I Wish I'd Known this at 65

Tom walked into my office last April with a simple question: “Can you help me figure out why my tax bill is so high?”

He was 75. Retired for three years. Living comfortably on Social Security, his pension, and withdrawals from his IRA. No major financial stress. Just... confused about why his taxes kept climbing.

I pulled up his return.

His required minimum distribution that year was $52,000. Combined with his Social Security and pension, his taxable income hit $118,000. He was paying about $19,000 in federal taxes, plus another $9,600 in Medicare IRMAA surcharges because his income crossed the threshold.

(Note: Tom's IRMAA surcharge reflects his full Medicare MAGI, which included tax-exempt municipal bond interest and other investment income not captured in his $118,000 taxable income figure.)

“When did you start thinking about retirement taxes?” I asked.

He paused. “I guess... when I retired? My advisor said I was fine. Just take the RMDs and enjoy life.”

“Did anyone talk to you about Roth conversions when you were 65?”

“Maybe? I remember someone mentioning it. But I was still working part-time, and it felt like I’d be paying extra taxes for no reason. I figured I’d deal with it later.”

Later had arrived. And it was expensive.

Here’s what Tom didn’t realize: between ages 65 and 72—before RMDs started—he’d had a seven-year window to convert portions of his traditional IRA to Roth at the 22% tax bracket. If he’d converted $60,000 per year during those years, he’d have paid about $13,200 annually in federal tax on the conversions.

Total cost over seven years: roughly $92,000.

Instead, by waiting, he’d take RMDs for the next 15-20 years at higher effective rates—likely 24-32% federal, plus IRMAA surcharges, plus higher Social Security taxation.

Projected lifetime tax cost: over $270,000.

The difference? About $180,000.

Same money withdrawn. Different timing. Completely different outcome.

“Why didn’t anyone make this feel urgent?” he asked.

That’s the question that stuck with me.

Most people don’t ignore retirement taxes because they’re careless. They ignore them because taxes don’t feel urgent until suddenly they are.

Market volatility feels immediate. You see your balance drop, your stomach tightens, and you think about adjusting. Taxes? You pay them every year. You file, and you move on. Nothing about that process creates urgency.

During working years, taxes are simple: earn more, pay more; earn less, pay less. The cycle resets every April. Planning focuses on accumulation: balances, returns, and contribution limits. Taxes feel like a nuisance, not a design constraint.

Pre-tax deferrals reinforce this. Contributing to a traditional 401(k) reduces your current tax bill, which feels like winning. The tradeoff—future taxation—is invisible. No immediate cost. No emotional feedback. Over time, you internalize a dangerous belief: deferring tax is the same as reducing tax.

It isn’t. But because the bill hasn’t arrived yet, the distinction doesn’t feel important.

The brain treats retirement taxes as theoretical because they depend on unknowns: future income, future rules, and future longevity. When something is both inevitable and undefined, humans naturally discount it. It’s not procrastination; it’s rational neglect, shaped by how uncertainty gets processed.

There’s also complexity. Retirement tax rules don’t follow the same logic as working-year taxes. RMDs, IRMAA thresholds, Social Security taxation formulas, and provisional income calculations. Most people correctly sense they don’t fully understand the system. When faced with complexity and no immediate deadline, the default response is: “I’ll deal with this when I’m closer.”

So people tell themselves, “I’ll have more clarity later,” or “My advisor will tell me if it matters.”

The problem? Retirement is when taxes stop being something you respond to and start being something you live inside.

In retirement, taxes become structural. They’re no longer driven by what you choose to earn, but by how your assets are organized and when rules force income out. Optional income becomes required income. Flexibility narrows. Reversible decisions become permanent. This is what people don’t see coming.

By the time retirement begins, most tax outcomes are already locked in, not by strategy, but by earlier inertia, account types, contribution history, and deferral patterns. When RMDs start at 73, you realize your tax situation isn’t something you can reshape. It’s something you can only manage.

This is why retirement tax conversations miss the mark when they focus on optimization—rates, brackets, deductions—as if the problem were mathematical. The biggest driver of retirement tax outcomes isn’t math, it’s timing. A decent decision made early matters far more than a perfect decision made late. Think of it as the difference between compound interest and compound taxation. Just as compound interest boosts your savings over time, acting early on taxes can significantly reduce your lifetime tax burden. The earlier you act, the more you benefit.

Once retirement income becomes forced rather than discretionary, your options collapse. Planning becomes reactive. You’re not choosing outcomes; you’re responding to them. And that’s where frustration sets in. Not because taxes exist, but because the window to influence them has quietly closed.

What people regret isn’t paying tax. It’s losing flexibility. The regret follows a pattern:

First, surprise: “I didn’t realize it would work this way.”

Then confusion: “No one explained this to me.”

Finally, resignation: “I guess this is just how it is.”

But the system didn’t change. The structure was always there. It just didn’t matter, until it did.

Tom sat across from me, looking at the numbers.

“So I waited too long?”

Not entirely. He still had some options: Qualified Charitable Distributions to reduce RMDs, strategic timing of large expenses, and some Roth conversions in lower-income years. But the big moves? The ones that would have saved six figures? Those required time he no longer had.

“The best time to think about this was at 65,” I told him. “The second-best time is now.” Tom’s shoulders slumped as he realized seven birthdays had cost him six figures. He nodded, then asked the question I hear constantly: “Why doesn’t everyone talk about this?”

Because it doesn’t feel urgent until it’s too late to do much about it.

Retirement taxes aren’t a rate problem. They’re a timing problem.

The question isn’t “How do I lower my taxes?” It’s “When do I still have choices?” Not “What’s the best strategy?” but “Which decisions lock future outcomes in place?”

Tax planning done early doesn’t feel dramatic. There’s no urgency, no emotional payoff, and no visible crisis being solved. It often feels premature, or even unnecessary. But that quietness is exactly what makes it powerful. It preserves optionality before optionality becomes scarce.

Tax planning done late feels intense and urgent, but constrained. You scramble for solutions precisely because so few are left.

Here’s the specific window that matters most:

Ages 62-72: The Gap Years

This is when you have maximum flexibility:

• You can control your income (not working full-time anymore)
• Social Security might not have started yet (or is just beginning)
• RMDs haven’t kicked in (those start at 73)
• You’re likely in lower tax brackets than you’ll be later
• You can still make large Roth conversions without triggering IRMAA

This window closes fast. Every year you wait, the math gets worse. At 73, RMDs start, and your income is no longer fully discretionary. By 75, you’re likely stuck in whatever tax situation your earlier decisions created. By 80, you’re managing consequences, not preventing them.

The cost of waiting isn’t subtle. For someone with a $1 million IRA:

Option 1: Convert $70K/year ages 65-72 (gap years strategy)

• Pay roughly $15,400/year in federal tax at 22%
• Total paid during conversions: ~$108,000
• Future RMDs are smaller, taxed at lower rates
• Lifetime tax cost: ~$180,000

Option 2: Wait, take RMDs starting at 73

• RMDs start at ~$40K/year and grow
• Taxed at 24-32% as brackets compress and rates potentially rise
• IRMAA surcharges likely
• More Social Security gets taxed
• Lifetime tax cost: ~$320,000+

Same money. Different timing. $140,000+ difference.

Most people who wait aren’t indifferent to taxes. They care deeply. They just assumed caring later would work as well as caring sooner. It doesn’t.

The goal isn’t to obsess over tax minutiae or chase perfect answers decades in advance. It’s simply to recognize that some problems are easier to prevent than fix, and time is your most valuable planning asset.

Tom left my office that day with a plan. Not perfect, but better than doing nothing. He understood what the delay had cost him, and why he couldn’t get those years back.

“I wish I’d known this at 65,” he said.

I hear that almost every week.

If you’re between 60 and 72 right now, you still have time. But that window is closing.

What’s your current age and your traditional IRA balance? I’m curious where people are in this timeline and whether the gap years concept resonates.

—Phil