I've Seen Your Tax Return. Here's What Worries Me.

Every spring, I sit down with a stack of tax returns. My clients are mostly retirees or people within a few years of retirement. By now, I’ve reviewed enough 1099s and IRA statements to spot the patterns before I even get to the numbers.

Most of my clients did everything right. They saved. They worked with advisors. They built real wealth over decades of discipline. And yet, year after year, I see the same quiet problems hiding in their paperwork.

None of them involves bad decisions. Most of them involve good ones, made over a lifetime, with consequences nobody warned them about.

Pattern One: The Timebomb With a Timer on It

Here’s what I notice first when I open a return for a retiree in their late sixties: the income looks manageable. Social Security, a modest IRA withdrawal, and some interest income. The tax bracket is low, often 12%, sometimes 22%. Everything looks fine.

Then I pull up the IRA balance.

For many of my clients, that number falls between $600,000 and $1.5 million. And that’s where I start doing the math they haven’t done yet.

Starting at age 73, the IRS requires account holders to withdraw money, even if they don’t need it. The required amount increases as a percentage each year. By their mid-seventies, a client with a $1.2 million IRA may have a minimum distribution of $50,000 or more annually. By the early eighties, this can exceed $70,000.

Stack that on top of Social Security, and a couple that were comfortably in the 12% bracket are suddenly pushing into 24% or higher. Medicare premiums jump because of IRMAA surcharges. More of their Social Security becomes taxable. The 3.8% net investment income tax can come into play.

Nobody made a mistake. The IRA grew exactly as intended. The timebomb was always in the design.

Pattern Two: The Safe Money That Isn’t Working

The second thing I notice is where the non-IRA money is sitting.

A surprising number of clients have substantial balances in savings accounts, money market funds, or short-term CDs. Sometimes it’s $200,000. Sometimes more. When I ask about it, the answer is usually some version of: “ That’s my safe money.”

Safe from what, exactly, is the question worth asking.

Cash protected from market volatility also loses ground to inflation yearly. With 3% inflation, $300,000 in a savings account loses about $9,000 in purchasing power each year. This happens quietly and doesn’t show up in the return. The balance remains the same, so it doesn’t feel like a loss. But each year, the money buys less.

The irony is that the clients most focused on protecting their money are often the ones most exposed to this particular risk. They moved money to safety and then left it there, sometimes for years, without asking whether it was actually doing a job.

Pattern Three: The Coordination That Never Happened

Here’s something I notice that doesn’t show up in the numbers at all: the advisor and the CPA are almost never talking to each other.

The financial advisor manages the investment accounts. The CPA files the return. Both are doing their jobs. But the ten-year tax picture falls between those two jobs, and nobody owns it.

The advisor isn’t naturally focused on the tax consequences of a Roth conversion. The CPA isn’t naturally thinking about income sequencing or annuity structure. And the client, reasonably, assumes that if something important needed to happen, one of their professionals would have mentioned it.

Often, nobody does.

The RMD projection doesn’t get run. The gap-year window isn’t identified. The Roth conversion opportunity passes year after year until the RMDs begin, and the options narrow significantly.

This isn’t a failure of competence on anyone’s part. It’s a structural gap. And it costs real money.

Pattern Four: Enough Money, Not Enough Permission

The last pattern is the one that stays with me longest.

I have clients with $1.5 million or $2 million who are watching what they spend at the grocery store. Not because they have to. Because they’re afraid to trust their own plan.

Every market dip sends them back to the spreadsheets. Every headline about inflation or recession prompts a call. They have more than enough. Still, they don’t feel that way. No one has ever shown them, in clear terms, that their income is secure no matter what the market does next week.

The money is there. What’s missing is the architecture that makes it feel safe to use.

I’ve sat across from people with genuine wealth who haven’t taken a real vacation in years, who won’t turn the thermostat up in winter, who feel guilty spending on their grandchildren. They are not poor. Their plan doesn’t have an income floor. Without one, every dollar spent feels like a dollar closer to running out.

That’s not a math problem. It’s a structure problem. But structure is fixable.

The Window Most People Are Sitting In

What makes all four of these patterns genuinely frustrating to observe is that most of my clients are already sitting in the window of time when they can still be addressed.

Between retirement and age 73, income drops. The paycheck stops. RMDs haven’t started. For most people, taxable income is lower than it has been in decades. Often, it is lower than it will ever be again.

That window is when Roth conversions make the most sense. You pay taxes on the converted amount now, at today’s bracket. That money grows tax-free, comes out tax-free, and is never subject to RMDs. A couple converting $40,000 to $50,000 per year over eight years might spend $60,000 to $80,000 in taxes to do it. In exchange, their RMDs shrink, their bracket in late retirement stays lower, their Medicare premiums stay flat, and their heirs inherit a Roth instead of a tax bill.

The math almost always favors acting. The question isn’t whether that IRA money will eventually be taxed. It will. The only question is when and at what rate.

That same window is when income structure decisions matter most. If you’re going to build a guaranteed income floor using an annuity, doing it before RMDs begin lets your income plan and tax plan work together. You know what’s coming in. You know what bracket you’re in. You can make coordinated decisions instead of reactive ones.

Most people don’t know they’re sitting in this window until it has narrowed or closed.

What the Return Is Really Telling You

I think about tax returns differently than most CPAs. Filing is the minimum. Understanding what the numbers are telling you about the next decade, that’s the real work.

What those returns show me, year after year, is that the clients who end up in the best position in late retirement aren’t always the ones who earned or saved the most. They’re the ones who had a structure. An income floor that didn’t depend on market conditions. A Roth balance that gave them tax flexibility. A plan where their advisor and their CPA were working from the same projection.

The clients who built that structure early sleep better. They spend more freely. They stop checking their balances every morning. They take the trips they’ve been putting off.

The ones who didn’t build it often have plenty of money and very little peace of mind.

That gap between having enough and feeling like you have enough is not a personality trait. It’s a design flaw. And in most cases, it’s still fixable.

If you’re somewhere between retirement and 73 right now, or within a few years of retiring, the most useful thing you can do isn’t to review your investment returns. Instead, run a forward projection on your IRA. See what your tax picture looks like at 75, at 80, at 85. Then ask whether your income plan and tax plan have ever been in the same conversation.

If they haven’t, that’s where to start.

Peace of mind in retirement isn’t an accident. It’s arithmetic.

If any of these patterns sound familiar, the window to address them is probably open right now. The gap years are a finite resource. A forward projection on your IRA takes about an hour with the right person and can change the entire shape of your retirement tax picture. If you'd like to run those numbers together, you can find me at phil.cpa.