No, Taxes Won’t Derail Your FIRE: Here’s What You’ll Really Pay in Retirement

BiggerPockets Money Podcast

BiggerPockets

Investing, Education, Business

4.6 • 2.9K Ratings

🗓️ 20 May 2025

⏱️ 43 minutes

🔗️ Recording | iTunes | RSS

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Summary

No, Taxes Won’t Derail Your FIRE: Here’s What You’ll Really Pay in Retirement Podcast Description Taxes in retirement have been called a “silent wealth killer” for those pursuing FIRE—but does the data tell a different story? If you’re worried about a ticking tax bomb wiping out a huge chunk of your investment portfolio or even delaying early retirement, you won’t want to miss this one! Welcome back to the BiggerPockets Money podcast! Today, we’re joined by fellow investor and self-proclaimed data nerd Mark Livingstone, who has created a free resource and spreadsheet YOU can use to estimate your tax burden in retirement. For most early retirees, taxes are negligible compared to the amount of income they can withdraw, and Mark will demonstrate this with a step-by-step walkthrough of his powerful FIRE tax tool! Along the way, you’ll learn the key differences between marginal and effective tax rates and why people who retire today pay much less tax than in decades prior. You’ll also hear about the four income “levers” you can pull in retirement, when income tax and capital gains tax kick in, and how to build the most tax-friendly withdrawal strategy possible! In This Episode We Cover Why taxes in retirement aren’t nearly as bad as you probably think A step-by-step walkthrough of Mark’s free retirement tax spreadsheet How the United States’ progressive income tax system works Marginal and effective tax rates explained (and how they impact your tax burden) The four income “levers” you can pull in retirement (and how each is taxed) How taxes impact the safe withdrawal rate (and why the 4% rule works) And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/money-642 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠[email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Today, we are tackling what most people think is the silent wealth killer in early retirement,
0:05.8	taxes during retirement.
0:07.5	Few people understand how little taxes will actually impact their withdrawal strategy.
0:12.7	Now, today's episode relies heavily on visuals.
0:15.8	So if you're listening to this episode on audio, you might want to hop on over to our YouTube
0:20.4	channel to follow along.
0:27.4	Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen,
0:31.7	and with me as always is my giant tax nerd co-host, Scott Trench. Yeah, Mindy, I used to be
0:36.5	IRS. Now I'm going to be IR no after this episode, I think.
0:40.3	Bigger Pockets has a goal of creating one million millionaires.
0:42.3	You're in the right place if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone,
0:47.3	no matter when or where you're starting.
0:49.3	And the tax payments, the taxes you'll pay in early retirement should be pretty negligible
0:56.4	as the headline. Mark Livingstone emailed Mindy and I a few months back when I was perseverating
1:03.4	over this topic because my intuition was telling me, hey, if I want to spend a little more than maybe
1:10.5	the $50,000, $50,000, that seems to be a
1:13.3	target baseline for a lot of people in the FI community. But if I wanted to spend 150, for example,
1:17.7	I'm going to have to realize a lot more income, right? And that's going to result in a tax burden.
1:21.6	And how does that geometrically compound, you know, grow the asset base required to sustain a higher
1:26.9	spending level? And Mark picked up on that and decided to say, Scott, you know, grow the asset base required to sustain a higher spending level. And Mark
1:28.5	picked up on that and decided to say, Scott, your intuition is completely wrong. That impact doesn't
1:34.3	really exist as the headline. And here's a very detailed mathematical model to prove out how
	...

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