In this Halloween‑themed episode of the One of a Kind Financial Show Daily, host Mike Milligan (joined by co‑host Gary) warns retirees age 73 and older about the most dangerous tax pitfalls they face. The conversation uses the Halloween metaphor of “tricks” (tax penalties) versus “treats” (proper tax planning) to keep the tone light yet urgent. The main topics covered are: (1) Required Minimum Distribution (RMD) errors that trigger a 25% penalty plus ordinary income tax; (2) Early withdrawals from retirement accounts before age 59½ that incur a 10% penalty and higher tax brackets; (3) Excessive tax withholding that functions as an interest‑free loan to the IRS; (4) Failure to maximize tax‑advantaged accounts (401(k) match, Roth, HSA, back‑door Roth) leading to lost deductions and growth; (5) An overview of Mike’s “One of a Kind Financial Plan,” which bundles tax strategy, retirement income, investment, long‑term care, and legacy planning. The episode intersperses promotional calls‑to‑action (phone numbers, text keywords) and a compliance disclaimer clarifying that Mike is a CFP and investment advisor, not a tax or legal professional. The overall takeaway is that retirees can avoid costly “tax tricks” by understanding the rules, adjusting withholding, contributing fully to tax‑advantaged accounts, and seeking a comprehensive financial plan.
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Be one of a kind with Mike's Plan.
Welcome to the One of a Kind Financial Show Daily with your host, Mike Milligan. It is Friday. Ooh, Halloween, October 31st.
I'm excited, guys.
Trick-or-treating time's here for me and my wife. We're actually getting dressed up tonight and going to a 1920s party in a speakeasy in San Juan, Puerto Rico with some of our folks from the San Juan Social Club. If you want to know more about the San Juan Social Club, go to sanjuansocialclub.com and you can see And get in tune with that. That's just not for people who live on the island. That's for people who visit the island or want to interact with a bunch of entrepreneurs who are forward-thinking when it comes to what's going on in the markets, in business, and entertainment. But again, it's Halloween, and Halloween's one night per year, folks. But guess who dresses up every day and comes to you with a trick-or-treat notice? Well, that's Uncle Sam, right? Because there's a lot of tricks in the tax code, and when you mess up on them, he will take all the treats in the form of penalties and interest.
And so today on Halloween, you can't—
as Gary will say in the show, you can't turn the porch light off for Uncle Sam. He always comes knocking at everybody's door. Let's talk about some tips and tricks to avoid being tricked by the IRS so that you don't treat them. Happy Halloween, guys. We'll see you in November. And by the way, Be one of a kind.
Halloween, one night a year the kids go door to door asking for treats, but the IRS, they knock on the door, they ask for their treats, and unlike Halloween, they're not going away if you turn the porch light off. They're gonna still, still be there. So let's make sure you're giving them treats, but not the whole candy stash. You know, sometimes you, you know, you don't feel like getting up and you just leave the whole bowl of candy out there. and some kid swoops in and grabs all the candy. You don't want the IRS to do that. So, you know, we're gonna make sure that doesn't happen.
You know, Gary, you always see, you always see kids dressed up as the Statue of Liberty. And I don't know what the top Halloween costumes are this year, but like when I always took my kids, you'd always see a Statue of Liberty.
Oh yeah.
But yeah, but, but, you know, they should have had, you know, Uncle Sam was a patriotic figure back in the '60s and '70s for Halloween.
Sure.
Yeah. But now, but now this tax man You know, they are dressed up every day and they're looking for you to make a mistake. And, uh, and they want you to— they want you to give them more of your hard-earned money. Uh, so let's— so we'll talk about some, some ways not to overpay the IRS.
Yeah, let's do that. Let's start with the first one, RMD mistakes, the 25% penalty trap.
Well, the problem here is if you miss your required— you know, as we're getting toward the end of the year, right? Uh, many people who are 73 and older now Have to take a required minimum distribution. But if you miss taking that RMD or you calculate them incorrectly, it, it'll trigger a brutal 25% penalty on the amount not withdrawn, plus you still owe the regular income tax on the distribution. And so some common mistakes that are made there is you don't take the first RMD by April 1st following the year you turn 73. You use, uh, an online system where you miscalculate. The biggest RMD problem that we see is people that actually have money in a 401, in an IRA, and they think they can aggregate the balances on those and they'll take it from just one of the accounts. The reality is, is if, if you have plans that are not the same, you cannot aggregate balances. And even though you may have, you may have taken the proper amount of RMD, you didn't Do them from the right accounts. So the IRS is still going to come and ask you not only to pay the tax on what you missed from that account, they're also going to ask you to pay a 25% penalty.
All right. Retirement early— a retirement account early withdrawal penalties, the double tax hit.
Well, this is, you know, people that are under 49 and a half years old who, you know, get themselves in problems, or they want to pay off their house early. They They'll go into their 401s or traditional IRAs before age 59½, and they'll take money out that triggers ordinary income tax and a 10% penalty. We often see this when a job loss forces people to take money out of their IRA, when financial emergencies present themselves that are not penalty-free exceptions. Or they take large retirement withdrawals that bump you into higher tax brackets because a financial professional told you that an indexed universal life policy is better, or a whole life policy is better.
And when you—
so when you don't understand the difference between 401 loans and withdrawals, the penalties alone can be 5 or 6 figures.
Mm-hmm.
And so we want to avoid this trick that many people fall for and give. And we don't want Uncle Sam to have more of the money because you've, you know, you're doing something wrong.
Yeah, absolutely. The show is the One of a Kind Financial Show with Mike Milligan. And Mike is with One Oak Financial, Ideas by Mike. I wanna give you the phone number, get on the calendar, get you all set up with that comprehensive plan. There's no cost, there's no obligation. 800-748-1838, 800-748-1838, or text the word ideas to 600-700. Excessive tax withholding, the interest-free loan to Uncle Sam. You don't want to do that.
No, I mean, like, people, people don't understand, like, what a tax refund really is. Really means that you just giving your money early to the IRS and they're not giving you any interest on that money. The average tax refund in 2024 was $2,815. That meant that taxpayers gave the government that money As an interest-free loan all year. Imagine what that's— that's it. That's the equivalent. If you get paid every 2 weeks, that's the equivalent of about $125 more in your paycheck. So, so why, why does this happen? It's because people have outdated W-4 forms not reflecting their current life situations. It means they're over-withholding and, and they have this kind of, I'm gonna save money, that's forced savings mentality.
Sure.
It's gonna be give back to me once a year. Or it could be they're not completing, uh, getting all their dependents properly. Guys, I'm telling you, it's better to— if you want to force savings, get your tax liability as close to zero. And in your paycheck, save that $200+ per month for yourself and at least earn some interest. Build yourself up an emergency fund, uh, that, you know, that you're doing over the year versus just getting a lump sum payment from the IRS. March, April, or May the year after you, uh, right, right, you allowed them to keep your money.
All right, missing tax-advantaged accounts contributions, lost deductions.
So some people just fail to maximize their 401. I mean, there's a lot of people who don't even contribute to the 401 up to the match that their employer given, and others who are, you know, saving money in their bank and missing the opportunity to put money into— if you're saving money in your bank, you're paying after-tax money anyway. Why not put that money into your Roth 401 or a Roth IRA or even your health savings account? Because then, if you put it into those vehicles, you're still putting after-tax money in, but you're missing out on the tax-deferred growth that comes with it. So, missing the 401 match, missing the triple tax advantage of the health savings account, overlooking catch-up contributions for age 50. Or even missing the Roth back— mega backdoor Roth strategy for high-income earners is huge.
Yeah, that's why you need Mike in your corner. That's why you need the One of a Kind Financial Plan. Mike, about a minute left. Tell us about it.
So the One of a Kind Financial Plan is put in place where taxes are the biggest expense you ever pay. And like, just as the IRS, they dress up every day, they knock on your door to get taxes on money that you earn. Money that you've saved and money that you are— that is continuing to grow in those savings accounts. We want to slow down their taxes that they're getting from you. The One of a Kind Financial Plan will build a tax strategy in place for you that helps you understand and pay what you should pay. It also has the benefits of a retirement income plan An investment strategy that's right for you, a long-term care plan that fits into your lifestyle so that you will be taken care of at the end of your life, and then a legacy plan that tells you, I love you. Folks, this Halloween season, let's make sure that you're building something that is big and beautiful for yourself, a one-of-a-kind financial plan so that you can live a one-of-a-kind life.
800-748-1838, 800-748-1838, or text the word IDEAS to 600-600.
One last message from our compliance team. As a reminder, Mike Milligan, Certified Financial Planner, is an investment advisor representative of Advisory Alpha LLC, an SEC-registered investment advisor. All opinions expressed by me, Mike, or any podcast guest are solely our opinions and do not reflect the opinions of Advisory Alpha. This recording is for informational purposes only, should not be relied on solely for investment tax or legal decisions, and it's in no way intended to communicate or guarantee specific performance or suitability of any security instrument or product as we may have discussed. Investment advisory and financial planning services offered through Advisory Alpha LLC, a registered investment advisor. Insurance products are provided by Ideas by Mike, a licensed agency located in Norfolk, Virginia, and licensed to do business in all 50 states. While tax and legal issues may be discussed in the general course of financial and investment planning, Advisory Alpha does not provide tax or legal services. Please consult with your tax or legal professional prior to Making decisions related to these issues. If you want us an appointment with Ideas by Mike or One Oak Financial, please reach out via our website. This podcast is produced in conjunction with Mike Milligan LLC.
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