Why Taxes Are Not Listed Separately in Basic Retirement Expense Calculations

Full analysis

A listener asked why income taxes are not explicitly listed as a sixth component of the "Minimum Dignity Floor" — the core retirement expenses of food, utilities, transportation, housing, and healthcare. Chris Stein explained that taxes are not an independent fixed expense like utilities: they depend entirely on how the expenses are funded. Someone drawing entirely from a Roth IRA owes no taxes on those distributions, while someone drawing only from a traditional IRA will owe taxes on every dollar. The framework handles this by targeting after-tax income to cover the five core expenses, rather than naming taxes as a separate line item. Importantly, only the taxes on income used to cover the five basic expenses need to be secured with guaranteed income — not the taxes on distributions taken for discretionary spending, which can be paid from those same discretionary dollars. The hosts added that including all taxes in the guaranteed-income calculation would push retirees toward buying unnecessarily large annuities, which they see as counter to good planning.