Why Your Taxes in Retirement Might Surprise You

“I thought retirement meant lower taxes. I didn’t realize they could actually go up.”

That’s what a couple told me recently when we sat down to review their retirement plan.

They had done everything right. Years of hard work, saving diligently, and investing wisely had brought them to the point where retirement was finally within reach. They were ready for more freedom, more time with family, and fewer responsibilities.

But what they weren’t ready for was the surprise waiting in their tax bill.

The Retirement Tax Shock

Like many people, this couple assumed their taxes would drop once the paychecks stopped. Instead, as we laid out their income sources, the picture looked very different:

• Required Minimum Distributions (RMDs) from their retirement accounts pushed up their taxable income.

• Social Security benefits were taxed at higher levels than they expected.

• Investment income added another layer to their tax liability.

• Medicare surcharges crept in, raising healthcare costs at the very moment they wanted stability.

The result? Their annual tax bill was nearly as high as when they were working full-time. The surprise on their faces was something I’ve seen many times before.

The Common Misconception

Most people expect retirement to mean lower taxes. Fewer hours, fewer paychecks, fewer obligations; why wouldn’t your taxes shrink too?

But in reality, the IRS doesn’t step back when you retire. In fact, retirement can trigger new kinds of taxable events that catch people off guard. Without planning, taxes can quietly eat away at the very nest egg you’ve spent decades building.

The Good News

With proper planning, you can reduce the impact of taxes and keep more of what you’ve worked so hard to save. Smart strategies can help you:

• Create flexibility with how and when you draw income.

• Manage RMDs and avoid larger-than-expected distributions.

• Optimize Social Security timing to keep taxes in check.

• Minimize Medicare surcharges by coordinating income sources carefully.

With the right approach, you don’t have to let the IRS decide how much of your retirement you get to keep.

Don’t Wait Until It’s Too Late

If you’re within five to ten years of retirement, now is the time to get ahead of this. Waiting until the first RMD hits or Social Security starts is often too late to make meaningful adjustments.

Planning early gives you more choices, more flexibility, and more confidence that your money will last.

Ready to Build Your Tax-Smart Retirement Plan?

If you’re unsure how taxes will affect your retirement income, let’s connect. Together we can build a tax-smart plan that keeps more money in your pocket and gives you the confidence to enjoy retirement without unwelcome surprises.

Reach out today and let’s start creating a plan that works for you.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material