Sean Mullaney

To my mind, an early retiree is simply anyone who retires prior to being eligible to enroll in Medicare.

That is, generally speaking, the first of the month you turn age 65.

And indications are a majority of Americans do early retire.

And there's plenty of reasons for that.

Sometimes it's choice.

Sometimes it's we've got enough money saved up.

So why are we still working?

And sometimes it's a layoff or my job got obsoleted or whatever it might be.

Early retirement tends to have advantages when it comes to tax planning.

I say that because early retirement offers an opportunity to spread out income over a longer window of time.

And in today's tax planning environment, the tax rules are telling you, they're yelling at you, spread out income, spread out income, spread out income.

So what I mean by that is we live in an era of a very high standard deduction.

We live in an era of the 10% tax bracket and the 12% tax bracket.

A married couple, especially in their 60s or 70s, could have well, well over $100,000 of income subject to only a 0% tax bracket, which is essentially what the standard deduction is.

the 10% bracket and the 12% bracket.

So that's sort of yelling and screaming, please spread out income over time.

And that's part of the reason the early retiree has a tax advantage.

He or she is going to have to live off their income over a longer window of time, which generally speaking helps from a tax planning perspective.

Why is that?

Well, for the simple reason that we ought to pay tax when we pay less tax.