3 Real Ways Law Firm Partners Can Reduce Retirement Taxes
Law firm partners face a more complex financial landscape than many other professionals. Income rises and falls throughout the year. Distributions come late. K-1 forms take the place of standard wage reporting. Multi-state filing requirements often appear without warning. These factors make it harder to manage taxes and even harder to plan for retirement.
Yet despite the complexity, three strategies consistently help partners reduce taxes over the long term. These approaches work because they give you control. They allow you to shape your tax bracket, manage your income timing, and use charitable tools that support both your financial plan and your community.
Here is how each strategy works and why it matters.
1. Use a Mix of Pre-tax, Roth, and Taxable Accounts
Using a mix of traditional pre-tax and Roth accounts creates real tax flexibility in retirement. When you have pre-tax 401k and IRA accounts, tax-free Roth accounts, and taxable accounts, you gain control over your lifetime tax bill, not just the taxes you pay this year.
Infographics of Mix of Pre-tax, Roth, and Taxable Accounts
Pre-tax accounts lower today’s tax bill. Roth accounts grow tax-free for qualified withdrawals. Taxable accounts give you flexible access to capital, though sales may create capital gains. When all three work together, you have more flexibility to decide how much income to recognize each year based on your tax bracket and income needs.
Partners deal with uneven income, late distributions, and capital calls, so this mix becomes even more valuable. It helps you avoid landing in a higher bracket at the wrong time.
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High income year
• Large distribution or private investment sale
Draw from Roth to avoid adding taxable income
Lower income year
• Smaller distributions or reduced practice income
Draw from pre-tax accounts to fill lower brackets
Any year
Use tax-smart withdrawals from taxable accounts for flexible access
This structure puts the right dollars in the right year and gives you long term control over your tax bill.
2. Use Strategic Withdrawal Sequencing
Withdrawal sequencing shapes your tax bill for the rest of retirement. Some withdraw pro-rata from all accounts. Others draw from taxable accounts first, then pre-tax, then Roth. Neither approach fits every partner.
Your best sequence depends on:
• Marital status
• Current and future bracket
• Age
• Charitable plans
• Required Minimum Distribution timing
• Social Security timing
• Size of each account
• Firm distributions
• Investment restrictions or private gains
Partners also face K-1 income, unpredictable distribution timing, and multi-state filing, which makes a personalized plan essential. Good sequencing keeps you in lower brackets longer, prevents large Required Minimum Distributions later, and creates opportunities for Roth conversions. The goal is simple: use the order that fits your income pattern and long term needs.
3. Use Charitable Giving to Reduce Taxable Income
Charitable tools can lower retirement taxes when used at the right time.
Donor advised fund
• While you can donate to a donor-advised fund anytime, you can maximize your tax-savings by donating in high-income years
• Deduction in the year you contribute
• Grants to other charities can be sent later
Helps offset strong K-1 years and smooth long term taxes
Qualified Charitable Distribution
• Available afterage seventy one half
• Donate directly from your IRA
• Give up to one hundred eight thousand in 2025
• If done correctly, can counttoward your Required Minimum Distribution
• Does not raise taxable income
Strategic use of Qualified Charitable Distributions can reduce the tax impact of Required Minimum Distributions
Note: QCDs cannot go to donor advised funds or private foundations.
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Infographic Law Firm Partners Can Reduce Retirement Taxes
How One Advisory Partners Helps You
Retirement tax planning becomes easier with guidance from someone who understands partner income, K-1 tax rules, and the timing challenges that come with uneven distributions. Jonathan Booze J.D., CFP®, AIF® brings more than twenty years of experience in law, finance, and wealth management. His background in executive compensation and retirement planning helps you coordinate pre-tax, Roth, and taxable accounts, structure a withdrawal plan that matches your goals, and integrate charitable strategies that support long term tax control.
Jon works with high net worth families across the country, focusing on investment management, inherited wealth, retirement planning, and tax aware strategies. He helps clients simplify complex decisions, create clarity in their financial path, and align every part of their plan so they can use their time with greater purpose.
Schedule an appointment with Jonathan Booze to build a retirement plan that fits your goals.
Bottom Line
Law firm partners face unique challenges when planning for retirement. Income varies. Taxes can be unpredictable. Required Minimum Distributions can build quickly. But when you use a mix of account types, follow a personalized withdrawal sequence, and apply charitable strategies, you gain meaningful control over your long term tax bill.
These three tools work together. Account variety gives you flexibility. Smart sequencing guides the order of withdrawals. Charitable tools provide additional ways to reduce taxable income during both high income and Required Minimum Distribution years. Firms like ONE Advisory Partners help partners put these pieces together with a plan that fits their goals and income pattern.
FAQs: Reducing Retirement Taxes for Law Firm Partners
1. Why are retirement taxes more complicated for law firm partners?
Many partners receive K-1 income, face uneven distributions, and often file in multiple states. This makes income harder to predict and tax planning more complex.
2. How does using pre-tax, Roth, and taxable accounts reduce taxes?
Each account type creates a different tax outcome. Using all three lets you choose (within certain limits) where withdrawals come from each year in retirement so you can manage your tax bracket more effectively.
3. Which account should I take funds out of in a high income year?
Considering useing Roth accounts. Qualified withdrawals do not raise taxable income, which helps you avoid moving into higher brackets.
4. Which account should I take funds out of in a lower income year?
Consider useing pre-tax accounts. Lower income years allow you to draw from traditional 401k or IRA accounts while staying in a lower bracket.
5. Why does withdrawal sequencing matter?
The order of withdrawals affects your lifetime tax bill. Smart sequencing keeps you in lower brackets longer and prevents large Required Minimum Distributions later.
6. What factors shape my withdrawal sequence?
Marital status, current and future brackets, age, Required Minimum Distribution timing, Social Security timing, account balances, firm distributions, and charitable goals.
7. How does charitable giving reduce retirement taxes?
Donor advised funds may help offset high income years. If done correctly, Qualified Charitable Distributions can reduce Required Minimum Distribution taxes by sending IRA dollars directly to charity without raising taxable income.
8. How can One Advisory Partners help?
Jonathan Booze J.D., CFP®, AIF® builds personalized withdrawal plans, coordinates pre-tax, Roth, and taxable strategies, and integrates charitable tools for long term tax control.
Schedule a call with Jonathan Booze to build a retirement plan that fits your goals.
Reference
Internal Revenue Service. (n.d.). Retirement Topics: Beneficiary. Retrieved from https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
Forbes. (2017, March 31). Top Tax Mistakes Law Firm Partners Can Avoid. Retrieved from https://www.forbes.com/sites/advisor/2017/03/31/top-tax-mistakes-law-firm-partners-can-avoid/
Schwab. (n.d.). Roth vs. Traditional IRAs: Which Is Right for You? Retrieved from https://www.schwab.com/learn/story/roth-vs-traditional-iras-which-is-right-you
