How a single move could slash your taxes in retirement — but just 18% of Americans are doing it. Are you missing out? Christy Bieber Mon, November 9, 2026 at 7:15 AM EST 9 min read GC=F +1.06% Photo by Carlos_Pascual / Shutterstock Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.
Do you feel like your tax bill is too big? You could be among the many Americans who are missing out on a golden opportunity to reduce their tax bill in retirement.
In fact, making just a single move could help future retirees avoid paying taxes on retirement account withdrawals and reduce the chances of Social Security becoming taxable. But few Americans are taking full advantage of the opportunity.
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So, what are so many Americans missing? It's simple: a Roth IRA.
Vanguard's 2026 edition of its annual How America Retires (1) report found that only 18% of active participants (workers currently contributing to workplace retirement plans) were contributing to Roth accounts at the end of 2025.
This statistic aligns broadly with past data showing that under a quarter of all American households (2) have Roth IRAs.
For many Americans, not having a Roth account could be a big mistake because they offer considerable tax benefits in retirement. However, they work a little differently than traditional IRAs, so there are a few key things to understand.
As with any retirement account, the details matter. Here are some of the rules and limitations you might want to consider before opening a Roth account:
Withdrawal rules differ: While traditional IRA and 401(k) accounts let you to reduce your tax bill in the year you contribute to the account, both require you to pay taxes on withdrawals. Roth IRAs and Roth 401(k)s defer your tax breaks until retirement, so you don't claim an upfront deduction. However, you'll pay no taxes on qualifying withdrawals from a Roth provided that you opened your first Roth account at least five years prior to the time of withdrawal and are at least 59 ½ (3) years of age.
There are contribution limits: Roth IRAs share a combined contribution limit with traditional IRAs, while Roth and traditional 401(k)s share a combined contribution limit. In 2026, for example, you can contribute a total of $7,500 (4) across Roth and traditional IRAs (or $8,600 if you're 50 and over and eligible for catch-up contributions). For Roth and traditional 401(k)s, the combined limit is $24,500 (plus additional catch-up contributions between $8,000 and $11,250, depending on your age). These limits are separate from employer contributions.
Roth IRAs have strict income limits: For traditional IRAs, you won't be allowed to make tax-deductible contributions to a traditional IRA account if your income is too high, but you could still make non-deductible contributions. If your income is too high for a Roth, you can't make any direct contributions (5) to it. Income limits vary by tax filing and change by year, so you can check the current IRS rules (4). There's no income limit for 401(k) contributions.
Roth accounts do not require required minimum distributions (RMDs): While traditional IRAs require you to begin making withdrawals starting at 73 (if you were born between 1951 and 1969) or 75 (if you were born in 1960 or later), there's no RMD requirement (6) for Roth accounts.
So long as you follow IRS distribution rules (7), the tax rules applied to Roth IRAs can be a major advantage, as they potentially let you withdraw all your investment gains without ever paying a dollar of tax on the money. You'll also have the peace of mind that you can keep your qualifying withdrawals as a retiree instead of sending some of your money to the IRS.
With a Roth, you may even avoid taxes on Social Security, as income distributed from a Roth doesn't count (8) when determining whether you meet the threshold where Social Security becomes taxable (9).
Simply put, owing nothing to the IRS or your state government could provide substantially more flexibility in retirement — when you're relying much more on your investments and benefits for support.
And while no one can conclusively predict how tax rates will trend, rates are very low right now by historical standards (10). There's also a good chance you could end up in a higher tax bracket in retirement, in which case you might be much better off claiming your tax savings later rather than today.
In the end, if you aren't already contributing to a Roth, you may want to look into whether your workplace plan offers one or whether you can open a Roth with a brokerage firm or financial institution of your choosing. Or you could explore other tax-efficient investments so you can keep more of your money rather than paying the government a big bill each year.
There are many great options to help you keep your investment income high and your tax bills low. Here are a few to consider.
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If you're worried about inflation eating away at your budget over a long retirement, precious metals like gold are often seen as both a hedge against inflation and a recession-resistant investment.
That's because, unlike fiat currencies, the precious yellow metal can't be created out of thin air or printed at will by central banks. This inherently limited supply can help it store value in the face of inflation.
Gold is also regarded as the ultimate safe haven. Since it's not tied to any one country, currency or economy, investors tend to flock to it — driving prices higher — in times of economic uncertainty or geopolitical instability.
If you're thinking about adding precious metals to your portfolio, opening a gold IRA with the help of Goldco allows you to hold physical gold and other metals while still benefiting from the tax advantages of an IRA.
Goldco has a strong reputation in the space and is viewed as one of the leading companies thanks to its 4.8/5 rating on Trustpilot and A+ rating from the Better Business Bureau. The company even offers a guaranteed buyback program if you ever decide to sell, meaning they'll repurchase your metals at the highest price based on current market value.
To explore whether opening a precious metals IRA could be a helpful hedge for your portfolio, as well as an opportunity to score generous tax breaks, you can download Goldco's free gold and silver guide to see if it's a good fit for you.
Plus, the company will match up to 10% of qualified purchases in free silver.
Real estate is another tax-efficient investment that can be used as a hedge against inflation.
Their appeal is straightforward: People will always need a place to live and assets like rental properties can produce a steady, predictable income that comes with tax deductions (11) and potentially lower rates on capital gains than for standard income.
It's also a popular hedge against inflation, since property values and rental income often rise alongside the cost of living. However, the time, effort and costs required to get into this asset class can be a barrier of entry for many everyday investors.
These days, you don't have to buy property to get into the real estate game. You can gain exposure through real estate investment platforms like Arrived.
Backed by investors including Jeff Bezos, Arrived helps investors access SEC-qualified real estate investments, including rental homes, vacation rentals,and diversified funds.
Arrived's properties allow you to both benefit from property appreciation and earn a passive income stream without the hassle and stress that being a landlord normally requires. This means no worrying about finding tenants or fixing broken faucets.
All you have to do is sign up, then you can view a selection of vetted properties and start investing with as little as $100. That way, you can make sure the investment is right for you before you make a major commitment.
Once you start investing with Arrived, you get access to over 596 properties in 67+ markets, while eligible investors can also use Arrived's secondary market to reshuffle their portfolio.
For a limited time, investors can even get a 2% account match when opening an account and adding $2,000 or more.
Creating a tax-efficient retirement plan could be a lot easier with the right help.
This is especially true for investors with bigger portfolios, where financial decisions often become increasingly nuanced. Managing withdrawals, minimizing tax exposure and ensuring long-term sustainability can require greater coordination and strategic planning.
In these cases, working with a financial advisor could help reduce costly mistakes.
For instance, If you have a portfolio of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this kind of planning.
Simply answer a few questions about your savings, retirement timeline and overall investment portfolio. From there, WiserAdvisor reviews its network to match you — for free — with up to three vetted, reputable advisors aligned with your specific needs.
You can then schedule no-obligation consultations with your matches to determine who is the best fit for your long-term goals.
WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties and specific financial results are not guaranteed.
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Vanguard (1); Investment Company Institute (2); Fidelity Investments (3), (5); Internal Revenue Service (4), (6), (7), (9); Empower (8); Tax Foundation (10); Rocket Mortgage (11)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
