Why Taxes Are Stressing Americans’ Retirement Plans
Retirement preparedness has taken a hit for many Americans, as stubborn inflation, rising medical premiums, and high interest rates have eroded savings. Now, a new concern is arising: the effect of taxes on long-term finances in retirement, according to Allianz Center for the Future of Retirement’s Q1 2026 Quarterly Market Perceptions Study.
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This quarter, a whopping 70% of Americans say they worry about taxes on retirement income, a jump from 66% last quarter, while 70% “worry higher future taxes will impact tax-deferred retirement savings,” according to the study.
“We often see that these concerns peak around this time of year. While we pay taxes all year round, the amount we pay often comes to the forefront as Tax Day approaches,” said Kelly LaVigne, VP of consumer insights, Allianz Life Insurance Company. “When you’re taking a closer look at what you pay in taxes now, it can increase worries about taxes in the future. At the same time, taxes are an ongoing expense that can pose a risk to your long-term financial stability.”
Experts say there are several steps Americans can take to avoid worrying about the impact of taxes on their retirement.
Why are taxes becoming a major concern now?
Steve Sexton, CEO of Sexton Advisory Group, said the study’s findings are not surprising.
For decades, conventional retirement advice centered almost entirely on saving as much as possible, diversifying your portfolio, and letting compound interest do the work, he said, and tax planning for retirement savings often took a back seat.
“What’s changed is the urgency. With tax rates from the Tax Cuts and Jobs Act, passed in 2017, expiring last year, ongoing federal deficit spending, and growing uncertainty around fiscal policy, Americans are right to wonder how much of what they’ve saved they’ll actually get to keep,” Sexton added.
Allianz also found that 62% say they “would stop using their current financial professional if they didn’t help them navigate the current tax environment strategically,” a data point Sexton found “particularly telling.”
“Clients are no longer satisfied with investment returns alone. They want a tax strategy, and if their advisor can’t deliver one, they’ll find someone who will,” he said.
Other anxiety drivers are at play this tax season, notably geopolitical tensions, which have made markets very choppy and volatile.
Bobbi Rebell, CFP, consumer finance expert at CardRates.com, noted thatmany people are hyper-aware of their retirement account balances because they have been under pressure recently due to the war in Iran, which has triggered renewed inflation fears.
“That puts both taxes and retirement top of mind,” Rebell said.
Another point Rebell underscored is that financial information is now more accessible to the mainstream population than ever, and that has made people aware, as they age, that all the tax savings they have enjoyed putting the money into these accounts, “will come back to hit them when they take the money out.”
“It is a reminder that the investments are tax-deferred, not tax-free. The balances we all see in our tax-deferred accounts are not the final numbers. They are still pre-tax. While many of us may assume our taxes will be lower when the money comes out, we don’t know if that will be true,” she said.
“What’s changed is the urgency. With tax rates from the Tax Cuts and Jobs Act, passed in 2017, expiring last year, ongoing federal deficit spending, and growing uncertainty around fiscal policy, Americans are right to wonder how much of what they’ve saved they’ll actually get to keep.”
Steve Sexton, CEO of Sexton Advisory Group
One generation stands out: Gen X
There are also generational differences, as Gen X is the group that worries most about taxes in retirement and is the least optimistic about the economy. The study found that an eye-popping 79% (up from 66% last quarter) in this cohort “are concerned that continued market volatility could negatively impact their long-term financial plan.” In comparison, millennials, Gen Z, and boomers share similar concerns, at 74%, 71%, and 59%, respectively.
Americans in the so-called “sandwich generation” also often have a lot on their plate, having to care for both their aging parents and their children, while also trying to take care of themselves.
As LaVigne pointed out, Gen X Americans are at a critical time for preparing for retirement. They are likely starting to think about what their tax situation will be like in retirement.
“If they are going to use strategies like Roth Conversions or accumulate savings in a tax-advantaged HSA, now is the time. They are also at a pivotal time when market conditions can have a big effect on their retirement outcomes,” he said.
In addition, a mere 25% of this generation believes now is a good time to invest, compared to 39% of Gen Z, 40% of millennials, and 32% of boomers.
Sexton argued that Gen X is caught in a uniquely stressful position: they’re close enough to retirement to feel the urgency but haven’t yet locked in a strategy.
They also watched their portfolios take significant hits during the dot-com crash and the 2008 financial crisis, and they’ve navigated stagnant wages and a rising cost of living. Now they’re approaching retirement with real concerns about how market volatility and a higher tax burden could erode what they’ve built, he added.
“When people are too nervous to invest, they risk falling further behind on building the retirement income they’ll need. The core challenge for Gen X isn’t just managing taxes. It’s turning that anxiety into action before time runs out,” Sexton said.
What can Americans overall (and Gen X in particular) do to not have to worry about taxes for their future?
Experts agree: there’s no way to never worry about taxes. But some strategies can maximize savings while alleviating stress.
For instance, Allianz’s LaVigne said one strategy is to spread your assets across tax categories by using Roth IRA conversions, contributing to HSAs, and using other types of accounts.
“A tax adviser can help you to start planning now to create a tax-efficient strategy for your future,” he said.
In addition, for most Americans, the core issue is that the bulk of their savings sit in tax-deferred accounts like 401(k)s and traditional IRAs, said Sexton, and that money has never been taxed, which means every dollar you pull out in retirement is counted as ordinary income and taxed accordingly.
“If tax rates rise in the future, and there is a strong case that they will, you could end up paying significantly more to the IRS than you planned for,” he said, adding that the most powerful tool available today is the Roth conversion.
According to him, paying taxes on a portion of those funds now, while rates are still relatively low, allows that money to grow and be withdrawn tax-free later.
“It won’t make sense for everyone every year, but a phased conversion strategy done in coordination with a tax professional can meaningfully reduce your future tax liability,” he said.
Beyond that, spreading assets across different account types, including taxable brokerage accounts, tax-deferred accounts, and tax-free accounts like Roth IRAs or HSAs, gives you the flexibility to control how much taxable income you draw in any given year of retirement, he added.
As for Gen X specifically, there is still time to make meaningful adjustments, but that window is narrowing.
“The worst move right now is letting concern about making the wrong choice become an excuse for making no choice at all,” Sexton added.
Sherman Standberry, CPA, CEO and managing partner at My CPA Coach, also recommended that Gen Xers look into “super catch-up” contributions or tax credits for kids and parents to provide immediate relief that can be redirected toward retirement shifts.
“To truly protect your future, start by creating a written tax plan now so you aren’t surprised by the IRS later,” Standberry said.
Bottom line: the time to act is now.
“Taxes will increase, and longevity will magnify all risks in retirement,” said Alex Duffy, independent Agent at Goldfinch Financial Group.
Duffy said that Americans can mitigate these risks by consulting a trusted financial advisor or a knowledgeable tax professional to protect their retirement funds with a sound tax strategy.
“Enjoying a retirement free from taxation, or at least lower taxation, requires strategic planning and must begin right away,” he added.
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