Why Early Retirement Means Paying Less in Taxes

BiggerPockets Money Podcast

BiggerPockets

Investing, Education, Business

4.6 • 2.9K Ratings

🗓️ 23 September 2025

⏱️ 54 minutes

🔗️ Recording | iTunes | RSS

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Summary

In this episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench are joined by tax experts Sean Mullaney and Cody Garrett to reveal how early retirement can actually be your smartest tax strategy. The conversation immediately tackles one of the biggest misconceptions holding people back from FIRE - the fear that retiring early means facing higher taxes. Instead, they demonstrate how lower retirement income typically translates to significantly lower tax bills, completely flipping the conventional wisdom about retirement tax planning. The discussion dives deep into their comprehensive approach to tax planning for early retirement, centered around the powerful concept of "Pay Tax When You Pay Less Tax." This isn't just theory - they break down practical, tax-efficient strategies that can save you thousands, including optimizing traditional 401k contributions, maximizing Roth IRA conversions, and strategically managing taxable investment accounts. These aren't complex maneuvers requiring a team of accountants; they're accessible strategies that any early retiree can implement. Beyond the big-picture tax strategies, this episode tackles the real-world challenges that derail many FIRE plans. Learn how to build robust emergency reserves that won't trigger unnecessary tax consequences, handle unexpected income disruptions without destroying your tax efficiency, and leverage advanced techniques like qualified charitable distributions to further reduce your tax burden. Whether you're years away from retirement or already making the transition, this episode provides actionable insights to minimize your lifetime tax burden while maximizing your financial independence. The discussion is intended to be for general educational purposes and is not tax, legal, or investment advice for any individual. Mindy, Scott, and the BiggerPockets Money podcast do not endorse Sean Mullaney, Mullaney Financial & Tax, Inc. and their services. 00:00 Taxes in Early Retirement 00:54 Debunking Tax Myths in Early Retirement 03:03 Understanding Taxable Income in Retirement 04:10 Effective Tax Strategies for Early Retirees 05:37 Capital Gains and Tax Rates 12:25 Tax Planning Tools and Calculators 23:43 Tax Optimization Strategies 24:27 Debate: 401k vs Roth IRA 24:56 Order of Operations for Financial Independence 25:42 Roth IRA Conversion Strategies 32:33 The Middle Class Trap 39:09 Tax Strategies for New Investors 44:21 Connect with Sean and Cody Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	What if they told you that retiring early could lower your tax bill instead of raising it?
0:05.2	Most people think that leaving their job means losing tax advantages.
0:09.2	But today, we're revealing why early retirement might be the best tax strategy you've never
0:15.1	considered.
0:24.1	Hello, hello, hello, and welcome to the Bigger Pockets Money podcast.
0:29.6	My name is Mindy Jensen, and with me as always is my never-taxing co-host, Scott Trench.
0:30.8	Thanks, Mindy, great to be here.
0:32.7	We won't defer the tax puns.
0:34.5	We get started immediately done today's show.
0:38.3	We are so excited to be joined today by Sean Mullaney and Cody Garrett here at Bigger Pockets Money. We've had them separately on the podcast before, but we are so excited
0:43.1	to be joined by them together to talk about their new tax book, Tax Planning 2 and through
0:48.0	early retirement. Sean and Cody, welcome back to Bigger Pockets Money. Thanks so much for having us.
0:53.0	We're glad to be here. Thanks so much.
0:54.5	Do you guys both agree that people believe that taxes in early retirement are going to be worse
1:00.3	than they ultimately end up being? I generally think that's true. There's this, I call it an
1:06.1	incoate fear, right? Because people talk about widowows tax trap, Irma, required minimum distributions.
1:14.1	These things have scary names. And so they become these sort of boogeymen. But a lot of times,
1:19.1	you know, I think the next time you think about a commentator or some sort of commentary talking
1:24.0	about taxes are going up in retirement or taxes are going to be daunting in retirement,
1:28.9	ask where the math is. And it tends to be, look, we cannot give 100% blanket statements on the
1:35.4	Bigger Pockets Money podcast. But it tends to be that most people are going to pay less tax
1:41.9	in retirement during their working years, mostly for the simple reason
	...

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