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If you’re a client of ours, we are already doing this for you. Please consider passing this article along to a newly minted retiree in your world.
Every year, we meet families who are a year or two into retirement and proud of how little tax they paid the year before. “This is the lowest we’ve paid in taxes in more than a decade,” they’ll say. “Isn’t this great?”
It feels like a win. However, it reflects one of the most common misconceptions we see in real retirement planning.
There is a window—typically from the early sixties to the early seventies—when retirees may not have turned on Social Security, have not elected pension income, and have not yet reached the age for required minimum distributions. Income is unusually low during this period. That is exactly why the tax bill looks small, and that is exactly why these years matter so much.
For our clients, these are not quiet years. They are strategic years. The low tax bill is less valuable than the low tax bracket.
This is when we help families make tactical decisions that take full advantage of those low brackets. The goal is not to minimize next year’s taxes, but to shape the next decade. We want the maximum dollars to pass through the lowest brackets, not the fewest dollars taxed at the lowest rates. The work is forward-looking: What can we do now so that future years are stronger, smoother, and more tax-efficient?
Because once pensions begin, Social Security starts, and RMDs arrive, tax brackets often jump right back to working-year levels. This is when people not working with a planner look back and say, “We wasted eight years of 15 or 18 percent brackets, and now we’re paying far more.”
We never want our clients to experience that regret. We map these years carefully, fully-integrated with your CPA partner.
We build detailed income plans that show exactly what their income will look like over the next several years, so the tax plan and lifestyle plan stay aligned.
Questions We Encourage Families to Consider Now
- How long will I realistically be in lower tax brackets, and how should I use those years?
- What income sources will automatically begin later, and how could they change my tax situation?
- What steps today will meaningfully reduce the tax burden I face at 73, 75, and beyond?
If you are a client of Napier Financial, we initiate this fully-integrated financial plan for you alongside your CPA.
If you do not yet work with our team, have you had this conversation with your current advisor? If you have not, why have they not initiated the conversation?
These are the decisions we help families make every day. The key is recognizing that this window is real and making sure it does not go to waste.
