The Retirement Tax Surprise: What Boomers Need to Know Before It’s Too Late
You did it.
You worked hard, saved consistently, and now you're either enjoying retirement—or it's just around the corner.
You’ve been told for years to put money into retirement accounts, defer taxes, and wait for the golden years. But wait… no one told you?
Retirement might be your highest-taxed phase yet.
Seriously.
Between Social Security income, Required Minimum Distributions (RMDs), capital gains, Medicare premium adjustments, and even state taxes… it can feel like a financial ambush.
Let’s break down why this happens—and what you can do now to soften the blow.
1. RMDs: The Tax Bomb That Starts at Age 73
If you’ve saved in a traditional IRA or 401(k), you’ve been enjoying tax deferral for years. But the IRS eventually wants their cut.
That’s where RMDs come in.
Once you hit age 73, you’re forced to take money out of your retirement accounts—and those withdrawals are taxed as ordinary income.
Why it matters:
Your RMD could bump you into a higher tax bracket.
It could trigger higher Medicare premiums (thanks, IRMAA).
It might even impact how much of your Social Security is taxed.
What to do now:
Consider Roth conversions in your 60s to reduce your future RMDs. Yes, you’ll pay tax now, but it could save you significantly down the road.
2. Social Security Isn’t Always Tax-Free
Up to 85% of your Social Security benefits could be taxable depending on your total income—including investment income, part-time work, and yes, those RMDs.
Here’s the trap:
You think you're getting $3,000/month from Social Security.
But add in just a few thousand from another source, and suddenly, a big chunk of that is taxable.
Solution:
Work with an advisor who can map out income sources before you trigger your benefits. Sometimes, waiting a year or two—or rebalancing your withdrawal strategy—can dramatically reduce taxes.
3. IRMAA: The Medicare Surcharge You Didn’t See Coming
This one stings.
You file your taxes, enjoy a good year, and then boom—two years later, your Medicare premiums go up.
That’s IRMAA (Income-Related Monthly Adjustment Amount).
If your income exceeds certain thresholds, you’ll pay more for Medicare Part B and D—even if the bump was from a one-time event like a Roth conversion or asset sale.
Proactive planning = lower premiums.
A well-timed income strategy can keep you just under IRMAA thresholds. And in some cases, you can file an appeal based on a “life-changing event” like retirement or loss of income.
4. Capital Gains & Selling Assets in Retirement
Selling your long-held investments? Downsizing your home?
These capital gains could push your income higher than expected—and cause a domino effect with taxes, Medicare, and Social Security.
Even if you’re “living off savings,” your tax return may tell a different story.
Pro tip:
There’s a 0% capital gains bracket for certain income ranges. With the right strategy, you can sell appreciated assets without triggering taxes—but timing is everything.
5. State Taxes Still Matter—Even in Retirement
Not all states treat retirees the same.
Some tax Social Security, some don’t. Some offer pension exemptions, others tax everything.
If you’re thinking about relocating in retirement, don’t just compare housing costs. Compare tax policies. And if you’re staying put? Learn how your current state impacts your bottom line.
6. Your Filing Status Can Change Your Tax Life
A tough but important truth: Losing a spouse in retirement often means going from “Married Filing Jointly” to “Single.”
Which means:
Lower standard deductions
Tighter income thresholds
Bigger tax bills on the same income
If you’re newly widowed or preparing for that reality, it’s worth building a multi-year tax strategy now—not later.
7. You Don’t Have to Navigate This Alone
The retirement tax landscape is not DIY-friendly.
Rules change. Thresholds shift. And one wrong move (or missed opportunity) can cost you thousands.
But with the right guide, you can:
Smooth out income across years
Reduce your lifetime tax bill
Maximize your Social Security and Medicare benefits
And keep more of the money you worked so hard to earn
Let’s Build a Tax-Smart Retirement Plan—Together
You planned for retirement.
Now it’s time to plan for retirement taxes.
We’re here to help you make smart, proactive decisions that reduce surprises, minimize your tax burden, and give you the peace of mind to enjoy the years ahead.
Contact our office today to schedule a retirement tax check-up.
You’ve done the saving—now let’s make sure you keep more of it.
We are here to help you succeed!
Contact Coker James to begin your journey.
STAY INFORMED!
Receive the latest in tax and small business updates that affect your finances and growth prospects.
Location
“Archer Lewis” is a brand name under which Archer Lewis, LLC, its subsidiary entities, and Jarrard, Nowell & Russell, LLC provide professional services. Archer Lewis, LLC, its subsidiary entities, and Jarrard, Nowell & Russell, LLC practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable laws, regulations and professional standards. Coker James Accountants, LLC is a subsidiary entity of Archer Lewis, LLC. Jarrard, Nowell & Russell, LLC is a licensed independent CPA firm that provides attest services and Archer Lewis, LLC and its subsidiary entities provide bookkeeping, tax and advisory services. Archer Lewis, LLC and its subsidiary entities are not licensed CPA firms. The entities practicing under the “Archer Lewis” brand are each individual firms that are separate legal and independently owned entities and are not responsible or liable for the services and/or products provided by any other entity providing services and/or products under the “Archer Lewis” brand. Our use of the terms “our firm” and “we” and “us” and terms of similar import, denote the alternative practice structure conducted by Jarrard, Nowell & Russell, LLC, and Archer Lewis, LLC and its subsidiary entities.