What the Wealth Podcast #80: Taxes

Taxes are one of the most significant risks to your retirement, and without proper planning, you could be facing a tax bomb. That’s what this week’s episode of What the Wealth is all about.

Tax Bomb

You could be facing a tax bomb when it comes to your retirement savings. If you’ve been saving for retirement in a 401(k), Traditional IRA, or other tax-deferred retirement account, you had some advantages. You got tax deductions for the contributions, and the money grew tax-deferred.

When it comes time to withdraw money from those accounts for retirement income, that’s when the tax bomb goes off. You haven’t yet paid taxes on that money, and the IRS wants its cut.

Those withdrawals are taxed as ordinary income, so if you have $1 million, 30% to 40% of that is going to the IRS, more if you live in a state with income tax. So you’re looking at $600,000 to $700,000 to live on, again, less if you’re in a state with income tax.

Of course, not all of that is due at once, so you’re unlikely to be pushed into a higher tax bracket, but you don’t have as much retirement income as you thought.

Tax Planning

As financial planners, we don’t prepare or file taxes, but we do a lot of tax planning for our clients. As you can see, it’s critical to understand how taxes impact your retirement income and to plan accordingly.

We’re just passed the deadline to file 2022 taxes, so now is a good time to determine what changes and adjustments you can make for 2023.

If you owed taxes, consider saving more into tax-deferred retirement accounts. Don’t worry about the tax bomb down the road; we can make moves to lessen that later. Right now, you need to reduce your taxable income so you don’t get stuck with an IRS bill (or such a big one) next year. Contributing to an HSA can reduce your taxable income as well.

If you’re charitably inclined, you can give money to an organization that aligns with your core values, perhaps through a donor-advised fund. You can contribute to Roth accounts by doing a Roth conversion. All of these can give your stool an additional leg.

It’s important for your financial advisor to look at your financial picture and decisions through a tax lens. What do things look like if you retire a year earlier than you had planned? What do things look like if you start taking Social Security at age 65 rather than 67? How can you structure your charitable donations to give you the biggest tax advantage?

If you have questions about taxes, reach out to me at Jonathan@whatthewealth.com.

Or call the office at 865-251-0808 . If you’re not currently a client, we can do a free assessment of your 2022 tax return. If you’re presently a client, reach out with your 2022 tax return or put us in touch with your CPA so we can give you advice based on your most current numbers.


And check out my new YouTube channels. The videos are short, walk and talks, where I take a stroll and talk about whatever’s on my mind. I have a Paradigm Wealth Partners channel, too, and have recently created an Instagram page.

Listen to the Full Episode:

What You’ll Learn In Today’s Episode:

  • The biggest risk to your retirement (and why).
  • The most common mistake people make when it comes to saving, investing, and taxes.
  • The taxes that are due when you take money out of retirement savings.
  • Various ways you can start now to positively impact your tax situation next year.
  • Where many advisors fall short when it comes to tax planning.
  • How we help our clients with tax planning.

Ideas Worth Sharing:

  • “Some of that money you saved will be due to the IRS when you make those withdrawals.” – Jonathan Bednar
  • “It’s important to understand how taxes impact your planning, income, and spending.” – Jonathan Bednar
  • “We look through a tax lens to help make decisions or help you be aware of decisions you’re making so that you have the full picture when you’re making those decisions.” – Jonathan Bednar

Resources In Today’s Episode:

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