Planning for Taxes in Retirement: EDU #2537

If you would like to skip over Chris and Jake chatting about Jake’s recent trip to Ireland you can go to 7:00.

Chris’s Summary
I am joined by Jake today, while Jim is traveling, to examine taxes in retirement. We look at why not all taxes belong in the Minimum Dignity Floor. We also consider the trade-offs between Roth conversions and IRMAA, and the role of a cash reserve during the delay period in protecting both essential and discretionary spending when markets move against you.

Jim’s “Pithy” Summary
While I’m traveling, Chris and Jake dig into taxes in retirement. The Minimum Dignity Floor comes up, and a lot of folks get part of this wrong. It’s about protecting the basics with secure income. Start dragging every tax expense into it and that’s when you end up purchasing annuities you don’t need.

Roth conversions and IRMAA can trip people up too. Skip the conversions and you dodge the tax bill for now—but that just means bigger RMDs and bigger taxes later. Convert more today and you feel the hit right away, sometimes with IRMAA stacked on top. There’s no move that makes it painless, and with larger portfolios IRMAA simply becomes part of life.

The delay period brings up that old 3% safe withdrawal. The problem is what it puts at risk when markets stumble. It’s not the basics that get cut first—it’s the Fun Number. That’s why Chris and Jake talk about keeping a moat. A pool of safe assets would give you the security and confidence to keep enjoying retirement even if the markets dip.

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