A Zero Tax Strategy for Retirees: How to Access $126,000 Tax-Free Every Year

Most retirees assume that paying taxes in retirement is inevitable. But there is a way for many married couples to access up to $126,700 in income each year—completely tax-free. This isn't a gimmick. It's a smart, tax strategy that leverages long-term capital gains treatment and the standard deduction. And yet, very few people are taking advantage of it. As fee-only financial planners working with clients in Raleigh & Charlotte we've used this strategy to help our clients pay zero income tax.

The Math Behind the Zero Tax Strategy

As of June 2025, here’s how the numbers work for a married couple filing jointly:

$30,000 – Standard deduction for married couples
$96,700 – Top of the 0% long-term capital gains tax bracket

Add those together, and you can generate up to $126,700 in income per year without owing a penny in federal income taxes.

But there’s a key requirement: The bulk of your income must come from qualified long-term capital gains, meaning you need to hold investments for more than one year and sell them strategically.

4 Steps to Build Your Own Zero-Tax Retirement Strategy

If you're aiming to take full advantage of this tax-free income threshold, here’s the blueprint we recommend:

Max Out Retirement Accounts Early. Especially Roth IRAs and Roth 401(k)s. These accounts allow for tax-free withdrawals in retirement and give you flexibility when coordinating your income sources.
Build a Taxable Brokerage Account. We prefer using low-cost ETFs in these accounts to maximize tax efficiency and diversification. These accounts become powerful tools when used alongside retirement accounts.
Hold Investments for Over a Year. Unless you’re doing tax-loss harvesting, the goal is to earn long-term capital gains treatment on your investment growth.
Realize Long-Term Gains Strategically. Sell just enough appreciated investments each year to stay under the 0% capital gains bracket. That means carefully tracking gains, dividends, and interest so you don’t overshoot the tax-free window.

Why Taxable Accounts Matter More Than You Think

Taxable brokerage accounts are often overlooked but offer several big advantages for retirees:

They have no early withdrawal penalties
Are not subject to required minimum distributions (RMDs)
Get preferential tax treatment on qualified dividends and long-term gains

Used properly, they give you a ton of flexibility in early retirement—especially when paired with Roth accounts.

Real-Life Example: Bob & Mary’s Zero-Tax Retirement

Be sure to watch the video above as we walk through an actual client scenario for clients who retired at age 62.

Is This Strategy Right for You?

Not everyone can use this exact playbook—but a customized version may work for your situation. If you're retiring soon, have significant brokerage assets, or want to delay Social Security, this strategy could save you thousands each year. We also use variations of this strategy to fill up the 10% or 12% tax brackets depending on specific facts and circumstances.

If you'd like to explore the benefits of working with a fee-only fiduciary advisor we invite you to give Ark Royal Wealth Management a call!