So many people think that when they get to retirement, they’re going to pay far less in taxes, and that might be true, but it also could be a myth. Let’s just look at some of the potential taxes you might have to pay in retirement.

Number one, you may still be employed. You say what? Retirement, still employed? Statistics show that 43% of all the people who are retired still have some kind of employment. That some kind of employment is going to bring in some kind of income. Now, it might not be what you’ve been making for the last 20 or 30 or 40 years, but that little employment could impact you in so many ways and you’re still going to have to pay tax on every single piece of employment or tax that you, where you bring in money.

You also need to remember something else too. You may bump yourself up in brackets. The 12% bracket stops at married, filing jointly a little around $90,000 or so. If you’re single around, a little over $45,000 is where the 12% stops. But when you go over that, if you have employment or other things that drive you up, you may have what’s called bracket creep. You may creep up into the bottom of the next bracket. So that’s something you always need to be aware of. Not only the bracket that you’re paying, but how are you within that bracket. Are you in the middle? Are you at the bottom of that bracket? Or are you at the very top of that bracket where you might push yourself up into a higher income bracket by bringing in money?

So many people in retirement, almost everyone has social security. Social security could also, number one, increase your bracket. but you could be in a position where maybe you don’t have to pay tax on social security, but you do pick up a job, you do sell something, you do have some kind of event and some other completely unrelated area, and that could cause your social security to be taxed.

You also could suffer an extra tax on Medicare. You say, how? Well Medicare Part B and Part D. If you make under around $200,000 if you’re married or under around $100,000, if you’re single, you’re probably not going to have to pay extra for Part B and Part D. However, if you go over those thresholds in retirement, now watch this, this is really the catch. If you go over those thresholds the last two years before you get onto Medicare, because they do a two-year look back to determine whether they’re going to increase your IRMAA tax is what it’s called when you’re getting Medicare Part B and Part D. So you may retire and think my income is going down. I don’t hit those thresholds for Medicare taxation to be raised. And you may be surprised by the fact that they’re going to do that to your look back to when you were working and when you were making more money.

Here’s another thing, capital gains. You say, where would I have capital gains in retirement? If you sell highly appreciated stock, then that could incur capital gains. And remember, capital gains are taxed based on your total taxable income. So you may push yourself into the bracket where you do have to pay 15% tax or 20% tax on capital gains. If you sell a house, a lot of people are selling a house here in California, moving somewhere else and buying a house and they’re saying, we saved a lot of money. Well guess what else they did? They had capital gains that they took out and they can’t do like the 1031 exchange and buy a piece of property there and wash their capital gains. They’ve got to maybe pay some capital gains by selling the house.

So the other thing is, if you sell a business. Many people have a business and they’ve worked for themselves and they might be self-employed or one or two employees at the end, they finally sell their business and they finally then realize, I may have capital gains tax that I have to pay from selling a business, so the taxes.

And then the biggest thing we haven’t even talked about. The biggest thing is at 73, even if you don’t need any of that money out of your IRAs or your 401ks, the government’s going to knock on your shoulder and their plan requires you at 73 to start paying what’s called required minimum distribution. Now, let me explain what that means. It’s required. There’s a minimum and you have to take the distribution. It’s real plain. Just look at each of those three words. But calculating it is very difficult because the calculation is never a percentage and it changes every year based on what’s called the Uniform Life Expectancy Table. In other words, you’re going to have to take out more and more and more as you get older when maybe sometimes you are spending a little bit less money.

So taxes, you’re going to get hit by them. You might get hit by employment tax, by a bracket bump, by social security tax, by Medicare, by capital gains on a business or home or stock that you sell. And we all, if we live to 73 and we hope we all do, will get hit with required minimum distributions.

So the question is, what do we do about taxes? Okay, they’re going to come. You can cry about it, but they’re going to come. The government’s $34 trillion in debt, maybe 35 by the time you’re watching this show. You’re going to have taxes. The question is, what do you do about it? Well, I’m so happy to tell you that even if you don’t know it, you have a tax plan. It’s written by the government. And I’ll tell you, it’s written to their advantage with the required minimum distributions and the amounts and the brackets and all of those things, you could end up in retirement paying far more tax than you ever expected. Ed Slott known as America’s authority on IRAs and 401ks says that taxes are the biggest one item that will separate a retiree from their retirement dream.

So here’s the deal. You can have your own tax plan, a plan to attack the tax code and make it work in your favor. You’re going to have to pay them, but would it be okay to pay fewer? Now, one of the things we do for clients when they come into Mosley Wealth Management is we provide for them a tax report that takes what their taxable base is going to be in retirement and shows them the government plan and shows them a way that they can provide and develop with us their own tax plan so you can pay a lot less.

If you’d like to get ahold of that, give us a call *55-567-0933, and we can provide you a tax plan. We’d be glad to talk to you and work with you on that. Listen, if you like this content subscribe to our youtube channel and we’ll notify you when new info comes out. My goal in every show is if you’ll give me 8 to 10 minutes, I will do my best to increase your financial knowledge and help you ease into retirement