The 0% Tax Bracket Most Retirees Walk Right Past

The withdrawal rate conversation and the tax conversation are not separate entities. They are the same conversation. And the person who truly understands both doesn't need to be as conservative about their withdrawal rate because they're keeping so much more of what they take out. The goal was never to withdraw less. The goal was always to keep more. Hello friends, this is Tyler Gardner welcoming you to another episode of your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. Before we get into today's episode, I am genuinely thrilled to share this with you. After three years of listening to your questions and locking myself in a room to answer as many of them as I can, I decided it would be slightly more efficient to write a book. So I did. It's called Real Wealth, published by Norton out December 6th of this year. Yeah, the kid whose parents thought he might be illiterate until he was 21, and whose high school English teachers passed him on the condition he never took another English class, and I'm dang proud of how it turned out, and what I believe it can and will do for all of you. Here are three quick reasons to pre-order right now, and I'll tell you exactly how at the end. One, you'll actually finish this book. I know, low bar, except it really isn't. I've spent two decades watching people's eyes go blank the moment I said asset allocation. I took that personally. This is my response. You know the look, and I refuse to be the cause of it. Number two, the number one comment I get thousands of times is, you left something out. You're right. I'm making 60 second videos about topics that deserve 60 minutes. This is my answer. Everything in one place. No countdown clock, no algorithm cutting me off. And number three, what I'm most excited about, every month through December, I'll be releasing an exclusive pre-order incentive, and April's might already be my favorite. Pre-order this month, and you're automatically in for a free two-hour live event on Wednesday, May 6th, where I'll be expanding on some of the ideas present in the book and answering some of your most commonly asked practical and theoretical investing questions. This will be exclusively for people who pre-order. Here's all you need to do. Go to tylergardner.com, pre-order the book, then click the button on the page that says you've pre-ordered. Two minutes, you're in, and I genuinely cannot wait to do this with all of you. Real Wealth, December 6th, your future self will appreciate having an all-in-one place, and now on with the show. A few months ago, I did an episode on how I'd allocate a $2 million portfolio in retirement, 90% stocks, 10% money market, and how you could comfortably withdraw $120,000 to $200,000 annually without running out of money. That episode got more responses than anything I've done in a year and a half on this podcast, which I genuinely appreciate. And about a third of those responses were some version of, hey, Tyler, that's great, but you missed one big consideration, taxes, which fair enough. I left a giant door open. We all walked through it. But transparently, I try not to address multiple topics on a single episode. And this clearly leaves much undiscussed and underexplored. So today, we're going back to the $2 million portfolio, same setup, same person, same plan, and we're talking about the tax layer that sits on top of all of it. Because here's the thing I want you to understand before we get into the specifics, and here's the thing that everybody who's written to me clearly does understand. The return on your portfolio is not the number that matters. Too many of us focus on the returns throughout our lives without even considering what our tax plan is doing to said returns. That is why the after-tax return on your portfolio is the number that matters. And most people, including some who are otherwise very thoughtful about investing, Treat taxes as something that happens to them rather than something they can significantly influence. And I want to start there today. Starting now, you can and should make it a priority to control taxes before anything else you do. It's the biggest mistake I made early in my business. I left a ton of money on the table for the old IRS to take, which they did gladly. and now I'm working tirelessly to focus on taxes above anything else I do. Now, the bad news, as we all know, they can't be eliminated entirely. I want to be clear about that. I'm not a tax attorney. I am not a CPA. And if I were going to give you advice specific to your situation, I would tell you to please find one before implementing any of this. Additionally, I can only imagine, because I've seen some of it, the garbage and nonsense to which you've all been exposed on social media, telling you to go buy 10 G-wagons, hire a private chef, take your family on business trips, in essence, vacations, go buy some real estate for fun just so you can learn about bonus depreciation, and then write it all off. Most of that, my friends, is what we like to call in the industry tax fraud. And most of those people telling you that are what we call ding-dongs. Now, back to what we can do legally and seriously. Taxes can be managed. They can be anticipated. They can, in some cases, be dramatically reduced with some fairly simple decisions made at the right time. And the people who do this well don't have secret information. They just understand the rules and plan accordingly. Today, I'm going to give you five of the most important tax considerations for someone drawing down a $2 million portfolio in retirement. We're going to try to keep it real, keep it specific, and keep it grounded in actual 2026 numbers, because I'd rather give you something you can use than something that makes you feel smart, but doesn't really help you in any actual way. And if you stick with me until the end, I want to leave you with something that I think reframes the entire withdrawal rate debate. The 4% rule, the 5% rule, dynamic spending in a way that nobody talks about, but everyone I think needs to hear. So you might want to stick around because I really do think we can wrap this all together very nicely. And as always familiar ask if you find any of this useful review on Apple or Spotify is genuinely the best thing you can do for the show as it helps others find the show and lets me know that someone out there in personal finance land is listening and getting at least some inspiration to take action today. All right, let's get into taxes. Consideration number one, the pre-tax time bomb, what it actually costs to pull from a traditional IRA or 401k or that money that was never fully yours to begin with. Let's start with the foundational issue. Because if you don't understand this, everything else is harder to follow. And I lead with this because based on data leading into 2026, the vast majority of U.S. retirement assets remain in pre-tax, tax-deferred accounts, even as Roth options grow. While a specific finalized percentage for 2026 is not yet calculated, obviously, data through today indicates that pre-tax accounts such as your traditional 401k, your traditional IRA, simply dominate our total retirement assets. Why does that matter? Well, when you put money into a traditional 401k or IRA, you got a tax deduction on the way in. That was the deal. You didn't pay taxes on the money when you earned it, and at the time, it felt like you had somehow cracked the personal finance code. Free money. Well, not really. You delayed those taxes until you pulled the money out in retirement. And your investment growth inside those accounts has been compounding tax deferred the entire time. That part's a good thing. But here's the part that doesn't always get said clearly enough. Every single dollar you pull out of a traditional pre-tax account is counted as ordinary income in the year you take it. Not capital gains. Not some special retirement income rate. Ordinary income. Also known as the worst type of income imaginable for tax purposes. This is the same rate that applies to your salary, your freelance work, your consulting income. It goes right on top of whatever else you're earning that year and gets taxed accordingly. For 2026, the marginal tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. So let's run the numbers on our $2 million retiree, and let's assume for simplicity they're married filing jointly, their entire $2 million is in a traditional IRA or 401k, and they want to pull out $120,000 this year or roughly 6% of the portfolio. They start by taking their $32,200 standard deduction. That brings their taxable income down to $87,800. For 2026, the 22% bracket for married filing jointly kicks in at income above $100,800. And the 12% bracket covers income between $24,800 and roughly $100,800. So the vast majority of that $87,800 is sitting in the 12% bracket. That's actually not terrible. But here's where it gets a little complicated. First, Social Security. If you're receiving Social Security benefits and have other income, Up to 85% of your Social Security benefit can be added to your taxable income. This is one of the most widely misunderstood tax rules in retirement. People think Social Security is tax-free. It is not for most people with any other meaningful income. If our $120,000 withdrawal is happening alongside a Social Security benefit of $30,000, you may find yourself adding $25,500 of that benefit onto your taxable income, pushing your effective taxable income considerably higher than you planned. Now, obviously to me, the quick fix of this is don't take out $120,000 from the pre-tax unless you have to because of R&Ds and account for that $30,000 when you're planning. Second consideration there would be IRMA. This is not technically a tax but it functions exactly like one IRMA the income monthly adjustment amount is a Medicare surcharge for higher retirees In 2026 if your modified adjusted gross income as a married couple exceeds certain thresholds, you will pay significantly more for Medicare Part B and Part D premiums than someone with lower income. The first IRMA tier for married couples filing jointly triggers at modified adjusted gross income above roughly $218,000 in 2026. But these cliffs can be steep. And if you're doing large Roth conversions or selling assets in a particular year, this is a number worth knowing. Third, and this is one that tends to sneak up on people, required minimum distributions. RMDs are the minimum amounts you must withdraw from your traditional IRA, SEP IRA, and 401k starting after you turn 73. The RMD age is currently 73, is scheduled to rise to 75 for those born in 1960 or later, starting in 2033. Now, here's the problem. If you've been diligently not touching your $2 million pre-tax account, letting it grow, pulling minimally, by the time you hit 73, you might have $3 million, $4 million or more sitting there. And the IRS will then require you to withdraw a calculated percentage of that balance every year, whether you need the money or not. If you're 78 years old with a $100,000 IRA balance, your RMD would be roughly $4,545. Now scale that to a $2 million account and you're looking at withdrawals of $80,000 to $90,000 a year at minimum, all counted as ordinary income on top of social security, on top of whatever else you have. Now, again, if you know that you're going to get that as the RMD, plan accordingly. You probably wouldn't need $120,000 from elsewhere. The lesson here is not don't save in pre-tax accounts. Those accounts were and are a fantastic tool to get you where you are. The lesson is understand that you have a silent partner in your pre-tax account who has been patient for a very long time, but is going to show up eventually. Yes, the government. Planning for when and how that partner gets paid is the entire game, and it is largely within your control. This episode is brought to you by Element. My sister's a marathoner who treats Element like a food group. When I told her I was partnering with them, she called me for 17 minutes. The first 10 were enthusiasm and catching up. The last seven were logistics about how many boxes I could get to her and how quickly I could do it. I've also mysteriously been reconnecting with a lot of old cycling friends. Years of radio silence, and now my phone seems to be buzzing. It's wonderful, genuinely touching, but each call seems to end the same way, with some variation of, so what's the element sponsorship situation exactly, followed by their giving me an unprompted shipping address. 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Terms and limitations apply. Subject to approval and eligibility, built cards are issued by Column N.A., member FDIC, pursuant to license from MasterCard International Incorporated. Consideration number two. Roth conversions, the best tax move most people do too late, or why the years before RMDs are the most valuable tax planning window of your life? Here's a question I want you to sit with for a moment. When in your life is your taxable income likely to be at its lowest? For most people, the answer is the years between retirement and age 73, the window after you've stopped working and before Social Security, RMDs, and other income sources have fully stacked up. In that window, if you're living off savings rather than generating new income, Your taxable income can be surprisingly low, and that, it turns out, is one of the most valuable planning windows you're ever going to have. This is where you might consider looking into Roth conversions. In theory, it's a simple concept. You take money out of a traditional pre-tax account, and you move it to a Roth account. You pay ordinary income taxes on the amount converted in the year you do it. In exchange, that money and all future growth on it will come out of the Roth completely tax-free. No taxes on withdrawals, no RMDs during your lifetime, none. The math on this works beautifully in the right window. Here's a good example. Let's say you retire at 62. Your only income this year is $20,000 from a part-time consulting project. You're married filing jointly. Your taxable income after the standard deduction is essentially zero. The 12% bracket for married filing jointly, remember, goes up to roughly $100,800 in 2026. That means you could convert roughly $80,000 to $100,000 from your traditional IRA into a Roth IRA and pay only 12% federal income tax on it. Now, compare that to the alternative. You do nothing, the account grows, you hit 73, and the IRS forces you to take RMDs that push you into 22 or 24% brackets. You've paid a higher rate of money you may not have even needed yet. Now, here's where we're going to have a quick, very real, very blunt, come to Jesus moment that should ground us all. Remember that we exist in a marginal tax rate system. That means that when your income crosses certain thresholds, the tax brackets, only that additional income is taxed at a higher rate. I say this because even though it might be obvious to some of you, A, I've worked with countless clients who were very smart and sharp and didn't know this well into their 70s. And B, if we really sit down and do the math on the difference between your staying in the 12% versus your crossing into the 22% or 24% with a few thousand or 10,000 bucks. We're not talking about the difference between your enjoying retirement playing Mahjong and your selling organs just to pay the rent. The personal finance world loves to create fear-based content around the need for you to stay in certain brackets, And that's hopefully coming from a place of love. But hear me now. If you don't want to endlessly optimize your life and you cross into the 22% bracket or the 24% bracket for a conversion on some ordinary income, guess what? You're fine. Relax. And you didn't have to deal with the headaches and the paperwork that required for those who did choose to convert to save a few bucks and aggression. All that said, the Roth conversion window is still worth knowing about. Roughly ages 60 to 72 for most people. That's the single best tax planning opportunity in retirement and a striking number of people either don't know about it or don't use it because they have an allergic reaction to voluntarily paying taxes. I understand that impulse, but voluntarily paying 12% to avoid being forced to pay 24% later is not a punishment. It is basic arithmetic. And if you do have the time and energy and you do want to go through the little bit of paperwork, I'd encourage you to at least look into it. One quick addition, there's also a new senior deduction worth knowing about in 2026. Taxpayers 65 and older can claim an additional $6,000 deduction per qualifying taxpayer available whether you take the standard deduction or itemize. And it phases out at a 6% rate for those earning over $75,000 single or $150,000 joint. This is new from the One Big Beautiful Bill Act passed in 2025, and it meaningfully lowers the tax cost of conversions for early retirees who qualify. A few important caveats here. First, Roth accounts come with a five-year rule when we're talking about conversions. You need to have had your Roth IRA open for at least five years before a qualified withdrawal is tax-free if you converted. So if you're late to this, open a Roth now, even if you're only putting a small amount in, just so you can start that clock. Second, large conversions will raise your modified adjusted gross income, which means you need to be careful about IRMA Medicare surcharge cliffs and the Social Security taxation thresholds I mentioned in consideration number one. Third, and I'll say this again and forever, please run these numbers with a CPA. The general principle is sound. I stand by that. But the execution needs to account for your specific income, accounts, and timeline. Now, if you're listening to this and thinking, I'm already in my 70s and I didn't do any of this. I hear you and we'll get to that. The answer is not as dire as it feels. There are still some moves available. Consideration number three the taxable brokerage account the most underused retirement tool in the arsenal This one surprises people And quick personal confession I don even know why I call it a confession because I'm very proud of this. Though I am in a high tax bracket right now, and I'm doing my best to put as much in a pre-tax SEP IRA now as I hope to be in a lower tax bracket in my 60s, I'm ultimately prioritizing my taxable brokerage account now as well in a way that I never have before. And here's why. We've spent decades being told to max out our 401ks, fund our traditional IRAs, take that employer match, defer, defer, defer. And that advice is largely correct, especially when we're in high tax brackets. But it creates a world where many disciplined, diligent savers arrive at retirement with the vast majority of their assets and pre-tax accounts and almost nothing in a regular taxable brokerage account. This to me creates a massive problem because here's what a taxable brokerage account gives you that your IRA does not. First, full flexibility, no rules, no age requirements, no withdrawal penalties, no forced distributions. You can take out exactly as much or as little as you want whenever you want for any reason without the IRS having any mandatory opinions about it. Second, you get considerably favorable tax treatment on long-term gains. When you sell investments in a taxable brokerage account that you've held for more than a year, you pay long-term capital gains rates, not ordinary income rates. In 2026, single filers can earn up to $49,450 in taxable income or $98,900 for married couples filing jointly and pay 0% federal capital gains tax on long-term gains. 0%. We're going to come back to this in consideration four because it deserves its own section. Third, the step up in basis at death. This is one of the most powerful and underappreciated features of taxable accounts. When you pass assets held in a taxable brokerage account to your heirs, the cost basis of those assets steps up to the market value at the time of your death. If you bought VOO at $200 a share 30 years ago, and it's now worth $800, and you die holding it, your heirs inherit it at $800 basis. They could sell it the next day and owe zero capital gains taxes. This makes taxable accounts extraordinarily efficient for estate planning relative to IRAs, where every dollar inherited is typically fully taxable as ordinary income, and many people I know who have inherited pre-tax IRAs were then pushed into higher brackets, resulting in just one more additional headache they didn't want to have. This episode is brought to you by Copilot Money. I have a group chat with four of my closest friends from my finance days. Between the five of us, we have decades of experience managing other people's money, multiple licenses, and I say this with love, a genuinely embarrassing amount of opinions about expense ratios. These are not people who download budgeting apps. These are people who tend to mock budgeting apps. Yet every single one of them uses co-pilot money, unprompted, voluntarily. One of them texted me last month just to say, and I quote, I finally feel like my financial life is in one place from a guy who used to manage eight-figure portfolios. Here's why people who actually know money keep landing on this one. It tracks your spending, net worth, investments, savings goals, and budgets in one place. And it's genuinely beautiful to look at, which shouldn't matter, but absolutely does when you're trying to build a habit. It automatically categorizes transactions, which means you'll stop pretending you'll sort your bank statements this weekend. It tracks your subscriptions so you'll finally find that streaming service you forgot you had and the gym membership you've been emotionally lying to yourself about since February. It works across iPhone, iPad, Mac, and their web app, and they don't sell your data. It's the only personal finance app to win an Apple Editor's Choice Award, was a finalist for the Apple Design Awards, and holds a 4.8 star rating from over 25,000 reviews. Which means it's not just the finance nerds in my group chat. It's a lot of regular people who downloaded it and never deleted it. That is genuinely the hardest thing to accomplish in this category. Go to try.copilot.money slash Tyler and use code Tyler2 to get two free months of CoPilotMoney. That's try.copilot.money slash Tyler using code Tyler2. That's T-Y-L-E-R and the number two. This episode is brought to you by Gelt. Tax day has officially come and gone, but I have one quick question for you. How did your CPA treat you this tax season? Did they reach out proactively, walk you through your options, and make you feel like a priority? Or did you hear from them in mid-March, feel slightly rushed, and wonder afterward if you left money on the table? That second experience is not normal. You just haven't experienced what a great CPA can do for you and your business. Yet. A great CPA is a year-round partner, not a once-a-year fire drill. And Q2 is the best time to make a switch because your new CPA has bandwidth, your numbers are fresh, and there's a full year ahead to make moves that actually matter. And right now, Gelt is offering two things for new clients who sign up before June 30th. First, if you filed an extension, a focused 30-minute session with a CPA to find everything that can still impact your 2025 taxes before the October deadline. It's a paid add-on, and depending on what they find, it frequently pays for itself immediately. Second, for any new client onboarding in Q2, Gelt will go back through your recent returns and find deductions you may have missed, and in many cases, recover them. Also a paid add-on, and also one that often costs you nothing net by the time they're done. Both are time-sensitive, and neither is available year-round. So, if you're a business owner or a high-net-worth individual. And if your CPA made you feel like an afterthought this season, go to joingelt.com slash Tyler. That's J-O-I-N-G-E-L-T dot com slash Tyler and find out what a better experience looks like. Fourth, tax loss harvesting. In a down year, you can sell positions that are sitting at a loss, book those losses, and offset gains elsewhere, or offset up to $3,000 of ordinary income, and then reinvest in a similar position. Similar position. Avoid that wash sale. The loss doesn't mean you get out of the market. You can stay invested, but you get a tax benefit on paper. You cannot do this in an IRA or 401k. It's a taxable account exclusive. The practical implication for a $2 million retiree, if you have the option, you want assets spread across all three tax buckets, pre-tax, Roth, and taxable, because it gives you maximum flexibility to engineer your income strategically from year to year. Pull from taxable when you're in a 0% capital gains window, pull from Roth when any withdrawal would push you into a higher bracket, pull from pre-tax and lower income years to fill up the 12% bracket. This is what I call asset location. And everyone is missing this because they're too busy thinking about asset allocation. But just like real estate, location matters more than anything else in investing and tax considerations. If you arrive at retirement with everything in pre-tax accounts, you've lost that flexibility. You can still do Roth conversions, see consideration number two, but you're doing it under a time constraint and tax pressure that you didn't need. So if you're still in the accumulation phase, and you've maxed your tax-advantaged accounts and have money left to invest. Taxable brokerage is not a consolation prize. It is a beautiful strategic tool. Use it. Consideration number four, the 0% capital gains bracket is the best legal tax arbitrage available to retirees. I want to spend just a little extra time here because I think this is genuinely one of the most actionable and underutilized strategies in retirement tax planning, and most people have never heard of it. So let me set the table. Long-term capital gains, profits from selling investments you've held for more than one year, are taxed at special rates that are lower than ordinary income rates. Those rates are 0%, 15%, and 20%, depending on your total taxable income for the year. Again, for 2026, the 0% rate threshold for married filing joint is $98,900 in total taxable income. For single, it's $49,450. Here's what that means in plain English. If you are a married couple in retirement with taxable income below $98,900, after your standard deduction, after any other deductions, every dollar of long-term capital gain you realize that year costs you exactly zero in federal taxes. Zero. Zero percent. Not a small number. Zero. Let me show you how this works with our $2 million portfolio. Let's say our couple has $1.5 million in a taxable brokerage account invested in VOO, $400,000 in a traditional IRA, and $100,000 in a Roth IRA. This year, they need $100,000 to live on. Their Social Security covers $40,000 of that. They need another $60,000 from their portfolio. Their taxable income from Social Security after the standard deduction might be something like $25,000. Rough numbers, but stay with me. That means they have roughly $73,900 of space remaining before they hit the 98.9 ceiling, they can realize $73,900 in long-term capital gains from their taxable brokerage account and pay federal capital gains taxes of exactly nothing. They get $73,900 in income, federal capital gains tax equals zero. Now, here's the advanced version of this, sometimes called gain harvesting, which sounds like something you do in a field, but it's actually just strategically selling appreciated investments in low income years, booking the gain at 0% and immediately buying them back. Unlike tax loss harvesting, there's no wash sale rule for gains. You could sell VOO, pay zero in taxes on the appreciation and buy VOO back the same day at the new higher cost basis You essentially reset your basis at zero tax cost Again check with a CPA as I just the messenger Now why does this matter Because the higher your cost basis in an asset the less gain you'll recognize when you eventually sell it. This reduces your tax burden in future years, and if you're holding assets you plan to leave to heirs, gives them a higher starting basis with which to work. There are a few things that complicate this picture and that you need to run carefully. High-income taxpayers may also be subject to an additional 3.8% net investment income tax on cap gains if their modified adjusted gross income exceeds $250,000 for married filing jointly or $200,000 for single filers. So if your income in a given year is running high for any reason, a big Roth conversion, a sale of something significant, you need to factor that in. Also, capital gains add to your modified adjusted gross income, even at the 0% rate, which means they can affect your Social Security taxation and Medicare IRMA thresholds. The ceiling of $98,900 is your taxable income ceiling, not your modified adjusted gross income ceiling, and those are different numbers just in case you weren't confused enough. This is precisely the kind of calculation that benefits from 15 minutes with a spreadsheet and ideally a conversation with a tax professional once a year. But the fundamental point stands. If you are a retiree with a meaningful taxable brokerage account and your income in a given year allows you to stay below the cap gains threshold, you have access to a legal IRS-sanctioned 0% tax rate on investment income. Most people in your situation will never take advantage of it because nobody told them it existed. I'm telling you, it exists. Consideration number five, withdrawal order, which account to tap first and why it matters almost more than anything else. All right, we've talked about the tax nature of pre-tax accounts, the value of Roth conversions, the strategic use of taxable brokerage accounts, and the 0% capital gains bracket. Now let's put it all together into the practical question that actually governs day-to-day retirement finance. When I need money, which account do I take from? This is called withdrawal sequencing, and getting it right or getting it wrong can have six-figure implications over a 20-year retirement. I'm not being dramatic. The order in which you pull from different account types affects your tax bill every year. The size of your future RMDs, the amount of money you leave to heirs, and whether your Roth accounts have time to grow tax-free while you're using other assets to live on. Here's the conventional wisdom, which is a decent starting point but not the final word. Step one, spend from taxable accounts first. Use the dividends, interest, and if needed, sell appreciated positions. In years where your income is low, you may be capturing those 0% cap gains we just talked about. Step two, then pull from pre-tax accounts, your traditional IRA or 401k. Do this strategically, trying to fill up lower tax brackets without pushing into higher ones. Step three, pull from Roth last. Let the Roth grow as long as possible tax-free since it has no RMDs and every dollar that comes out is completely tax-free. This is the conventional sequence, and it makes sense in many situations, but there are important exceptions. Exception one, the Roth conversion window. In years where your taxable income is unusually low, perhaps you retired early or you've already spent down your taxable accounts, it may make more sense to pull living expenses from a Roth while simultaneously converting pre-tax funds to Roth at a low rate. Yeah, this one's counterintuitive. You're spending Roth now and converting pre-tax to Roth at the same time. But if your alternative is to let that pre-tax account keep growing and face larger forced RMDs in your 70s, burning some Roth now while converting cheap pre-tax dollars can actually be the better long-term math. Exception number two, RMD management. if you're approaching 73 with a very large pre-tax account. Begin drawing it down earlier than you might need to, even if you don't need the cash, in order to reduce the size of future mandatory distributions. A qualified charitable distribution, or QCD, is also worth knowing about here. In 2026, individuals aged 70 and a half or older can donate up to $111,000 directly from an IRA to a qualifying charity, and that amount counts towards satisfying your RMD without being included in your taxable income. If you are charitably inclined and would otherwise be giving to charity anyway, the QCD is one of the most tax-efficient moves available to retirees with large pre-tax accounts. Exception three, the account you're leaving behind. If you plan to leave assets to heirs, the order in which you spend down different accounts has estate planning implications. Pre-tax IRA balances left to non-spouse heirs are generally subject to ordinary income tax as the beneficiary withdraws them. And under the SECURE Act rules, most non-spouse beneficiaries are required to empty inherited IRAs within 10 years. That can be a significant and unexpected tax event for your heirs. Taxable brokerage accounts, as I mentioned earlier, benefit from the step-up basis and are generally a much cleaner asset to inherit. Roth accounts, while tax-free, also fall under the 10-year rule for non-spouse heirs, but at least the withdrawals are tax-free if done within those 10 years. The sequencing you choose during your lifetime shapes what your heirs receive and how they're taxed on it. The broader point here is that withdrawal order is not a set and forget decision. It should be revisited every year or at least every few years as your income situation, account balances, tax rates, and life circumstances evolve. The $2 million portfolio we talked about in the original episode isn't a static thing. It's a living, growing, changing set of assets that interacts with a tax code in real time, and the person who pays attention to that interaction will almost always come out ahead of the person who doesn't. Okay, I know that was so much. Here's what I want you to walk away with today. If nothing else, let's get to two more broad points that hopefully will help you move forward. Investment returns get almost all the attention. Tax efficiency gets almost none. But over a 20 or 30-year retirement, the after-tax dollar is the only dollar that actually matters. A portfolio that earns 8% and is managed thoughtfully from a tax standpoint will almost always outperform a portfolio that earns 9% with no tax attention at all. The five things we talked about today, the true cost of pre-tax withdrawals, the power of Roth conversions in the right window, the strategic role of taxable brokerage accounts, the 0% capital gains bracket that most people never use, and the sequencing of which account you tap first. None of these are complicated. They're not secret. They're just the rules applied deliberately. And most people don't apply them deliberately because they're busy or because they find taxes boring or because nobody ever laid it out for them in a way that felt actionable. So hopefully today was actionable. And I want to say this one more time, clearly yet again, please work with a CPA or a tax-aware financial planner if you're making significant decisions in this area. And no, not all financial advisors are created equal here. The general principles I've described today are sound and well-established. The application to your specific situation, accounts, income, state taxes, social security timing, health considerations, estate goals. That's where a professional earns their fee and then some, as long as it's a flat fee. And one more thing before I let you go. And this one connects directly back to the original $2 million portfolio episode. And it's what I promised you'd get if you stuck with me till the end. There's a lot of debate around safe withdrawal rates. The 4% rule, the 4.7% rule, dynamic spending. Whatever framework you've landed on tends to treat your withdrawal rate as a single number. You pick it, you execute it, you hope the math holds. But here's what very few people factor in. Your effective withdrawal rate and your after-tax withdrawal rate are two completely different numbers, and the gap between them is entirely within your control. If you're pulling $120,000 a year from a $2 million portfolio that is entirely in a pre-tax account, your withdrawal rate is 6%. But if $25,000 of that is going to taxes, your real purchasing power withdrawal is more like 4.75%. You're spending 6% to live on 4.75%. Now flip it, same $120,000 withdrawal, same portfolio, but you've got a three-bucket structure. Pre-tax, Roth, taxable. And you're pulling strategically. You're harvesting $70,000 in long-term gains at 0% from your taxable brokerage. You're pulling $30,000 from the Roth completely tax-free. You owe almost nothing. Your after-tax purchasing power on that $120,000 withdrawal is close to $120,000. Same withdrawal rate, dramatically different purchasing power. This is why I have always said that the debate about whether to use 4% or 5% or 6% misses the point slightly. The withdrawal rate conversation and the tax conversation are not separate entities. They are the same conversation, and the person who truly understands both, who treats their portfolio not just as an investment decision but as a tax management system, doesn't need to be as conservative about their withdrawal rate because they're keeping so much more of what they take out. The goal was never to withdraw less. The goal was always to keep more. Okay, now that's it for today. If this gave you something to think about, please consider leaving a review on Apple or Spotify as it helps more people find the show. And we can all think of someone right now who would benefit from knowing at least one of the points we explored above. As always, hope this gives you something to think about during the week ahead. Thanks for tuning in to your Money Guide on the Side. If you enjoyed today's episode, be sure to visit my website at TylerGardener.com for even more helpful resources and insights. And if you're interested in receiving some quick and actionable guidance each week, don't forget to sign up for my weekly newsletter where each Sunday I share three actionable financial ideas to help you take control of your money and investments. You can find the signup link on my website, tylergardner.com, or on any of my socials at Social Cap Official. Until next time, I'm Tyler Gardner, your money guide on the side, and I truly hope this episode got you one step closer to where you need to be.