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7 Inefficiencies on Rich Retirees' Tax Returns, Ep #389

Retirement Starts Today

Release Date: 02/24/2025

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A lot of retirees assume their tax situation gets simpler once they stop working, but that’s not always the case. There are plenty of ways high-net-worth retirees end up paying more than they need to—sometimes without even realizing it. 

Maybe it’s interest and dividend income getting taxed at higher rates, or IRA withdrawals happening earlier than necessary. Maybe it’s something as simple as missing the right way to report charitable giving. These things add up, and over time, they can quietly eat away at retirement savings.

Some of the biggest inefficiencies show up on tax returns in ways people don’t always expect. Social Security benefits taken too soon, mutual funds kicking off surprise capital gains, or estimated tax payments falling short and triggering penalties—it all matters. 

There are ways to structure income, investments, and withdrawals to keep more of what’s earned, but they take a little planning. The goal isn’t just to minimize taxes for the sake of it, but to make sure every dollar is working as efficiently as possible.

Most of these inefficiencies can be fixed with a few small adjustments. Some require a different way of thinking about income in retirement, others just mean taking advantage of tax rules that are already there. Either way, it’s worth a closer look. A little awareness now can mean thousands saved over the years. 

Outline of This Episode

  • (0:00) Inefficiencies on Rich Retirees' Tax Returns
  • (4:07) Top tax inefficiencies: Interest, dividends, and premature IRA withdrawals
  • (6:52) Charitable distributions, Social Security timing, and phantom capital gains
  • (9:33) Capital gains, charitable intent, and avoiding underpayment penalties
  • (12:24) Listener question: Travel spending habits of wealthy retirees
  • (19:05) Listener question: Callable CDs and interest rate risk
  • (21:16) Closing thoughts and practical takeaways

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