How to Money: Cutting Taxes & Retiring Sooner w/ Cody Garrett

Podcast: How to Money
Host: Joel (iHeartPodcasts)
Guest: Cody Garrett, CFP (Measure Twice Financial)
Episode #: 1037
Date: September 17, 2025

Episode Overview

This episode dives into the interplay between tax planning and early retirement, featuring financial planner and tax expert Cody Garrett. Cody unpacks how everyday people can use the tax code strategically to save money, maximize their retirement options, and achieve financial independence earlier. Drawing from his and CPA Sean Mulaney’s new book, Tax Planning to and Through Early Retirement, Cody explains tax concepts with clarity, advocates for intentional financial decisions, and offers practical strategies for both early and late savers.

Key Discussion Points & Insights

Personal Finance Frameworks and Intentional Living

• Lifestyle Investments: Cody highlights the value of spending on personal and family well-being, including therapy, gym equipment, and accountability partners, over material “splurge” items.

  “The best money we ever spent... was her [my wife] being a homemaker, being a stay at home wife. ... I would say that in our family, my wife’s dream in life is to be a stay at home spouse. ... Ironically, the best money we spent was actually her not making money outside of the home because ... we can spend more time together.”
  (05:00)

• Intentional Career/Life Choices: More people are choosing lower incomes, part-time work, or homemaking for improved quality of life, requiring careful financial and tax planning.
  (06:07)

Who the Book is For & Early Retirement Trends

• Defining Early Retirement Audiences: Originally aimed at the FIRE crowd, Cody and co-author Sean Mulaney realized most Americans end up retiring before 65—voluntarily or not—making these strategies widely relevant.

  "We found out there's a study… that says 70% of Americans report retiring before age 65."
  (08:10)

• Planning for Involuntary Retirement:

  "Even if you don't plan to retire early, you should probably plan for it. ... There's a lot of involuntary retirements happening..."
  (08:20)

• Reframing ‘Retirement’: Cody coins “financial independence, recreational employment” – aiming to work optionally and pursue values/altruism, not just stop working.
  (08:41)

Tax Awareness – Stakes and Misconceptions

• Tax Visibility is Low for Most: People often don’t recognize how much they pay in taxes since payroll withholds it automatically.

  "When's the last time you actually received like a pay stub ... it's probably just digital at this point."
  (11:02 - 11:07)

• Fear-based Tax Narratives: Media often overstates “tax doom” to sell products, but the reality, especially for retirees, is more optimistic:

  "Financial media...there's so much fear-based marketing around taxes. ... We're kind of this middle ground of saying, hey, we definitely want to make you aware and educated about the federal income tax system, but we want to back it up with real math."
  (12:11)

The Tax Code: Friend or Foe?

• Retiree-Friendly Policy: Both political parties have made recent tax laws advantageous especially for retirees, given their political sway.

  “Over the last 10 years, both parties have made taxes way more favorable, specifically for retirees. ... Over 55% of voters in the last election were over 50 years old ... so retirees are probably the last people they're going to raise them on.”
  (17:21)

• Massive Tax-Free Allowances for Retirees:

  "Almost $50,000 of ordinary income in retirement being completely tax-free federally."
  (18:12)

How Tax Incentives Should Shape Behavior

• Traditional vs. Roth Accounts:

  • The IRS incentivizes tax deferral (traditional 401(k)), allowing you to take deductions while working and possibly convert/withdraw later at a lower rate.

  “...a lot of people think it's Roth now or never. ... For most people I serve, there's an incredible opportunity in early retirement…to convert [pre-tax] at those lower effective tax rates.”
  (23:15)

  • Roth conversions aren’t an all-or-nothing choice and can be timed strategically.

  “It’s really not Roth now or never. It’s Roth now, later or never.”
  (23:15)

• Government Incentives: The code encourages people to save and invest in the economy (e.g., capital gains are taxed less than ordinary income). (19:51), (24:14)

Strategic Tax Planning vs. Annual Tax Prep

• Long-Term Planning Beats Yearly Minimization:

  “There's a difference between tax preparation and tax planning. ... Tax planning is ultimately about reducing your lifetime tax liability.”
  (30:05)

• Tax Rate Arbitrage Explained:

  • Defer income at high tax rates (while working), then realize or convert it in lower-income years (early retirement).

  “Tax rate arbitrage effectively means that I'm going to defer income when it would have been taxed at a higher tax rate than when I'll distribute or convert that money later on.”
  (31:33)

Roth Conversion Strategies

• Spreading Conversions = Big Savings:

  “...a million dollars at once [Roth conversion]...they're going to pay $281,000 in taxes... 28% effective rate. But over 4 years… cut liability in half, to 14.9%.”
  (34:29 - 36:47)

What If You’re Starting Late?

• The “Compelling Three” for Catch-Up:

  • (1) Max workplace traditional accounts
  • (2) Roth IRA (direct or backdoor)
  • (3) Taxable brokerage contributions

  (38:37)

• Why Roth IRA is often preferable for high earners:

  • Deductibility phaseouts for traditional IRAs
  • Roth IRA access may require the backdoor route due to income
    (39:10)

Planning Amid Tax Law Changes & Uncertainty

• Focus on What’s Known and Controllable:

  “Make decisions this year based on what's currently known and within our control... The uncertain parts... are outside of our control.”
  (40:11)

• Both parties unlikely to raise retiree taxes substantially; “nothing’s more permanent than a temporary tax cut—for retirees.”
  (41:24)

Social Security Fundamentals

• For younger savers, don’t zero out Social Security but use conservative assumptions by inputting your real wage record and assuming no further work.

  "I like this kind of Goldilocks, just right of saying, yeah, I'm going to assume no more earnings and see what it says. And it says about $36,000 a year..."
  (45:07)

• Claiming Age Strategy:

  • Delay if possible for increased benefit and more room for Roth conversions
  • Claim if income is needed

  “The later you claim...the more years you have with less taxes because Social Security benefits… The later you claim, the more benefits you'll receive, especially if you're already sufficient in retirement.”
  (46:11 - 47:27)

Withdrawal Rates & Retirement Flexibility

• Caveats on the 4% Rule:

  • It’s a guideline, not a strict rule—real-life economies and income streams are variable.

  “It was never intended to actually be a retirement distribution strategy…If I retire at 55 and claim Social Security at 70…Do I adjust my withdrawal…?”
  (54:13)

• Probability of Success vs. Underspending:

  “If I have a 99% probability of success…that also means I have a 99% chance of underspending and under giving while I'm alive, which is another risk…”
  (57:44)

• Flexibility Is Key:

  • Small adjustments over long retirements make a major difference (e.g., cut back on small luxuries for a market downturn, splurge more during booms).

  “As soon as you understand the direction, get out of that [4%] rule and start living life with more flexibility and understanding that you can adjust as time moves along.”
  (59:06)

Notable Quotes & Memorable Moments

• On Splurging With Intention:

  "My next splurge would be hiring an accountability partner for exercise... But it's hard to keep myself accountable. So I want somebody who gives me a program, but also helps me follow through."
  (03:35)

• On Financial Independence and Values:

  “I call it fire: financial independence, recreational employment. ... I plan to become financially independent, work optional…so that I can work because I want to, not because I have to. ... That actually gives me permission to lean into my value of generosity.”
  (08:41)

• On Political Realities of Tax Legislation:

  “If they are going to raise taxes, retirees are probably the last people they're going to...the last cohort that they're going to raise them on.”
  (17:21)

• On Tax Planning vs. Tax Prep:

  “Tax preparation is all focused on what happened last year and this year. Tax planning is ultimately about reducing your lifetime tax liability.”
  (30:05)

• On Roth Conversion Nuance:

  “Doing conversions over several years, not all at once, can reduce your tax bill by half—patience and intentionality are critical.”
  (36:47)

• On the Danger of Not Spending Enough:

  “If I have a 99% probability of success...that also means I have a 99% chance of underspending and under giving while I'm alive, which is another risk that very rarely gets talked about.”
  (57:44)

Important Timestamps

• Cody’s Approach to Splurging: 03:35
• Best Family Financial Decision: 05:00
• Who Needs Early Retirement Planning: 08:10
• Tax Visibility & Pay Stubs: 11:02
• Fear-Based Tax Narratives: 12:11
• Tax Code as Retiree’s Friend: 17:21
• Tax-Free Allowances for Retirees: 18:12
• Traditional vs. Roth Explained: 23:15
• Tax Planning vs. Tax Preparation: 30:05
• Tax Rate Arbitrage in Action: 31:33, 34:29–36:47
• The “Compelling Three” Approach for Late Starters: 38:37
• Planning Amid Tax Code Changes: 40:11, 41:24
• Social Security Realism Exercise: 45:07
• Claiming Social Security and Its Effects: 46:11–47:27
• Withdrawal Rates and Flexibility: 54:13, 57:44, 59:06

Resources Mentioned

• Book: Tax Planning to and Through Early Retirement (Cody Garrett & Sean Mulaney) – measuretwicemoney.com/book
• Cody’s YouTube: Real financial planning meetings and Roth conversion case studies
• Financial Planning Tools: Bolden/New Retirement, Prolona
• SSA Calculators: For more realistic Social Security projections

Takeaways for Listeners

• Be intentional with both lifestyle and finances—prioritize quality of life, not just income growth.
• Don’t focus only on annual tax savings; lifetime strategy pays off, especially through tax rate arbitrage and well-timed Roth conversions.
• The tax code increasingly incentivizes savers and early retirees; don’t fear taxes—use them.
• Social Security will likely provide a meaningful benefit; plan using conservative but realistic estimates.
• Build flexibility into your retirement spending and plans; with adjustment, you can lessen risks of both running out of money and underspending.

For more, check out Cody’s book or watch real client case studies on his YouTube channel (links in the show notes).