Suze Orman warns retirees of impending tax trap

Financial expert and bestselling author Suze Orman recently highlighted the so-called "Tax Torpedo" in her "Women & Money" podcast—a surprisingly high tax burden that can affect retirees. Those who exceed certain income thresholds, in particular, should be prepared for this tax challenge. In her podcast episode, Orman provided valuable tips on how to prepare for such tax events and ideally avoid them. She further explained which investment accounts are particularly advantageous for minimizing tax obligations during retirement and securing retirement assets sustainably. Retirees could be surprised by this tax phenomenon when, for example, they sell certain investments or make large withdrawals from their retirement accounts, such as a traditional IRA. To counteract this, Orman advises investing in Roth IRAs or similar tax-advantaged accounts, as contributions are made from taxed income and withdrawals during retirement are tax-free. Moreover, delaying the claim of Social Security benefits until the age of 70 could be advantageous. A later claim results in higher monthly payments, which Fidelity, an asset management company, quantifies as up to 24%. This can be a sensible strategy for retirees to gain further years without additional taxable income.