1. 2 weeks ago I stated what the problem typically is.  
2. Last week I showed how it creates a large lifetime tax liability if no action is taken.
3. In this email, I will show how it can not only create an income tax bomb but also a Medicare tax bomb. And there are a few other things that can cause you to pay Uncle Sam more than you need to.

To quickly summarize

• The problem - Most retirees have saved a large chunk of money that has never been taxed. 
• The "tax bomb" - When Required Minimum Distributions (RMDs) kick in, you will be required to take money out of your pre-tax account, and the amount will get higher the older you get (assuming your investments continue to grow modestly over time), and you will owe more in taxes and probably get bumped into a higher tax bracket causing an income "tax bomb." 

Not only is there the income "tax bomb," but there is also a potential Medicare tax bomb. 

Obviously, no one likes paying a higher tax rate than they need to, but what we have found is that when people start taking their required minimum distributions, and it causes their Medicare Parts B+D to cost more, they get really infuriated and upset with this! And this higher cost is likely to stick around for the rest of their lives.

They say, "Why didn't my guy/gal tell me this was going to happen?!!"  

Because they don't do real tax planning, I would say around 70-80% of financial advisors still don't do tax planning. Crazy, IMO. 

So, if they haven't done any tax planning in their "gap years" (the years between retirement and RMD age), not only do they have to pay a higher tax rate than they should have at RMD time, but the cost of Medicare Parts B+D is based on adjusted gross income (AGI), and a higher AGI causes higher Medicare costs.    

In an example I use in my Taxes in Retirement presentations, a couple was happy to pay a very low tax rate the first few years of their retirement, but they did zero tax planning, and now that their RMDs are going to kick in next year, not only will they be in the 32% tax bracket, but this will also cause them to bump up 3 levels on the Medicare excess premium threshold chart (pictured above). So, now they will also be paying $11,503.20 more per year in Medicare premiums... ouch! And it is likely to be this way for as long as they live.

So, when I say "tax bomb" and "everyone needs tax planning," this is why.

I'll cover a few more "exciting" tax items to consider next week. Kidding, I know it isn't exciting, but it can certainly move the proverbial needle!