Personal Finance

With $9M In Assets, We're Retirement Age But Starting To Dread The Looming Taxes

Aaron Webber

Published: March 6, 2025 10:30 am

Given the number of guides, tutorials, books, and videos available online about how to minimize your taxes or avoid them altogether, it’s normal to feel apprehensive about paying taxes at all. Considering the flood of propaganda filling our televisions and social media feeds about taxes, especially in recent weeks, what are the realistic options for those who are approaching retirement and feel nervous about tax day?

One couple was worried about this exact scenario as they quickly reached retirement age, so they took their concerns to the people on Reddit for advice. Here is what they said. Please remember, of course, that everything you read online, including this article, are opinions. You should always speak to a financial expert before making any big financial decision.

The Situation

The author of the post in question recently reached $9 million in retirement savings and was concerned about how much taxes they might have to pay. They hired the services of a financial planner as well.

The author has a salary of $180,000, $30,000 of which goes directly into his Roth 401(k), and the employer also contributes $22,000. His wife earns a pension of $70,000 per year.

They also get $2,000 in passive income every month from two rental properties.

So far, they have $6.5 million in tax-deferred 401(k) accounts and another $2.5 million in Roth accounts.

With so much money saved, they asked the community what their options were for avoiding paying taxes or reducing their tax liability.

The Community Response

A large number of the people who responded were confused about why someone so rich was asking strangers online how to avoid taxes. Even if the author of the post ended up paying the maximum amount of taxes possible, he would still have more money left over than most people would ever see in their lifetimes. Obviously, the author knows what they’re doing, given their use of various tax-advantaged retirement accounts and a financial planner, or they wouldn’t have been able to amass so much wealth in the first place.

That being said, a handful of commenters provided their own opinions on what he could do to reduce his tax liability upon entering retirement.

First, look into converting the Roth 401(k) accounts into traditional 401(k) accounts. The rules for this transition vary, but taking advantage of the after-tax funds of a traditional account can save thousands of dollars if done properly. We highly recommend using an expert if you want to explore this option.

Second, most people fall into a lower tax bracket when they enter retirement because they are not actively making money, so using your current tax situation to estimate how much you’ll pay in retirement is not accurate. However, while this is true for most people, those who choose to continue working at some level or have passive income (like the author) those streams of income are subject to tax and can change your tax bracket. This can influence how much tax you have to pay on your pre-tax savings or Social Security.

If you want to minimize your tax burden, then eliminating those streams of income will keep you in a lower tax bracket. For the author, this would mean selling their investment properties.

Beyond these reasonable options, there wasn’t much the author could do since their finances weren’t particularly complicated.

With not much else to go on, a few helpful commenters offered advice to the author beyond avoiding taxes.

They reminded the author that the whole reason retirement exists in the first place is because people at that age are too old to be useful or valuable in the workplace, and that if you are waiting until retirement to “enjoy life”, you’ve already missed out on your best years and many opportunities along the way.

The author has more than enough money to retire already, so a few even recommended they retire now and enjoy what time they have left, since making it to retirement is never guaranteed, and all that saving would be wasted if they died early.

The general consensus was that the author was spending way too much time, effort, and money trying to figure out how to avoid taxes when they didn’t stop to think whether all this effort was worth how much they would save on taxes. If they just stepped back and took a break from the rat race, they might actually enjoy life while they’re in it, instead of trying to maximize their retirement.

The author could already live like a king on the money he has saved up and still have plenty left over for generations to come. The problem with the author isn’t that he might pay too much in taxes, it’s that his priorities aren’t straight.

A small minority of commenters recommended a few extreme options. These included working more to increase their savings to taxes wouldn’t reduce it as much, monetizing their hobbies or turning them into side hustles, or even starting a business to deduct everyday expense to get small tax breaks. We will not give these silly ideas the attention they crave. Your hobbies should be time for you to enjoy, and you should not be forced to monetize every second of your life simply because other people place the value of their lives in how much money they have. That is a sad way to live.