Podcast Summary: The Long View

Episode: Cody Garrett and Sean Mullaney – “For Most Americans, You’re Going to Pay Less Tax in Retirement”

Date: January 20, 2026
Hosts: Christine Benz, Amy C. Arnott
Guests: Cody Garrett, CFP®, and Sean Mullaney, CPA

Overview

This episode focuses on tax planning for early and traditional retirees, drawing from Cody Garrett and Sean Mullaney’s new book, Tax Planning to and Through Early Retirement. The discussion covers why most retirees will likely pay less tax in retirement, debunks fear-based tax narratives, and offers practical strategies regarding asset allocation, withdrawal sequencing, Roth conversions, and utilizing taxable, traditional, and Roth accounts effectively at various stages of retirement.

Defining “Early Retirement”

• Definition:
  Garrett and Mullaney define “early retirement” as retiring any time before age 65—prior to qualifying for Medicare.

  "Early retirement is pre-65...around 70% of Americans report retiring before then, both voluntarily and involuntarily."
  — Cody Garrett [01:57]

• Typical Retiree Profile:
  Most early retirees they see are high earners and high savers, though not necessarily “extremely frugal.”

  “The one thing I don’t typically see is extreme frugality. Really to any degree.”
  — Sean Mullaney [03:09]

Withdrawal Rates and Spending Approaches

• 4% Rule as a Guideline:
  The 4% rule and “25x annual expenses” remain common touchstones, but Garrett encourages a nuanced, personalized approach.

  “Ignoring Social Security altogether is a big mistake...life isn’t linear and everybody adjusts along the way.”
  — Cody Garrett [04:25]

• Monte Carlo Simulations – Caution Against Over-Optimization:
  High success rates in simulations (>90-100%) can mean dramatic underspending.

  “100% probability of success also means a 100% probability of underspending and under-giving while you’re alive.”
  — Cody Garrett [06:05]

• Flexibility Is Critical:
  Mullaney notes that most retirees will adjust spending as needed.

  “Most folks are going to be successful in retirement...if markets go down, the odds are you’re going to make appropriate adjustments.”
  — Sean Mullaney [07:26]

The Value of Tax Planning for Early Retirees

• Why Focus on This Cohort:
  Early retirees face unique challenges: lack of pensions, more reliance on personal savings, and confusion about optimal withdrawal sequencing.

  “There’s so much withdrawal confusion out there...no training for how do I sequentially take this money out in a tax-efficient way.”
  — Sean Mullaney [08:16]

• Shift from Defined Benefit to Defined Contribution Plans:
  This shift creates responsibility but also flexibility for retirees.

  “It gives us some fantastic flexibility and tactics for how we control those drawdown strategies...”
  — Cody Garrett [10:05]

Moving Beyond Fear-Based Narratives

• Common Tax Fears & Urgency in Financial Marketing:
  There’s an industry tendency to use alarmist terms (“bombs, traps, torpedoes”).

  “A lot of this marketing has made pre-retirees and retirees assume that every decision needs to happen now or never.”
  — Cody Garrett [11:30]

• Data-Driven, Non-Political Reality:
  Over recent decades, both political parties have favored tax cuts for retirees.

  “Both major parties have actually made taxes even more favorable specifically for retirees over the past 10 years.”
  — Cody Garrett [13:01]

Taxes in Retirement: Interlocking Parts and Strategic Planning

• Avoid “One-Off” Calculators:
  Standalone tools (like Roth IRA calculators) oversimplify an interconnected situation.

  “It’s time to stop thinking about should I do a Roth conversion? It’s time to think about strategically, how should I be arranging my drawdown.”
  — Sean Mullaney [13:25]

• Tax Rates: Myth-Busting Future Increases:
  Historical context and political realities suggest continued, relatively low tax rates for retirees in the foreseeable future.

  “At some point we have to step back and question this assumption that oh of course taxes are going up on retirees in the future.”
  — Sean Mullaney [17:19]

• National Deficit and Tax Hikes:
  Despite national debt rising, taxes on retirees repeatedly cut because of political incentives.

  “Where’s the key political constituency that’s going to be for tax hikes on retirees? I’m not seeing it.”
  — Sean Mullaney [21:03]

Account Selection and Funding: Where to Save

• Traditional vs. Roth vs. Taxable Accounts:

  • Traditional 401(k)/IRA: Contributions are deducted at your highest marginal rate (“from the top down”), but distributions in retirement are taxed “from the bottom up.”
  • Roth IRA/401(k): Best when you expect to be in a higher tax bracket in retirement.
  • Taxable Accounts: Offer flexibility for early retirees; crucial for tax-efficient early withdrawals.

  “Be careful about foregoing taxes to build up taxable accounts...I prioritize flexibility and your short-term savings objectives over tax optimization.”
  — Cody Garrett [23:52]

• You Should Pay Tax When You Pay Less Tax:

  “For most Americans, you’re going to pay less tax in retirement.”
  — Sean Mullaney [27:38] Most retirees benefit by deferring taxes (using a traditional account), as retirement income generally falls into lower brackets.

Taxable Brokerage Accounts: Flexibility for Early Retirees

• Advantages in Early Retirement:
  • Can maintain lifestyle with minimal tax impact.
  • Offers more planning levers (e.g., Roth conversions, ACA premium credits).

  “You can maintain your desired lifestyle with very little tax consequences, maybe even zero, captured by both the standard deduction and also those long-term capital gains...”
  — Cody Garrett [31:06]

Advanced Savings: Mega Backdoor Roth IRA

• Who Benefits:
  • High earners with access via employer plans
  • After-tax contributions (beyond traditional/Roth limits) can be moved into a Roth (in-plan or via IRA).

  “The mega backdoor through the 401(k) or 403(b), you’re not foregoing a tax deferral...it’s an amazing opportunity.”
  — Cody Garrett [33:18]

Asset Location: Placing Investments in the Right Accounts

• General Principles:
  • Bonds: Place in traditional pre-tax IRAs/401(k)s — shields ordinary income, slows RMD growth.
  • Equities: Hold in taxable accounts — benefit from lower dividend and capital gains tax rates.

  “By using this asset location principle...we keep our tax return more flexible...and open the door to potentially more advantageous tax planning.”
  — Sean Mullaney [35:35]

Withdrawal Sequencing and Sequence of Returns Risk

• Draw Down Taxable Assets First:
  Keeps taxable income low early, enabling better tax planning later.

  “Since taxes are an expense, increasing taxes in the early part of retirement...increases that sequence of returns risk.”
  — Cody Garrett [39:30]

• For Those With Only Traditional Accounts:
  Extra steps may be needed (e.g., Rule of 55, SEPP/72(t)) for early withdrawals. Roth/HSAs can help avoid high taxes in “jump” years.

  “Don’t be scared if the bulk of your money is in traditional retirement accounts...that probably means you had some incredible tax deferral opportunities”
  — Cody Garrett [42:24]

Required Minimum Distributions (RMDs): Less Onerous Than Assumed

• Recent Changes Benefiting Retirees:

  • RMDs now start at age 75 for many; lower percentages required.
  • Expanded standard deduction reduces tax burden.

  “It turns out they’re not all that onerous and they don’t require that large of a taxable distribution when they start.”
  — Sean Mullaney [45:01]

• Charitable Giving:
  Qualified Charitable Distributions (QCDs) can satisfy RMDs while avoiding tax.

Roth Conversions: When and When Not to Do Them

• Not Always a Good Idea:
  Pre-Medicare (ACA premium) years: avoid; “golden years” (66-69): ideal window.

  “These four years [66–69] tend to be the best in my view, the best Roth conversion years because we don’t have required income, we could delay Social Security, we’re not managing for premium tax credit.”
  — Sean Mullaney [48:50]

• Later Years:
  After RMDs and Social Security start, Roth conversions lose much of their appeal.

Tools for DIY Tax Planning

• Current/Last Year Tax Prep:
  • Dinkytown.net
  • Holistaplan (for professionals)
• Long-Term Projection:
  • Bolden (formerly New Retirement)
  • Perlana (browser-based, built by Bogleheads)

  “Be very careful with those assumptions...Outputs only as good as the inputs.”
  — Cody Garrett [52:40]

Notable Quotes & Highlights by Timestamp

• On Fear-Based Tax Narratives:

  “Words that pop out like bombs, traps, torpedoes, penalties, alongside a sense of urgency like act now before it’s too late.”
  — Cody Garrett [11:30]

• On Tax Rates in the Future:

  “I think the question about the tax rates going up in the future is actually kind of the wrong assumption to make.”
  — Cody Garrett [15:52]

• On Politicians and Retiree Taxes:

  “I do trust politicians to not turn on a dime against their own interests.”
  — Sean Mullaney [17:19]

• On RMDs and Withdrawal Safety:

  “At 75, you have to take 4.07% of the account. Is that a safe withdrawal rate for a 75-year-old? I certainly would argue it is.”
  — Sean Mullaney [45:01]

Takeaways

• Most Americans should expect lower effective tax rates in retirement than during their working years.
• Fear-based narratives and one-size-fits-all calculators are suboptimal for tax and retirement planning.
• Strategic, personalized drawdown plans—ideally using flexible taxable assets and Roth conversion windows—offer the best results.
• Recent legislative and political environments strongly favor retirees from a tax perspective.
• Asset location, withdrawal sequencing, and understanding your taxable income layers unlock significant tax optimization potential.