Hi, I’m David Bach. I’m a 10-time New York Times bestselling author with over 7 million books sold, and I’ve spent 30 years in financial services helping people save and invest for retirement. Through this work, I’ve helped millions align their money with their values and achieve financial freedom. Recently, while updating the 20th Anniversary Edition of The Automatic Millionaire, I realized something troubling about retirement in America – and I have a big idea to fix it.

The Problem: Trillions Locked Away, Little Used in Retirement

Americans have done a great job saving for retirement. In fact, about $44 trillion is now invested in retirement accounts (roughly one-third of U.S. household financial assets). The baby boomer generation alone – around 73 million people – collectively holds trillions of dollars (over $10 trillion) in these accounts. The unfortunate irony is that much of this money isn’t being used to enjoy retirement. Most boomers won’t touch their retirement funds until they’re forced to start Required Minimum Distributions (RMDs) in their 70s. In fact, over 80% of retirees only withdraw the IRS-mandated minimum or nothing at all until RMDs kick in. Financial plans often advise using taxable assets first and leaving IRA/401(k) money for last – to defer the hefty ordinary income tax on withdrawals as long as possible.

The result? These retirement accounts keep growing untouched, and retirees hesitate to spend the money they diligently saved. As my grandma used to say: “Money is like manure – if you leave it in one place it starts to stink, but if you spread it around, things start to grow.” In other words, money sitting idle does little good; money in motion can enrich lives.

The Solution: A 12% Flat Tax on IRA Withdrawals After Age 60

My idea is simple: Let’s reward the savers (especially Baby Boomers) by letting them actually use their retirement money. How? Reduce the federal tax on traditional retirement account withdrawals to a flat 12% (ordinary income tax rate) starting at age 60. This would be a temporary incentive – an eight- year window from 2026 through 2033 – during which retirees could withdraw from their pre-tax IRAs or 401(k)s and pay just 10% tax instead of whatever higher rate their ordinary income would normally incur.

This 12% IRA Flat Tax would dramatically lower the tax penalty for tapping into retirement funds. It’s essentially a “tax holiday” on retirement withdrawals in one’s early retirement years. By doing this, we encourage people to actually use the money they saved – to enjoy their retirement, rather than hoarding it until government RMD rules force it out.

Potential Benefits of the 12% Flat Tax Proposal

What could happen if we did this? A lot of positive outcomes:

• Retirees enjoy their money in peak years: Baby Boomers in their 60s and early 70s could afford to spend more in their active retirement years, improving their quality of life. They might take that dream trip, renovate their home, or simply worry less about every penny. Some might even choose to retire a bit earlier or reduce their working hours, confident they can withdraw savings at a low tax cost.

• Economic stimulus: Rather than sitting in accounts, that money would start flowing through the economy. If even a fraction of $10+ trillion in boomer retirement savings is spent, that’s a massive stimulus. Our analysis suggests this policy could inject over a trillion dollars into the economy over eight years, boosting growth. It might even increase annual GDP growth by ~0.2 to 1.0 percentage points, providing a timely economic uplift when needed.

• Delay Social Security stress: If retirees have more accessible funds, some may delay taking Social Security benefits (since they can draw down their own savings first). Delaying Social Security by even a year or two both increases their eventual monthly benefit and eases the strain on the Social Security Trust Fund, potentially pushing back its insolvency date by a year or more.

• Freedom and personal choice: With only a 12% tax bite, retirees gain freedom to use their money as they see fit. They might reinvest it in taxable accounts, buy a second home, help their children purchase a first home, travel extensively, or donate to charity. The key is the choice becomes theirs, not driven by tax fears. It makes spending one’s hard-earned savings a more fun and feasible choice, rather than something to dread at tax time.

• Entrepreneurial opportunities: A wave of money moving from tax-deferred accounts into the economy could spark new businesses and services. Financial advisors, fintech firms, and entrepreneurs may develop creative solutions to help retirees manage and spend this wealth. Think of new investment products, retirement spending tools, or businesses catering to boomers enjoying travel and leisure – a whole “retirement spending” economy could blossom.

• Incentive for younger savers: This isn’t just about current retirees. Imagine you’re Fifty-something with retirement on the horizon – if you knew a flat 10% tax on withdrawals at 60 was in play, you’d have a huge incentive to save more now. Nearly 50 million Americans in their 50s could be motivated to max out retirement contributions in the next 5–10 years, aiming to capitalize on the tax break when they hit 60. That means an overall increase in personal savings rates leading up to retirement, which is a long-term good for financial security.

Addressing the Trade-Offs

No idea is perfect. The obvious trade-off here is a temporary drop in tax revenue from retirement withdrawals, which could slightly increase the federal deficit in the short term. In essence, we’d be letting retirees keep more of their money (the government collecting 12% instead of, say, 22% or more). However, much of that lost tax revenue might be offset indirectly by economic growth from higher spending (sales

taxes, business profits, jobs created, etc.). And remember, it’s a time-limited policy – not a permanent cut – designed to jolt life into trillions of dormant dollars.

It’s also important to note: this is just an idea – a conversation starter. I’m not a lobbyist, and I have no political agenda or business interest that profits from this. I’ve been nurturing this concept for about five years, looking for ways to validate it. Thanks to new AI modeling tools, we were finally able to “test” and analyze the impacts of this idea with data. The research and simulations are shared on this website for you to explore. We want people to think about this scenario and provide input, because big ideas get better with many minds at work.

Big Ideas Are Possible – Let’s Talk About It

Admittedly, proposing a 12% flat tax on retirement withdrawals is a big idea – and big ideas can be challenging. But our country has a history of embracing bold financial ideas when the time is right. In just the past year, we’ve seen policies that once seemed unlikely become reality, like the new “No Tax on Tips” deduction (allowing workers to deduct their tips from income)  and even a “No Tax on Car Loan Interest” deduction (letting individuals deduct car loan interest up to $10k). If those can happen, then maybe giving millions of Americans a break on retirement withdrawals isn’t so far-fetched after all.

Empowering 73 million Baby Boomers to access and enjoy the retirement money they worked so hard to save could truly work – for them and for the economy. And it would send a positive message to younger generations that saving for retirement pays off in more ways than one.

Finally, our analysis examined a flat tax on retirement withdrawals at 10%, 12%, and 15% using multiple AI models — Perplexity, ChatGPT, and Gemini. As expected, the models differed in their conclusions, much like leading economists would. The goal of proposing a 12% rate was simply to spark discussion. Whatever the final rate, the real win is simplicity — helping retirees access their savings with lower taxes and fewer complications.

Thank you for reading this far. If this idea resonates with you, please share it with friends and add your voice to the conversation. This website is set up to share all the research we conducted, and even lets you play with the assumptions and data yourself. I believe it’s a discussion worth having for the future of retirement in America.  You can review everything that has been done so far on our Notebook LM – created to begin and continue the conversation,