Many people assume taxes automatically go down once they stop working. For higher-earning households approaching retirement, the opposite is often true.
In practice, the years just before and after retirement can create a perfect storm of higher taxes—driven by large pre-tax balances, compressed Required Minimum Distributions (RMDs), Medicare IRMAA surcharges, and the way Social Security is taxed. Without proactive planning, retirees can find themselves paying more in taxes than they did during their peak earning years.
Why Taxes Can Rise After Retirement
1. Large Pre-Tax Retirement Balances
High earners often accumulate significant assets in traditional IRAs and 401(k)s. While those accounts provided valuable tax deferral during working years, withdrawals are fully taxable as ordinary income.
Once RMDs begin, the IRS—not you—sets the minimum amount that must be withdrawn each year, often pushing retirees into higher tax brackets than expected.
2. Compressed RMD Timelines
Many high earners retire near RMD age, creating a narrow planning window. Waiting until RMDs begin can result in:
Larger forced withdrawals
Higher marginal tax rates
Fewer opportunities to manage income intentionally
This is especially common for professionals who retire in their mid or late-60s.
3. Medicare IRMAA Surcharges
Higher taxable income can trigger Income-Related Monthly Adjustment Amounts (IRMAA), increasing Medicare Part B and Part D premiums.
These surcharges are based on modified adjusted gross income from two years prior, which means a single high-income year—often caused by RMDs or large conversions—can increase Medicare costs later, even if income subsequently falls.
(See Medicare’s explanation of IRMAA thresholds:
https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties)
4. Social Security Taxation
Up to 85% of Social Security benefits can be taxable once provisional income crosses certain thresholds—thresholds that are not indexed for inflation.
For higher-income retirees, RMDs and portfolio income often make Social Security benefits taxable sooner and to a greater extent than expected.
(IRS overview: https://www.irs.gov/newsroom/are-social-security-benefits-taxable)
What Proactive Tax Planning Can Look Like
The goal isn’t to eliminate taxes—it’s to smooth them over time and reduce unpleasant surprises.
Common planning strategies include:
Roth conversions during lower-income years before RMDs begin
Intentional income layering, coordinating withdrawals across taxable, tax-deferred, and tax-free accounts
Charitable strategies, including Qualified Charitable Distributions (QCDs) once eligible
Medicare-aware planning, avoiding unnecessary IRMAA triggers
At Mayfair Financial, this work is typically integrated into a broader retirement income plan rather than treated as a one-off tax tactic.
(Internal link: Retirement Tax Planning at Mayfair Financial)
Why This Matters for St. Louis-Area Near-Retirees
Many near-retirees in the St. Louis region:
Have long professional careers with sizable retirement balances
Retire before RMD age
Are surprised by the interaction between federal taxes, Medicare premiums, and Social Security
Addressing these issues before retirement—or in the early retirement years—often creates far more flexibility than waiting until RMDs are already in motion.
Final Thought
Rising taxes in retirement aren’t a sign that something went wrong—they’re often the predictable result of how retirement accounts and tax rules work together. The key is recognizing the risk early and planning intentionally.
If you have questions about how taxes may affect your retirement income, reach out to our team. We’re here to help make these transitions clearer and less stressful.
The content is developed from sources believed to provide accurate information. The information in this material is for educational purposes only and is not intended as tax, investment, or legal advice. It may not be used to avoid any federal tax penalties. Please consult legal, investment, or tax professionals for specific information regarding your situation. Mayfair Financial and FMG Suite developed and produced this material to provide information on a topic of interest. FMG is not affiliated with the named state-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.