053: How to Prepare for Rising Tax Debt and Inflation

Sep 23, 2021

Once again, the tax bill is coming–and the biggest asset for so many Americans, with the exception of their real estate, is a pre-tax retirement plan. This could be a 401(k), a 403(b), a thrift savings plan, an IRA, or something else. 

And no matter what people say, their biggest expense is not healthcare–it’s taxes. Taxes go up as retirees withdraw retirement income, they affect Medicare B, C, and D premiums, and they’re all but inevitably going up.

In today’s episode, we discuss a number of issues: how Congress has failed to steward our money, why inflation is all but inevitable (and why it’s so hard to find products right now), and what you can do to protect yourself in the years (and decades) to come.

Here are just a handful of the things that we'll discuss:

  • Why so few people are aware of their tax situation until they enter into retirement.
  • How healthcare and taxes go hand in hand to increase retirees’ expenses.
  • Why every American citizen now owes over $470,000 in taxes to address the national debt.
  • Why inflation is out of control right now. 
  • Ways to prepare for the coming tax debt, no matter what your retirement plan looks like.

Inspiring Quote

  • “Having a plan is paramount to your success.” – Ed Siddell
  • “So, converting to a Roth, using other vehicles to help ensure that your income down the road when you do retire is tax-free or at a much lower tax basis so if taxes do go up, it’s not going to affect your lifestyle, and the only way to do that is to have a plan.” – Ed Siddell

Interview Resources


LeAnne Siddell: It's The Retirement Trainer with Ed Siddell, a podcast about finding ways to help you become financially fit for your future no matter what financial shape you're in now. Taxes, we've talked about it before but it is a new world and we're talking about it again. This is LeAnne Siddell and here to help us with all our questions and to give us some guidance to help us stay in the best financial shape possible, it's The Retirement Trainer with Ed Siddell. 


LeAnne Siddell: Hi, Ed. 

Ed Siddell: Hey, LeAnne. What's going on? 

LeAnne Siddell: Okay. Well, we're going to talk about taxes again because they seem to be changing every year. 

Ed Siddell: You know, D.C., they can't help but to spend money and when you spend money, the tax bill is coming. It really is and it affects all of us and all of our lives. And we really have to think about it in simple terms because for most people, their single biggest asset other than real estate, when it comes to retirement, it's their pre-tax retirement plans, their 401(k)s, 403(b)s, thrift savings plans, IRAs, and the list goes on and on and on. And I ask people all the time, what's the single biggest expense that most people have in retirement? 

LeAnne Siddell: And they always say health care. 

Ed Siddell: Always. But it's taxes just because of that reason. 

LeAnne Siddell: The taxes are the things that we cut the check for and we see them go out. Sometimes people don't recognize what taxes are until that one April 15th rolls around. 

Ed Siddell: Well, because for most people, their whole lives, they get their paychecks, the taxes are taken out so they don't really see it until it comes time for retirement because when they retire, they give up that paycheck and now they have to create their own, which means they have to come up with their own tax bill to make sure that it's taken care of. And that's when it really hits home. As taxes go up, they have to pull more and more money out to generate their income for retirement. They've got to pay the taxes. So, the more that they pull out, that affects the taxes on Social Security. It also affects the means-based testing on Medicare B, C, and D, which means the more income that you have, the more you're going to be paying the premiums on those Medicare B, C, and D. When we're talking to Ethan and Seth, our two boys, with Seth got his first paycheck from Wendy's and he's like, "Where's the rest of the money?” It's kind of enlightening out of the mouths of babes. It's really important when you think about it. And I'm a math guy. It's all about the numbers. And I say it all the time, it is, it's really all about the math. 

Taxes, I think they're more relevant today than ever before because if we look at the national debt and what it was all the way back in 2008 before we started going on this huge spending spree, the national debt was just shy of $9 trillion. And when we talk about the national debt, that really doesn't include what we call unfunded liabilities and so unfunded liabilities, it's kind of like a mortgage, right? When people have a mortgage, the reason they have a mortgage for most people is they don't have the 300,000, 400,000, or 500,000 or more to pay for their house in cash. So, they get a loan from the bank because they want to live where they're at and enjoy life in that house. Since they don't have the money for that $300,000 mortgage, it's unfunded. Okay. That money isn't saved. So, we have unfunded liabilities here in our country that relates to Social Security, Medicare, government pensions, and the list goes on and on and on. So, all the way back in 2008, those unfunded liabilities were 25 trillion. That's with a T, $25 trillion, meaning every American citizen owed $56,000 to cover that $25 trillion. So, that was all the way back in 2008. 

LeAnne Siddell: Now, our national debt exceeds what the unfunded liabilities of 2008 were. 

Ed Siddell: Yeah. You know what? That's a great way of putting it. You're exactly right, because now, as of today on the net (, we owe almost $29 trillion as far as the national debt. But here's the kicker. The unfunded liabilities right now are over $156 trillion meaning each U.S. citizen, the liability for each U.S. citizen, that means we all owe over $470,000 per person. That's a lot of money. That's more than the average cost of the house here in the U.S. 

LeAnne Siddell: It’s more than most people have saved over their lifetime. 

Ed Siddell: It is. I mean, it really is and it's scary. And so, just this year, Congress has passed over $3 trillion in new debt already this year. The year isn't even over and we want to add another 3.5 trillion. So, that's going to be close to $7 trillion in one year. So, just to put it in perspective, let's just talk about the 3 trillion that we already passed. When Clinton left office and Bush took over, do you know what the national debt was at that point in time? 

LeAnne Siddell: Well… 

Ed Siddell: That's okay. Most people don’t but it’s… 

LeAnne Siddell: But I thought that Clinton, his touting was that he balanced the budget but it really wasn't that case. 

Ed Siddell: Well, I mean, really, we were under GDP. All right. So, our spending was under the GDP on an annual basis on average. He inflated it but we were still under GDP, gross domestic product. And when Bush took over, the national debt was 5.8 trillion. So, that means over a 225-year period, the history of America, we have accumulated less than $6 trillion. In less than six months this year, we more than added 50% of that, $3 trillion to the national debt. I mean, think about that. I mean, that's crazy. 

LeAnne Siddell: Yeah. That was just for COVID. 

Ed Siddell: And that was just for COVID and we want to do another $3.5 trillion. I use David Walker as an example every time we're talking about taxes when we teach class. So, he was the Controller General under both Clinton and Bush. So, he was kind of like the CPA of the country if you will. And he had a quote and this was way back in 2009 and he said, "Regardless of what politicians tell us, any additional accumulations of debt, I mean, they're basically deferred tax increases.” All right. So, think about that. Back then, again, we just talked about it. The national debt was below $9 trillion. All right. And right now, it's over three times that. It's almost $29 trillion. In 2008, the CBO, Congressional Budgetary Office, said that if Social Security, Medicare, and Medicaid and I'm using that example because Social Security is number one in as far as our budget spending goes on an annual basis. Medicare is number two. Medicaid is number three. And then the interest rate on the national debt is number four. The CBO said that if Social Security, Medicare, and Medicaid go unchanged, the rate for the lowest tax bracket would increase from 10% to 25%. The rate on incomes in the current 25% tax bracket would have to be increased to 63%, and the rate of the highest bracket would have to be raised from 35% to 88%. 

Now, obviously, people are like, "Well, right now the highest tax bracket is over 37%.” You're right but this was back in 2008. And I hear when I read this quote and we're talking about it in class, people say, they are like, “Ed, come on, that's never going to happen.” You know, taxes are never going to get that high. 

LeAnne Siddell: But they were that high all the way back in the 70s, right? 

Ed Siddell: In the 60s, right? From 1960 to 1963. And here's the problem. You know, the government, D.C., I call it crazy town because it is, they're not being good stewards of our money. You know, these people work for us but they're spending like it's a blank check. They keep spending. There's no end in sight and that tax bill is coming. I mean, we're going to have to pay for it. And we're already starting to pay for it right now because we continue to print money. We're flooding the economy with these dollars, this paper dollar that’s really a fiat currency, which means it's not backed by anything other than the full faith and credit of Uncle Sam, and that hidden tax is called inflation. And we’ve seen it. 

LeAnne Siddell: Yeah. Oh, you've been seeing it. You've been seeing it but I don't know that people actually really started to pay attention until maybe the last three months when they're seeing drastic changes in things they can no longer get their hands on. They aren't even producing right now because they can’t even get it. 

Ed Siddell: Right. They can't get it. So, I was talking to your brother yesterday. We were at our nephew's at the Delaware County Fair. So, I'm talking to your brother, Frank, and he was telling me how crazy it is at work. So, he sells meat and his clients are… 

LeAnne Siddell: That's one way of putting it. All right. 

Ed Siddell: I was trying to figure out how to say without naming his company. 

LeAnne Siddell: I don't know that he'd appreciate that but we'll leave it alone. 

Ed Siddell: But he sells to like Myers and 7-Elevens so there are retailers to the end-user. And he was saying that he's had to go back to his customers and client base several times this year already year-to-date. Now, we're in September, halfway through September, and they've already had to raise their prices 50%. All right. 

LeAnne Siddell: I'm hearing it everywhere. My friends are in sales and as fast as they're putting out quotes, the quotes are changing because things are everything from transportation to lack of. In some ways, the sales representatives even believe that there's somewhat price gouging because the stockpile is down so they can afford to charge more because people want what they're selling. 

Ed Siddell: Yeah. Because there is supply and demand. 

LeAnne Siddell: Supply and demand is just making it up. 

Ed Siddell: Well, it's just like the price of used cars. 

LeAnne Siddell: The price of used cars and new cars.

Ed Siddell: Yeah. And new cars. It's just outrageous because they can't get computer chips. I mean, that supply chain, the inflation, all this kind of goes hand-in-hand. I don't want to go down a rabbit hole when we're talking about the U.S. dollar being a fiat currency but it's important because the U.S. dollar is the world currency and if we keep spending like we are, obviously, not only are we going to have inflation, let's just pray to the good Lord above that we don't have hyperinflation like we did under Carter but this is also why we're keeping interest rates so low. The government has a vested interest in low-interest rates because as rates go higher, that means the service on the national debt is higher and we don't have it in the budget right now. So, it used to be our annual budget was below $3 trillion. Right now, we've already collected 3.8 and the budget is roughly just shy of $5 trillion. It just keeps going up to pay for all these programs and services. So, yeah, I mean taxes. Right? I mean, if the national debt is up 300% just from 2009, so a little over 10 years ago, which way do you think taxes are going? 

LeAnne Siddell: Yeah. So, now with all this, how about we'd be a little encouraging? How do we protect ourselves against this? 

Ed Siddell: Okay. So, we've identified the problem. The sky is not falling. It's not falling.

LeAnne Siddell: Yeah. We kind of beat that one down. 

Ed Siddell: All right. So, look, Uncle Sam's getting his money. No matter what, he is going to get his money. We all know that. And having a plan is paramount to your success because if you don't have a plan and that paycheck during retirement, the more that you pull out, the more you're going to have to pay in taxes, which again, affects Social Security, the means-based testing on Medicare, which means the cash flow that you're actually going to be able to use and spend is going to go down. And it's that cash flow, that income in retirement that really determines how much fun you get to have. All right. I mean, it really is. So, being able to put a plan in place so it doesn't negatively affect you is really important in deciding how you're going to pay Uncle Sam, when you're going to pay it, and how much. So, right now taxes are low. And I'm not saying go out and convert everything to do a Roth conversion with everything, because it is, it's all about the math. Everyone's situation is completely different. But there are so many different options out there as far as contributing to the Roth portion of your 401(k) now, locking in those taxes so that when the money comes out since you already locked the taxes in on the original contribution, you don't owe taxes on that but all that growth comes out tax-free as well. 

So, converting to a Roth, using other vehicles to help ensure that your income down the road when you do retire is tax-free or at a much lower tax basis so if taxes do go up, it's not going to affect your lifestyle, and the only way to do that is to have a plan. Life is going to happen. Bad things happen as they sometimes do. We call it life. You need to know what to do next. You got to take all the emotion out of that decision-making process so that you do have success so that you can take those vacations and spend time with the grandkids and do what you want to do.

LeAnne Siddell: And not watch and listen to the news every single night. Well, that stresses you out. 

Ed Siddell: And have a heart attack. Yeah. Chicken Little, the sky is falling, and just know that you're going to be okay, right? 

LeAnne Siddell: So, if people want more information, what do they do? 

Ed Siddell: You know, just go to Give us a call at 614-526-4118. Send us an email at You know, and anyone who reaches out, we're going to give you a guide on taxes. It's really going to help you out. And if you have questions we can set up a 15-minute complimentary phone call, no obligation, and answer your questions and see if we can point you in the right direction. 


LeAnne Siddell: Well, it sounds like you already recapped everything out. But if you want Ed's help or you want a free no-cost obligation, give us a call at 614-526-4118, go to our website,, or email us at Thanks, Ed. 

Ed Siddell: Thanks.




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