The ‘Wait Until You Retire’ Tax Myth Only Works for 4% of People, According to This Retirement Advisor

Many retirees are told to defer paying taxes on their investments until retirement. “So many advisors have helped clients defer, defer, defer, because we all been told this myth, right?” said David Brooks on the Retire SMART podcast. “Defer your taxes because you’ll be in a lower tax bracket when you retire. And that’s a joke. That’s 4% of the people I’ve run into.”

If you spent 30 years channeling every spare dollar into a traditional 401(k) on the promise of a lower future bracket, Brooks’ experience is worth examining closely. When a retiree lands in a higher tax bracket instead, the IRS claims a larger slice of the nest egg than any projection had assumed. Tax planning is a discipline that layers dozens of tactics together, and deferral is only one of them.

A traditional 401(k) contribution skips income tax today, then taxes both your original dollars and decades of growth as ordinary income at withdrawal. The bet pays off only when three conditions align: tax rates hold steady or fall, retirement income lands meaningfully below working income, and withdrawals stay smooth rather than spiking in a single year. In practice, Brooks argues, that combination is rare.

Three compounding factors tend to push retirees into higher brackets than they expected. First, Required Minimum Distributions force withdrawals on the government’s timeline, not the retiree’s. Under the SECURE 2.0 Act, RMDs now begin at age 73 for those born between 1951 and 1959, and at age 75 for anyone born in 1960 or later. Second, Social Security benefits become partly taxable once provisional income crosses relatively modest thresholds. Third, Medicare Part B and D premiums climb sharply through IRMAA surcharges once income tops certain tiers. In 2026, that first IRMAA threshold sits at $109,000 for a single filer. The standard Medicare Part B premium is $202.90 per month, but it can escalate to as much as $689.90 per month for higher earners. A retiree pulling $80,000 from a traditional IRA to cover living expenses can simultaneously trigger taxation on Social Security benefits and an IRMAA surcharge, stacking three separate tax effects on top of the basic bracket calculation everyone was focused on.

Brooks’ own story grounds the argument. After selling his restaurants, he owed more in taxes than he had “ever made in a year” because, in his words, he “didn’t get good proactive tax planning.” Building a profitable business requires a very different skill set than engineering a tax-efficient exit. The same gap appears for retirees who assembled a seven-figure 401(k) and then find the withdrawal-phase rules working against them.

Brooks said his firm actively uses roughly 170 incentives written into the U.S. tax code, layering five to eight strategies for each client. The standard deferral playbook draws on exactly one. That single-strategy gap is the difference between handing money to the IRS and keeping it. The stakes are rising: with 401(k) employee deferral limits now at $24,500 in 2026, more workers than ever are accumulating substantial tax-deferred balances that will eventually require a withdrawal strategy.

“Taxes are the No. 1 bill you’re gonna face in life, but it gets even worse in retirement,” Brooks said. He identifies two groups that feel this most acutely: people at or near retirement age, and small business owners. For entrepreneurs, every dollar overpaid to the IRS is a dollar unavailable to grow the business or cover operating costs. For retirees, the damage may already be locked in by decades of single-strategy advice.

Tips for retirement tax strategies

1. Pull your most recent tax return and identify your marginal bracket.
2. Project your first full retirement year of income: Social Security, pensions, RMDs from any tax-deferred account, and any part-time earnings. Compare that projected bracket to your current one. If the future number is equal or higher, the deferral bet is not paying off.
3. Consider consulting a financial advisor to map out a multi-strategy tax plan that accounts for RMDs, IRMAA thresholds, and Social Security taxation together.

The deferral playbook was sold as a universal answer to a question that actually has different answers for different people, and for most retirees the numbers say the universal answer is the wrong one.

Editor’s note: This article was updated to include 2026 IRMAA figures (standard Part B premium of $202.90/month, surcharge threshold of $109,000 for single filers, maximum monthly Part B of $689.90), the current SECURE 2.0 RMD starting ages of 73 and 75, and the 2026 401(k) employee deferral limit of $24,500.