• Josh Rendler
  • About
  • Motion Retirement (YouTube)
  • Meet With Josh
• Retirees Spend Lifetime Income, Not Savings
• Why QCDs Don’t Trigger Medicare IRMAA
• Retirement Guardrails (Guyton-Klinger)
• The Roth Conversion Rule Almost Nobody Explains Correctly (4 Scenarios That Make It Simple)

Taylor Schulte: Tax season is finally over. The returns are filed, the stress is behind you, and the last thing you probably want to do right now is think about taxes again. I get it. But here’s the thing, the weeks right after tax season are one of the most valuable windows you have all year. Every number from last year is fresh, every missed opportunity is still visible, and every mistake you just uncovered is a clue about what to fix going forward. Most people close the folder and move on. The retirees who get ahead, they don’t.

So today on the show, I sat down with Josh Rendler. Josh is a partner at our firm and someone who spends his days deep inside client tax returns. So I thought he would be the perfect person to help me answer some of the big questions we’re hearing from people right now.

Questions like, “With last year’s return complete, what should you start taking action on to get ahead of your 2026 tax planning? What are the most common and most avoidable tax mistakes retirement savers make every year? How do you know if charitable giving actually belongs in your retirement plan and where do most people go wrong when they give?”

And with the recent flood of bold claims on the topic, I also asked Josh to share his unique take on social security timing. If you want to be more proactive, more tax efficient, and more confident through the rest of 2026, you’ll enjoy this episode.

Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I tackle the most important financial topics to help you stay wealthy in retirement. And now onto the episode.

3 Things to Review on Your Tax Return (And a Fresh Take on Social Security Timing)

Taylor Schulte: Josh, welcome to the show. I’m excited to have you on today to help answer some very timely questions for our listeners.

Josh Rendler: Excited to be here, Taylor. I’ve talked to so many different listeners of the show, so many smart retirees, but I don’t see them until after they’ve gone through several of these episodes. So it’s cool to get a chance to actually talk to them more at the higher end of the funnel here.

Taylor Schulte: Yeah, I’m excited to share your knowledge with the world here, with all of our listeners. So tax season is now officially behind us, but as you and I both know, that doesn’t mean that we can or that we should pause the button on tax planning. In fact, our first question for today comes from a longtime listener, Mike G, who’s out in Tampa, Florida, who is finding himself excited right now to start taking action on his 2026 planning, but he isn’t really exactly sure where to start. So here’s what he wrote.

“Hey, Taylor, after finalizing my 2025 taxes and uncovering a few mistakes and missed opportunities in the process, I’m finding myself extra motivated right now to get a headstart on my 2026 planning. I realize every situation is different, but I’d love to know if there are some common things I should be thinking about or acting on this time of year now that tax season is behind us. And in your experience, what tax planning mistakes do you see people make that are easily avoidable?”

Since you’re heavily involved, Josh, in the tax planning work that we do for our clients, I thought Mike would appreciate your perspective here. For someone coming out of tax season and wanting to be more proactive this year, what do you think they should be thinking about right now and what are some of the most common, avoidable mistakes that you see people make?

Josh Rendler: I think first off, Mike is doing a really good job about asking the right kind of question at this time. I think so many people, they get through tax season and it’s so stressful, not only for us as we try to get across the finish line, but also your tax preparer if you have one. And so that combination of stress back and forth just kind of tells you, let’s just get this done and then catch our breath. We passed April 15th here and we’re recording this actually just after tax day. And so we kind of want to just put this stuff to the side and not think about it for a time, but that’s not the best way to approach it, unfortunately.

It’s great to jump on this stuff really as soon as you can. You have all this information and data that’s available to you because you have all of last year’s information, the numbers there, and you’re ready to project those for the next year and dial in on some things that you might’ve missed in the previous year.

So coming back, and let’s get a little bit more specific towards Mike’s question. The very first thing I look at when I see a tax return come through, were there underpayment penalties? That’s just something that we want to avoid. If there were, we immediately want to create a plan to avoid that because that’s the first sign that we left the IRS a tip. Of course, we want to pay our fair share, but you’ve done a great job of coining this term. We don’t want to leave them a tip. We just want to kind of pay a fair share and move on from there.

Taylor Schulte: Really quick, maybe before we dive deeper there, can you explain what an underpayment penalty is and who that would apply to?

Josh Rendler: Yeah, thanks for backtracking me there. An underpayment penalty exists if you didn’t pay enough taxes across the course of the year. Now there’s some specific rules. Sometimes you’re subject to something called a 90% safe harbor. Sometimes it’s just about meeting the exact dollar amount that you need to meet for a certain calendar year. But let’s say you had a bunch of income and you didn’t properly withhold taxes.

Well, there’s a calculation the IRS has. And if in that calculation you did not pay enough, well, they’re going to go ahead and try to chip some extra money from you. They’re going to say, Mr. and Mrs. Client, you did not pay enough in taxes, and so we actually are charging you an underpayment penalty that can also accrue interest. So yes, you owe your fair share of taxes, you’ve gone through this whole tax planning process, and now you’re paying an extra bill that could be sometimes thousands of dollars if there wasn’t enough planning in the calendar year before.

Taylor Schulte: Okay. So you review your tax return or you review a client’s tax return, you see an underpayment penalty. What next? If Mike sees that on his tax return, what does he do after that?

Josh Rendler: So we want to close that gap. If there’s an underpayment penalty, it means we have to do something about it this year. So let’s just use some examples here and some numbers. We just finished 2025’s tax season. We’re sitting here in 2026. If your numbers, your income will look very similar to how it did last year, we need to make some adjustments this year. The easiest way to do that is to adjust your withholdings. In retirement, you’re kind of working in this blank slate.

So if you’re taking IRA distributions or social security, you can voluntarily withhold a little bit extra from those income sources to just easily have this kind of automated. It’s an automated system of, hey, I take an IRA distribution. Maybe every time I do that, I voluntarily send the IRS some percentage, 10%. It goes straight to them. Now we’re avoiding underpayment penalties by sticking to a consistent schedule.

The other option is having quarterly estimated payments. It’s a little bit more complex to calculate those numbers, but you can work closely with your tax preparer or your financial advisor if they help with proactive tax planning to determine what numbers there will help you make sure you avoid those underpayment penalties in the future because that’s the number one thing I don’t want to see on a client’s tax return.

Taylor Schulte: Is there anything else that someone could be doing this time of year? Now the tax season is behind us and this is all fresh in their minds and like Mike is motivated to actually attack their tax funding and get ahead of it early.

Josh Rendler: The next thing I would want to do with a tax return, and this is what we do here and part of our process, is look at what the balance was on that tax return. This is kind of like that picture tells a thousand words.

Well, that one number, it can tell us an entire story of how your tax season went this year and your tax picture looked the year before. If we see that there is a balance due, I think psychologically we don’t like that feeling. There’s a feeling of, “Oh, we did something wrong. Now I have to go pay this tax bill.” I would lightly challenge that and say, “That means you might’ve done something perfectly correct.” Now, as long as there’s no underpayment penalties, if you have some element of a bill still due, that’s probably the best case scenario. And for a lot of our clients, it’s what we plan to do.

The key with that though is just making sure, Taylor, as you know, and as your listeners know, we need to have the cash set aside. So we can’t forget about paying this tax bill. Let’s make sure we have that cash set aside, which means figuring out what a rough number might be because the last thing you want to do on April 14th is scramble to go and grab $30,000 from your investment portfolio, get it rushed over, wired over to you so you can then pay the IRS.

And then quickly, just on the other side of that, if you have a refund, let’s start again with that psychological piece of a refund. It feels good, but that’s IRS tip number two. If you are getting a refund, especially one that’s a meaningful amount, that means that you just let the IRS borrow your money interest-free for some amount of time, and that could have been as much as 12 months.

So as much as it feels good to get a refund, it might not be in your best interest when we’re looking at things from a mathematical or just numbers-based perspective.

Taylor Schulte: Now, I know not everybody has a CPA, not everybody has a financial planner and not everybody has both, but for those that do have both, for those that work with a financial professional and also work with a CPA, what should listeners expect that relationship to look like, that collaborative relationship between their financial advisor and their CPA both are doing different things.

Oftentimes I see, I’m sure you can relate to this, that the CPA is working, operating in a vacuum and just doing his or her job, and the financial planner is doing his or her job, and there’s not that open line of communications. What is a good collaborative working relationship? What does that look like?

Josh Rendler: It’s a big gap in this industry, quite frankly. We see so many people come to us and there’s been no communication between those two professionals. And more importantly, potentially, they don’t even know what the two are doing differently. And so they kind of say, “Oh, is my financial advisor supposed to do my taxes? Is my CPA supposed to do proactive tax planning?” I’m in the camp and I strongly believe that those are two very specific and different positions and roles. If we think about what a CPA does and what they do really well is they’ve got a window of, let’s call it really two months from February to April to take hundreds of different clients, gather, organize their tax data and submit things on time. If they go one step further, a lot of great CPAs will also look for ways to potentially reduce that tax bill.

Maybe it’s a pre-tax cyber contribution or some other sort of last-minute vehicle you can take advantage of to reduce that tax bill. But if you think about it, the CPA doesn’t have much more time to actually dive into the proactive tax planning or the long-term tax planning. That’s where a financial advisor comes in. They have usually more information, usually more touchpoints throughout the year. And so they look at finances and taxes from now, let’s say you’re age 60.

Well, yeah, we want to lower taxes right now, but we need to project all the way to age 90, 95, 100, potentially longer if you’re planning for your kids or charity. And so the financial advisor needs to focus on this long-term tax projection. Now let’s get a little bit more granular, Taylor, and talk about what it actually should look like inside of a single year.

I’ll just use one example here to kind of keep it simple. Let’s say you’re, again, 60 years old, you’re doing a Roth conversion. Well, the CPA is going to have a hard time figuring out what that Roth conversion was and why you did it because tax forms are as vanilla as they come, as you can probably imagine. They’re black and white. “Hey, there’s one number in a box that says that my client took out an IRA distribution. That’s all the information I have, one number in a box.”

If a financial advisor can actually provide context, open a line of communication to that CPA, the tax preparer, and provide that context, “Hey, heads up, that line is going to show $100,000,” again, round numbers. $75,000 of that was a Roth conversion. Another $10,000 might have been distributions to go fund a nice vacation. And then the remainder was actually prepaying some taxes, maybe a balance to the Fed and a balance to your state if you have state taxes.

Once the CPA sees that on their desk, things become way easier. And it’s not only easier for the CPA, but it’s also easier for the client or the individual because everyone has a more seamless experience where more context is king here. You don’t want to run into this trap of two different entities working independent of each other because now you’re going to have questions at kind of all three stages and you’re just making a challenging time, potentially even more challenging.

Taylor Schulte: I’ll just add to all of that to summarize what you said, communication is really important between the advisor and the CPA. And one other thing that can often creep up if that communication doesn’t exist is the CPA doesn’t always know exactly what forms to expect for that tax season, especially if you have accounts all over the place at different custodians and they all come in at different times. It’s possible that you or even your CPA goes to file taxes and doesn’t have all the forms yet from those custodians.

One thing that I know we do really well every single year is send not just our clients, but also their CPAs, a tax letter that indicates exactly what tax forms they should expect to receive this year. So if there’s a tax form that is missing, they know to hold off and wait for that tax form to come in before they file those taxes.

So this all just leads back to having a really good open line of communication and good relationship between those two professionals to ensure that all opportunities are taken advantage of, and of course, costly mistakes are avoided.

Josh Rendler: It’s a really good point, Taylor. I’m glad you brought that up because oftentimes we think about maybe two or three tax forms that exist when you’re working, maybe it’s a W2, when you’re in retirement, maybe it’s a 1099R, but oftentimes there are more tax forms in the picture. There are accounts potentially at different custodians and the tax forms come out at different parts of the year. And so if you’re an individual trying to tackle this on your own, it’s pretty challenging. If you have professionals who understand what tax forms are in the picture and they can share that with your CPA, then again, it’s just a really seamless experience.

Taylor Schulte: While we’re talking about taxes, one common tax planning strategy that people often hear about is charitable giving. And I know, Josh, this is the topic that you are really passionate about. And you recently told me about a prospective client that you met with who said something along the lines of they really like the idea of supporting causes they care about, and they would absolutely love to do it in the most tax-efficient way, but they’re also nervous about giving money away before they’re fully confident in their own retirement plan.

In other words, they want to make sure that their own oxygen mask is on and working first, and their plan is rock solid before they start to commit to a charitable giving strategy. Now, at the same time, like a lot of other people, they also worry that if they wait too long, they could miss the most tax-efficient window to engage in charitable giving.

So I guess I have two questions for you here. First, how can someone determine whether charitable giving truly belongs in their retirement plan or not? Is there a process or a framework that you might use to help people think through and determine if charitable giving is something that should make its way into a retirement plan? And then second, for someone who is charitably inclined that does want to give to charity and does want to incorporate it into their tax strategy, what are some of the biggest mistakes people make or maybe some of the most overlooked opportunities to give more strategically?

Josh Rendler: When it comes to charitable giving, and you’re right, this is the single topic in retirement financial planning that I probably am most passionate about. I love planning around charitable giving. Addressing the first part of your question, can you give to charity? Well, a lot of people want to and they haven’t spent enough time thinking about what that might look like, but the first thing is to actually make sure your plan is okay. And the way to do that is just to run a typical retirement plan.

Once you retire and you’re starting to settle into retirement, get a sense of what your expenses are, that’s when you can kind of map out, “Hey, am I taking out too much money? Am I taking out not enough money? What does my actual retirement look like? ” So I can go out and still live my life not running out of money or at least feeling confident enough in my retirement before I take that next step towards charitable giving.

The piece that you mentioned that’s really important there is everyone is aware, their listeners here are super smart. They know that there is kind of this tax honeymoon. When you retire and if you retire in your 60s, that’s when you start to feel almost some pressure that you need to start making decisions quickly because you understand that you’re in potentially an artificially low tax bracket during this time, at least until other income sources come into play, or we start running into some of the hidden thresholds like Medicare.

So once you’ve determined that your plan is okay, the big thing to remember is there’s absolutely no rush. And part of the reason I can say that is because my number one favorite tool for charitable giving is a qualified charitable distribution, or we’ll call it a QCD for short. The listeners, as a quick reminder, a QCD is giving to charity directly from your IRA. So I think a lot of people understand what that is and how it works, but I think we can forget about how powerful that QCD is. And the QCD becomes powerful in multiple different ways. Number one, you’re eligible when you’re age 70 and a half.

So Taylor, just around the corner for us, meaning you have time. If you’re in your 60s, if you’re even 68 or 69 years old, you still have time to kind of think about your charitable decisions because you’re not even eligible until 70 and a half. Now, we reach age 70 and a half. What do we do? We take money directly from our IRA and we give to charity. We are immediately doing a couple of things that are helping your plan on that exact day.

The first one is we’re satisfying charitable intent. That’s always the most important thing here with charity. We’re not giving just to save on taxes. We’re giving because it’s an important part of who we are and what we want to do with our retirement savings.

The next piece is we are reducing future RMDs. I think we’re all aware of the kind of torpedo that can happen if you let your IRA sit untouched. Well, when you hit RMD age, which is required minimum distributions, those distributions at 73 or 75, it depends on when you’re born. They can really just launch your tax bill into places that you were completely surprised to end up in.

So again, QCDs, you’re removing money or you’re reducing money from that pre-tax bucket that will eventually lead to these high tax bills. The third thing that happens right away, age 70 and a half, is you’re able to continue doing some of your proactive tax planning because QCDs, unlike a donor advised fund contribution, unlike direct giving to charity, we know those are beneficial to your taxes, but they still get factored into that Medicare premium surcharge, the income related monthly adjustment amount, that’s that nasty IRMA.

This hidden calculation is all based on your modified adjusted gross incomes. Maybe I’m going a bit too much into the weeds here. The story and the thing to take away from this is QCDs are almost invisible, specifically for this use case. Recently, they are getting added to tax returns, which is kind of like, hey, finally, but QCDs for the most part are invisible for your tax picture, meaning they will not affect your ability to still take money out to go on vacation, take money out to do a Roth conversion or realize long-term capital gains. That stuff can still happen while being able to carefully manage some of those brackets that can ultimately cost you anywhere from three to $10,000 more per year while you get the exact same Medicare coverage as your neighbor.

Taylor Schulte: I want to circle back to how do I know if I’m okay to build charitable keeping into my plan? And you mentioned going through a retirement planning process. One of the reasons that I love putting the health of a retirement plan in dollar terms instead of a percentage is because it does help to really bring to the surface how healthy somebody’s plan is.

Listeners know I talk a lot about the retirement guardrails withdrawal strategy, and by following that strategy and using that method of evaluating a retirement plan, it allows us to show the client, “Hey client, you currently need let’s say $10,000 per month from your portfolio to fund all of your living expenses, but according to our analysis, you could be withdrawing $20,000 per month from your portfolio.” So there’s that $10,000 delta there for you to work with, which feels and sounds very different than me telling you, “Hey, Josh, you have a 99% probability of success,” which you’re like, “Okay, cool, but what if that drops to 50% or 40%, then what?”

So putting this in dollar terms gives people the confidence that their plan is healthy and then allows them to have that conversation with their professionals or with their spouse to say, “Okay, we have this delta in our plan. We have this opportunity to either go and spend more money on things that we really love and enjoy or maybe even consider donating some of that money.” So I don’t know if you have any additional thoughts there, but it just kind of came up when you mentioned trying to figure out if and how this could fit into somebody’s plan.

Josh Rendler: I do want to add some context onto that really good point. This is something our clients tend to really latch onto potentially more than anything else we’re doing in our entire total retirement system or our processes here that we have at our firm. When you see something in dollar terms, it just clicks a lot better because you’ve lived your whole life working in dollar terms. You’ve made a salary, you’ve made contributions in dollar terms, and now you’re going to go spend your money in dollar terms. So again, those percentages, they’re okay, and I think it gives us kind of a good baseline starting point. We should always include that as part of your plan.

Josh Rendler: But those dollar terms are really what allow us to have the confidence to either spend more money or do these charitable gifts. One last thing I’ll mention, Taylor, because you brought it up and it’s something I know you’ve seen and I think you’ve really helped develop the way we phrase this guardrail system is it’s not just about, “Hey, can I spend this much money?” But it’s also about understanding how healthy your plan is.

So if your guardrails tells you you can spend 10,000 or take out 10,000 from your portfolio every month, but after we run all these calculations, you only need four or $5,000, well, that means your plan has that much wiggle room and that wiggle room can either make you sleep better at night. It can either contribute to an extra vacation, it can either contribute to extra gift to your kid, or of course, these charitable giving strategies we’re talking about here today.

Taylor Schulte: Yeah, well said. I appreciate that. My last thought and comment here before we move on is that sometimes when we bring up charitable giving in these conversations with clients or prospective clients, I find sometimes people feel embarrassed to say they don’t want to pursue charitable giving, like they’re doing something wrong and not giving back to this world and they’re sitting on a very healthy nest egg and we ask them if this is something they want to pursue and they’re almost kind of embarrassed to say, “Not really. ” So I just want to just highlight it’s okay, not everybody needs to engage in charitable giving. And in fact, people do it in a lot of different ways. It’s not always just giving money and trying to maximize that tax break. A lot of our clients will donate their time. They’ll volunteer for causes that they really care about.

So I just want to highlight, not everybody needs to engage in charitable giving. It’s okay to say, “No, it’s not for me and I want to use my money in different ways.” While charitable giving may not apply to everyone, social security claiming decisions absolutely do. And lately, if you’ve been following personal finance content, there’s been a flood of content in this space making some pretty bold claims about the best time to claim your benefits with people debating whether most retiree should claim early or delay as long as possible or do something in between.

Now, Josh, you’re actually contributing to this debate yourself in a new YouTube video that will be out by the time this episode airs. And I’ll link to it in today’s show notes for anyone who wants to go deeper. But while we have you here, I’d love for you to share some cliff notes with us. When it comes to social security timing strategies, what’s your take here? How do you think retirees should be thinking about that decision, especially with so much conflicting advice out there right now?

Josh Rendler: Maybe two unique things in the way I might approach a social security decision that might be different from some of the other things that people are finding as they surface online content. Again, social security is so important and so relevant because it applies to pretty much every single retiree, especially with some recent legislation changes, nearly everyone is going to expect to receive some sort of a social security check.

So I want to talk about two specific things here, Taylor, just to draw out again, something that might be hopefully a little bit different than what listeners have already engaged and consumed. There is a serious psychological element to having a guaranteed source of income. Sometimes it’s annuities, oftentimes it’s social security. If you have a check that you know is coming every single month into your bank account, your ability to make decisions about spending becomes a lot easier.

I keep talking about that extra vacation or that dinner out or that gift to someone. If money is coming into your bank account, you know it’s coming back and you don’t have to think about how or when or any of that information that is required to actually bring money into your accounts. So in our experience here, we have found, and I know Taylor, you’ve also uncovered some really good research on this. The retirees who have guaranteed sources of income have a weight off their shoulders. And again, psychologically, they end up spending more of their money rather than underspending.

And on the other side, the retirees who have to actually go into an account, withdraw the money and figure out a system for that, tend to underspend because it just doesn’t feel good to be drawing from your portfolio. If I talk about myself in this example, when I see something hit my bank account, let’s say it’s a paycheck, I feel way more comfortable spending that money, even though that’s a much smaller amount than what I have saved in my accounts.

I think the thing that’s a gut punch more than anything to me is if I have to go into either an investment or my cash savings account and take something out to go spend it from there, it could be the exact same dollar amount, Taylor. It could be $3,000 because of something happening with my car or a new lease payment

Taylor Schulte: Or your dog.

Josh Rendler: Unfortunately, yeah, my dog likes to throw us for a loop. Definitely get pet insurance. We’re not talking about that today, but go get pet insurance. Yeah, it’s exactly the same point. If I could time it up to a paycheck, I feel much better about it. If I have to pull it from savings, the same dollar amount, it just doesn’t feel as good.

So the first thing to consider with Social Security, don’t be stuck on just what is my biggest check amount. We know we’re all smart retirement savers here. We know that if we wait to age 70, we’re going to get a bigger check and we’re going to get a bigger check for life. What we don’t think about sometimes is that math is not everything and retirement’s not just this one single math problem where we just think of ourselves as robots or calculators and we just optimize for this one thing.

So don’t be scared to take Social Security early. If it’s going to give you some extra confidence to spend, if it’s going to make you sleep better at night, and if it’s going to help you avoid that psychological barrier of watching your IRA balance draw down. And so Taylor, I’m curious what your experience is before I dive into the next thing I want to talk about, if you just have anything to add onto there about sometimes avoiding the robotic nature of just looking at numbers and instead thinking about, “Well, this is human lives we’re talking about and we should approach financial planning with that in mind.”

Taylor Schulte: There’s obviously no one size fits all answer here. And something that you and I are both passionate about, I should say everyone here at our firm is passionate about is helping our clients really spend this money that they work so hard to save. And so if Social Security, a guaranteed income source taking it early is going to help them enjoy retirement, especially in those early, more active years, it should absolutely be a part of that conversation and decision making.

The other part of this, and maybe this is where you’re going next, I’m not sure. The big question mark, the thing that we absolutely don’t know, and there’s no textbook out there that will know this, is longevity, how long that you’re going to live. Now, you can make some educated guesses and use family health history or your current health situation to make an informed decision there, but we don’t know how long we’re going to live.

And this timing decision does, for a large part of it, hinge on our life expectancy. So that’s something to take into consideration as well.

Josh Rendler: Yeah, I can jump right into that as I talk about my second point here. Longevity concerns also can match up with surviving spouse concerns. We understand what happens when a married couple, one spouse predeceases the other with a meaningful amount of retirement still left on the table for that surviving spouse. Maybe you get a year of grace period, but you drop into those single tax brackets.

That and a multitude of other reasons encourage so many, which retirement savers to want to have money in Roth accounts, Roth IRA accounts. Again, it just sometimes feels better. You sleep better at night. If you know you’re protected or you have a hedge against future tax changes, future tax rate increases, well, hey, I’ve got this big bucket of money that’s tax-free.

Another quick beast I’ll mention is if you want to give to your kids or leave a legacy, I should say to your kids, it’s more efficient to do that through a Roth account because when they ultimately inherit it, they don’t have a tax bill that comes attached to that.

So with that said, when we’re talking about Social Security and we’re also talking about individuals who just really like the idea of having money in Roth, those two situations or those two scenarios can come together really nicely with this one point. We go a little bit into the weeds on this one, so I apologize in advance. But if we think about a typical retirement saver, they’ve got a good chunk of money, maybe most of their money saved in a pre-tax IRA or 401k and they didn’t do anything wrong.

That’s exactly what you should do. If you’re in your high-earning years, you save taxes, you want to reduce taxes in those years by putting money into a pre-tax IRA. But then all of a sudden you wake up one day in your 60s, you’ve got all this money sitting in your IRA and you’re retired and you need to find a way to go out and actually spend that money tax efficiently.

If you want to do Roth conversions, let’s look at what happens. You’re pulling out money from your IRA to fund your lifestyle. If you want to do Roth conversions again, like I said, you’re pulling additional money out of your IRA to fund those Roth conversions or to process that transfer from a pre-tax IRA to a Roth IRA. All of that comes with the tax bill. That’s an ordinary income tax bill as if you were still working. So you’re subject to the federal tax brackets. And also in many states, you’re subject to state taxes. That creates this huge tax bill that you don’t maybe feel great about, but you’re getting money into Roth.

So it’s not the end of the world, but what if we could be a little bit more strategic? And that’s where this idea of claiming Social Security early can actually help here.

So if we think about Social Security, let’s say we take it at age 62 and we apply it to this situation I’m talking about right here. Well, Social Security has maybe some hidden or maybe it’s pretty well known, tax benefits in terms of how that income is treated and shows up on your tax return.

One thing that’s consistent is up to 85% of your Social Security income will be federally taxable. On the flip side, that means 15% is federally tax-free. It doesn’t go into the equation for calculating your federal tax bill. One step further, states like California, which we’re here in and we’re very aware of how aggressive the tax bill can be just to state. Also states like Oregon, they do not tax social security at all from a state level. So if we look at two examples here, number one, you pull $50,000 from a IRA to do your Roth conversion.

Well, that’s $50,000 of taxable income at the Fed and state level. Instead, if you have Social Security and maybe combined, it’s something close to that $50,000, only 85% is subject to federal taxes and 0% is subject to your state taxes. Again, this is state dependent, but it does occur in quite a few states. I think we’re somewhere around 42 states that do not tax social security benefits now.

So what we did with all that, if anyone’s still following along with my complicated explanation, is we’ve now opened the door to either do more Roth conversions or just save on our tax bill. But it’s kind of a unique strategy where you balance these two things. It’s a little bit counterintuitive, but again, if Roth is really important to you, it’s a strategy I would highly recommend considering. At least do the analysis and see if it works for your situation.

Taylor Schulte: I do appreciate you sharing all that. And hopefully people were following along there. I think just the takeaway again is that there is no one-size-fits-all solution here. It’s not take it early or take it late or everyone should take it a full retirement age. Every situation is different. And this all goes back to your retirement needs and goals, the things that you want to accomplish are things that are most important to you, and it’s different for everybody.

So going through this exercise, not just going through the math and crunching and the numbers, but having conversations, again, whether it’s with a professional or with a spouse or a family member, having these conversations to work through the process and determine what’s really going to be best for you.

Josh Rendler: It’s my favorite conversation to have. It’s the ones where we might crunch some numbers in the background and figure out how one thing works, but it doesn’t mean we just have to throw it at our clients. We need to have a conversation. We’ll go back and forth, figure out the plan that not only looks good on paper, but also makes the clients feel good and comfortable so they can go out and enjoy their retirement.

Taylor Schulte: Absolutely. And like I always say, there’s this textbook answer, which is great. We want to uncover that, but then there’s your answer. And for a lot of our clients, they say, look, social security is mine. I want to take it. I know it probably makes more sense to delay it and I’ll get more money, but I want my money. I’ve been working hard my whole career, been paying into social security, I want to take my money. That might not be the textbook answer, but that’s okay.

To wrap up here, Josh, you and I first connected while you were in school here locally actually at San Diego State University. And while you were there, I was doing some volunteer work for the financial planning program. I think I was around that time just getting my firm launched. It seems to me that you knew at a fairly young age that you wanted to be a financial planner, which is rare for someone at that age to know what they want to do for their career.

Now, fast forward to today, and you’re now a partner of our firm and you work directly with clients every single day, helping them navigate retirement and all the complexities that come with this stage of life. And I’m just personally curious to know while I have you here on the show, now that you’ve worked with hundreds of retirees throughout your career, what it is that you love most about this profession? What gets you excited about the work that you get to do every single day?

Josh Rendler: Again, I’ve been chatty, so I’ll keep this one pretty condensed and I can because it is pretty clear the thing that I really love doing in this job. And it comes down to the fact that we work only with retirees and retirement is this intricate puzzle. It’s thousands of interconnected pieces that all need to play nicely together in order for a plan to really work well and again, for a client to feel good about it. So my favorite kind of plan that I like to work on, Taylor, is when I get my hands in there from the ground up.

Let’s say someone, retirement is just around the corner and they need help putting all the puzzle pieces together for that pre-retirement stage. Can I retire? Is my plan going to be okay? Then the next stage, this transition period, really underrated part of retirement is what that transition period looks like because it’s not going to be a straight line.

And then finally, it’s the ongoing maintenance of that plan. So you switch over into retirement. It doesn’t really stop there. We’ve now successfully transitioned, but you’re going to hit multiple different milestones along the way and each milestone is going to bring some kind of change into the picture, whether you’re spending more or spending less or we’re doing proactive tax planning or we’re turning it off. All of that contributes to almost like three or four different puzzles at a bare minimum. And as someone maybe you could pick up at this point, I love putting those puzzles together. I like working on these projects, piecing them together, and then all of a sudden the dominoes fall apart and we have to kind of rebuild this plan again, knowing that things are changing in the client’s life.

Taylor Schulte: And some of those milestones are very predictable. They’re maybe age-related or stage of life related, but there’s a lot of milestones or events, I should say, in retirement that are unpredictable that we can’t map out in a retirement plan. And I’m sure the same for you, but I like solving those challenges. I love that every day and every case is different, that it’s not this predictable planning process that we are throwing curve balls and we get to work through those complexities and those challenges and really help our clients navigate them successfully.

Josh Rendler: Yeah. Really key piece there. We have to go into retirement, understanding that things will change. I went right after college, did a Europe trip where we spent two weeks. It was a completely jam-packed itinerary, and I didn’t really know what was going to come of that trip. The best advice, the single best advice I got, and I still remember it to this day, and I still apply it to other pieces of my life here, is something will go wrong. Just accept that and be ready to adapt. Now in retirement, it doesn’t mean something’s going to go wrong, but it does mean that your playbook is going to change multiple times. You mentioned these milestones, we have age 60. It’s going to look a whole lot different at 63, 65, 70, R&D age, and even later in life than that. So we need to understand that retirement is unique.

It’s going to change. It’s okay if our plan changes. We just need to be ready to adapt, do our best to plan ahead, and then stay on top of these changes or these milestones so that we can continue just enjoying retirement without having hiccups along the way. Let’s make sure we smooth out these changes to the best of our ability.

Taylor Schulte: Very well said. I think it’s a great place to cap off this conversation. Josh, I really appreciate you joining me today and sharing your knowledge with our audience here. For anyone who wants to learn a little bit more about Josh, in today’s show notes, I will share a link to his bio page on our website. On that page, there’s actually an introductory video from Josh. You can learn a little bit more about him personally and his career path and what he does here at the firm. Josh also has a great YouTube channel that is growing rapidly, so I’ll share a link to that in the show notes as well for anybody who wants to check those out. So Josh, thank you again very much for joining me today.

Josh Rendler: Thank you, Taylor, and thank you to everyone who listened today. Again, it was really fun to be here.

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.