Ep 34 - The Silent Tax Bomb That Could Cost You in Retirement

MMM-PYP-: 2026

Voiceover: [00:00:00] Welcome to [00:00:05] Metcalf Money Moment. The podcast unlock financial clarity and confidence with [00:00:10] expert insights to achieve your goals. Hosted by Jeb Graham, Ethan Hutchinson [00:00:15] and Eric Wymore. Each episode offers decades of combined expertise in wealth [00:00:20] management, retirement planning, and more. Join us for practical strategies to [00:00:25] inspire your financial journey.

Now, your host.[: 00:00:30

Jeb Graham: [00:00:35] Welcome to Metcalf Money Moments podcast. My name is Jeb Graham, here with Eric Wymore and Ethan [00:00:40] Hutchison. How we doing, guys?

Eric Wymore: Doing good? Yeah. Good morning. Doing well.

Jeb Graham: Good [: 00:00:45

Right? It's because we're talking about That's some deep stuff here we're talking about. What's that? [00:00:55]

Ethan Hutcheson: Yeah. It's 5:00 AM outside. You can't see, but

Jeb Graham: that's, that's right.

Ethan Hutcheson: Done.

Jeb Graham: Especially to [: 00:01:00

We're at the day we're recording here. It's April 22nd, so tax day was just about a week [00:01:15] ago. Um, and, you know, hopefully most people. Got their [00:01:20] taxes and they weren't surprised by anything. But I would guess that there's a few listeners here, a few of our [00:01:25] clients, uh, you know, that maybe got their tax return or people that are, you know, out there [00:01:30] considering, uh, becoming a client that might have gotten their tax bill.

little bit higher, uh, than [: 00:01:35

And I think, uh, you know, the other thing is that most people, I wouldn't [00:01:55] say most people, but a lot of people out there think of their. Financial advisor and all they think about is, Hey, what [00:02:00] is the return on my portfolio? How did I do on my investments last year? Uh, [00:02:05] and I think when you have a higher level advisor, the conversation shifts, uh, and becomes more [00:02:10] about, yes, you want to get good returns, but you also realize that the biggest, uh, you know, expense [00:02:15] that you're gonna have over your lifetime is actually taxes.

And how do you avoid those? [: 00:02:20

And the curse is, is that people that have trust accounts, [00:02:40] non-retirement accounts, they now have these big embedded gains, uh, in their accounts where [00:02:45] if we just do a general rebalance, it's gonna generate taxable income for them. [00:02:50] Not only that, if you own mutual funds in those taxable accounts, there's big [00:02:55] capital gains distributions that are coming out that really you don't have a lot of control over.

So, [: 00:03:00

So today, I think more [00:03:20] than anything, what we wanna do is just. Talk to you about what are those things that can catch people off [00:03:25] guard, uh, and then more importantly, what you can do and how you can plan for it. So, Ethan's gonna talk [00:03:30] about capital gains and portfolio tax drag, and then Eric's gonna jump in and talk a little bit [00:03:35] about retirement income and tax traps there.

little bit about, you know, [: 00:03:40

Ethan Hutcheson: Yeah, I, I, uh, I'm gonna start this out with a pop quiz [00:03:55] and, and Eric, you're gonna be the, the, the corporate guy.

y. Alright. Would you rather [: 00:04:00

Eric Wymore: Uh, well, I'm gonna [00:04:10] say, I'm gonna say the TOD or joint account.

of uncover maybe some of the [: 00:04:15

Um, well, let me take that back a second. So we're gonna, we're gonna chop that up. So what we're gonna [00:04:25] talk today and kind of expand on the question I asked Eric, is, is the difference in, um, [00:04:30] income taxes, capital gains? And we'll kind of touch on some of the income taxes and things of that nature down the road.

[: 00:04:35

And there's a lot of factors that play here. If you're a [00:04:55] really high income earner, you might have a 20 20% capital gains tax. If you're kind of [00:05:00] in the middle of the road, you might have a 15% capital gain tax. And then it kind of, you know, [00:05:05] tailors itself down to, there's some people out there that have zero.

ercent capital gains tax. So [: 00:05:10

Everything we talk about, we're, we're not trying to necessarily [00:05:30] avoid taxes, we're just trying to control them and understand them. Um, [00:05:35] taxes are a blessing and a curse. If you're paying capital gains taxes, your, your investments are doing [00:05:40] well. Um, it's a good thing. Um, if you're not paying capital gains taxes and you've got a lot of [00:05:45] losses on your books.

lens you're looking at those [: 00:05:50

So what kind of capital gains tax are we looking at? [00:06:05] So you're gonna have federal capital gains taxes, and then there's a lot of states that also have capital gains [00:06:10] taxes involved with them as well. So as a, as a general broad example, if you've got a $2 [00:06:15] million trust account or a $2 million joint account between you and your spouse, we call that non-retirement [00:06:20] monies.

y into that account and your [: 00:06:25

And then you're gonna have some [00:06:40] short-term capital gains embedded in there where you're looking at ordinary income taxes, which can be anywhere from [00:06:45] 22, 24 or 35% depending on what income looks like. So just kind of [00:06:50] controlling and realizing and knowing what those taxes look like. I think. [00:06:55] Puts, just gives you guys better guidance as clients on understanding what those tax [00:07:00] traps look like down the road.

itigate and kind of control, [: 00:07:05

Maneuver and change the portfolio composition around [00:07:25] without churning up capital gains taxes. Okay? So if you've got 10 securities in [00:07:30] your portfolio, five of them have gains, five of them have losses, and you call us and [00:07:35] you say, I need $200,000 to go buy a boat. Um, can I get that money outta my TOD? [00:07:40] What we're doing on the back end is looking at what can we sell at a gain and [00:07:45] offset by a loss to virtually get you at tax neutral distributions out of that [00:07:50] account.

so if we've got a down year, [: 00:07:55

[00:08:10] Asset location is, is pretty big. And, and Eric's gonna touch on this a little bit here in a moment, but [00:08:15] asset location, and, and Jeb highlighted it as well. Um, if you've got mutual funds inside of your [00:08:20] TOD or taxable money, your non-retirement accounts, you've got uncontrollable cap gains [00:08:25] distributions that occur.

if you've got ETFs, everyone [: 00:08:30

So, um, it's not just what you [00:08:45] make, it's what you, you bring home what you can keep and, and we're trying to. [00:08:50] Lessen the burden of taxes. We can't ultimately get away from taxes altogether. Just helping [00:08:55] our clients understand and kind of, uh, forecast out what all that looks like. So,

Jeb Graham: can I [: 00:09:00

To, to the, um, and I think that's a good topic of conversation when you talk [00:09:05] about a non-retirement account, uh, a mutual fund versus an ETF, right? Is that there's, [00:09:10] it's kind of twofold, right? Because a lot of times we have clients. That transfer in mutual funds [00:09:15] to us that already have a big gain. Right? So for us to get it from the mutual fund [00:09:20] to the ETF, we would need to take a gain in order to do that.

So, so, [: 00:09:25

And it's actually better. Just to stay in that mutual fund. And that's something that's, it's not a one time, Hey, let's just weigh [00:09:45] this, this year. It's one of those things that, you know, we might look for opportunities to make that [00:09:50] switch sometime down the road for 'em.

years to completely [: 00:09:55

Jeb Graham: Totally. Yep.

um, Eric, you know, where we [: 00:10:05

Eric Wymore: Yeah, absolutely. I mean, [00:10:15] again, most, you know, most individuals really gonna spend their entire working career [00:10:20] squirreling away money on a regular basis into a pre-tax account, maybe a [00:10:25] 401k, and then all of a sudden they retire.

d. They start drawing social [: 00:10:30

'cause that's what's gonna save your bottom, [00:10:50] the bottom dollar. And, and so, you know, we've got a couple of different strategies. I'm gonna share [00:10:55] with you some of the formulas to that. Work for our clients as well [00:11:00] as some of those tax tax traps that, that are gonna come in the future. And, [00:11:05] and, and anytime we look at this, we, we kind of look at like, your income, your retirement [00:11:10] income is, you know, three different legs, right?

You've got kind of that. [: 00:11:15

Um, serves purpose, right? You defer to your [00:11:35] deferred income tax when you, when you, when you're making contributions to your 401k. [00:11:40] Um. Building up tax-free growth, uh, in the future when [00:11:45] you contribute to your Roth 401k or Roth IRA, um, all serve a very, very [00:11:50] important purpose in your retirement income in the future.

the third leg that you just [: 00:11:55

Um, so you get those three legs in there [00:12:15] and, and it is all a matter of where you're getting your money from. So, you know, talk to a client, how much do you need [00:12:20] in a year to live off of? They tell us an amount, we figure out what's the [00:12:25] best strategy, what's the best account to take it from, and, and, and, you know, helps us, [00:12:30] helps them keep that tax efficiency, uh, that we're striving for.

But, [: 00:12:35

And they have this thing called a required [00:13:00] minimum distribution. Well, the IRS won't allow you forever to take, keep your money tax [00:13:05] deferred in A IRA account or a 401k. They're going to start requir re [00:13:10] requiring you to take out minimum distributions and those can be large. Uh, it's based [00:13:15] on a, you know, life expectancy table.

on the last year's value and [: 00:13:20

And, you know, how do we get money out of that account [00:13:55] so those RMDs aren't so large, uh, later on in life. That's a big strategy [00:14:00] that we run. Another little trap that kind of pops up is that social [00:14:05] security tax trap. So. Again, your, your social security income [00:14:10] starts off, uh, not being taxed, and then as long and, but as [00:14:15] you make more money, you know, IRA withdrawals, whatever it is, [00:14:20] pension.

y then can turn into taxable [: 00:14:25

I'm retired, I've got [00:14:45] these expenses that I need to, to, to meet. What's the best place to take it from? [00:14:50] You know, so, so we're not getting into that next level of taxation with, [00:14:55] with our social security income. Um. Another thing that, [00:15:00] uh, uh, you need to be a little bit aware of is it's Medicare [00:15:05] Irma Tax, I-R-M-A-A, Irma tax, [00:15:10] so Medicare, basically your Medicare premiums, you know, age 65, you're starting, you're on [00:15:15] Medicare.

determined by the. Two years [: 00:15:20

So, you know, I'm gonna speak in general [00:15:40] terms on Irma. We're just trying to make sure that we try to keep our incomes at certain levels [00:15:45] so all of a sudden we don't go above a certain dollar amount of income. And then [00:15:50] our Medicare premiums, you know, jump up quite a bit. So it's just something that [00:15:55] we, we take into consideration.

know, when we're, when we're [: 00:16:00

You know, 30 to 45, let's say, or 2025 [00:16:25] to 45, most likely it would be better for you to contribute to [00:16:30] a Roth 401k. Pay the tax. Now the fur, the, the [00:16:35] money will go into a Roth 401k or a Roth IRA. It'll grow tax, tax free. [00:16:40] Uh, then, you know, when you take it out, when you're 59 and a half, it's all tax, [00:16:45] you know, uh, that you don't pay any more income tax on it.

best thing that you can do, [: 00:16:50

So your pre-tax 401k. Um, but along the way [00:17:10] you're kind of always, constantly putting money in a non-retirement type of account. Uh. [00:17:15] Again, that provides a lot of flexibility when you're older. Um, then when you get into [00:17:20] age 60, you know, early sixties, we're really trying to, if we can try to figure out how to lower our [00:17:25] income tax so we don't get into that tax, that Irma, bill Irma tax bill.[00:17:30]

to [: 00:17:35

But there's always [00:18:00] something to do at a particular age. And so that's just something to. You [00:18:05] know, have that communication with your advisor. Like, what should I be doing? Where should I be putting away my [00:18:10] money? What buckets do I need to be filling up? And that will go a long, a long [00:18:15] ways, uh, for the future when you're going to need to turn on that retirement income.[00:18:20]

u, I think, uh, if, if we're [: 00:18:25

Solely and a, a [00:18:40] comprehensive wealth manager or a personal CFO or whatever it is that you wanna call it, uh, that's [00:18:45] kind of quarterbacking and managing a lot of different things. I think a lot of the, these things that we just [00:18:50] talked about can abso absolutely be avoided when you have an open line of [00:18:55] communication between your financial advisor, investment advisor, or I [00:19:00] guess, uh, personal CFO and your CPA meaning.

at you're doing, and this is [: 00:19:05

We're [00:19:20] running it through holistic plan. We're trying to identify any potential tax pitfalls, anything that [00:19:25] they can do to maybe, uh. Avoid or lower their tax bill. But not [00:19:30] only that, we're looking at, you know, hey, what, let's look at their non-retirement account. Let's see, what are the embedded [00:19:35] gains? How much can we sell this year to keep 'em in the 0%, you know, cap gains tax bracket or [00:19:40] the 15% cap cap gains tax bracket?

ually gonna look like? And I [: 00:19:45

Than what you thought that you were [00:20:05] going to. So, um, you know, real world examples, and I think we kind of hit on these, but I'm gonna [00:20:10] summarize them, is that number one, you tax harvesting is a big deal, right? When in our non-retirement account, we [00:20:15] wanna offset as many gains with losses as possible. You can also use a strategy called direct [00:20:20] indexing that we're not gonna go to on here, on this podcast.

ou, in your next meeting, if [: 00:20:25

This year's [00:20:40] strategy. It's a, Hey, let's save money over our lifetime strategy, which is just as important if not more important [00:20:45] than let's, than the, let's save money this year on, on taxes. But coordinating that and trying to get as [00:20:50] many conversions as you can. In that as low of a tax bracket as you can.

Is [: 00:20:55

That can gift money and they can gift highly appreciated stock [00:21:15] and kind of have a double tax savings because they get to, to write it off and they avoid paying the capital [00:21:20] gain. So using some of those more high level strategies, you're not gonna get that [00:21:25] advice from a strictly an investment advisor, you know, that's only worried about the returns of your [00:21:30] portfolio.

ion that comes with having a [: 00:21:35

Um, but. [00:22:00] Certainly send your tax return and, and let's have that conversation. Um, and again, the goal [00:22:05] is not to avoid taxes. It's to control when and how you pay 'em. So [00:22:10] this was productive. Um, any, any last thoughts, guys? Anything else to [00:22:15] add?

Ethan Hutcheson: Do you guys know why taxes are never invited to parties?

Jeb Graham: [: 00:22:20

Ethan Hutcheson: because they always take too much.

Jeb Graham: There you go.

Hutcheson: That's all I got. [: 00:22:25

Jeb Graham: out. That's pretty, I think we should, you know, we should have Googled some more of these tax jokes 'cause there's some [00:22:30] good ones out there.

Ethan Hutcheson: Yeah.

o, um. But no. So productive [: 00:22:35

Voiceover: Thanks for tuning in to Metcalf Money Moment, the podcast. We hope today's episode [00:22:50] provided valuable insights to help you unlock financial clarity, confidence. And peace of [00:22:55] mind. For more expert advice and resources, visit medcalf partners.com. [00:23:00] Until next time, make every money moment count.[00:23:05]

Jeb Graham, Ethan Hutchinson [: 00:23:10

The opinions voiced in this podcast are for general information [00:23:25] only and are not intended to provide specific advice or recommendations for any individual to determine which strategies or investments may be [00:23:30] suitable for you. Consult the appropriate qualified professional prior to making a decision.

nd is no guarantee of future [: 00:23:35