On a recent episode of the podcast, I walked through a conversation I have almost every week.
Someone will say, confidently, “I’ll be in a lower tax bracket in retirement.”
And my response is always the same:
Lower than what?
It is not a trick question. It is a clarity question.
Because the truth is, sometimes that statement is accurate. And sometimes it is completely off base.
If you are building wealth without understanding how it will be taxed when you actually use it, you are planning only half the journey.
And retirement is not about accumulation. It is about distribution.
The Real Goal of Saving
Let’s zoom out.
The only reason we save and invest is to turn on an income stream later so we can spend our time how we want. That is it.
And when that income turns on, what matters is not your gross balance.
It is your net after tax income.
Most people spend decades focused on growing accounts. Very few spend time thinking about how those accounts will be taxed when they start pulling money out.
The IRS does not give refunds for poor planning.
A Real World Example
In the episode, I walked through an example of a couple in their mid forties earning $400,000 per year. They had:
$1.2 million in pre tax retirement accounts.
$500,000 in investments.
$75,000 in savings.
They were doing what most high earners are told to do. Max out pre tax retirement plans. Defer taxes. Keep accumulating.
Their current marginal tax bracket was 24 percent.
Now here is the key question.
If they retire and want to maintain a lifestyle anywhere near what they are living today, will they really be in a lower tax bracket?
To drop below that 24 percent bracket, they would need to generate significantly less taxable income in retirement. And for most high income households, that is not the direction life tends to go.
Especially if the majority of their wealth sits in pre tax accounts.
The Tax Time Bomb
When most of your retirement dollars are pre tax, nearly every dollar you withdraw in retirement is fully taxable.
In this couple’s case, if they continued funding primarily pre tax accounts, more than 70 percent of their future retirement income would be fully taxable.
That creates two challenges.
First, you have less flexibility.
Second, you have less control over your tax bracket in retirement.
If every dollar you pull increases your taxable income, your options shrink.
This is where tax diversification becomes powerful.
Diversification Is Not Just About Investments
We talk all the time about diversifying investments. Stocks. Bonds. Real estate. Different sectors.
But very few people diversify how their money will be taxed.
When this same couple shifted future contributions toward Roth accounts, their projected retirement picture changed dramatically.
Instead of having nearly three quarters of their income fully taxable, they built meaningful buckets of tax free income.
That one structural change allowed them to:
Control how much taxable income they show each year.
Potentially reduce their effective tax rate.
Increase their net after tax income without increasing total withdrawals.
Same gross retirement income.
Different tax outcome.
That is the difference between deferring taxes and designing them.
Alignment compounds.
The Distribution Question Most People Ignore
Ask yourself this.
When you turn on your retirement income, where will it come from first?
Pre tax accounts?
Taxable brokerage accounts?
Roth dollars?
Social Security?
Have you modeled what that will look like?
Or are you assuming it will just “work out”?
Accumulation is only half the equation. Distribution sequencing determines what you actually keep.
If you are within 10 years of retirement, this question becomes even more important. Roth conversions, partial reallocations, and intentional withdrawal strategies can meaningfully change your lifetime tax bill.
But those decisions require clarity now.
Not at 65.
Key Takeaways
1. Do not assume you will be in a lower tax bracket in retirement.
Lower than what? Run the numbers before you rely on that assumption.
2. Look at where your money sits today.
How much is fully taxable? Partially taxable? Tax free?
3. Build tax diversification intentionally.
Pre tax and Roth are tools. Neither is always right. The power is in having both.
4. Plan for distribution, not just accumulation.
The real question is not how much you will have. It is how much you will keep.
When your life design and your financial structure move in the same direction, progress becomes intentional instead of accidental.
That is how you design your future so powerfully that it reshapes your present.
Action Items or Next Steps
If this conversation sparked new questions for you, I would encourage you to subscribe to the Built For Life, Not Just Wealth podcast. We continue to unpack topics like taxes, cash flow, equity compensation, and long term planning in a way that connects money to real life.
If you want a quick snapshot of where you currently stand, take a few minutes to complete our Financial Scorecard . It is a simple, private way to evaluate your alignment across cash flow, protection, investments, and long term vision.
And if you would like to have a conversation about your specific situation, you can schedule a meeting with me or a member of our team. No pressure. Just clarity around what is working, what needs adjusting, and what is possible.
Cheers,
Ryan Burklo