Every financial move you make — every withdrawal, conversion, or sale — sets off a chain reaction that can ripple through your entire retirement plan. What seems like a simple decision today could quietly trigger thousands in extra taxes tomorrow, higher Medicare premiums next year, and reduced Social Security benefits for life.

This is the Retirement Tax Domino Effect — and understanding how to control it can make the difference between keeping your income or handing it to Uncle Sam.

The Hidden Chain Reaction Behind Every Withdrawal

Most retirees think about their taxes one year at a time. But in retirement, taxes behave differently.

When you pull money from your IRA, sell investments, or start collecting Social Security, it’s not an isolated event. Each source of income interacts with the others, often in surprising — and expensive — ways.

Here’s what that chain reaction can look like:

1. You take an IRA withdrawal to cover living expenses.
2. That withdrawal counts as ordinary income and increases your adjusted gross income (AGI).
3. The higher AGI causes more of your Social Security benefits to become taxable (up to 85%).
4. The inflated AGI also pushes you into a higher Medicare IRMAA bracket, adding hundreds — or even thousands — to your annual premiums.
5. And to make matters worse, it could trigger higher capital gains taxes on investments you sell later in the year.

One decision. Five dominoes down.

The IRMAA Shock: When Higher Income Means Higher Healthcare Costs

If you’re on Medicare, you’ve likely heard the term IRMAA –short for Income-Related Monthly Adjustment Amount. It’s a surcharge added to your Part B and Part D premiums if your income crosses certain thresholds.

In 2025, a single filer with income above $103,000 — or a married couple above $206,000 — pays an extra $69.90 per month per person on Part B premiums. And that’s just the first tier. The highest bracket can add more than $419 per month per person.

Here’s the kicker: IRMAA is based on your income from two years prior. So a Roth conversion in 2025 could spike your Medicare premiums in 2027.

Most retirees don’t realize they’ve crossed an IRMAA threshold until they get a letter from Social Security announcing their “adjusted” premium. By then, it’s too late to undo it.

Social Security’s Tax Trap

Social Security benefits are partially taxable depending on your “provisional income,” which includes half your Social Security, plus all your other taxable income and tax-free municipal bond interest.

The thresholds haven’t changed since 1984:

• Single: $25,000 – $34,000
• Married: $32,000 – $44,000

Once your provisional income passes those levels, up to 85% of your benefits become taxable.

Combine that with Required Minimum Distributions (RMDs) that start at age 73, and it’s easy to see why many retirees find themselves paying more taxes in retirement than when they were working.

The Sequence That Can Save — or Sink — Your Retirement

The order in which you draw income from your accounts matters far more than most people realize. It’s called tax-efficient sequencing, and it’s the secret to keeping your dominoes upright.

The goal is to withdraw income strategically, spreading it across taxable, tax-deferred, and tax-free accounts in a way that keeps your AGI — and your tax brackets — under control.

Here’s a simplified sequence that often works well:

1. Start with taxable accounts (like brokerage or savings) early in retirement, allowing IRAs and Roths to keep growing tax-deferred.
2. Use Roth conversions strategically before RMD age to “fill up” lower tax brackets.
3. Delay Social Security until full retirement age (or beyond) to maximize benefits and minimize taxes during conversion years.
4. Draw RMDs when required–but use qualified charitable distributions (QCDs) to offset the tax hit if you’re charitably inclined.
5. Use annuities with tax-efficient income riders or LTC benefits to create stable, tax-advantaged income streams later in life.

It’s not about avoiding taxes — it’s about controlling the timing of when you pay them.

Case Study: How the Johnsons Saved $10,000 a Year

Meet Bill and Karen Johnson, a retired couple from Utah.

Bill is 68, Karen is 66, and together they’ve saved about $1.1 million–$800,000 in a traditional IRA, $200,000 in a brokerage account, and $100,000 in a Roth IRA.

When they first retired, their advisor suggested taking withdrawals directly from their IRA to cover expenses. Seemed logical enough–until tax season hit.

Their $85,000 withdrawal pushed their AGI to $128,000. That did three things:

• Made 85% of their Social Security taxable.
• Triggered IRMAA surcharges that added $2,400 to their Medicare premiums.
• Bumped them into a higher federal tax bracket.

Their total extra tax cost? Nearly $10,000.

A second opinion revealed the problem wasn’t how much they were taking — it was where they were taking it from.

By adjusting the sequence, their advisor created a more efficient plan:

• Withdraw $40,000 from the brokerage account (mostly capital gains, taxed at 15%).
• Withdraw $25,000 from the IRA to fill up their 12% bracket.
• Take $20,000 from the Roth IRA — tax-free.

Their new AGI dropped below the IRMAA threshold. Only 50% of their Social Security was taxable, and their overall tax bill dropped by $6,500. Add in the avoided Medicare surcharges, and the total savings reached $10,000 per year.

That’s the power of sequence–and the danger of ignoring it.

The New Retirement Planning Rule: Taxes Come First

In the accumulation years, investment growth drives the plan. In retirement, tax strategy does.

Your rate of return matters–but your after-tax return matters more.

The difference between an 8% return and a 7% return is minor compared to the difference between a 12% tax rate and a 24% one.

A well-designed income strategy integrates:

• Tax bracket management
• IRMAA awareness
• Social Security optimization
• Roth conversion timing
• Strategic annuity placement for tax-advantaged lifetime income

When you coordinate these pieces, you’re no longer reacting to taxes — you’re controlling them.

Final Thought: Don’t Let the Dominoes Fall

Most retirees spend decades building their nest egg but only minutes thinking about how taxes will hit them later. Yet the IRS, Medicare, and Social Security are all connected. Move one domino, and the others start to tumble.

The smartest retirees — and their advisors — don’t just build wealth. They sequence it, shield it, and spend it strategically.

Because in retirement, it’s not what you make.

It’s what you keep that counts.

Lyle Boss, The REAL BOSS Financial, endorsed by Glenn Beck as the premier retirement advisor for Utah and the Mountain West States. Boss Financial, 955 Chambers St. Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.