts of our conversation. Linda described how these discussions are often reactive rather than proactive. Couples rarely want to talk about what happens if one of them dies first, even though it is, as she put it plainly, simply a fact that one spouse will likely pass before the other.

She uses a split-screen feature in her planning software to show clients what their tax picture would look like as a single filer compared to filing jointly. Seeing that side-by-side comparison often creates the same kind of clarity moment that visual retirement planning creates for us with our own clients.

She also confirmed something important about inherited accounts. Required Minimum Distributions do not disappear simply because the account owner passed away. If the original owner was already taking RMDs, those requirements often continue for the beneficiary. Spousal beneficiaries are treated differently than non-spouse beneficiaries such as children, grandchildren, nieces, or nephews, and the rules for each situation vary.

Our Planning Perspective: We often tell married couples that some of the most protective planning decisions, like Roth conversions, are not really about the couple while both spouses are living. They are about the surviving spouse's future tax bracket. A conversion that makes little difference while married may create meaningful protection once one spouse is filing as a single taxpayer. We modeled exactly this kind of surviving spouse scenario in our retirement case study youtube videos, where the same household produced very different outcomes depending on which spouse passed first and how the accounts were structured.

What Should Married Couples Know About the Big Three Inherited Account Types?

We walked through the three major account types that come up in nearly every legacy conversation.

An Inherited IRA generally requires the beneficiary to pay taxes on the money as it comes out. Under the SECURE 2.0 Act, most non-spouse beneficiaries now have ten years to fully distribute the account, a meaningful change from prior rules that Linda said still catches many families by surprise.

An Inherited Roth IRA, when distributions are qualified, generally passes tax-free to the beneficiary, though the same ten-year distribution window often still applies for non-spouse beneficiaries.

A Taxable Brokerage Account generally receives a step-up in cost basis to fair market value at the original owner's death. This often eliminates capital gains tax on the appreciation that occurred during the owner's lifetime, and there is typically no ten-year distribution requirement attached to it.

Our Planning Perspective: The account type your heirs inherit may matter just as much as the amount they inherit. Two families with similar total assets can end up with very different after-tax outcomes depending on which accounts hold the wealth. This is part of why we walk every couple through our legacy conversation happens alongside the retirement income conversation rather than as an afterthought.

Why Do State Taxes Matter So Much Between North Carolina and Arizona?

Since we both live and work between these two states, this comparison felt especially relevant.

North Carolina currently applies a flat state income tax rate of approximately 4.25 percent and does not tax Social Security benefits. Certain government retirees may also qualify for additional protection under the Bailey Act, depending on eligibility requirements.

Arizona uses a tiered tax structure that was restructured in recent years, generally ranging from below one percent up to a maximum of 2.5 percent for most taxpayers, with higher earners potentially reaching a slightly higher bracket. Arizona also does not tax Social Security benefits, does not tax military retirement pay, and provides an exclusion on a portion of state retirement income for qualifying state employees.

Linda noted that both states compare quite favorably to higher-tax states like California, Pennsylvania, or New York, which is part of why so many retirees relocate to North Carolina, Arizona, or Florida. She also pointed out an important nuance. Some higher-tax states offer specific retirement income exclusions that lower-tax states do not. It often evens out differently than people expect, which is exactly why state-specific planning matters rather than relying on a state's general reputation as high-tax or low-tax.

Our Planning Perspective: This is why we pay close attention to state-specific rules for every married couple we work with, whether they are in Cary, North Carolina, the broader Arizona area, or considering a move between the two. 

Should Retirees Rely on AI, TikTok, or Google for Tax Answers?

We asked Linda directly about this, since it comes up constantly in client conversations. Her view was balanced. AI tools can be genuinely useful, and she uses them herself. But she was clear that no AI system she has seen can take all of a person's individual pieces, income, accounts, family situation, goals, health, state of residence, and put them together into one coherent, personalized strategy the way a professional conversation can.

She shared a phrase she uses often with clients who compare their tax return to a neighbor's. There are no two identical tax returns, the same way there are no two identical snowflakes. The rules may apply broadly, but the outcome depends entirely on individual circumstances.

Our Planning Perspective: We agree completely, and this extends to financial planning as well. Tools, including AI tools, can help someone gather information and start asking better questions. They are not a substitute for a coordinated, personalized plan built around a couple's actual accounts, goals, and family history.

What Is the Biggest Piece of Advice for Couples Approaching Retirement?

When we asked Linda to sum up her biggest takeaway, her answer was simple. Tax planning near retirement is a pivotal part of the overall plan, and too many people fill out their Social Security and Medicare paperwork without ever having a forward-looking tax conversation alongside it. Her closing thought was direct. It is okay not to know. It is not okay to not ask.

The Value of a Coordinated Team

Throughout this conversation, one theme kept surfacing. Linda and our firm operate independently of one another, as separate fiduciaries with separate responsibilities, yet we intentionally collaborate. When a client works with both a tax professional and a financial planner who communicate with each other, decisions like Roth conversions, withdrawal timing, and account structuring can be evaluated from both the tax lens and the planning lens at the same time.

Linda put it simply. Her job is to help someone pay the least amount of tax legally possible. Our job is to help build the most coordinated retirement income plan possible for married couples approaching or already living in retirement. When those two goals work together intentionally, rather than in isolation, spouses benefit from a more complete picture. 

Next Steps

Stop guessing when you can retire or how much is enough. For the first time, see it clearly. Your retirement age options, your real after-tax spending, and your personal numbers, built visually in your own plan. Many people spend additional years working simply because they never saw their options clearly.

If this conversation raised new questions about your own tax and retirement picture, we invite you to schedule a complimentary Discovery and Alignment Call with our team. It is a brief conversation to learn about your situation and decide together whether coordinated planning may be a good fit for you.

You can schedule a Discovery and Alignment Call here: https://calendar.app.google/6Bn1U3f77XaR9qB2A

If you are looking for tax preparation or tax planning support specifically, Linda Reader can be reached through TaxRez at https://www.taxrez1040.com or by phone at 480-278-9334. She offers a complimentary initial consultation for new clients.

Awaken Financial Designs is headquartered in Cary, North Carolina, and registered in Arizona, with virtual guidance available to married couples nationwide where we are appropriately licensed. We operate as a flat-fee fiduciary firm and do not charge assets under management fees.

Thank you for being here with us.

Frequently Asked Questions

What is the difference between a CPA and an IRS Enrolled Agent?An Enrolled Agent is a tax professional certified directly by the IRS who specializes exclusively in tax preparation, tax planning, and IRS representation. A CPA is a certified public accountant who may handle both bookkeeping and tax work. Enrolled Agents can represent taxpayers before the IRS up to and including tax court.

Is Social Security Benefits income taxable?Yes, depending on other income sources, up to 85 percent of Social Security benefits may become taxable at the federal level. Many retirees are surprised by this because they assumed Social Security was entirely tax-free.

What is a Roth IRA conversion?A Roth IRA conversion involves moving money from a tax-deferred account, such as a traditional IRA or 401(k), into a Roth IRA. The converted amount becomes taxable income in the year of conversion. Once inside the Roth account, the money may grow tax-free, and qualified withdrawals after age 59 and a half, meeting the five-year rule, come out tax-free.

Does being married affect Roth IRA conversion strategy?Yes. Married couples filing jointly generally benefit from a higher standard deduction and wider tax brackets than single filers, which often makes converting the same dollar amount more tax-efficient while married than as a single filer.

What is the SECURE 2.0 Act ten-year rule?Under the SECURE Act and SECURE Act 2.0, most non-spouse beneficiaries of an inherited IRA are now required to fully distribute the account within ten years of the original owner's death, rather than stretching distributions over their own lifetime as prior rules allowed.

What is a step-up in basis?A step-up in basis generally resets the cost basis of an inherited taxable asset, such as a brokerage account or home, to its fair market value at the original owner's death. This often eliminates capital gains tax on appreciation that occurred during the original owner's lifetime.

How does North Carolina tax retirement income compared to Arizona?North Carolina applies a flat state income tax rate of approximately 4.25 percent and does not tax Social Security benefits. Arizona uses a tiered tax structure generally ranging from below one percent up to approximately 2.5 percent for most taxpayers and also does not tax Social Security benefits or military retirement pay.

Can AI tools replace a tax professional or financial planner?AI tools may be useful for general research and education, but they generally cannot combine an individual's complete financial and tax picture, including income, accounts, family situation, health, and goals, into one coordinated, personalized strategy the way a professional relationship can.

What is the widow tax?The widow tax informally refers to the financial impact a surviving spouse may experience after the loss of their spouse, including a shift to single filer tax brackets, a lower standard deduction, and often a higher effective tax rate on similar levels of income.

Do you work with couples outside of North Carolina and Arizona?Yes. Awaken Financial Designs is headquartered in Cary, North Carolina, and registered in Arizona. We provide virtual guidance to married couples nationwide where we are appropriately licensed.

Disclosures: Awaken Financial Designs LLC | CRD #339725 | Flat-fee fiduciary RIA | Veteran and Woman Owned | Headquartered in Cary, North Carolina, with registration in Arizona. Virtual nationwide where appropriately licensed. This article is for educational purposes only and is not financial, tax, or legal advice. Linda Reader and TaxRez are an independent tax professional and firm, separate from Awaken Financial Designs. Nothing in this article should be interpreted as tax advice specific to any individual situation. Tax laws are subject to change and vary by state and individual circumstances. Please consult qualified financial, tax, and legal professionals regarding your specific situation.