The 0% Tax Bracket Most Retirees Walk Right Past

Tyler Gardner (0:00)

The withdrawal rate conversation and the tax conversation are not separate entities. They are the same conversation, and the person who truly understands both doesn't need to be as conservative about their withdrawal rate, because they're keeping so much more of what they take out. The goal was never to withdraw less. The goal was always to keep more.

Hello, friends. This is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be.

Before we get into today's episode, I am genuinely thrilled to share this with you. After three years of listening to your questions and locking myself in a room to answer as many of them as I can, I decided it would be slightly more efficient to write a book. So I did. It's called Real Wealth, published by Norton out December 6th of this year. Yeah, the kid whose parents thought he might be illiterate until he was 21, and whose high school English teachers passed him on the condition he never took another English class, and I'm dang proud of how it turned out and what I believe it can and will do for all of you. Here are three quick reasons to preorder right now, and I'll tell you exactly how at the end. One, you'll actually finish this book. I know, low bar, except it really isn't. I've spent two decades watching people's eyes go blank the moment I said asset allocation. I took that personally. This is my response. You know the look, and I refuse to be the cause of it. Number two, the number one comment I get, thousands of times, is you left something out. You're right, I'm making 60 second videos about topics that deserve 60 minutes. This is my answer, everything in one place, no countdown clock, no algorithm cutting me off. And number three, what I'm most excited about, every month through December, I'll be releasing an exclusive pre-order incentive, and April's might already be my favorite. Pre-order this month and you're automatically in for a free two-hour live event on Wednesday, May 6th. Where I'll be expanding on some of the ideas present in the book, and answering some of your most commonly asked practical and theoretical investing questions. This will be exclusively for people who pre-order. Here's all you need to do, go to tylergardner.com, pre-order the book, then click the button on the page that says you've pre-ordered. Two minutes, you're in, and I genuinely cannot wait to do this with all of you. Real wealth, December 6th, your future self will appreciate having it all in one place, and now on with the show. A few months ago, I did an episode on how I'd allocate a $2 million portfolio in retirement, 90 percent stocks, 10 percent money market, and how you could comfortably withdraw 120,000 to 200,000 annually without running out of money. That episode got more responses than anything I've done in a year and a half on this podcast, which I genuinely appreciate, and about a third of those responses were some version of, hey, Tyler, that's great, but you missed one big consideration, taxes. Which, fair enough, I left a giant door open, we all walked through it, but transparently, I try not to address multiple topics on a single episode. And this clearly leaves much undiscussed and underexplored. So, today, we're going back to the $2 million portfolio, same setup, same person, same plan, and we're talking about the tax layer that sits on top of all of it. Because here's the thing I want you to understand before we get into the specifics, and here's the thing that everybody who's written to me clearly does understand. The return on your portfolio is not the number that matters. Too many of us focus on the returns throughout our lives without even considering what our tax plan is doing to said returns. That is why the after-tax return on your portfolio is the number that matters. And most people, including some who are otherwise very thoughtful about investing, treat taxes as something that happens to them, rather than something they can significantly influence. And I want to start there today.

Starting now, you can and should make it a priority to control taxes before anything else you do. It's the biggest mistake I made early in my business. I left a ton of money on the table for the old IRS to take, which they did gladly. And now I'm working tirelessly to focus on taxes above anything else I do. Now, the bad news, as we all know, they can't be eliminated entirely. I want to be clear about that. I'm not a tax attorney, I am not a CPA, and if I were going to give you advice specific to your situation, I would tell you to please find one before implementing any of this. Additionally, I can only imagine, because I've seen some of it, the garbage and nonsense to which you've all been exposed on social media, telling you to go buy 10 G-wagons, hire a private chef, take your family on business trips, in essence, vacations, go buy some real estate for fun just so you can learn about bonus depreciation, and then write it all off.