Episode summary
Cody Garrett and Sean Mullaney: 'For Most Americans, You're Going to Pay Less Tax in Retirement'
The Long View
· · 56 min · Hosts: Christine Benz, Amy Arnott · Guests: Cody Garrett, Shawn Melany
Summary
Cody Garrett and Sean Mullaney argue that tax planning before and during retirement should be treated as a sequence problem, not a fear-driven guessing game. They define “early retirement” as any time before Medicare eligibility, typically before age 65, and say many Americans retire before then voluntarily or involuntarily. Their core thesis is that retirees often pay less tax than they expect, especially when they use traditional accounts strategically, keep taxable income low, and treat Social Security, Roth conversions, and required minimum distributions as interconnected decisions.
They push back on the idea that the 4% rule, Monte Carlo outputs, or standalone Roth calculators should drive decisions in isolation. Instead, they emphasize spending taxable accounts first, using asset location to place bonds in traditional accounts and stocks in taxable accounts, and making Roth conversions in the years that offer the most flexibility. They say the best conversion window is often the mid-to-late 60s, before Social Security starts and before RMDs begin.
On future tax policy, both guests argue that retirees should not assume taxes will inevitably rise. They say recent policy has generally been favorable to retirees, that politicians have incentives to protect older voters, and that the more useful question is not whether rates rise, but whether a retiree’s taxable income rises. They also note that RMD rules are now more generous than many advisers remember, with RMDs starting at 75 for those born in 1960 and later.
Key takeaways
- The guests say most Americans will likely pay less tax in retirement than they do while working, especially if they use traditional accounts well.
- They argue the best Roth-conversion years are often the “golden years” between Social Security claiming and RMDs, when income planning is most flexible.
- They say taxable brokerage assets are especially valuable for early retirees because spending them first can keep income low and preserve ACA premium tax credits.
- They caution that bonds usually belong in traditional accounts because bond interest is tax-inefficient and can raise future RMDs.
- They say RMDs are less punitive than many people think because the higher standard deduction, delayed starting age, and revised IRS tables have reduced the burden.
Notable quotes
“for most Americans, you're going to pay less tax in retirement”
“the world tends to be our oyster”
“taxation in retirement is relatively light”
“the best Roth conversion years”
How the episode opens
Please stay tuned for important disclosure information at the conclusion of this episode. Hi and welcome to the long view. I'm Christine Benz, director of personal finance and retirement planning for Morning Star.
And I'm Amy Arnot, portfolio strategist for Morning Star. Our guests on the podcast today are Cody Garrett and Shawn Melany. They're both adviceonly financial planners and they're the co-authors of a new book called Tax Planning to and Through Early Retirement.
Cody is a certified financial planner and the founder of Measure Twice Money, where he helps DIY investors make informed decisions aligned with their values. He also leads Measure Twice Money, which is an educational community for financial planners. Shawn Melany is a certified public accountant and head of Melany Financial and Tax.
He also writes the blog fiaxguide.com which is focused on the intersection between financial independence and taxes. Cody and Sean, welcome to the long view.
Thanks for having us. — Thank you. So glad to be invited back.
Well, we're excited to have you here and and to talk about your book which is called Tax Planning to and Through Early Retirement. So the book is focused on tax planning and early retirement and I'm wondering if you can talk about how you define that. There are people who retire very young, like in their 40s, but there are also people who retire a little bit young, like in their early 60s.
So, who are you pitching the book toward?
Yeah, that's right, Christine. So, early retirement, for the sake of this book, we have to decide what what are we defining as early retirement? We're define that as any time before Medicare eligibility, which is typically the month of your 65th birthday. So we actually found a study out there that was kind of surprising that around 70% of Americans report retiring before then both voluntarily and involuntarily.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- tax planning
- early retirement
- medicare eligibility
- retirement withdrawals
- tax-smart retirement strategies
Companies and tickers mentioned
- MORN
- Morningstar
- Measure Twice Money
- Melany Financial
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Long View, this episode and its artwork belong to Morningstar, Christine Benz - Director of Personal Finance and Retirement Planning, Ben Johnson - Head of Client Solutions, Amy Arnott - Portfolio Strategist. Octagon is not affiliated with the show; this page is an independent summary.
