Tax-Efficient Retirement Investing After Rate Cuts

The sneaky cost that eats returns: taxes, not fees

Most retirees obsess over expense ratios, 0.06% vs 0.10%, and miss the bigger leak in the bucket: taxes. That’s the real drag, especially now. After this year’s rate cuts, yields have shifted, bond prices have moved, and the tax bite is showing up in places that looked harmless last year. If you’re watching your cash yield slide while your bond fund’s distribution math changes, yeah, that’s the point. The mix of ordinary income, qualified dividends, and capital gains is different in 2025, and the IRS doesn’t send a push alert when that happens.

Here’s the quick reality check with actual numbers: ordinary income (interest from cash, CDs, and most bond funds) is taxed at your marginal rate, still 10%, 12%, 22%, 24%, 32%, 35%, 37% for 2025. Qualified dividends and long-term capital gains are generally 0%, 15%, or 20% depending on income. And above certain thresholds, the 3.8% Net Investment Income Tax kicks in ($200,000 single / $250,000 married filing jointly, those thresholds haven’t budged in years). That spread alone can swing your after-tax return by a full percentage point or more.

What changed this year? Policy rates drifted down from their 2023-2024 highs, so cash yields at many brokerages that were north of 5% last year are now closer to the mid-4% range or lower. Meanwhile, bond prices firmed as rates fell, which means more of a core bond fund’s total return can show up as price gains (taxed at capital gains rates when realized) and less as interest (taxed at ordinary rates), but it depends how the fund manages turnover and distributions. That shift in where returns come from is exactly why the tax drag moved.

A couple of simple, concrete comparisons to ground it:

• If you’re in the 22% bracket and your taxable-brokerage cash yields 4.3%, your after-tax yield is about 3.35%, because it’s ordinary income.
• A high-quality national muni fund yielding 3.0% has a taxable-equivalent yield near 3.85% for that same 22% bracket (3.0% ÷ (1-0.22)). If you’re in the 32% bracket, that jumps to ~4.41%, without touching your federal tax bill.
• Qualified dividends at 15% tax can beat a higher ordinary yield after-tax. A 3.6% qualified dividend stream nets ~3.06% after tax for many filers, compare that to cash or bond interest taxed at 24% or 32%.

Where this lands: your asset location and withdrawal order now matter more than your fund selection. In taxable accounts, you want tax-efficient assets (munis, broad equity ETFs with low turnover); in IRAs, you park the ordinary-income stuff (taxable bonds, REITs). And when you draw, the sequence, taxable, then tax-deferred, then Roth, or some planned blend, can change your lifetime tax bill by six figures. I’ve seen families pay more in avoidable taxes than a decade of expense ratios, which still bugs me, I once caught a client’s “safe” cash drag costing 0.90% after-tax relative to a muni option; we fixed it in an afternoon.

The takeaway for this section: fees matter, but in retirement the tax code is the bigger lever, especially after rate cuts shift returns across interest, dividends, and gains. We’ll show how to place assets, pick the right cash and bond sleeves for your bracket, and set a withdrawal order that starves the tax drag before it eats your returns.

Cash isn’t king forever: repositioning your safe bucket in 2025

Short version: cash stopped paying like it did at 5% when the Fed kept rates pinned high. After the 2024-2025 easing cycle, money market and T‑bill yields have started to slip, and the tax math just changed again. This is where many households quietly give back 0.5-1.0% after-tax without noticing. I’ve literally watched it happen in client portals, great allocations, then a “safe” sleeve that leaks return like a slow tire.

What’s changing now

• Money market funds and 6‑month T‑bills peaked above 5% in 2023 (public data everywhere at the time), but yields are coming down after the rate cuts that started last year and continued this year. I won’t pin an exact number in print because it moves weekly, but the direction is down. That’s what matters for planning.
• When taxable cash yields fall, tax‑exempt short muni funds can look better on a tax‑equivalent basis in brokerage accounts, especially for high brackets.
• Where you hold the “safe bucket” matters as much as what you buy. Taxable vs. IRA isn’t a footnote; it’s the headline.

Use tax‑equivalent yield (TEY) to compare apples to apples

Quick formula, then I’ll translate: TEY = muni yield ÷ (1, marginal tax rate). If your short‑term national muni fund has an SEC yield of 3.0% and you’re in the 32% federal bracket, TEY ≈ 3.0% ÷ 0.68 = 4.41%. That means a 4.41% taxable cash yield is roughly the break‑even. If your brokerage sweep or T‑bill ladder is paying less than that, the muni may be the better choice (mind state tax and AMT exposure; I know, acronyms, AMT is the alternative minimum tax, and a few muni funds can be exposed to it).

Yes, I’m simplifying, SEC yield isn’t your realized return, and credit spreads can wiggle. But for triage, this gets you 90% of the way there without building a spreadsheet. And one more nuance: T‑bill interest is exempt from state tax, so for a high‑tax state, your taxable hurdle rate is a bit lower than the simple federal TEY makes it look. You can run a state‑adjusted TEY if you want to be precise.

Account placement: split your “safe” bucket

• Emergency sleeve (3-6 months of expenses): keep this in taxable accounts for access and to avoid forced IRA withdrawals. High‑quality cash or very short T‑bills are fine; if your bracket is high and yields keep sliding, a short‑duration muni fund can make sense here too. Liquidity first, yield second.
• Multi‑year safety sleeve (2-7 years of planned withdrawals): house this in IRAs when possible to avoid annual tax drag. Inside an IRA, taxable short‑intermediate Treasuries, MBS, or a laddered high‑quality bond ETF don’t leak taxes each year. Outside an IRA they do. That leak was tolerable when cash paid 5%+. With yields easing, the leak matters more.

Inside vs. outside retirement accounts

• In taxable: compare after‑tax yields. Money market income is ordinary income. T‑bills: federal tax only, no state. Munis: generally federal tax‑exempt; state may be exempt if you buy your state’s fund. TEY is your friend here.
• In IRAs: use whichever safe assets offer the best risk‑adjusted return. No need for munis in an IRA, they waste the tax benefit. I know that’s basic, but I still see it weekly.

I‑Bonds: still an inflation hedge, not a cash replacement

The rules didn’t change in 2025. Purchase caps remain $10,000 per person per calendar year electronically (plus up to $5,000 via federal tax refund as paper bonds). Interest is federal‑taxed when you redeem (or at maturity) and state‑tax‑free. They’re great if you want inflation linkage without mark‑to‑market volatility, but they’re not a flexible cash bucket: 12‑month lockup and a 3‑month interest penalty if you redeem before five years. Revisit them when inflation expectations jump; otherwise, they’re a niche sleeve, not core liquidity.

A quick reality check

Rates can bounce. If the Fed pauses or inflation re‑flares later this year, short yields might stop falling. But you don’t need a crystal ball. Set decision rules: “Hold muni fund X in taxable when TEY > cash by 0.30%+ after state tax.” “Keep 24 months of withdrawals in IRA ladders; refill annually.” Then adjust quarterly. I’m biased, I like rules that survive my own bad moods and market noise.

One last anecdote

Earlier this year we moved a retiree couple from a 100% taxable money fund paying less than their TEY hurdle into a split: 40% short muni in taxable, 60% a 3‑year Treasury ladder inside the IRA. After fees and taxes, the modeled lift was ~0.55% per year. That sounds small until you compound it over a decade. And yes, I did triple‑check the math because I’ve fat‑fingered a yield before, happens to the best of us.

Put the right assets in the right buckets: a 2025 asset‑location blueprint

With policy rates off their 2023 peak, the old rule of thumb matters again: ordinary income belongs where it’s sheltered; tax‑efficient growth can sit in taxable. Nothing cute. Just placement that cuts tax drag when yields aren’t doing all the heavy lifting.

• Tax‑deferred (traditional IRA/401(k)) is your ordinary‑income garage. Prioritize taxable bonds (core, multisector, high yield), REITs, and higher‑turnover active funds. Interest and most REIT distributions are taxed as ordinary income if held in taxable. Keeping them in pre‑tax accounts defers the hit. REIT payouts are largely non‑qualified; in many years 60%+ of distributions get ordinary treatment (check the fund’s 1099‑DIV footnote, yes, that footnote). Many active funds realize gains throughout the year; turnover north of 70% is common in some categories, which just leaks taxes if you park them in a brokerage account.
• Taxable brokerage is for clean, tax‑efficient growth. Broad equity index ETFs and tax‑managed funds tend to minimize capital‑gains distributions. The ETF in‑kind creation/redemption mechanism has kept many flagship funds at or near zero capital‑gains payouts in recent years; plenty of large U.S. equity ETFs reported no capital‑gains distributions in 2023 per sponsor reports. Qualified dividends and long‑term gains still enjoy the 0%/15%/20% rate structure (in place since 2013), which is far better than ordinary‑income rates for most households.
• Roth is for the highest‑growth, highest‑volatility stuff. Put your longest‑horizon, asymmetric upside here, small‑cap, emerging markets, innovation tilts, even private growth if you can access it and accept the risk. Future gains are tax‑free, and there are no RMDs. If you think equities can compound around 7% over time, give or take, and I’ll argue that number over coffee, the Roth deserves your biggest upside chips.

Plan for RMD gravity, starting now

SECURE 2.0 set the RMD age at 73 starting in 2023. That means every dollar you grow in pre‑tax accounts is a future forced distribution and taxable income. A simple way to reduce future RMD taxes: overweight bonds (and other ordinary‑income assets) in the traditional IRA and keep higher‑expected‑return equities in Roth/taxable. You’re trading some IRA growth for a smaller RMD base later. Not perfect science; it’s a glidepath. But it works.

Mind the NIIT

The 3.8% Net Investment Income Tax has been in effect since 2013 for high earners (MAGI thresholds apply). When you size your taxable growth sleeve, remember that long‑term gains can face 20% + 3.8% NIIT at the top bracket. That extra 3.8% turns a “harmless” year‑end rebalance into a real bill if you’re over the threshold. This is where ETFs’ low distribution histories and tax‑loss harvesting matter. I know, harvesting feels tedious; do it anyway, set a calendar reminder becuase future‑you will not remember in December.

A practical placement checklist

1. Traditional IRA/401(k): Core taxable bonds, TIPS, high yield (sized prudently), REITs, high‑turnover active strategies, income‑heavy alternatives.
2. Taxable: Broad equity index ETFs, tax‑managed funds, individual stocks you intend to hold long term, muni funds if you’re in a high‑tax state or bracket.
3. Roth: Highest expected return and volatility sleeves; the stuff you’d hate to sell for RMDs later. Rebalance here to the extent possible to avoid generating gains in taxable.

Quick rule I use: if it throws off ordinary income or frequent gains, hide it in pre‑tax; if it’s quietly compounding with low turnover, let it live in taxable; if it could be a rocket ship, or a roller coaster, favor the Roth.

One caveat: life’s messy. Liquidity needs, state taxes, and employer plan menus can force compromises. That’s fine. Just stay directionally correct, and review after big income years or when distributions spike. And if you accidentally bought that REIT ETF in taxable, yea, it happens, don’t beat yourself up; fix it during your next rebalance window.

Withdraw like a pro: bracket management while rates are lower

Rate cuts don’t change the tax code, but they change portfolios, cash yields, and the sequence of what you tap first. Short-term yields aren’t the 5%+ we saw last year; money markets and T-bills have slipped off the peaks, which means more folks are trimming stock funds again for cash. That’s exactly when smart bracket management earns its keep, quietly, every year.

Coordinate withdrawals, year by year

• Start with taxable cash flows. Take dividends and bond interest from taxable first. If you still need cash, then top up from pre-tax IRA or Roth depending on your marginal bracket and Medicare considerations.
• Fill, don’t spill, the bracket. For 2024 (yes, last year’s published numbers), the 12% ordinary bracket topped out at $94,300 of taxable income for married filing jointly and $47,150 for single. The standard deduction was $29,200 MFJ and $14,600 single. Work from a projection so you can add just enough IRA withdrawals to “fill” your target bracket without kicking income into the next tier. 2025 inflation adjustments are higher, but use current IRS tables when you finalize your plan.
• Harvest long-term gains in low-income years. The 0% long-term capital gains band in 2024 ran to $94,050 (MFJ) and $47,025 (single). If your taxable income sits below that, you can realize gains, reset basis, and pay 0% on those gains, as long as you stay within the band. This is gold in gap years (post-retirement, pre-RMD) or in a down-income year after rate cuts shift your cash flow.
• Mind IRMAA cliffs. Medicare uses a two-year lookback for premiums, and surcharges (IRMAA) are cliff-y. For 2024 determinations, the first IRMAA tier kicked in above $103,000 MAGI (single) or $206,000 (MFJ). One dollar over is enough to raise premiums. In 2025, your premiums reflect 2023 MAGI, but the planning point is the same: model your MAGI before you convert or harvest.

Roth conversions: opportunistic, not reckless

• Use down-income or post-cut years to convert up to the top of your target bracket. If portfolio income is lighter because yields came in and you trimmed equities, that’s room to convert. I tell clients: pick the bracket you’ll be happy to repeat in RMD years, then fill it, don’t blow past it.
• Remember the 2026 sunset risk. Individual provisions from the Tax Cuts and Jobs Act are scheduled to expire after 2025. That likely means higher ordinary rates and a smaller standard deduction in 2026 unless Congress acts. Translation: 2025 is a still-open window to lock in conversions and gain harvesting at today’s rates.

Charitable? Use QCDs to cut AGI

• Qualified Charitable Distributions from IRAs at age 70½ remain available in 2025. They reduce AGI, which helps with IRMAA, NIIT thresholds, and those fun state tax phaseouts. The QCD annual cap is indexed; it was $105,000 in 2024 (up from the historical $100,000). You can pair QCDs with partial Roth conversions to fine-tune AGI.

Quick playbook: take taxable interest/dividends first, harvest 0% LTCG if available, fill the rest of your target bracket with IRA withdrawals or Roth conversions, use QCDs at 70½+ to trim AGI, and keep an eye on IRMAA cliffs before year-end. Simple to say, annoying to do without a projection.

Now, I’m going to sound a bit too excited here because this is where the dollars stack up: one well-timed year can reduce lifetime RMDs, keep you in lower Medicare brackets for two years, and reset basis on holdings you plan to keep. That combo shows up as real cash in retirement, boring, repeatable, not flashy.

And yes, it gets complex fast. Markets move, dividends surprise, muni interest is exempt federally but not always for state add-backs, and conversions raise MAGI even when no cash changes hands. My own spreadsheet has more tabs than I’d like to admit. If you’re within, say, $5-10k of an IRMAA threshold, run the calcs twice or have your CPA sanity-check before December 31.

Bottom line for 2025: with rates lower than last year’s peaks and TCJA provisions set to sunset in 2026, use this year to manage brackets deliberately, harvest gains in low-income pockets, convert to Roth up to (not past) your chosen bracket, and deploy QCDs once you’re 70½. Rinse, repeat, and re-check after big income changes.

Fixed income after cuts: duration, munis, and the tax math that actually matters

Rates aren’t where they were at the 2023 peak. The 10‑year Treasury briefly grazed ~5% in October 2023, then spent most of 2024-2025 lower, which means price sensitivity is back on the table. Duration matters again. As a rule of thumb, if a portfolio has a 6‑year duration, a 1% drop in yields points to roughly a 6% price gain (and the reverse if yields back up). The Bloomberg U.S. Aggregate’s duration has hovered near ~6 years the last couple years, so the math isn’t academic, it’s Tuesday.

Taxable account? Munis can win when yields compress

The choice isn’t “muni or not.” It’s after‑tax yield, your bracket, your state, and how much duration you want to carry. Quick math: tax‑equivalent yield (TEY) = muni_yield ÷ (1, tax_rate). At the 37% top federal bracket in 2025 (still in effect pre‑TCJA sunset) plus the 3.8% NIIT where it applies, the combined rate can be 40.8% before state taxes. A 3.25% national‑muni fund has a TEY of ~5.49% at 40.8% (3.25% ÷ 0.592). In a high‑tax state using an in‑state fund, TEY can be even higher because you may dodge state income tax too. That’s why, as yields slide off 2023 highs, high‑quality muni funds often beat taxable core bond funds on an after‑tax basis, especially for households in the 32%-37% brackets. Caveat: watch AMT exposure (private‑activity bonds); most broad funds keep it minimal, but check the fund’s AMT % in the prospectus.

Build or extend ladders, inside IRAs if you can

If you like predictability, ladders still work. But put them where taxes don’t nick you each year. In IRAs/401(k)s, a 5-10 year Treasury/Agency/IG ladder gives you rolling reinvestment, easy rebalancing, and no annual tax friction. In taxable accounts, each maturity and reinvestment triggers 1099s and potential state tax; not fatal, just messy. I’ll extend ladders by a year when the long rung offers reasonable term premium, and I’ll compress them when the curve is flat or inverted. Inside an IRA, those tweaks don’t create capital gains, clean and simple.

Harvest bond losses when spreads pop

Credit spreads widen fast when risk aversion spikes. Use that. If your taxable core bond fund is down, you can tax‑loss harvest: swap into a similar, not “substantially identical,” fund for 31+ days. Example: realize an $8,000 loss, keep market exposure via a different intermediate core or a Treasury‑heavy ETF, then switch back later if you want. The $3,000 ordinary‑income offset per year is still the law in 2025, and the remainder carries forward. Wash‑sale rule is 30 days across accounts, don’t accidentally rebuy the same CUSIP in your spouse’s account; I’ve seen it happen; it’s annoying.

TIPS go where phantom income can’t hurt

TIPS accrue inflation adjustments that are taxable annually even when you didn’t get the cash (phantom income). That’s fine inside IRAs/401(k)s/HSAs, not great in taxable at higher brackets. The CPI‑U accrual adds to your 1099‑OID; in a 37% bracket, that’s a real drag. My preference this year: hold TIPS in tax‑advantaged accounts and use nominal munis or Treasuries in taxable if you need high‑quality ballast.

Rebalance with coupons and cash flows

In taxable accounts, try to steer rebalancing through coupons, maturities, and new contributions, then touch principal only when you must. That minimizes realized gains. With bond yields off their 2023 highs, coupons are doing more of the work again, so use them, set your sweep to rebalance toward your underweight sleeve.

Practical guardrails, 2025 edition

• Muni vs taxable: run TEY using your actual marginal rate. Include 3.8% NIIT if your MAGI clears the threshold (for 2025, it’s unchanged in statute at $200k single/$250k joint from the ACA; check your CPA on phase‑ins).
• Duration: match your risk. If a 0.75% yield move would keep you up at night, don’t own an 8‑year duration fund. A 0.75% rise implies ~‑6% on an 8‑year profile.
• Ladders: inside IRAs, a 5-7 rung ladder (annual or semi‑annual rungs) balances reinvestment risk without over‑complicating. In taxable, keep ladders shorter and simpler unless you need state‑specific munis.
• Harvesting: pair a broad Agg ETF with a different issuer’s Agg, or swap from core‑plus to Treasury/Agency for the 31‑day window. Same mandate, different “substantially identical” standard, be conservative.
• TIPS placement: default to tax‑advantaged. In taxable, use I Bonds for inflation hedging if you still have annual capacity.

My take, net‑net: with the rate cuts behind us and markets pricing a shallower path now, after‑tax yield and duration placement do more of the heavy lifting than security selection. Get the account type right, keep the ladder boring, and let the coupons show up on time.

Tie it all together: your tax‑smart paycheck for the next decade

Quick wrap so you can act without overthinking it. The theme this year is pretty simple: lower yields re‑shuffle the after‑tax leaderboard. Placement, withdrawal order, and using 2025’s windows do the heavy lifting while you sip coffee and try not to micromanage every tick.

• Recheck cash and short‑bond placement as yields slip. T‑bill and savings yields aren’t where they were in 2023, and that matters after taxes. Ordinary income in taxable gets hit at your marginal rate plus possibly the 3.8% NIIT if your MAGI is above $200k single / $250k MFJ (those thresholds are fixed in law). If your high‑yield savings is 4% and your combined marginal rate is ~35% including NIIT, your after‑tax is about 2.6%, suddenly that muni fund or shifting some short duration inside an IRA looks smarter. Don’t donate return to taxes because inertia felt comfy.
• Map asset location like you mean it. Ordinary‑income producers (short bonds, taxable bond funds, REITs, high‑turnover credit) live in IRAs. Tax‑efficient broad equity (total market, factor funds with low turnover) belongs in taxable, so you get qualified dividend and long‑term gain rates. Your highest expected growth, the “swing for the fences but we’re patient” stuff, goes in the Roth, where compounding and withdrawals are tax‑free. It’s the same pie, but the slices bake differently.
• Run a two‑year bracket forecast: 2025 and 2026. The TCJA individual provisions are scheduled to sunset after December 31, 2025. That means, absent new law, the top marginal rate moves from 37% back to 39.6% in 2026, and today’s 12%/22%/24% brackets revert to ~15%/25%/28%. The standard deduction also shrinks while personal exemptions return. Translation: consider harvesting gains in 2025 if you can keep them in the 0%/15% bands, and look at Roth conversions in 2025, maybe early 2026 too, before brackets potentially reset higher. Watch IRMAA cliffs; conversions raise MAGI and can push Medicare premiums up the following year, ask me how many times I’ve seen that surprise blow up an otherwise clean plan.
• Automate your tax plumbing. Tie quarterly estimates to your withdrawal plan and stop guessing. The IRS safe harbor rules are simple: pay 90% of current‑year tax or 100% of last year’s (110% if prior‑year AGI was over $150k) to avoid penalties. Use EFTPS or IRS Direct Pay, tag payments as 1040‑ES, set calendar nudges. This is boring, which is exactly the point.
• Stay nimble; review annually. I’m big on intellectual humility, markets and Congress don’t care about our forecasts. Rebalance locations once a year, revisit the withdrawal order when life changes, and keep a short checklist: brackets, NIIT exposure, state taxes, IRMAA, and any one‑time income items. Small wins, an extra 0.3% here, 0.2% there, compound into real money over 10 years.

One more thing, yes, I’m more enthusiastic about Roth space this year. Lower rates reduce the opportunity cost of paying tax now, and if 2026 brackets are higher, you bought the future discount on sale. Will policy change again? Probably. That’s why we size moves, not swing for the fences on every pitch.

If you only do three things this week: move ordinary‑income assets into tax‑advantaged accounts where possible, run the 2025/2026 tax forecast with gain harvesting and a measured Roth conversion schedule, and flip on automated quarterlies tied to cash flows. Done right, your “paycheck” from the portfolio shows up on time, keeps the IRS happy, and leaves more compounding where it belongs.

Frequently Asked Questions

Q: How do I decide what to hold in taxable vs. IRA/Roth after rates came down this year?

A: Quick rule of thumb that still works in 2025: put tax-inefficient stuff (ordinary-income generators like taxable bond funds, REITs) in tax-deferred or Roth accounts, and keep tax-efficient stuff (broad equity index funds, ETFs with low turnover) in taxable. With cash yields sliding from 5%+ last year to the mid-4% range now, the ordinary-income tax bite still hurts. So: 1) Hold core bond exposure in IRA/401(k) when you can. 2) In taxable, favor equity index ETFs and, if you need fixed income there, consider Treasuries (state-tax free) or high-quality muni funds after checking the tax‑equivalent yield. 3) Keep your emergency cash where it’s safe and FDIC/NCUA insured, but don’t over-park taxable cash if you’re in the 22%+ bracket, shift some fixed income to tax-advantaged accounts instead.

Q: What’s the difference between ordinary income and qualified dividends/capital gains for my 2025 taxes?

A: As the article notes, ordinary income (think cash interest, CDs, most bond fund distributions) is taxed at your marginal bracket, still 10%, 12%, 22%, 24%, 32%, 35%, 37% for 2025. Qualified dividends and long‑term capital gains generally hit 0%, 15%, or 20% depending on income, and the 3.8% Net Investment Income Tax can stack on top once you’re above $200k single / $250k married filing jointly. That spread is why a 4.3% cash yield turns into roughly 3.35% after tax for someone in the 22% bracket, while a similar total return coming as long‑term gains can be meaningfully better after tax. The article’s whole point: after this year’s rate cuts, more of a bond fund’s return may shift toward price gains (potentially cap gains) vs. interest, so the tax character matters as much as the headline yield.

Q: Should I worry about my bond fund’s distributions flipping from interest to capital gains this year?

A: Yes, just enough to check the facts, not to panic. Rates fell this year, which can push more return into price gains and less into interest, as the article flags. Action items: 1) Look up your fund’s distribution history and “tax character” on the fund’s site. 2) Review turnover, higher turnover can trigger realized gains. 3) If you hold it in taxable and expect big capital-gain distributions, consider swapping before record date into a similar, more tax‑efficient fund (mind wash‑sale rules if it’s an ETF/ETF swap). 4) If you can, hold core bonds in an IRA/401(k) to neutralize the tax character altogether. Simple fix beats fancy gymnastics.

Q: Is it better to do a Roth conversion in Q4 if my portfolio income dropped after the rate cuts?

A: Possibly, and Q4 is your last clean window to run the numbers. Lower ordinary income from cash/bonds this year can create “room” in the 12% or 22% brackets to convert pre‑tax IRA dollars to Roth at a cheaper rate. Checklist: 1) Project full‑year taxable income now (don’t forget RMDs if applicable). 2) Fill up your target bracket with a partial conversion before 12/31. 3) Watch the NIIT thresholds ($200k single / $250k MFJ) and IRMAA Medicare brackets, accidentally crossing them is a very not-fun surprise. 4) If you’re charitably inclined and taking RMDs, consider Qualified Charitable Distributions (QCDs) to reduce AGI, which can make a Roth conversion more palatable in the same year. Talk to your CPA before you push the button, I’ve seen one too many December facepalms.

@article{tax-efficient-retirement-investing-after-rate-cuts,
    title   = {Tax-Efficient Retirement Investing After Rate Cuts},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/tax-efficient-retirement-after-cuts/}
}