You did it.
You played the long game—saved aggressively, invested wisely, and now you’re standing at the doorstep of retirement. Maybe you’re already there, finally enjoying the fruits of decades of discipline. But here’s a plot twist nobody talks about at the company farewell party:
Retirement could be your most expensive tax season yet.
At JS Morlu, we’ve seen this surprise hit countless high-income earners and diligent savers like Bob, the lamp mogul from Fairfax. Bob thought his golden years meant lower taxes. Instead, he walked into a tax jungle of RMDs, IRMAA penalties, and capital gains booby traps.
Let’s break it down—so you don’t become the next Bob.
1. RMDs: The IRS’s Retirement Time Bomb
Once you hit age 73, the IRS mandates Required Minimum Distributions (RMDs) from your traditional IRAs and 401(k)s. That tax-deferred account you loved during your working years? Now it’s sending taxable income your way—whether you need the money or not.
Why RMDs can sting:
- They’re taxed as ordinary income
- They could push you into a higher tax bracket
- They might cause your Medicare premiums to spike (thanks to IRMAA)
- They may increase the portion of your Social Security benefits that get taxed
What to do:
Start planning in your early 60s. Strategic Roth conversions now can reduce future RMDs. You’ll pay some tax today but possibly dodge bigger bills later. Think of it like pulling weeds before they overrun your financial garden.
2. Surprise! Your Social Security Might Be Taxed
Yes, that monthly Social Security check you waited years to claim? Up to 85% of it could be taxable, depending on your total income.
Let’s say Terry, the invisible sock entrepreneur, receives $3,000/month in Social Security. Add in $10K from part-time consulting and another $15K in RMDs? Boom—he’s over the income threshold, and his Social Security gets partially taxed.
Avoid Terry’s fate:
Work with a tax advisor who understands the “provisional income” formula. Timing your withdrawals and benefits, or rebalancing your taxable and tax-free income streams, can reduce your tax burden dramatically.
3. IRMAA: The Medicare Premium Penalty Nobody Mentions
Have a great income year and two years later, your Medicare premiums jump? That’s IRMAA (Income-Related Monthly Adjustment Amount), and it can hit hard.
Triggers include:
- RMDs
- Roth conversions
- Selling an appreciated asset
- One-time windfalls
Solution:
Plan your income proactively. At JS Morlu, we map out multi-year income projections to keep clients just under IRMAA cliffs. And if your high income was due to a life change (like retiring or losing a spouse), you can sometimes appeal those surcharges.
4. Capital Gains Can Backfire
Downsizing your home? Selling investments to fund travel dreams? Those capital gains might cause:
- Higher overall income
- Increased IRMAA premiums
- A bigger slice of Social Security taxed
But here’s the good news:
There’s a 0% long-term capital gains bracket for certain income levels. If you can keep taxable income in check, you might sell appreciated assets tax-free.
It’s all about timing. Sell too much too fast and you’ll climb into the next bracket. Spread gains out over multiple years and you may save tens of thousands.
5. State Taxes Still Count—Even in Retirement
Many retirees overlook the impact of state taxes on their retirement income. Some states tax Social Security. Others hit your pension or retirement distributions.
Before relocating, compare states not just by sunshine or golf courses, but also by tax policy. JS Morlu helps clients project five- and ten-year tax impacts based on residency.
6. Your Filing Status May Change—And That Changes Everything
One of the hardest transitions in retirement is losing a spouse. Beyond the emotional toll, it often changes your tax filing status from “Married Filing Jointly” to “Single.”
What this means:
- Smaller standard deductions
- Faster entry into higher tax brackets
- Potentially higher taxes on the same income
Planning ahead helps.
We recommend reviewing estate and income strategies that hedge against future tax hikes due to a change in filing status.
7. Retirement Tax Planning Is Not DIY-Friendly
Let’s face it—between IRMAA cliffs, RMDs, capital gains windows, and evolving IRS thresholds, retirement tax planning isn’t a DIY job. A wrong move can mean thousands in avoidable taxes.
But with the right guide, you can:
- Maximize what you keep from Social Security
- Minimize Medicare surcharges
- Smooth your taxable income across years
- Avoid bracket jumps and tax traps
Let’s Protect the Wealth You Worked So Hard to Build
At JS Morlu, we believe your retirement years should be stress-free—not tax-surprise-filled. Whether you’re in your 50s planning ahead or in your 70s managing distributions, we help you build a tax-smart retirement strategy that works.
📞 Schedule your personalized retirement tax check-up today.
Let’s make sure your golden years shine brighter—and not get buried under a surprise tax bill.
