Taxes in retirement: A conversation with Ed Slott

Tax day is coming up, so this episode of the podcast focuses on how taxation changes when you retire. I wrote about this topic recently for The New York Times, and one of my sources for that story joins me this week - Ed Slott.

Ed is a CPA and a very well-known author and host of educational seminars on public television.

Ed likes to say that taxes don’t stop in retirement - they’re really just getting started. I’d say he’s right about that insofar as higher income retirees go - you’ll be paying taxes on part of your Social Security, and probably surcharges on Medicare premiums. Those aren’t technically taxes, but they sure feel like it when you’re paying them. Drawdowns from tax-deferred IRAs and 401ks are taxed as ordinary income…and possibly at high rates.

In the Times story, I reported on a study using IRS data that shows the tax burden for the majority of households actually falls in retirement. That means most middle and lower-income households. One reason taxes fall is that you’re not making payroll tax contributions. But income taxes tend to fall because total income is lower, and only part of Social Security is taxable.

I asked Ed to walk us through how taxes change in retirement. We also talked about the latest retirement legislation making its way through Congress - the Secure Act 2.0. This is legislation that has some implications for taxes in retirement, since it revises the rules for required minimum distributions and the way that Roth contributions can be made within a workplace retirement plan.

Click the player icon above to listen to the podcast. The program also can be found on Apple Podcasts and Stitcher.

Medicare now covers over-the-counter COVID-19 tests

Medicare is now providing up to eight free COVID-19 rapid tests for free. If you’re enrolled in Medicare Part B, just bring your Medicare card to a participating local pharmacy; tell the pharmacist you’re there for your free tests. It takes a minute to run through the paperwork, but it’s worth the wait. You can find more details on the Medicare website.

What I’m reading

Many of us want to age at home, but that option is fading fast . . . Inside a campaign to get Medicare to reverse course on a controversial new Alzheimer’s drug . . . How to tell if your financial adviser is overcharging you . . . How declining immigration hurts the nursing home labor force.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit retirementrevised.substack.com