Most of the expensive mistakes I see in retirement planning as a CFP® are subtle. This one is not.

A Medicare enrollment trap springs most often on the very people who feel least worried about it: Those working past 65 with what they assume is perfectly good employer coverage.

But a hard Medicare deadline with a permanent penalty attached can snare people who did everything else right.

Here's how it happens, why it costs real money and what to do about it.

The setup

When you turn 65, you become eligible for Medicare. Most people know that. What trips them up is the assumption that because they're still working and covered by an employer health plan, they can ignore Medicare until they retire.

Sometimes that is true. Often, it's not, and the difference comes down to the size of the employer and the type of coverage you have.

If you work for a larger employer, generally one with 20 or more employees, your group plan can remain your primary coverage, and you can delay Medicare Part B without penalty under a special enrollment period.

But if you work for a smaller employer, Medicare might be considered your primary payer once you turn 65, even while you're still on the company plan.

In that situation, delaying Part B doesn't just risk a penalty. It can leave you with gaps in coverage, because your employer plan might pay as though Medicare is already covering its share, whether or not you're enrolled.

That distinction — 20 employees —isn't something most people think to check. They see, "I have health insurance through work," and reasonably conclude they're fine. The rules don't care how reasonable the assumption was.

The penalty that never goes away

Here's the part that stings. If you're required to enroll in Part B and you miss your window, the late enrollment penalty is not a one-time fee.

According to Medicare.gov, the Part B penalty adds 10% to your premium for each full 12-month period you could have had Part B but did not. You pay that surcharge for as long as you have Part B, which for most people means the rest of their lives.

Think about what that means. Delay three years when you should have enrolled, and you're looking at a 30% premium surcharge, every month, indefinitely. There is no statute of limitations, no point where it falls off. A misunderstanding at 65 becomes a line item you carry into your nineties.

Because that 30% applies to whatever the standard premium happens to be each year, the dollar cost climbs right along with premiums over time. Across a 20-year retirement, a few years of delay can quietly add up to thousands of dollars in surcharges you could have avoided.

I have seen people discover this years later and have no recourse, because the rules were followed exactly as written — just not by them.

The timing windows that matter

Medicare enrollment runs on specific windows, and missing them is what triggers the trouble. Your initial enrollment period is a seven-month stretch around your 65th birthday: the three months before, your birthday month, and the three months after.

If you qualify to delay because of active employer coverage at a large employer, you get a special enrollment period to sign up later without penalty, typically while you're still covered and for eight months after that coverage ends.

The danger zone is the space between assumptions and rules. People who retire and lose coverage sometimes assume they can enroll whenever they get around to it.

The eight-month clock after employment ends is easy to blow past, especially amid the chaos of leaving a job. Miss it, and you might be stuck waiting for a general enrollment period and carrying the penalty besides.

What to do

A few concrete steps make this entirely manageable.

Well before you turn 65, find out if your employer has more or fewer than 20 employees and confirm in writing how your plan coordinates with Medicare. Your human resources (HR) department or benefits administrator should be able to tell you whether your coverage lets you delay Part B. Do not guess, and do not rely on a coworker's situation, which might differ from yours.

If you're at a small employer, treat your 65th birthday as a real deadline and enroll during your initial enrollment period unless you have confirmed you genuinely qualify to wait.

If you're delaying because of large-employer coverage, mark the eight-month special enrollment period that begins when that coverage ends. Put it somewhere you won't lose it. The moment you retire or drop the employer plan, the clock starts.

Remember that Part D, prescription drug coverage, has its own late enrollment penalty with similar lifetime consequences. If your employer coverage is not considered creditable drug coverage, the same kind of permanent surcharge can apply.

There is one more wrinkle worth flagging, because it catches a particular group off guard. If you contribute to a health savings account, enrolling in any part of Medicare, including Part A, ends your ability to make new HSA contributions.

Part A is premium-free for most people and many enroll in it automatically without thinking, but doing so while still funding an HSA can create a tax problem. If you work past 65, still contributing to an HSA and plan to delay Medicare, that interaction needs to be on your radar.

It's a small detail with outsize consequences and is precisely the kind of thing that gets missed when someone assumes Medicare is a single on-off switch rather than a set of separate decisions.

The bigger lesson

What makes this trap so frustrating is that it punishes inaction by people who weren't being careless, they were just uninformed. There is no investment decision here, no market risk, no judgment call about strategy. It's purely a matter of knowing the rules and the dates, and acting before a deadline that doesn’t announce itself.

If you're approaching 65 and still working, don't let, "I have coverage through my job," be the end of your analysis. It's the beginning of a question, not the answer.

Spend an afternoon confirming exactly how your employer plan interacts with Medicare, and put the relevant enrollment windows on your calendar.

It's one of the rare retirement mistakes that is completely avoidable with a single phone call, and one of the few in which the cost of getting it wrong follows you for the rest of your life.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Like many, you might have the best intentions of "getting your affairs in order."

Year after year, it lands on your list of resolutions. Yet, every December, it rolls over, untouched, to the next year.

You aren't alone. Trust & Will's 2026 Estate Planning Report, a survey of 5,000 U.S. adults, found that just 26% of us have a will, down from 31% a year earlier, and that 56% have no estate planning documents at all.

Estate planning feels uncomfortable for two reasons:

• It's a topic most of us know little about
• It forces us to sit with our own mortality

The consequences of this procrastination are significant and affect those you love during an already difficult time.

Without a will or trust, state law decides who receives your assets, not you. That process, called intestate succession, might not reflect what you would've chosen, and it can drag out for months or years in probate court, with legal fees eating into what's left behind.

For high-net-worth individuals, the stakes are even higher: More assets, more complexity and possibly blended families or business interests that default rules weren't designed to handle well.

I'm here to help you break the cycle of avoidance, procrastination and (let's face it) fear. Here are some important basics to help you get started.

1. Your will: The foundation and the safety net

A will is the document most people picture when they think about estate planning, and it remains the foundation. It directs who receives what, it names the executor who will carry out your wishes, and it's the only document that can name a guardian for minor children.

If you do nothing else on this list, do this one. It has two limits worth knowing.

Probate. A will must pass through the public court process that a trust is built to avoid.

Retirement accounts and life insurance don't pass under your will, which surprises people. Those assets go to whoever is named on the beneficiary form, no matter what your will says.

If you're married, there is one more decision to make here. It's a common instinct for married couples to want a single, shared document. Some states don't permit a joint will, and even when one is valid, estate attorneys generally advise against it.

Two separate wills give each spouse independent flexibility to make changes. A joint will can lock in original terms for the surviving spouse even if circumstances dramatically change.

Two wills, written to complement each other, often referred to as "mirror wills," achieve the same shared intent with far more clarity.

2. Revocable living trusts: Skipping probate

A revocable living trust is a legal structure you create to hold your assets, such as your home, investment accounts and business interests. You control it, can change it anytime and continue managing everything exactly as before.

Its key benefit is that assets titled in the trust's name bypass probate entirely when you pass away, transferring directly to your beneficiaries without court supervision.

Settling a trust still takes time, but it's not dependent on a court's calendar. That means a faster, smoother transition for your heirs and privacy as well, since probate records are public. A revocable living trust is often the centerpiece of a modern estate plan.

If you set one up, your will then takes a particular form alongside it, called a "pour-over" will. Any assets you forgot to formally move into your trust or acquired shortly before your death, are "poured over" into it through the will, so they are ultimately distributed according to your wishes.

This safety net ensures any overlooked assets don't fall back into intestate succession. As a backstop, it doesn't replace the trust; it completes it.

There is one misconception worth clearing up. A revocable trust keeps your estate out of probate, but it does not reduce estate tax.

The reassuring news is that most families don't owe any. The federal exemption was increased to $15 million per person in 2026, or up to $30 million for a married couple.

However, state thresholds vary. New York taxes estates above $7.35 million in 2026, and because of the state's "cliff," an estate worth more than 105% of that figure, roughly $7.72 million, loses the exemption entirely and is taxed from the first dollar.

Consider the limits and estate tax rules of your own state.

3. Power of attorney: Your trusted 'agent'

Everything up to this point concerns what happens after you're gone. But the next four documents address a time when you're alive but unable to act or make decisions for yourself, whether because of cognitive decline as you age or a sudden accident or illness.

To prepare for such a time, a financial power of attorney lets you appoint someone who will make decisions on your behalf.

This is an important step to keeping your financial and legal matters on track. It:

• Removes friction with banks and brokerages
• Keeps bill paying, investment management and real estate or business matters moving without interruption
• Can spare your family a court-supervised guardianship or conservatorship, which is public, slow and expensive

Keep in mind that many banks will honor only their own form, so ask each institution what it requires while you're still able to sign.

4. Healthcare directives: A message for your loved ones

A healthcare directive, sometimes called a living will, is a written statement of your medical wishes when you can't advocate for yourself.

Rather than leaving loved ones with the burden of critical decisions such as whether you'd want life support, resuscitation or other invasive interventions, a healthcare directive provides them with a roadmap.

It records your values and expectations, so that if a wrenching decision ever must be made, your family is carrying out your wishes rather than guessing at them under pressure.

5. Healthcare proxies: Naming your decision-maker

While a directive states your wishes, a healthcare proxy (also called a durable power of attorney for healthcare) names a specific person to make medical decisions on your behalf if you're incapacitated.

Real medical situations are often fluid and require judgment calls. Your healthcare directive provides information and guidance for these decisions but can't lay out every scenario that could arise.

Choosing someone who knows you well and can act calmly under pressure matters more than choosing the "obvious" family member. Name the person who can ask a doctor a hard question, then live with the answer.

Tell the people you didn't name why you chose as you did while you can still explain it yourself.

6. HIPAA authorization: The one people skip

Naming a proxy is not quite the same as making sure the people who love you can find out how you are. Federal medical privacy law limits who a provider may share your information with, and a HIPAA authorization is the short form that names the people your doctors may speak with freely.

Your proxy has a right to what they need once their authority is in effect, but many proxies are written to take effect only after a physician documents that you can't decide for yourself, and obtaining that determination can require the very records the proxy is not yet entitled to see.

The authorization removes that circularity. It can also cover anyone you'd like to include, such as a sibling or an adult child. It's usually signed at the same time as the proxy and takes a few minutes. It's often a missed step because it feels redundant.

Check-ins: Not a set-it-and-forget-it

An estate plan isn't a one-time project. Marriages, divorces, births, business growth and moves to a new state can all affect whether your plan still works, or whether it's even valid.

Review your plan every three to five years, and immediately after any major life event. A proxy who has moved out of your life or a beneficiary who has already died, can undo years of careful planning.

There's no time like the present: Check it off the list

Most people don't act until something forces the issue, but that might be too late. Don't wait for a push. Be prepared and give yourself the luxury of knowing that your estate plan is solidly in place.

The topic might be uncomfortable, but the process itself is usually far more straightforward than the anxiety that not having a plan creates.

If you do only three things this month, do these.

First, pull up the beneficiary designations on every retirement account and life insurance policy you own and confirm that each one names the person you would name today. Those forms override your will, and a former spouse or a long-deceased parent still sitting on a 401(k) form is one of the most common ways an otherwise sound plan fails.

Second, write down what you own and how each asset is titled, because titling, not intention, determines what passes through probate.

Third, choose your healthcare proxy and your financial agent, ask whether they're willing to serve, and tell them where the documents will be kept.

Do that much, and an estate planning attorney can build the rest around decisions you've already made, which is faster and less expensive than starting from a blank page. Your loved ones will be glad you did.

This article is for informational purposes only and does not constitute legal, tax or financial advice. Estate planning laws vary by state, and individual circumstances differ significantly. Please consult a qualified estate planning attorney or financial adviser before making decisions about your will, trust or healthcare directives.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

More than 32,000 Americans now hold $10 million or more in tax-advantaged accounts, with more than 1,000 holding balances above $25 million, according to Joint Committee on Taxation data.

These balances rarely stem from routine contributions to broad index funds. Typically, they trace back to startup founders, venture capitalists and corporate insiders placing low-cost, early-stage equity into self-directed IRAs and watching valuations compound over decades inside a tax-shielded wrapper.

Building that level of wealth is a remarkable achievement. Protecting it across generations, however, presents an entirely different planning challenge.

Mega-retirement accounts face growing scrutiny in Washington. Legislative proposals in the past decade have sought to cap total retirement balances or enforce mandatory distributions once balances surpass $10 million.

In today's dynamic tax landscape, affluent families must ask: Is an IRA still the optimal vehicle for long-term growth assets?

The traditional IRA drag: Ordinary income vs capital gains

Traditional IRAs deliver upfront deductions and tax-deferred growth, but every distribution is taxed as ordinary income — up to 37% federally, plus state taxes.

For rapidly appreciating equity, this dynamic creates a significant tax drag. Gains that would otherwise qualify for long-term capital gains rates (capped at 20% plus the 3.8% net investment income tax) lose their tax character entirely inside a traditional IRA. Decades of growth convert into ordinary income upon withdrawal.

The ordinary income vs capital gains tradeoff deepens for heirs. Under the SECURE Act, most nonspouse beneficiaries must fully distribute an inherited IRA within 10 years. A $20 million traditional IRA forced out over a decade can push beneficiaries into top tax brackets every year, surrendering nearly half the account to tax obligations.

The Roth trap: Income tax free, estate tax exposed

Roth accounts offer tax-free distributions and no lifetime required minimum distributions (RMDs), making them a natural candidate for high-upside equities. Yet, an often-overlooked exposure remains: The full Roth balance remains inside the owner's gross taxable estate at death.

Consider an entrepreneur seeding a Roth account with early-stage equity that grows to $50 million. While heirs receive an income tax-free windfall, they might face a substantial estate tax bill on the balance above the federal exemption limit ($15 million per person).

Another strategy is to withdraw from mega-Roth accounts after age 59½ and gift those funds — either directly or via trust structures. This approach can rapidly exhaust lifetime gift tax exemptions, restricting broader estate options.

Estate planning alternatives: Irrevocable trusts

To insulate high-growth assets from systemic tax drag and estate expansion, families expecting their wealth to trend above the federal estate tax exemption amount often look beyond retirement accounts toward irrevocable trust structures.

One has the choice of paying the trust's taxes over time by using a grantor trust. Because the grantor pays the annual income tax on behalf of the trust, the assets inside compound tax-free without diminishing the trust, principally providing a tax-free gift to beneficiaries each year.

To avoid paying the taxes of the irrevocable trust, the grantor might use a non-grantor trust in which the trust pays its own taxes. The grantor might "turn off" the grantor's trust status to convert the trust into a non-grantor trust.

Grantor trusts can be structured to allow indirect access to trust funds in more than one way. An independent trustee can be granted discretion to make distributions to beneficiaries based on health, education, maintenance or support needs, offering flexibility without giving the grantor direct control.

For married grantors, a spousal lifetime access trust (SLAT) provides a more direct route: It permits actual distributions to a spouse, who might then informally share that benefit with the grantor.

A non-grantor variation, the SLANT, can achieve similar goals, often for state income tax purposes. Because retaining a swap power would convert the trust back to grantor status, SLANT distributions rely more heavily on independent trustee discretion, which calls for more careful drafting.

While legislative discussions periodically evaluate changes to grantor trust rules, these vehicles remain primary pillars for intergenerational wealth transfer when executed with careful legal oversight.

Strategic asset placement across vehicles

Optimizing a complex wealth structure requires matching specific asset classes to the appropriate legal and tax wrappers. Note that these are general frameworks; the right approach for any given family will depend on their specific asset profile, complexity and risk tolerance.

• Traditional IRAs. Often best allocated to steady, yield-generating assets such as private credit or real estate investment trusts (REITs), where ordinary income tax rates match the income profile of the asset.
• Roth IRAs. Highly effective for strong growth equities, provided total household wealth remains within long-term estate tax exemption thresholds.
• Irrevocable grantor trusts. Ideal for high-upside, early-stage positions once family wealth exceeds federal estate tax thresholds, shielding future growth from federal estate tax.
• Taxable portfolios. Well-suited for core appreciated assets intended for transfer at death, leveraging the step-up in basis to eliminate unrealized capital gains. For concentrated, highly appreciated positions held prior to death, structured hedging and derivative strategies can help manage concentration risk, while other diversification tools such as direct indexing can allow for a more gradual transition out of the position.

Preserving generational wealth requires thoughtful vehicle selection, proactive risk management and staying ahead of changing tax frameworks. As balances grow, revisiting where assets sit, and why, can be one of the more overlooked ways to preserve wealth across generations.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Your inheritance will likely be very different from your parents'. Two forces are at play. First, as life expectancies lengthen, the next generation is receiving inheritances much later in life. Second, the amount of wealth changing hands is staggering: Trillions of dollars will be passed down as part of the Great Wealth Transfer.

People inheriting money in their 30s or 40s might use those funds to buy a home or pay for their children's college. But those receiving inheritances in their 50s and 60s are using that money differently. For many, this windfall triggers a "second retirement" — an unexpected phase of financial freedom that allows them to completely rewrite their timeline.

Here's how experts recommend maximizing a late-in-life inheritance.

Buying back time

Well-off people are often advised to give with warm hands (while they are still alive) for a reason. Financial gifts for children during their 20s, 30s, or 40s can often be more "helpful" than receiving that money later.

Joshua Mangoubi, founder and chief investment officer at Considerate Capital Wealth Management, is familiar with that scenario. But he also says the narrative is shifting.

"What I usually hear is some version of, 'Man, I could have used this in 1998.' I get it. I would have said the same thing. Give it a few months, though, and the 1998 comment stops coming up," he says.

As Mangoubi explains, "At 35, the money buys stuff. At 60, you already own the stuff. Most of the 60-year-olds I work with are trying to get rid of stuff, not buy more. So what does the money buy now? Time."

What makes a late-in-life inheritance even more valuable, Mangoubi says, is that many older people know what they want to do with their time, whether it’s seeing their grandchildren more often, exploring hobbies, or traveling. And that’s something it’s hard to put a price tag on.

Paying for long-term care

On the flipside, Mangoubi says, a lot of people who receive an inheritance later end up using it to pay for a surviving parent’s long-term care.

"Long-term care insurance has an ugly math problem," Mangoubi says. "The people who can self-fund their care don't need it, and the people who need it can't afford it."

Given the way medical costs keep climbing, Mangoubi isn’t surprised by this trend. According to CareScout, the median cost of an annual assisted living stay was $74,400 and a private room in a nursing home was almost $130,000 annually, as of 2025.

While covering long-term care isn’t the most fun way to use an inheritance, it can at least alleviate an otherwise huge financial burden. Plus, recipients of an inheritance who don’t have their own long-term care plan can use the money to fund one.

Helping children and grandchildren

By the time many people reach their 50s or 60s, they’ve saved well and are still in their peak earning years. As such, they don’t necessarily have a great use for an inheritance. In these situations, recipients will often use the money to better the lives of their kids and, if applicable, grandkids, says Brandon M. Cox, CFP and founder of Coastline Complete Wealth.

"I also see people who inherit in their 50s and 60s realize they already have enough for themselves and start gifting money to their children or grandchildren. In that sense, some late-life inheritances almost skip a generation economically, even if they don’t legally," he explains.

Cox has also observed an interesting trend.

"I’d say more than half of the people I work with who receive a substantial inheritance want to keep all of it in their own bloodline," he says. "Their children become the beneficiaries of those inherited assets instead of their spouse, even in happy first marriages."

Retiring earlier than planned

While older beneficiaries of an inheritance may not "need" the money, it can often be a catalyst for early retirement, Cox says.

"We generally build retirement plans as if an inheritance isn’t coming," he explains. "Once it actually arrives, though, you can see people realize pretty quickly how different their financial picture is."

Cox shares that he once had a client with a successful pharmaceutical sales career who was making good money, but her inheritance let her retire earlier than she otherwise would have.

This phenomenon often acts as a "second retirement," where an unexpected late-in-life windfall allows someone to abandon their primary career trajectory and immediately enter a new phase of absolute financial independence.

"Once you know you don’t have to work anymore, that starts weighing on you pretty heavily when you’re having a bad day at work," he insists.

Patrick Simasko, elder law attorney and financial adviser at Simasko Law, has also seen late-in-life inheritances fuel earlier retirements than planned.

"Kids seem to want to retire earlier than their parents. They saw their parents work and never took advantage of their savings. The kids want to start their retirement as early as possible," he says.

Buying more financial security

In Simasko’s experience, many of his clients who receive a late-in-life inheritance are already in a strong position to retire comfortably. But that extra money, he says, can buy more financial security.

"There has been a major shift away from traditional pensions," Simasko explains. "For a 55- or 60-year-old who may not have a pension of their own, an inherited IRA or other retirement assets can substantially strengthen their retirement picture. In many cases, the inheritance isn't about buying something new — it's about providing greater security, flexibility, and freedom during retirement."

Pivoting to meaningful work

Some people may not be ready to retire in their 50s or 60s, despite being able to do so following a sizable inheritance. Allison Moeschberger, CFP and VP wealth adviser at Johnson Financial Group, says she’s seen clients use their excess income later in life to adapt their careers rather than ditch them.

"Working because you feel you have to is very different than working because you want to," Moeschberger says. "An inheritance can allow them to retire early, move to part-time, switch careers to try something new, or move from a paying job to volunteering."

Moeschberger shares a few stories of meaningful pivots.

"One client left their demanding job as an attorney and became a substitute teacher so they had the choice of working when they wanted to," she says. "Another stepped down from running a business to become a bartender at their local brewery because they already enjoyed going there as a customer and still wanted to be able to interact with people and have interesting conversations."

Funding family memories

You may not need more stuff if you inherit money in your 50s or 60s. But you can use that money to buy experiences, Moeschberger says.

"One of the best parts of being a wealth adviser is watching clients experience the things they dreamed of or wanted to do but thought would never be possible for them," she says. "Mediterranean cruises, real estate purchases in a new location, and home additions are all examples I’ve seen."

Moeschberger also said one client of hers chose to invite their kids and grandkids on a big family trip as an experience they would all appreciate and remember. And that’s a wonderful way to honor a loved one, too.

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After years of advising families through the transition into retirement, I've noticed that one question comes up more than any other, and it rarely has anything to do with how much money someone has saved.

It's a short question with a complicated answer. "Will I be okay?"

People want to know if they can retire, how they would draw income if they did and what risks might derail a plan they've spent decades building. The size of the number in an account doesn't make that question go away nearly as often as people expect it to.

Why the question doesn't disappear as wealth grows

It's easy to assume this worry is mostly about how much someone has saved. In my experience, it isn't, not entirely.

Until someone feels secure about their ability to retire, that concern tends to crowd out almost everything else. Tax efficiency, legacy planning, giving — none of it feels urgent until the core question is answered.

Once that sense of security is in place, a different worry often takes its spot: "Am I doing the right thing?" More accounts, more complexity, more moving parts can start to feel harder to manage, not easier.

The question evolves rather than getting answered once and staying answered. Having clarity of how much you need in order to retire is different from knowing your balance. One is a number on a statement. The other is a plan for turning that number into cash flow you can count on, year after year, market up or down.

Until that plan exists, the worry doesn't go away, no matter how large the balance is.

The adviser who helped you build wealth may not be the one who helps you spend it

One pattern shows up constantly among people exploring a new adviser relationship: The person they've worked with did a genuinely good job growing their money. That was never really in question. What's in question is what comes next.

Growing a portfolio and spending it down are two different problems with two different risk profiles.

While someone is accumulating, market swings are mostly noise — contributions keep going in regardless of what the market did last quarter.

Once withdrawals begin, the math changes. Pulling money out during a down market can do lasting damage to a portfolio in a way that contributing during a downturn never would. That's a real, well-documented risk, sometimes called sequence of returns risk, and it's one that a lot of accumulation-focused advisers simply aren't built to manage — not because they lack skill, but because it's a genuinely different discipline.

As I put it to a colleague recently: "Clients don't just want strategy. They don't just want solutions and answers or benefits. They want execution. The moment we stop doing that, we're out of business."

That's worth sitting with, because it applies just as much to the retiree managing their own plan as it does to any adviser. A strategy that sounds right on paper doesn't mean much if there's no mechanism to carry it out, rebalance around it and adjust it as circumstances change.

A framework for answering the question yourself

Feeling OK isn't something you talk yourself into. It's the result of having real answers to a specific set of questions. Anyone approaching retirement, whether working with an adviser or not, should be able to answer each of these with some confidence:

1. The number. How much do you need to retire, based on your own spending, not a generic rule of thumb like "25 times your expenses"?

2. The income plan. How will savings convert into a reliable paycheck? Which accounts get tapped in what order and why?

3. Social Security timing. When should you claim, and how does that decision interact with taxes, spousal benefits and the rest of the plan?

4. Tax sequencing. What are the tax implications of how and when you withdraw from taxable, tax-deferred and tax-free accounts?

5. Medicare and health care. How does the timeline for Medicare enrollment intersect with the income plan, particularly around IRMAA thresholds?

6. Estate alignment. Does your estate plan still reflect what you want, or is it a document that was drafted once and never revisited as circumstances changed?

Individually, each of these is manageable. Stacked together, they're exactly the kind of complexity that keeps people lying awake doing math in their head instead of enjoying the retirement they worked for.

Why the plan matters more than the portfolio

Most financial firms are built to manage investments. Far fewer are built to walk someone through this specific set of questions and turn the answers into a coordinated plan, one that comes before the investment strategy is finalized, not after, so the portfolio is built to support a real income plan rather than the other way around.

That distinction matters because a good plan that sits in a drawer doesn't make anyone feel OK. A plan holds up only if someone is checking in on it: Adjusting the withdrawal rate after a down year, revisiting the tax strategy when the rules change, updating beneficiary designations after a life event. The plan is not a one-time deliverable — it's an ongoing process.

What resolution looks like

People who work through this successfully rarely describe the outcome in technical terms. They describe it in plain language: The picture got simpler. The jargon went away. They stopped guessing and started deciding.

That's really the goal of good retirement income planning. Not to make the topic sound more sophisticated, but to take a pile of accounts, tax questions and what-ifs and turn them into something a person can hold in their head clearly: A number, a plan for drawing income and a sense of what happens if the market has a bad year right when retirement begins.

If you've built real wealth but still find yourself uncertain about what retirement looks like day to day, that uncertainty is common, and it's solvable.

It usually isn't a sign that something has gone wrong. It's a sign that no one has walked you through the whole picture at once, and that conversation is worth having before retirement begins, not after.

Please see important disclosure information at opalwealthadvisors.com/disclosure.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

As a nurse and now the CEO of a health company that serves older adults, I've spent decades around serious illness, aging and death. I've watched families make extraordinary decisions under impossible circumstances.

I've also seen something that still surprises people: Choosing hospice or palliative care isn't about giving up. Often, it's about focusing on what matters most.

Too many Americans believe there are only two choices at the end of life. You either go to battle by taking on every available treatment, or you surrender. This is one of the most damaging myths in healthcare.

There is another clear path. It's choosing peace.

Over the years, I've noticed that people facing the end of life often fall into one of three mindsets.

Some simply shut down. They withdraw from the world, becoming disconnected from the people and life around them.

Others fight relentlessly. Every new procedure, every hospitalization, every intervention becomes another struggle to postpone what they know is coming.

Neither approach is inherently wrong. Every person's journey is deeply personal.

But the people who leave the greatest impression on me are those who arrive somewhere in the middle. They say something like: "I've had a good life. I don't want to die, but I know death is part of life. I want to spend whatever time I have left being myself."

That isn't surrender. It's acceptance, which provides the clarity that many families desperately need.

Hospice and palliative care myths

About 2 million Americans on Medicare opt for hospice and palliative care every year, according to a report from the National Alliance for Care At Home, but the choice remains shrouded in misconception.

One of the biggest myths is that doctors stop caring. The opposite is true. Curative care focuses on defeating disease. Palliative care focuses on relieving suffering.

For people nearing the end of life, hospice shifts the goal from extending every possible day to making every remaining day as meaningful and comfortable as possible.

The question isn't whether medicine can do something, because modern medicine almost always can.

The better question is whether it should.

I've cared for people in their 90s with advanced dementia who undergo major surgery after a broken hip. Technically, the operation is successful. The X-ray looks perfect. But has the person recovered? Or have we simply repaired one body part while losing sight of the whole human being?

Medicine is remarkably good at treating diseases, but it can struggle to treat people.

That distinction matters.

Conversations to have now

The hardest conversations rarely happen between doctors and patients. They happen around kitchen tables. Adult children want one more treatment because they're afraid of losing mom. A spouse can't imagine saying no to another procedure. Old family conflicts resurface. Guilt enters the room.

Suddenly, decisions that should be about the people's wishes become tangled in everyone else's emotions.

I've seen families spend months arguing over what their loved one would have wanted because no one asked while they still could.

That's why these conversations should happen years before anyone needs hospice.

Seniors, you should tell your family what quality of life means to you. Put your wishes in writing. Explain where you draw the line between living longer and living well. Don't assume your children will somehow know. In a crisis, uncertainty almost always leads to conflict.

When families understand and accept a loved one's wishes, something remarkable often happens. The anxiety begins to lift. People stop guessing. They stop wondering if they're making the wrong decision. They can focus on being daughters and sons instead of decision-makers, spouses instead of advocates, grandchildren instead of witnesses.

They can simply love each other.

I also believe we need to change how we talk about hospice itself.

Far too many people arrive there only in the last days of life. By waiting so long, they miss many of the services that make hospice so valuable, such as expert pain management, emotional support, spiritual care if desired, social workers who help families navigate difficult decisions, and bereavement resources that continue after a loved one dies.

Hospice isn't about hastening death. It's improving life when time is limited.

In my experience, families almost never tell me they started hospice too early. Much more often, they tell me they wish they'd accepted the support months sooner.

A good ending

None of this means curative care is the wrong choice. If treatment offers a realistic chance to restore meaningful health or aligns with a person's goals, pursuing it can be exactly the right decision. The goal isn't to replace curative medicine with palliative care — it's to recognize the moment when the purpose of care changes.

Every life reaches that moment differently.

What I hope families remember is this: The measure of a good ending isn't whether we exhausted every possible medical intervention. It's whether we honored the person's wishes, reduced unnecessary suffering and gave them the chance to remain themselves for as long as possible.

In healthcare, we often celebrate fighting.

I think we should also celebrate wisdom.

Sometimes the bravest decision a family can make isn't choosing one more treatment. It's choosing one more meaningful conversation. One more story. One more shared meal. One more peaceful afternoon holding hands instead of sitting in another waiting room.

Choosing hospice isn't choosing death.

Sometimes, it's choosing how to live until the very end.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For retirees and pre-retirees, the question has shifted, from "How do I grow my wealth?" to "How do I sustain, protect and distribute it tax-efficiently?"

Over the past few years, technological advancements in the investment world have ushered in a new era of flexibility and control.

As a financial planner and owner of Alpha Planning, I find that direct indexing and tax-loss harvesting have become strategies that I'm discussing regularly — often with clients who have brokerage accounts over $250,000 and are keen on managing their retirement tax outcomes.

What is direct indexing — and why is it different?

Most investors have grown comfortable with index funds: Buy an S&P 500 ETF, and you get hundreds of companies with one click. But direct indexing lets us go one step further.

Instead of holding shares of a fund, we own the individual stocks that make up an index, opening up far more opportunities for customization and tax optimization.

To illustrate: Imagine your portfolio is like a chef's kitchen. Index funds are the meal kit — pre-packaged, efficient and predictable.

But direct indexing is the custom kitchen, stocked with individual ingredients that let you adjust every dish to your taste. You can swap one item for another, season to your preferences or craft a meal that's uniquely yours.

This flexibility is invaluable when managing taxes and making strategic choices.

And it's not just theoretical. Our team consistently averages 1% to 1.5% of tax alpha each year in nonqualified accounts simply by trading stocks strategically — that's above and beyond any market performance.

"Tax alpha" is a measure of how much additional money you keep by lowering your tax bill, and this alpha accumulates year after year, resulting in thousands of dollars in additional value for our clients over time.

The capital gains budget: A smarter, more strategic tax plan

One concept that has become the backbone of many retirement conversations is the capital gains budget. Think of it as an annual spending plan for your realized gains: How much can you afford to distribute before tipping into higher tax brackets or triggering additional Medicare IRMAA premiums?

Intentionally setting a capital gains budget creates room to coordinate other income strategies — like Roth conversions — without crossing those crucial thresholds.

Direct indexing allows for precise control of:

Tax-loss harvesting. By tracking individual positions, we can harvest losses throughout the year, offsetting gains and smoothing out your tax bill.

Roth conversions. Loss harvesting frees up "space" in your tax bracket so you can convert more IRA assets to Roth at preferable rates and accelerate tax-free growth without impacting IRMAA.

IRMAA management. Staying under IRMAA cutoffs means keeping your Medicare premiums as low as possible.

Flexible withdrawals. Harvested losses don't just help in a single year — they often carry forward, providing valuable flexibility for withdrawals in later retirement years. This can help ensure you're less likely to trigger excessive taxes when accessing your investment accounts for future needs, often when long-term care comes into view.

A case from my desk: Linda and Bob's retirement tax playbook

Earlier this year, I met with Linda and Bob, a couple who'd recently retired with $3 million in investable assets. Their challenge: To maximize after-tax retirement income, minimize surprises and plan for their family's future.

With direct indexing in their taxable account, we harvested $75,000 in losses over the first two years of the strategy.

This loss harvesting became essential to keeping their capital gains budget on track — allowing us to convert IRA dollars to Roth while staying under Medicare IRMAA thresholds and AGI limits.

It also provided the flexibility to help fund a second home purchase without affecting their IRMAA and Roth conversion strategy thanks to the carry-over losses we had helped accrue.

The payoff? Linda and Bob enjoyed predictable Medicare premiums, more tax-free growth, more flexibility for future withdrawals and an estate strategy ready for the next generation.

Their story is a perfect example of how intentional planning — not just reacting to market swings — translates into tangible, lasting benefits.

Who benefits most?

Direct indexing and a capital gains budget aren't only for ultra-high-net-worth investors. If you have a brokerage account over $250,000 and want to take control of your retirement tax plan, these strategies could be your missing link.

They offer proactive ways to personalize your financial plan, prepare for future legislative changes and put more money to work for you.

Key takeaways

• Direct indexing brings customized flexibility — think of it like a custom-made mutual fund — you have control over when to buy and sell, not the mutual fund or ETF
• Tax-loss harvesting is more powerful when you own individual stocks
• Setting a capital gains budget helps coordinate Roth conversions and manage Medicare costs
• Strategic trading generates tax alpha — on average 1% to 1.5% per year — which compounds into substantial long-term benefits
• Harvested losses create flexibility for withdrawals in future years, helping minimize taxes as retirement unfolds — especially when future needs like long-term care arise

Final thoughts

Retirement is about more than investment returns — it's about controlling what you can and planning with intention.

If you haven't reviewed your capital gains budget or explored direct indexing, now's a good time to sit down with your adviser and ask the tough questions.

In my experience, the confidence that comes from a well-structured, tax-smart retirement plan is the most valuable asset you can own.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

It’s perfectly natural to want your children to be well cared for after you’re gone. It’s also natural to wonder if they can manage an inheritance with the same care it took to build. After all, loving your children and trusting them with a large windfall are not the same thing.

An outright bequest can overwhelm a child who has never managed a large sum of money — much less a family business or other complex assets. A spendthrift trust, on the other hand, allows you to provide for them without dropping a huge lump sum into their checking account all at once.

What a spendthrift trust actually does

The name "spendthrift" comes from an English term for someone who is extravagant and recklessly wasteful with money. A spendthrift trust, an often-misunderstood estate-planning tool, lets you provide for your loved ones while protecting your legacy from poor decisions and creditors. Unlike a regular trust that lets you hand over assets, money or property all at once, a spendthrift trust rations money gradually according to its terms. That’s because the trust — not your children or other beneficiaries — owns the assets.

The trustee manages the spendthrift trust, deciding when, how much, and for what purpose funds are distributed according to your set terms. Your child does not have a right to demand a lump sum, to use the trust as collateral for a loan, or to pay a creditor. Sometimes this can be misconstrued as a vote of no confidence. However, if explained well, it is actually just the opposite, as this type of trust can help support your loved ones for decades when structured properly.

The risks of an outright inheritance

Over the next 25 years, trillions in U.S. personal assets will change hands in what’s known as the Great Wealth Transfer. The scale of that alone can make you feel a little uneasy about your kids’ finances after you’re gone.

Research by Morning Consult, in partnership with Kiplinger, shows why that uneasiness is so common: families often aren’t on the same page. Nearly twice as many parents expect to leave a meaningful inheritance (46%) as adult children who expect to receive one (23%). The same survey found that 11% of parents also worry their children won’t handle an inheritance responsibly.

With an outright inheritance, money and assets transfer directly to your beneficiaries without restrictions. That gives them full control over the inherited assets immediately upon your death and can expose those assets to risks that you never intended, especially if the beneficiary isn’t prepared. It’s not unusual that a lump-sum inheritance disappears faster than it arrived. The value of a spendthrift trust is that it can protect your heirs not just from creditors or lawsuits, but sometimes from their own financial mismanagement.

Who is a spendthrift trust for?

Spendthrift trusts are especially useful for beneficiaries who:

• Are young or financially immature, such as a teenager or a grandchild.
• Have special needs and/or receive government benefits.
• Have mounds of high-interest debt.
• Might be facing a divorce.
• Have a history of poor money management.
• May struggle with gambling or other addiction.
• Works in a profession with a high risk of lawsuits, such as doctors, lawyers and business owners.
• Is at risk of financial scams or exploitation.

When creditors can access trust assets

Spendthrift protection is not airtight. Even in states with clear statutes, courts may still allow creditors to access assets despite the spendthrift provision. For instance:

• Child support and alimony. Most states treat child support and alimony obligations as exceptions to spendthrift protection. A former spouse or child owed support can often compel a court to order distributions or wage garnishment.
• Basic needs providers. Some states allow creditors who provide beneficiaries with necessities, such as food, shelter or medical care, to file a claim against trust assets.
• Federal government claims. Federal tax debts and certain other federal obligations, such as defaulted federal student loans, may override a state's spendthrift protections.
• Tort victims. Some states allow victims of the beneficiary's intentional wrongdoing to obtain trust assets.

The specific exceptions depend entirely on your state's law, and a spendthrift provision that works well in one state may offer fewer protections in another state. Keep in mind, too, that the protection covers only those assets held inside the trust. Once you distribute the assets to your beneficiaries, they become the beneficiaries' property and ordinary creditor rules apply.

How to write the trust so it actually works

Creating a spendthrift trust is similar to creating any other trust, and the spendthrift clause itself can be relatively short. Under the Uniform Trust Code, saying the beneficiary’s interest is held “subject to a spendthrift trust” is often enough. However, you may choose to add provisions and conditions that let you decide when and how much to distribute to the beneficiary.

For example, you may add a provision that restricts how much your beneficiary can access each year. Or, you might add a condition that limits how your beneficiary can spend the money.

"Let’s say you are providing a $200,000 inheritance for your two children. You have one child who isn’t especially careful with money and the other is," says Oliver Kevin Morrisey, inheritance and estate lawyer at Empower Probate Lawyers. "You don’t split $200,000 equally. For the impulse spender, you might include a provision in the trust that pays $2,000 per month and can be used only for rent, education or healthcare. The other child can receive the $200,000 outright."

However, states have different rules about what you can and can’t stipulate in a spendthrift provision. Scott Jones, founder & financial advisor of Genesis Wealth Advisor Group, LLC, says, "In many states, an inheritance can be reached by creditors the moment it lands in the beneficiary's name, so the money mom and dad worked forty years to save can be gone before the beneficiary sees any of it."

That’s why it’s wise to consult with an estate planning attorney to ensure you’re following your state’s rules concerning the spendthrift provision.

Remember that a spendthrift clause may be overkill if your children or other beneficiaries are financially mature and stable, you have a modest estate, or you have no concerns about excessive spending or possible claims from creditors. A revocable living trust that becomes irrevocable at your death, with a spendthrift clause included, is often enough for many families.

How to choose a trustee

Choosing the right trustee for a spendthrift trust matters. You can choose a family member, a good friend, a bank or a trust company. Family members likely know your needs best, but a professional trustee with no emotional attachment can offer an objective third-party perspective. No matter who you pick, be sure the trustee is knowledgeable about financial matters because this person will distribute funds, protect assets, and ensure your beneficiaries use the money as you intended.

Pros and cons of a spendthrift trust

A spendthrift trust is one way to tell your beneficiaries you love them enough to protect the inheritance you built from impulsive spending or financial mismanagement that has nothing to do with whether or not they are "good kids." Instead, it is your way to help ensure their long-term financial security.

But keep in mind the drawbacks. Your beneficiaries have limited access to their inheritance, which can be frustrating in an emergency. And since the trust relies entirely on the trustee for distributions, disagreements may occur. Roughly 33% of adult children expect an inheritance will create conflict with their siblings, according to the Kiplinger-Money Consult survey. With that in mind, the best way to prevent arguments among your children is to take the first step. It’s never too early to start talking about your kids' finances.

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The Medicare Part D landscape is constantly evolving, brought on by major legislative updates like the permanent elimination of the "donut hole" and cap changes to out-of-pocket prescription spending. However, lower overall spending caps don't mean every plan offers equal value.

Private insurers set their own premiums, deductibles and pharmacy contracts, meaning two plans in the exact same zip code can carry dramatically different bottom-line costs for identical prescriptions.

Take this quick, 10-question quiz to test your knowledge about Part D and ensure you are well-prepared to select the coverage that is best for your health and budget this year.

And don't worry if you miss an answer, you can follow the links below the quiz to brush up on your knowledge.

More on Medicare Part D, from the Kiplinger retirement team:

• Medicare Part D Premiums Are Set to Hold Steady in 2027 Even After Subsidy Cuts
• 10 Things You Should Know About Medicare Part D Plans
• 8 Changes Coming to Medicare in 2027
• Your 2027 Medicare Open Enrollment Guide: Essential Dates and Notices
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Every team is measured by the scoreboard, but after the game, good coaches look beyond the numbers in their constant quest for improvement.

They study video to discern strengths and weaknesses in their team and the upcoming opponent. They identify opportunities, assess risks and make adjustments before the next game.

Retirement planning deserves the same approach.

Most people know how much they have saved for retirement. They may know their investment returns, their 401(k) balance or the value of their IRA. But those numbers alone don't answer the most important question: Are you actually prepared for the retirement you want?

A strong retirement plan should be evaluated from several different angles. A retirement scorecard can help identify where a plan is strong, where it may have vulnerabilities and where adjustments could make a meaningful difference.

Here are five areas worth keeping score on.

1. Secure income: How much of your retirement income can you count on?

One of the first questions retirees should ask is not how much money they have, but how much reliable income they will have.

Social Security may provide an important foundation. Pensions can provide another source of dependable income. Some retirees may also use annuities or other strategies designed to create guaranteed income.

The next step is to compare that dependable income with the expenses that must be paid regardless of what the financial markets are doing.

Consider:

• Essential living expenses
• Healthcare costs
• Mortgage or housing expenses
• Other recurring obligations

The objective isn't necessarily to have every dollar of expenses covered by guaranteed income. Rather, it's important to understand how much of your essential lifestyle depends on your investment portfolio's performance.

A retiree with $2 million invested and $100,000 of dependable annual income may have a very different retirement outlook than someone with the same $2 million portfolio but only $40,000 of dependable income. The account balances are identical; the retirement plans are not.

2. Retirement confidence: How well does your plan hold up when things change?

Retirement rarely unfolds exactly as expected. Markets rise and fall. Inflation changes. Tax laws evolve. Healthcare expenses can be unpredictable. And people may live longer than they anticipated.

That's why a retirement plan should be tested against more than one possible future.

One way to do that is through Monte Carlo analysis, which can test a retirement plan across thousands of potential market and economic environments.

A retirement plan can be tested against periods of strong markets, declining markets, sideways markets, different inflation rates and changing tax environments.

The purpose isn't to predict exactly what the future will look like. It's to determine how resilient the plan is when the future doesn't cooperate.

A plan that works only when investment returns are strong may look successful on paper but provide less confidence in the real world. A stronger plan is one that has enough flexibility to withstand adversity without requiring the retiree to completely change course.

3. Retirement taxes: How much of your money will you get to keep?

A retirement account balance isn't necessarily the same thing as retirement wealth.

Taxes matter. A retiree may have money in traditional IRAs, 401(k)s, Roth accounts, taxable investment accounts and other sources. Each account can have different tax consequences when money is withdrawn.

That means retirement planning shouldn't simply ask, "How much can I withdraw?" It should also ask, "Which account should the money come from, and when?"

For example, a retiree might consider whether to:

• Convert some traditional IRA assets to a Roth IRA
• Realize capital gains in a lower tax year
• Coordinate IRA withdrawals with Social Security
• Manage income to avoid unnecessarily higher tax brackets
• Consider the effect of additional income on Medicare premiums
• Determine which investments should be sold to fund retirement expenses

These decisions can look relatively small when viewed individually. Over a 20- or 30-year retirement, though, the cumulative tax impact can be significant. That's why a retirement scorecard shouldn't measure only investment performance; it should also measure how efficiently the plan converts wealth into after-tax retirement income.

4. Retirement risk: What could knock the plan off course?

Risk in retirement is about much more than whether the stock market goes down.

A comprehensive risk assessment should consider several factors, including:

• Expected investment return
• Retirement time horizon
• Target portfolio withdrawals
• Market volatility
• Inflation
• Longevity
• Healthcare costs
• Liquidity needs
• Personal comfort with investment risk

One retiree may be comfortable with a portfolio that another would find difficult to stick to during a market downturn. A theoretically optimal portfolio isn't necessarily a successful portfolio if the investor can't remain committed to it during a difficult market.

The goal isn't to eliminate risk. That's impossible. The goal is to understand the risks you're taking and determine whether they're appropriate for the retirement you're trying to create.

5. Estate efficiency: What happens to the money you don't spend?

Retirement planning doesn't end when you determine that you have enough money to live comfortably. There is another question: What happens to the money that remains?

For many retirees, leaving assets to children, grandchildren or charitable organizations is an important part of the overall plan. That means estate planning should be considered alongside retirement planning rather than treated as a separate exercise.

The type of account, beneficiary designations, potential taxes, fees and the way assets are transferred can all influence how much reaches the intended beneficiaries.

The goal is about more than accumulating wealth; it's also about determining how efficiently that wealth can accomplish what you want it to accomplish — during your lifetime and afterward.

Keep evaluating your scorecard throughout retirement

A scorecard isn't valuable because it produces a number, but because it starts a conversation. A retirement plan might have excellent investment performance but a weak tax strategy.

It might have substantial assets but insufficient guaranteed income.

It might have a strong probability of success but too little liquidity for the retiree's comfort. Or it might provide plenty of income today while creating unnecessary tax or estate planning problems later. That's why the numbers need to be viewed together.

The purpose of a retirement scorecard is to identify what needs attention now. Great coaches evaluate throughout the season. They recognize what is working, identify what isn't and make adjustments when circumstances change. Retirement is a long season and deserves the same discipline.

The goal isn't to achieve a perfect score and put the plan on a shelf; it's to understand where you stand today and identify what may need to change as your circumstances, markets and priorities evolve. A strong retirement plan is evaluated, adjusted and improved throughout the retirement journey.

Great coaches don't wait until the final game of the season to make adjustments; they keep evaluating the scoreboard along the way. Retirement is a long season and deserves the same discipline.

Dan Dunkin contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For many of us, retirement planning starts with an age. For some people, that may be 62 or 65. Others may work until 70 to maximize Social Security benefits. Whatever the reason, our planned retirement age is a goal. But what happens if your career ends earlier than expected?

It's a problem playing out in real time. While the August jobs report revealed a more resilient labor market and a steady unemployment rate (4.1%) overall, the information industry lost 23,000 jobs.

The ADP National Employment Report showed private payrolls rose by only 38,000 in August, less than the 46,000 added in July and below the 47,000 economists expected.

When you're in your 50s or 60s, an unexpected job loss combined with a prolonged job search can dramatically disrupt years of retirement planning. Losing income during those final high-earning years can put additional pressure on savings or force you to make significant financial decisions earlier than planned.

The smart move is to build flexibility into your retirement plan in case the worst happens. This can help prevent emotional decision-making — such as choosing to drain retirement accounts or claiming benefits earlier than expected — which can have long-term consequences.

1. Get your financial life in order — and don't forget healthcare

Understanding what your finances would look like if you suddenly lost your paycheck is the first step in preparing for the unexpected.

Start by reviewing fixed and discretionary expenses, available savings and any other sources of income to determine how long you could realistically maintain your lifestyle without working.

While many financial professionals suggest three to six months' worth of emergency savings set aside, returning to work may take longer than that because of the slower job market. Aiming to save more will keep you better protected, especially if you become ill or no longer able to work.

Knowing how much money you need each month can also help you identify expenses that can be cut before you begin withdrawing from long-term savings.

A sudden loss of employment may also mean losing health coverage. If that happens before you're eligible for Medicare, options such as COBRA may come with substantially higher premiums that could drain savings.

Factoring healthcare coverage into any scenario involving unexpected job loss can help buy you more time to consider your options and protect savings.

Having funds outside of retirement accounts can offer another layer of protection. This reduces the need to sell investments or begin taking retirement distributions to cover expenses.

This becomes especially important if sudden unemployment coincides with market volatility — when selling investments may lock in losses or reduce the amount invested for a potential recovery.

2. Stress-test your retirement plan now

Understanding what would happen to your retirement plan in the event of a sudden job loss is also part of the preparation. Stress-testing your plan by running it through different scenarios can help you understand how your finances would be impacted if your current situation changed.

For example, you could model what would happen if you stopped working now, retired several years earlier than your target age, or began withdrawing from savings prematurely.

If you lose your job unexpectedly, retirement doesn't have to be the next step. Before claiming benefits or making withdrawals, consider how that could impact your retirement.

Working through different scenarios can help determine whether relying on those sources of income now makes sense, or whether continuing to work would leave you better off in the long run.

3. Stay connected

In addition to financial preparation, keeping your professional skills and network up to date can give you more options if you find yourself looking for work. This includes maintaining required licenses or designations as well as staying connected with people in your industry.

Keeping up with changes in your field later in life can make it easier to pursue another position if you lose your job, rather than feeling forced into retirement.

For many of us, the age at which we hope to stop working is the first step in retirement planning. But that timeline is subject to change at any time.

Preparing for the possibility of a sudden job loss, building flexibility into your retirement plan and stress-testing it under different scenarios will help you understand how to move forward without minimizing benefits or sacrificing years' worth of savings.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Dear Wealth Wise, I'm 64 (almost 65), work full-time, and I'm tired of being told to use AI at my job. Can I retire on $1.6 million if my yearly spending needs are roughly $90,000 and Social Security will pay $3,500 a month (if benefits remain fully payable)? — Seeking Analog

Dear Seeking Analog — In the past year or so, AI integration has picked up tremendously. While some folks are embracing it, for others, it’s quickly becoming a sore spot.

Earlier this year, Talker Research found that 54% of those polled are "getting tired of hearing" about AI, and 30% view it negatively.

Here, our almost-65-year-old reader has clearly had enough of AI and is looking to retire because of it. Is he being impulsive? Does the math work in his favor? Here’s what our experts say.

The numbers might work, but they need to be tested

Our reader’s estimated $42,000 annual Social Security benefit should cover roughly half of annual spending needs. The remaining $48,000 will need to come out of savings.

Using the popular 4% rule, $1.6 million could support $64,000 in annual withdrawals. Since our reader only needs $48,000, they have a pretty good buffer, says Bryan Kuderna, CFP and founder of Kuderna Financial Team. However, he cautions, the often-overlooked factors are taxes and Medicare premiums.

"Spending $90,000 annually is obviously $90,000 of after-tax money," Kuderna explains. "At least a portion of their Social Security benefit [might] be taxable. Then it will be reduced by Medicare premiums, which can be around $200 monthly to much higher depending on their modified adjusted gross income. To have a rough estimate, they [should] assume a $2,500 monthly net Social Security check."

In that case, Kuderna explains, our reader could be looking at a gap, especially if their $1.6 million is sitting in traditional retirement accounts that are subject to taxes on withdrawals. If most of that money is in a Roth account, the math could work, he says. But that "if" needs to be addressed before our reader dives into retirement.

Taxes will vary heavily depending on whether the reader files jointly or as a single taxpayer. Our reader should also factor inflation into his plan, since that $90,000 per year will be worth much less over time.

'Shaky' Social Security is the wild card factor

Our reader suggested Social Security benefits might not be fully payable. They’re not making that up. Social Security Trustees recently reported the program could face broad benefit cuts by late 2032 if Congress doesn’t find a way to shore up its finances sooner.

Caleb Moyer, CFP, CFA, EA, and owner of Moyer Tax Services, says Social Security’s future is worth considering, but it shouldn’t necessarily shape a retirement plan.

"I wouldn't tell someone to keep working indefinitely because they're worried about Social Security cuts," Moyer says. "Instead, I would build a retirement plan that shows what happens if those cuts actually occur."

As Moyer explains, if Social Security benefits are reduced by 25%, our reader would receive $31,500 annually instead of $42,000. (Social Security’s Trustees project a 22% cut, so this builds in even more of a buffer.) That means they would need to withdraw $58,500 from their portfolio each year to maintain their $90,000 spending level.

"Their initial withdrawal rate would increase from 3% to approximately 3.66%," Moyer says.

"That's a meaningful difference, but it doesn't automatically mean retirement is off the table."

This especially holds true if our reader’s $1.6 million is housed entirely in a Roth account. In that case, our reader might not face taxes on their Social Security benefits.

The formula that determines whether taxes on benefits apply accounts for modified adjusted gross income (MAGI) and 50% of one’s annual benefit. Roth withdrawals aren’t part of MAGI, so even without a cut to Social Security, our reader would still be in the clear on benefit taxation, assuming they have no other income.

Social Security cuts aren’t the only thing to stress test.

"I would also want to see what happens if they experience poor investment returns early in retirement or live well into their 90s,” Moyer says. "The short answer is they should be able to retire, but it would be wise to work with a CFP to formulate a distribution strategy."

The right investment mix is key

If you’re going to retire at roughly 65 on $1.6 million, investing that money carefully is key, says Moyer.

"One of the biggest risks for someone retiring at 65 isn't necessarily running out of money because they spent too much," he says. "It's being forced to sell investments after the market has fallen significantly, particularly during the first few years of retirement."

That’s why Moyer recommends what he calls the three-five-seven plan.

"We look at how much someone expects to withdraw from their investments over the first three, five, or seven years of retirement, after accounting for Social Security and other income," he explains. "We then consider setting aside enough money in fixed income … with maturities aligned to their expected withdrawals to cover those years."

Addressing the burnout factor

"If someone has spent decades working and saving," Moyer says, "and their retirement plan shows they can reasonably support their desired lifestyle, there's a real argument for allowing themselves to enjoy the money they've accumulated."

But, he says, "That doesn't mean they need to make an impulsive decision and retire tomorrow. I would encourage them to build a financial plan, understand the potential risks, and determine what their retirement would actually look like."

The reader's birthday is also important. If he burns out and quits with six months to go before turning 65 (when he can start receiving Medicare), he will need to pay out of pocket for private health insurance (ACA). That can easily cost $800–$1,200 a month and derail his $90k year-one budget. If he is only one month away, those healthcare expenses are easier to manage.

David Talley, CFP, ChFC, EA, founder and lead advisor at Talley Wealth, says he understands that AI burnout is real. However, he says, retirement doesn't have to be one big jump.

"A lot of the people I work with step down in stages — maybe part-time, maybe consulting, maybe something totally different they actually enjoy," he says. "Even a little income in those first few years takes pressure off the portfolio right when it matters most."

At the same time, working part-time offers a chance to explore new activities or hobbies and ease the transition. That way, you’re not running away from burnout only to eventually replace it with boredom.

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our writers and experts in this advice column are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial adviser regarding any questions you may have in relation to the matters discussed in this article.

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For many public school teachers and other K-12 employees, retirement planning involves more than a pension and a single workplace savings account.

Depending on the employer, educators might have access to both a 403(b) plan and a governmental 457(b) plan, each offering tax-advantaged savings and features that can become particularly useful at different stages of a career.

Because the plans are often presented separately during benefits enrollment, employees might assume they need to choose one or the other.

In many cases, eligible workers can contribute to both, creating additional savings capacity along with more flexibility in determining when and how retirement assets are eventually used.

Why having both plans can matter

A 403(b) is available to employees of public schools and certain nonprofit organizations and functions in many ways like the 401(k) plans commonly offered in the private sector.

A governmental 457(b) is available to many state and local government employees.

Both generally allow employees to save through payroll on a tax-deferred basis, with Roth contributions also available under some plans.

For 2026, the standard employee contribution limit is $24,500 for each plan. Eligible workers age 50 and older might also qualify for catch-up contributions, while participants ages 60 through 63 might be able to make larger catch-up contributions if their plans allow it.

A 403(b) might also provide an additional catch-up opportunity for certain employees with at least 15 years of service.

The separate contribution limits can be especially valuable for educators who are able to save beyond the maximum permitted in one account. An employee with access to both plans could potentially contribute $24,500 to a 403(b) and another $24,500 to a governmental 457(b) in 2026 before applicable catch-up contributions.

Few households will be in a position to contribute the maximum to both accounts every year, but the additional room can become valuable later in a career when earnings are higher, major expenses have declined, or an employee is trying to accelerate retirement savings.

A 457(b) can offer added flexibility

The differences between the two plans become more important as retirement approaches.

Governmental 457(b) plans can provide added flexibility for employees who leave their employer before age 59½ because distributions after separation from service generally are not subject to the 10% additional tax that can apply to early withdrawals from other retirement accounts.

Different rules and exceptions apply to 403(b) plans, making the expected timing of retirement an important consideration when deciding how to allocate savings between the two accounts.

Consider a teacher who began working in her early 20s and expects to retire after more than 30 years of service. If she leaves her school system before she expects to draw heavily from her other retirement accounts, assets accumulated in a 457(b) could provide another source of income during the transition.

An educator planning to remain employed longer might place more emphasis on features of the 403(b), including the additional catch-up provision that might be available to long-tenured employees.

How the plans can work together

The value of having access to both accounts can change over the course of a career. A teacher in the middle of a career might contribute primarily to a 403(b) while balancing housing costs, college expenses or other financial priorities.

As those expenses decline, adding contributions to a 457(b) can provide another way to increase tax-advantaged retirement savings.

Retirement timing should also factor into the decision. An educator considering an earlier retirement might value the withdrawal flexibility of a governmental 457(b), while a long-tenured employee trying to increase savings late in a career might want to determine whether the 403(b) plan's additional catch-up provision applies.

Employees with sufficient income to contribute to both can also build separate pools of retirement assets that could provide additional flexibility when they begin drawing income.

Investment choices, fees and plan features should be part of the comparison, as well. Two plans offered by the same employer can have different investment menus, administrative costs, Roth options and loan provisions.

Understanding those differences can help employees decide where additional retirement dollars can be best directed.

Review your options before retirement

Educators approaching retirement should review the rules governing each account well before they expect to leave the workforce. The tax treatment of withdrawals can depend on the type of plan, the employee's age, when employment ends and other circumstances.

Reviewing those provisions several years ahead of retirement can provide more opportunity to coordinate workplace accounts with pension income, Social Security and other savings.

Benefits enrollment can also be a useful time for employees who have spent years automatically contributing to the same plan to revisit what their employer offers.

Asking whether both a 403(b) and governmental 457(b) are available, reviewing contribution and catch-up provisions, comparing investment choices and understanding withdrawal rules may uncover options that received little attention earlier in a career.

Teachers spend much of their professional lives planning around school years, grade levels and milestones that can be seen well in advance. Retirement benefits deserve the same periodic review.

Understanding how a 403(b) and 457(b) can work together might give educators more room to save during peak earning years and greater flexibility when the time comes to turn those savings into retirement income.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

By spring 1961, NASA was already launching rockets. Alan Shepard had just ridden one into space and back, a 15-minute flight.

Twenty days later, President John F. Kennedy raised the stakes in one sentence: "I believe that this nation should commit itself to achieving the goal … of landing a man on the moon and returning him safely to the Earth."

A quarter of a million miles, and back. Getting home wasn't an afterthought. It was in the mission from day one.

Nobody responded by shopping for a bunch of equipment. This was unknown territory. The mission plan came first, followed by years of engineering and training.

Once they had the mission mapped out, and engineering had their strategies in place, then they gathered the materials and tools needed for the job ahead.

How retirement planning is like that

Retirement planning is no different. While you are working and the paychecks keep coming in, you're flying short missions. Mistakes get refueled by the next contribution.

Retirement raises the stakes the way the moon did: The trip is longer, refueling stops, and the whole point is coming home safely (not running out of money).

The retirement planning mission is defined by your lifestyle and legacy goals. The engineering comes second, and its job is to get more out of your money while it carries out that mission.

Some retirees want more legacy or more flexibility and will accept a bumpier ride to get it. That's not wrong — it's your preference.

Others give up some upside for a smoother, more predictable ride, trading what matters less for more of what matters more.

There is no right or wrong answer. You decide the mission. Everything else is engineered around it.

The problem today is that too many soon-to-be retirees start buying tools and materials before the mission is defined: An annuity here, a REIT there, a CD because the rate looked attractive.

After the equipment is bought, they look to see what they can build. That's backward, and it's what often gets in the way of a good retirement plan.

Here's how to build a more comprehensive retirement plan, step by step.

Projections: The mission comes first

Your plan is your mission statement:

• What kind of retirement experience do you want?
• How much of your wealth is for lifestyle and income?
• How much is for legacy?

On the income side:

• Do you want more flexibility with a wilder ride?
• More predictability with less thrill?
• A happy middle built just for you?

Remember Kennedy's second clause: The mission was the safe return. Growing your money to become the richest person in the graveyard was never the mission either. Living on it, for decades, is.

Notice what we're doing here: We're defining the path forward, guided by the mission expectations. Not one product has been mentioned.

Strategies: Engineering comes second

Apollo crews logged thousands of simulator hours, and the engineers running the simulations rarely allowed a clean flight. They fed the crews the broken versions: Failed engines, dead radios, alarms mid-descent.

The crews knew the conditions ahead better than anyone alive and still trained for the ones no one could foresee.

This is your strategy session. If these dollars are going on this journey, how do they travel efficiently? This is where tax strategy and withdrawal sequencing come into play, where income, taxes, healthcare and legacy get coordinated. Mini missions, all serving the big one.

During Apollo 11's landing on the moon, computer alarms flashed, and then they discovered the landing zone was full of massive boulders. Neil Armstrong didn't panic or wing it. He flew past them to smoother ground and landed.

The crew never predicted that moment. However, they were prepared to react, and a prepared reaction is better than a risky prediction.

Investments and products: Equipment comes third

Only after the mission was set did the equipment get its assignments, and every piece was a specialist. The Saturn V was the rocket itself, 36 stories tall and nearly all of it fuel. It had one job: Throw the crew toward the moon. It burned itself out in minutes and fell away into the ocean, stage by stage.

The lunar module was the spindly, foil-wrapped lander riding up top, so specialized it could fly only in the vacuum of space. It carried two men down to the surface, lifted them back off and was left behind.

And the heat shield did absolutely nothing for eight days. Dead weight, riding in silence, until the capsule hit the atmosphere at 25,000 miles per hour, and the shield burned away, layer by layer, so the three men inside wouldn't.

No component was chosen on a vendor's pitch. Each was recruited because the mission required it.

Your investments and products deserve the same discipline. Diversify your assets by strategy, not investment ambiguity or hope that growth solves everything. Each investment or product should do a specific thing, at a specific time, in a specific way.

Some fund income in the early years. Some chase growth you won't touch for a decade. Some sit quietly until the markets crash and then get tapped for income while your other accounts recover. (For more on this strategy, check out my book, How to Retire on Time.)

Follow systems, not sentiment

Mission Control ran on flight rules, checklists and go/no-go polls written before launch. When an oxygen tank exploded on Apollo 13, nobody improvised from the gut. They worked the procedures and brought the crew home. They followed systems, not sentiment.

Write your processes down while you're calm so that when the markets crash, taxes go up, or something else unexpected happens, you'll know what to do. A process invented mid-crash is not a process. It's a fear-based reaction.

Run your retirement in this order:

• Plan (mission) first
• Strategies (engineering) second
• Investments and product (equipment) third

That way, the product pitch loses its power. Buy this annuity. Lock in this rate. Try this tool. Those lines don't work on someone with a mission. When the plan comes first and the strategies second, the right tools naturally select themselves.

So, before anyone shows you another product, ask the questions NASA asked before anything left the ground: What's the mission?

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

It starts at the very beginning. You hold your baby in your arms and feel a deep, primal desire to give them everything they need. At some point, though, it's time to tighten the purse strings and help them make responsible decisions.

Giving your kids everything they want can cause more problems than it solves, not only during their formative years, but also when they're well into adulthood. There can be a fine line between financially helping adult children and putting them into a situation in which they're financially reliant upon you.

The 'too-nice neighborhood' problem

According to a recent survey from mortgage lender Veterans United Home Loans, more than half of parents of adult children are willing to help their kids purchase a home. Sometimes that's helping with a down payment or closing costs. Other times, it's cosigning a loan.

Problems quickly arise when parents help kids buy houses they can't afford to maintain on their own. Whether it's a monthly payment that burdens the budget or homeowners association (HOA) fees that feel excessive, helping your kids buy a house that they can't afford can be more of a curse than a blessing.

Instead, help them buy within their means or match their down payment to ensure they have some financial skin in the game.

Avoid lifestyle inflation by proxy

If you paid for a somewhat luxurious life for your kids or took extravagant vacations when they were younger (and continue to do so into their adult years), your kids might feel that a certain lifestyle is the norm and come to expect it.

Trying to keep up with a lifestyle once provided by financially established parents can rapidly become problematic.

Covering rent, vacations or luxury expenses tells your kids that their current lifestyle is normal even when it's not sustainable. Once support stops, the adjustment can be brutal, and the kids might try to scramble to afford the same niceties to which they've become accustomed.

This isn't to say that you can't occasionally splurge on a fun family vacation or other luxury, but rather to suggest that boundaries are clear that such a splurge isn't to be expected.

You've probably learned how to deal with lifestyle inflation, as many successful people have. Don't allow it to become your kids' problem by proxy.

Gifts should build habits, not dependence

You can be generous with your adult kids without risking bigger problems. Offer to pay for tools that can create momentum so they can stand on their own, such as professional certifications, seed money for a business or contributions to a retirement account.

The goal is empowerment, not entitlement. If you can help set them up for success, do it with clear expectations that you thoroughly discuss.

Ensure the "help" you provide is actually helpful — a certification in a career your child has no interest in will likely be a waste of money, as would seed money for a business your child wouldn't be able to keep afloat.

Talk openly about the trade-offs

If you gift something to adult kids, explain what the gift does and doesn't cover. If you buy a home, clarify who handles taxes and maintenance. If you pay their tuition, make clear it's a one-time payment. Clarity today prevents conflict tomorrow.

Examine the complications and relational strain that can come with changing your role with your child from "parent" to "lender" and decide if it's worth it. If you expect your child to pay you back, have a clear agreement on the terms so there's no ambiguity in the payback of the funds.

Protect your own financial health

Parents often dip into retirement savings to help adult children, but that kindness can jeopardize long-term stability. It can be a bad idea to earmark money to fund your adult child's lifestyle when you might need that money for your retirement.

Remember: Your kids can borrow money for a house or an education, but you can't borrow your way through retirement. Being financially ill-prepared for retirement because you're helping your kids can backfire on everyone involved if they have to then step in to help you survive.

Helping your adult kids in a productive way can be beneficial, but putting your own finances at risk can damage your financial health. Instead, choose when you want to help, and be clear in your intentions of wanting to help your kids thrive in adulthood on their own.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

There's a well-known study that Fidelity produced years ago that reviewed thousands of brokerage accounts and looked at the returns in each. The anecdotal conclusion: The best-performing accounts belonged to deceased account holders.

Right behind them were accounts belonging to people who had simply forgotten their passwords. I find that finding remarkable — and completely logical.

You can't panic if you're not paying attention

The thesis is simple. Investors who aren't actively managing their accounts don't panic-sell, don't try to time the market and don't interrupt their investments' ability to compound.

Those combined factors tend to produce better returns than what more anxious, hands-on investors experience. The least-engaged accounts are effectively emotionless — no second-guessing when markets spike, no panic when they drop.

This tracks with what plays out in financial advising every day. Some clients want to be deeply involved in their portfolios — joining every call, making market calls of their own, flagging sectors they want to chase, constantly tinkering.

Others barely discuss their investments at check-ins, admit they haven't looked at their accounts in months and place full trust in their plans.

Categorically, the highly engaged, informed, opinionated investors tend to fare worse than the ones who stay mostly hands-off.

Markets go up and down — reliably

Detaching from day-to-day market noise can be a genuinely effective strategy for many investors. It keeps emotion — and the fight-or-flight instincts that come with it — out of the decision-making process.

It's tempting to make market calls or share strong opinions about the economy. The markets, unfortunately, aren't listening. They don't care about anyone's fears, predictions or analysis. They largely just do what they've always done, and they do it fairly predictably.

What does "predictably" mean here? Markets have historically averaged roughly 10% annual returns and have been up in about three out of every four calendar years. That's simply the pattern.

Knowing that in advance, a down year shouldn't come as a shock. Nor should the fact that some pullback happens during nearly every calendar year, even the good ones — that's the norm, not the exception.

There's no getting around it: Investing in the markets means living with volatility. The real question is how an investor responds to it.

The realistic middle ground

Being completely detached from an investment plan isn't the right answer either. It makes sense to keep some pulse on a portfolio, but for most people, an arm's-length relationship works best.

That might mean placing trust in a professional or building enough personal discipline to avoid constant tinkering.

The goal isn't to ignore the markets entirely — it's to stop reacting to every headline or talking head on a financial news show.

What matters more is staying allocated in a way that's aligned with long-term goals. Changes should be occasional, not reactive, grounded in research and represent a strategic shift worth committing to for an extended period.

Above all, an investor should be comfortable enough with the plan to stick with it through every kind of market.

Why this matters more in retirement

This dynamic becomes more important once someone shifts from saving to spending down a portfolio. During accumulation years, a rough patch in the market can often be corrected by continuing to contribute and letting time do the work.

In retirement, that safety net disappears. A retiree reacting emotionally to a downturn — selling at the wrong moment, abandoning a withdrawal strategy, chasing yield into something unfamiliar — can do lasting damage to a plan that took decades to build.

The retirees who tend to do best are often the ones who set an allocation aligned with their income needs, then largely leave it alone.

No one has to be dead to earn great long-term returns, but acting a bit more like it — staying invested, resisting the urge to tinker and tuning out short-term noise — might be the closest thing to a reliable strategy that exists.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Let's play a little "would you rather," retirement edition.

Would you rather retire somewhere warm or somewhere warm? Somewhere you can get a tee time, or somewhere you can also get a tee time? Somewhere popular among retirees or… you get the idea.

The playground version of "would you rather" pits opposites against each other: hot or cold, sweet or sour. But one of the biggest decisions of your life — where to retire — often comes down to two places that, on paper, both sound good. According to the moving-services platform HireAHelper, more than 2 million people aged 65 and older were essentially playing this game in 2025.

Take Naples, Florida, and Palm Springs, California. Both are sun-soaked, golf-mad, upscale havens that have been drawing retirees for decades.

Look closer, though — at the taxes, the risks, the culture, the whole character of each place — and the similarities fall away fast. Get past the sunshine, and one of them is probably a much better fit for your next chapter than the other. Here's how they stack up.

What to know about retiring in Naples, Florida

When you picture the Sunshine State, you probably think sandy beige and ocean blue. In Naples, the defining color might be fairway green. It's the self-titled "Golf Capital of the World," with the second-most golf holes per capita of any U.S. city.

So, head in any direction, and you’ll likely run into a golf course or a millionaire, since Naples also has one of the highest concentrations of them per capita in the country.

The price of this side of paradise

Cost of living matters at any age, but especially in retirement when living on a fixed income. It's usually dominated by one thing: housing. Naples is a case in point. Overall, the Economic Research Institute pegs the city's cost of living at about 29% above the national average, but everyday expenses — groceries, utilities, gas — actually run close to or just below the national norm.

The median home sale price is around $1.2 million, according to Redfin, with rents typically $2,000 to $2,500 a month. Set against a median household income near $153,000, it's a market that rewards those who arrive with equity already in hand.

What the taxman takes

Here's where Naples really shines. If you love the word 'no' and hate taxes, this is the place for you because Florida is about as tax-friendly as retirement gets. No state income tax. No tax on Social Security, pensions or 401(k)/IRA withdrawals. No estate or inheritance tax. For a retiree drawing down a pension and retirement accounts, that can mean keeping thousands of dollars a year that other states would claim.

Still, as nice as it is to worry less about taxes, it’s rarely the sole reason people choose Florida. "Clients do not move to Naples just to save on taxes," says Patrick Huey, a CFP® and founder of Victory Independent Planning in Naples. "They move because they want to enjoy the lifestyle, and then we test whether the numbers support that decision."

When you need a doctor

Retirement and healthcare go hand in hand, and Naples delivers. NCH (Naples Comprehensive Health) has been named one of Healthgrades' America's 50 Best Hospitals — the top 1% nationally — and is a Mayo Clinic Care Network member. It is also the region's only Joint Commission-accredited Comprehensive Stroke Center.

Sunshine… with an asterisk or two

Naples is known for warm, sunny days averaging around 83°F. But you can have too much of a good thing. The area logged 53 days with a heat index of 105°F or higher in 2023.

And there's a bigger asterisk. Hurricane season runs June through November, and Naples' low coastal elevation leaves it exposed to storm surge and flooding (Hurricane Ian hit in 2022; Helene and Milton followed in 2024). Redfin flags nearly all Naples properties as facing severe flood and wind risk over the next 30 years. That risk shows up on the bill. Home insurance averages around $9,660 a year for $300,000 in coverage, with flood insurance a separate policy on top.

Huey points to the ongoing cost of property and casualty coverage as the real planning issue in coastal Florida. "For many retirees, the question is no longer simply, 'Can I afford to buy here?' It is, 'Can I comfortably carry this house for the next 20 or 30 years when insurance, maintenance, and association costs are layered on top?'" he says.

His firm has even rewritten a client's retirement plan so they could move out of a floodplain and cut decades of insurance costs. As he puts it, insurance "is what increasingly determines whether the plan will help them sleep at night."

The Naples vibe check

AARP gives Naples an overall Livability Index score of 55 — solid, though dragged down by a low "opportunity" score (fitting for a place more about winding down than climbing up). With a median age of 67.3, this is unmistakably an older community, and a very safe one, with violent crime well below the national average.

It's also politically conservative and roughly 89% white. The lifestyle is upscale and traditional: white-sand Gulf beaches, luxury shopping along Fifth Avenue South and Third Street South, fine dining, and culture at Artis–Naples and The Baker Museum.

"People choose to retire here because they are buying a lifestyle as much as a tax profile," Huey says. "Warm winters, access to the water, strong golf and social communities, and the feeling of being in a place built around retirement all matter a great deal."

What to know about retiring in Palm Springs, Califonia

Tucked into the Sonoran Desert two hours east of Los Angeles, Palm Springs made its name on hot springs, stylish hotels, golf and spas. It’s a glamorous throwback to the era of Frank Sinatra, Marilyn Monroe and mid-century Hollywood. It's been a retiree magnet since the 1970s, drawing people who want an active, artful, unapologetically freer version of retirement.

The price of this side of paradise

Like Naples, Palm Springs isn't cheap. The Economic Research Institute puts its cost of living at about 29% above the national average too, essentially neck-and-neck with Naples. The difference is what it costs to get in the door. The median home sale price is around $590,000, per Redfin — roughly half of Naples' — with rents running roughly $1,480 to $1,970 a month. Median household income sits at about $73,119, notably lower than Naples, reflecting a broader mix of residents.

What the taxman takes

If Naples is the taxman's friend, Palm Springs is where he collects. California is among the least tax-friendly states for retirees with heavy pension and 401(k) income. Social Security is exempt, but pensions and IRA/401(k) withdrawals are taxed as ordinary income at rates from 1% up to 13.3% — the highest top rate in the nation — with most retirees landing near a 9.3% marginal rate.

The one bright spot for legacy-minded retirees: like Florida, California levies no estate or inheritance tax.

"The biggest drawback is California's income tax,” says Joon Um, a CFP® and advisor at Secure Tax & Accounting in Beverly Hills. But he points out that "most retirees are nowhere near the 13.3% top rate" (for state tax).

Um says retirees can manage the bite through "Roth conversions, managing withdrawals before RMDs, and using a mix of taxable, IRA, and Roth accounts to better control taxable income."

Even so, he adds, the tax hit often isn't the deciding factor: "Many retirees accept the higher taxes for California's weather, lifestyle, family and healthcare. Taxes matter, but lifestyle often matters just as much."

When you need a doctor

If the hot springs can't cure what ails you, the medical care can. Desert Regional Medical Center sits right in the city, a Level II trauma center, graded "B" for safety by Leapfrog. And a short drive away in Rancho Mirage, Eisenhower Health earned Leapfrog's top "A" grade for 10 straight cycles and ranks as the #1 hospital in the Riverside County–San Bernardino metro by U.S. News.

Sunshine … with an asterisk or three

This is the desert, so sunshine is the whole point. The area boasts about 300 days of it a year and less than five inches of rain. Winters are glorious, with highs in the 60s and 70s. Summers are the catch, with triple digits for months on end, frequently topping 108°F.

The other asterisks are geological and environmental. The San Andreas Fault runs through the region (earthquake coverage is a separate policy through the California Earthquake Authority), and the area faces extreme drought plus some wildfire and flash-flood risk. The state's broader insurance market is under strain, but Palm Springs proper is less exposed than California's fire country.

The Palm Springs vibe check

AARP scores Palm Springs a 49 on its Livability Index. The environment is its weak spot, a common knock on Southern California, thanks to air pollution. With a median age of about 57, it skews a touch younger than Naples, and the vibe follows.

This is active, sociable retirement. Palm Springs is also one of the most prominent LGBTQ communities in America, with among the highest concentrations of same-sex couples of any U.S. city, and that openness shapes its whole character. It's a mid-century-modern design mecca (Modernism Week is a marquee event), with a lively arts scene (the Palm Springs Art Museum, galleries, a film festival), golf and serious outdoor recreation, from hiking the Indian Canyons to riding the Aerial Tramway up Mt. San Jacinto.

While crime is slightly higher here than in Naples, it’s generally property crime, the bane of resort towns.

So, would you rather?

The choice isn't really about weather or golf since both cities have those in spades. Naples rewards you at tax time and with a genteel, traditional feel, if you can clear the higher cost of buying a home and stomach hurricane season. Palm Springs asks more of you at tax time and costs less to enter, trading hurricanes for heat and earthquakes while giving you a livelier, more diverse, more design-forward scene.

The right answer comes down to your priorities, your budget, and perhaps your politics just as much as your postcard. But if choosing between two sun-drenched havens is your biggest retirement dilemma, that's a pretty good problem to have.

Read More on Where to Retire

• Best Places to Retire in the US
• 7 Great Places to Retire in Florida
• The 'Florida Flip' for Roth Conversions: How to Use a No-Tax State to Lower RMDs
• 10 Reasons You Don't Want to Retire in Florida

If you're already contributing enough to capture your full 401(k) match, you've got the basics covered. The bigger opportunities — and the ones I see even diligent savers miss — are found a level up from there.

After more than a decade of helping people build their retirement plans as a CFP® professional, I've found that most people stop optimizing right after the match.

Other savings accounts and strategies that could work in their favor go unused for years, not because they're complicated, but because nobody ever walked through them step by step.

Here are five that can make a meaningful difference for people who are already saving well and want to do more.

1. Take advantage of an HSA's triple tax benefits

If you're eligible to contribute to a health savings account (HSA), it may be the most underused account you have.

HSAs offer a rare triple tax advantage: Contributions can be made pretax or may be deductible, earnings grow tax-free, and withdrawals are tax-free when used for qualified medical expenses.

For 2026, you can contribute up to $4,400 for self-only coverage or $8,750 for family coverage, plus another $1,000 if you're 55 or older.

Most people treat their HSA like a checking account for copays and prescriptions. You don't have to. You can pay medical costs out of pocket now, let the HSA grow untouched for decades and reimburse yourself years later, as long as the expenses were incurred after you established the HSA, weren't previously reimbursed or deducted and you kept adequate records.

I've worked with people in their 50s who'd been quietly saving old medical receipts for this exact reason, without ever calling it a strategy. Used that way, an HSA functions like one of the most tax-advantaged retirement accounts you have access to, not just a place to park money for copays.

2. Choose pretax or Roth in your 401(k) on purpose

Most people never actively decide between pretax and Roth contributions. Their 401(k) defaults to whatever the plan set up on day one, and they never revisit it. I've reviewed plans for people who hadn't looked at this choice in over a decade, even though their income, and the right answer for them, had changed completely in that time.

The difference matters. Pretax contributions generally reduce your taxable income now, while withdrawals are generally taxed as ordinary income later. Meanwhile, Roth contributions don't provide a current deduction, but qualified withdrawals are tax-free.

A useful starting point is to compare your marginal tax rate today with the rate you reasonably expect when the money is withdrawn. Keep in mind future required minimum distributions (RMDs), tax-law uncertainty, and the value of having both taxable and tax-free income sources in retirement.

For 2026, the 401(k) employee deferral limit is $24,500, with an additional $8,000 available if you're 50 or older.

One change worth flagging for this year: If your 2025 FICA wages from the employer sponsoring the plan exceeded $150,000, your 2026 catch-up contributions generally must be made as Roth contributions. It's a rule that's easy to miss.

There's no universal right answer here, only the one that fits your specific tax situation. Modeling your expected income and tax bracket in retirement with a retirement planning tool can help you make that call instead of guessing. (Note: I'm head of support and a financial planning educator at Boldin.) Make it a real decision, not a default.

3. Look into a mega backdoor Roth if you still have room to save

This one is for higher earners who've maxed out the accounts above and still have money left over to put away.

If your 401(k) plan allows after-tax contributions, separate from Roth contributions, you may be able to save well beyond the standard deferral limit. For 2026, the combined 401(k) employee-and-employer contribution limit is $72,000, or 100% of your compensation if less.

Catch-up contributions generally sit on top of that limit, potentially bringing the total to $80,000 if you're 50 or older, or $83,250 if you qualify for the higher age-60-to-63 "super" catch-up.

Once you've maxed your regular deferral and accounted for any employer contributions, the remaining room can sometimes be filled with after-tax dollars, then converted to Roth, either through an in-plan conversion or an in-service rollover to a Roth IRA.

This only works if your plan specifically permits both after-tax contributions and one of those conversion paths, so call your HR department or plan administrator before assuming it's available. Not every plan offers it, but for the people it fits, it's one of the more overlooked ways to build tax-free savings.

4. Stack a backdoor Roth IRA on top of your mega backdoor Roth

If you've just read about the mega backdoor Roth and assumed you've now used up your Roth options for the year, you haven't.

A backdoor Roth IRA lets high earners get money into a Roth IRA even after they've been phased out of contributing directly. You contribute to a traditional IRA on a non-deductible basis, then convert it to Roth shortly after. For 2026, the IRA contribution limit is $7,500, plus $1,100 more if you're 50 or older.

Here's the part I get asked about constantly: Your IRA contribution limit is separate from the limits that apply to your workplace plan. If you're otherwise eligible for each strategy, you can fund a backdoor Roth IRA and execute a mega backdoor Roth in the same year.

The one thing that can complicate a backdoor Roth IRA is the IRS's pro-rata rule, which requires you to consider all of your traditional, SEP and SIMPLE IRA balances together when calculating the tax on a conversion.

The calculation looks at the year-end value of all of those IRAs, not just the account holding your nondeductible contribution.

A mega backdoor Roth, whether converted inside your workplace plan or rolled directly to a Roth IRA, generally doesn't count toward those IRA balances.

If you don't have pretax traditional, SEP or SIMPLE IRA money sitting around, the backdoor Roth IRA stays clean from a tax standpoint. Either strategy can have tax consequences, so confirm the details with your CPA before you move any money.

5. Don't underestimate a plain taxable brokerage account

After three accounts built around tax breaks and rules, a taxable brokerage account can feel almost boring by comparison. But it doesn't get nearly enough credit.

There's no statutory contribution limit, no income cap and no early withdrawal penalty. You can invest as much as you want and sell investments or withdraw cash whenever you want, although selling appreciated investments can create a taxable gain.

That flexibility is rare among the accounts on this list, especially if you're hoping to retire before 59½ and need a bridge to cover expenses before your retirement accounts are penalty-free.

The tax treatment isn't as generous as a Roth or an HSA, but it's still better than most people assume. Long-term capital gains and qualified dividends get preferential rates, not your ordinary income rate.

For 2026, the 0% federal long-term capital gains bracket for married couples filing jointly extends through $98,900 of taxable income. Ordinary taxable income uses that bracket first, so only gains that fall within the remaining space qualify for the 0% rate.

There's also tax-loss harvesting: Selling an investment at a loss to offset capital gains and potentially up to $3,000 of ordinary income, subject to rules such as the wash-sale rule, something you simply can't do inside a 401(k) or IRA.

I've worked with many who treat their brokerage account as an afterthought, something they'll "get to eventually" once the tax-advantaged accounts are maxed. Fund it on purpose instead, particularly if flexibility and access before retirement age matter to your plan.

These add up faster than you'd think

Some of these moves require additional savings, while others change the tax treatment or destination of money you're already saving. The goal is to direct each additional dollar toward the account that best supports your plan.

That distinction compounds. A few percentage points redirected toward a Roth or an HSA in your 50s can mean a different tax bill in your 70s and 80s.

I've watched people run these strategies side by side and see for themselves how much of a difference the right combination makes over 20 or 30 years.

You don't need to implement all five at once. Start by identifying which strategies are available to you, then prioritize the one that best fits your tax situation, savings capacity and need for flexibility.

Before you know it, you will be on your way to a confident retirement knowing that you have optimized your savings.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

From meal planning and research to fact-checking, copy editing and document summarization, artificial intelligence (AI) is rapidly altering the contours of daily life, becoming as indispensable as a basic internet connection.

But AI is not a magic wand. It's a tool that, when used responsibly, can improve efficiency and fill in specific knowledge gaps.

Within financial services, AI is becoming a bigger factor, both at the adviser level and among consumers, who have more access than ever to educational tools to support planning and investing.

In some ways, this access can be beneficial to consumers and participants, giving them unprecedented access to resources that help them be more involved and invested in their financial planning.

1. Everyday efficiency

I'm probably not the only person who uses ChatGPT to help with shopping and meal planning. With a single prompt, I have a ready-made grocery list and budget-friendly dinner plan built around my specific tastes and dietary guidelines.

Could I achieve the same thing by flipping through cookbooks or doing a Google search? Probably. But it would take a lot longer to sift through all the recipes that don't meet my criteria.

In finance, AI can serve a similar purpose, helping potential investors to get the lay of the land. Someone can use it to compare two investment options or learn about complementary opportunities.

It's a low-stakes way to familiarize yourself with the dizzying array of investment options.

2. Learning and definitions

AI is a great learning tool. At a basic level, you can use Claude or ChatGPT to provide definitions for common terminology: What is a stock? What is a bond?

Of course, Google does the same thing, but AI does it more efficiently and effectively.

3. Fact-checking professionals

Though AI can't replace a professional, it is effective for fact-checking, much in the way that patients can consult with another doctor to get a second opinion.

Humans are fallible (though they're less prone to errors than their robotic cohorts), so it's always healthy to do some quick fact-checking

However, when it comes to your finances, AI is not, and can't be, a substitute for professional expertise. It can't replace the empathy and connection that another human can provide.

4. Bad prompts produce errors

Ever heard of "garbage in, garbage out"? If you give AI a confusing prompt, you're likely to get a muddled answer.

I experienced this firsthand during planning for a group bike trip. As an avid cyclist, I turned to my trusty AI assistant to help plan a multiday bike route for me and some of my colleagues.

Apparently, something in my prompt was confusing, and on the last day, instead of setting out on a 30-mile ride, we discovered that it was, in fact, an 80-mile route.

I learned a hard lesson: Clarity is everything, and even small errors can lead to mistakes that you might not catch until it's too late.

5. Easily confused

AI is not great at juggling multiple thoughts at once. Specifically, it can conflate similar-sounding but different concepts such as a separately managed account vs an adviser-managed account, or a retirement-plan brokerage window vs a retail-brokerage account.

While these distinctions might seem small to the layperson, they're important because they involve different fee structures, governance and access rules. AI can slip up when multiple concepts converge, even if it gets them right individually.

6. Bias and data limitations

Studies have shown that large language models (LLMs) have consistently demonstrated bias across categories such as gender, race and age. While this is a discrimination problem, it also contributes to functional errors as diversity of thought leads to better, more accurate outputs.

Even in a perfect world, Claude or ChatGPT could never replace your doctor, lawyer or financial adviser. People want to look across the table at someone they trust when discussing critical issues such as their health and finances.

They also want accountability. A couple of years ago, I started working with a running coach. If you're not an avid runner, the idea of a coach might seem ridiculous. Running is just putting one foot in front of the other, right?

Well, in addition to helping with training, sleep and diet, my coach keeps me accountable. I pay for a coach not because I don't know how to run, but because someone showing up to my house in the morning keeps me accountable. I won't skip a run if I know Jeremy is going to be there. AI is not going to solve that issue.

Likewise, the value of the adviser-client relationship is accountability, trust and follow-through. As an investor, AI can be a useful tool to help you become more efficient and better informed, but it will never be a substitute for your financial adviser. Supplement, don't supplant.

You're likely not the only one using AI. Your financial adviser might use it, too, which is OK, even smart, but you're entitled to know how they're using it and make that part of the decision-making process.

Related Content

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For savers, the sharp spike in interest rates has a silver lining: higher annuity payouts and larger risk-free guaranteed income streams.

When interest rates rise, annuity yields typically follow; insurers earn more on bonds they buy with customer premiums, so they can pass along higher rates to new annuity buyers.

An annuity is a contract between you and an insurance company that converts savings into guaranteed income — for a set period or for life.

With borrowing costs rising from the Federal Reserve’s benchmark short-term rate to the 10-year Treasury note, annuities are back in the spotlight. Preretirees and retirees seeking a guaranteed income stream beyond Social Security can take advantage of the rate spike and lock in higher annuity rates.

With equity markets near record highs and interest rates surging, U.S. annuity sales rose 2.2% in the second quarter to $121.2 billion, according to LIMRA. Sales in the first six months of 2026 totaled $228.7 billion, a new first-half record.

Money parked in annuities reduces market exposure and provides protection against a downturn in stocks.

There are many types of annuities. But we'll focus on two common types that offer fixed payouts or lifetime income and are simple to understand. Examples include:

Multiyear guaranteed annuity (MYGA). This is a "fixed annuity" that locks in a guaranteed interest rate for a set term — typically, three to 10 years — with tax-deferred growth and no market risk. As with a certificate of deposit (CD), this annuity is used for accumulation. You give the insurer a lump sum for, say, five years, earn a fixed annual rate of return and get your principal back at the end of the contract.

For example, if you put $100,000 into a five-year MYGA yielding 6.55%, you'll earn $6,550 each year and get your principal back five years later at the end of the contract.

Single premium immediate annuity (SPIA). Often called immediate annuities, this type of annuity is similar to an old-fashioned pension, as it turns a lump sum into guaranteed income for life. You give an insurer a lump sum today, and the company writes you a monthly check for the rest of your life or a fixed number of years starting immediately.

With SPIAs, be aware that once you turn over your money to an insurer in a "life only" SPIA, and they start providing a guaranteed income stream, the money you forked over is gone. For this reason, many buyers purchase SPIAs with a "period certain" or cash refund rider so their heirs get the remaining balance if they die early.

SPIA math is simple. To determine the monthly income an annuity will pay out, multiply the premium (or lump-sum payment) by the annual payout rate, then divide by 12. Using a $100,000 premium and a 5% payout rate, the monthly income would be $416.67. Monthly income = $100,000 x 5% / 12 = $416.67. At a 5.25% payout rate, the monthly income climbs to $437.50.

Why are annuities attractive now?

What makes these annuities attractive currently is the high income they generate because of the spike in rates.

As of October 1, 2026, the best fixed annuity rate for a three-year annuity is 6.10%, five-year annuities pay 6.55%, seven-year annuities earn 6.95%, and a 10-year annuity pays 6.35%, according to My Annuity Store.

With Wall Street penciling in another full percentage point of Federal Reserve rate hikes through the end of 2027, potentially taking the Fed’s overnight bank lending rate from 4% to 5%, investors must weigh whether now is the time to lock in higher rates.

From an income opportunity standpoint, those yields are attractive, and investors or retirees should take advantage of them, says David Lau, founder and CEO of DPL Financial Partners, an online platform that offers commission-free annuities.

"It’s a terrific time to lock in these rates," says Lau. A perk of owning a MYGA or fixed annuity is that most insurers let you withdraw up to 10% of your account value per year without a surrender charge, according to AnnuityExpert.com.

Despite forecasts of higher rates in the months and year ahead, it's difficult to predict the direction of rates. Timing interest rates is as difficult as accurately timing when to jump in and out of the stock market. Waiting for a better entry point could always net you an even higher rate on a new annuity. But it's not a guarantee.

"You can't get paralyzed by hoping or wondering whether you can get maybe a little better rate if you wait," says Lau.

Ed Massaro, CEO of Knighthead Life, an insurer that sells annuities, says savers shouldn't place too much emphasis on where rates are headed next when weighing whether to purchase an annuity.

"The right question isn't whether rates are at a peak; it's whether today's rates get you enough income to meet your retirement goals," says Massaro.

Options for annuity buyers as rates rise

Since nobody knows where rates will go, here are four options for an income-oriented preretiree, retiree or conservative saver to consider.

1. Lock in today’s rates. With the 10-year Treasury hovering at around a 19-year high of 5.25%, locking in today's annuity rates that range from 6% to nearly 7% makes sense for a saver who wants a guaranteed return today rather than betting on a higher rate in the future.

The sweet spot for fixed-income annuities or MYGAs is a five-year annuity with yields as high as 6.55% and a seven-year product that offers a top yield of 6.95%. "As long as you have the liquidity (e.g., available cash to meet your spending needs), lock in those longer-duration annuities," says Lau. Since the highest current yield on a 10-year annuity is 6.25%, Lau sees no reason to lock money up in an annuity for a decade.

2. Build an annuity ladder. One way to lock in today's elevated rates while minimizing interest rate risk is to build an annuity ladder that invests in a number of annuities spread across different maturity dates, says Steve Azoury, owner of Azoury Financial.

This strategy is similar to building a CD ladder, but it benefits from tax-deferred growth. Given that annuity rates offered by insurers currently top out at around seven years, you could spread money equally among annuities that offer fixed rates for one, two, three, four, five, six and seven years. If rates keep climbing, you can roll over an expiring annuity into a higher-yielding one, says Azoury. On the flip side, if rates dip for some reason, you'll have locked in today's higher rates.

Before committing any money to an annuity, Azoury says you should review your retirement goals and objectives and decide how big a weighting of annuities you want in your retirement portfolio.

3. Wait and see. If you're willing to bet on rates moving higher, you can wait to buy an annuity to take advantage of higher yields in the future. The risk is missing out on higher yields now and losing purchasing power on cash sitting in lower-yielding investments, says Lau. If the money you plan to deploy in an annuity is sitting in a risk asset such as a stock mutual fund, you risk losing money if the stock market goes down.

"That's the biggest risk, especially those within five years of retirement," says Lau. Losses in the stock market close to retirement can be hard to overcome (an effect known as "sequence of returns risk") and can deplete retirement savings faster than planned.

4. Buy now and buy later. Another strategy is to hedge your bets by putting a portion of your money into an annuity at today's rates and adding more later to hedge against future rate volatility. "Average in,” says Massaro. "Don’t try to pick the top."

Whatever strategy you choose, shop around for the highest rates available from highly rated insurers. An insurer with an A or higher credit rating is a less risky bet than going for a higher rate offered by a lower-rated insurance company.

The bottom line: today's annuity rates are plump enough to generate a solid income stream.

"It’s a good time to participate," says Massaro.

Weigh the downsides

Before you lock in an annuity, consider the drawbacks of fixed annuities.

Inflation. The most serious threat to a long-term annuity contract is inflation. For example, consider the buying power of the 5-year MYGA example above, with $100,000 invested and a 6.55% interest rate. At the end of five years, the insurance company will hand you a lump sum of $137,331, but its real purchasing power, adjusted for inflation, is $116,189.

You've beaten inflation and grown your real wealth by roughly $16,189, but your effective "real" rate of return after inflation is about 3.05% per year.

Penalties for early liquidation. Steep surrender charges, often up to 10%, apply if you liquidate your MYGA early. (SPIAs are similar to pensions and can't be cashed out.)

Taxed as ordinary income. Your annuity will enjoy tax-deferred growth, but gains will be taxed at higher ordinary-income rates rather than capital gains rates.

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If you thought of your client's career as an investment, what would it be? Would it be safe, like a bond? Or risky, like a stock?

Conventional wisdom says a person's career is more like a bond. The rationale is simple: Most people receive a relatively stable paycheck, so their career income has low volatility.

From there, the traditional advice follows that younger people can afford to take more risk in their investment portfolios and then gradually reduce their equity exposure as they approach retirement.

The logic sounds reasonable as a rule of thumb. The problem is that it's disconnected from how careers actually work. For starters, volatility and risk are not the same thing.

What can go wrong with a career?

Think about some of the risks embedded in human capital:

• Job loss. Career income is illiquid. You can sell a bond whenever you want, but you have to work to get paid. Even a temporary disruption to income can create a cash crunch.
• Disability. This is an obvious risk for certain professions, such as professional athletes, but an unexpected health event can leave anyone temporarily or permanently unable to work.
• Death. For someone with dependents, this raises a very practical question: What happens to my spouse or children if my income disappears?
• Displacement. This risk is particularly relevant in the age of AI. It's anyone's best guess which jobs and industries will be disrupted over the next decade.
• Professional liability. Doctors, lawyers, accountants, executives and others may have substantial career risk tied to litigation or professional mistakes.
• Skill. Career success isn't guaranteed. You may be a CEO spending as though you have another 10 years of high income ahead of you, but a few bad decisions can quickly bring humility to those expectations.
• Volatility. And yes, volatility matters too. Income can fluctuate considerably for people who rely on bonuses, commissions, equity compensation or other forms of variable pay.

Are all these risks important for every client? No, every career is different, and that's a key point.

Looking only at the volatility of somebody's paycheck misses the bigger picture. Human capital isn't a "safe" income stream that we can simply drop into a Monte Carlo simulation. It is a major source of wealth with its own liquidity, concentration, personal and economic risks.

The good news: Many of these risks are manageable

Many of these problems have solutions. A reserve fund can cover expenses during a job loss, buying someone time to find the right next position instead of taking the first available paycheck. Insurance can address disability, death and professional liability risks.

The investment portfolio can also play a role. If a client works in technology and much of their future wealth already depends on the technology sector, maybe their portfolio should have less exposure to tech stocks.

The portfolio can help diversify risks that already exist elsewhere in the client's financial structure.

Of course, not every career risk can be neatly hedged. If AI displaces your job, the solution may involve retraining, changing industries or reducing spending for a period.

Professional liability insurance may cover a malpractice settlement, but it doesn't find you another job. Disability insurance can replace some income, but it generally can't re-create the full economic value of a career.

Risk management doesn't mean eliminating uncertainty. It means identifying the things that could materially affect the client and putting practical protections in place where you can.

So what type of asset is human capital?

In my view, human capital looks much more like a private business than a bond.

Start with the opportunity. For most people, their career is one of the most important engines for wealth creation. Outside of the ultra-wealthy (and even many of those families originally created their wealth through somebody's career or business), human capital is often responsible for producing the majority of lifetime wealth.

Then consider the risks. Like a private business, human capital is:

• Illiquid. You have to work to realize its value. You can't sell 20% of your career tomorrow because you need cash.
• Concentrated. Your eggs are largely in one basket. An injury can end an athlete's career just as a professional mistake can materially impair the career of a doctor, lawyer or executive.
• Non-tradeable. You can't exchange careers with somebody else. If your profession becomes obsolete and you need to retrain, you may be starting over.
• Uncertain. You own both the upside and downside of your future earnings. The result will depend on some combination of skill, effort and luck.

Once you start thinking about human capital this way, the planning implications become more interesting. Instead of simply saying, "You're young, so you can own more stocks," an adviser can ask more useful questions:

• How resilient is this person's career?
• How accessible is their wealth?
• What happens if their income disappears?
• Is their investment portfolio doubling down on risks they already have through their job?
• What protections would allow them to take career or investment risk more confidently?

Those questions get us much closer to real risk management.

Human capital can also offset bad luck

Human capital isn't just something we need to protect. It can be an important risk management tool in itself.

Imagine someone is about to retire and the stock market suddenly falls 30%. If they're already retired, their options may be limited. They may need to cut spending or sell investments in a down market.

Someone who is still working has another lever available: Their career. They could delay retirement for a few years. They might work additional hours, pursue a higher-paying role or temporarily trade some work-life balance for additional income.

None of those choices is necessarily desirable, but having the option is valuable.

This flexibility can offset bad luck elsewhere in the financial structure, and that has implications for the portfolio. Someone with significant career flexibility may reasonably be able to tolerate more investment risk because they have another resource available if markets disappoint.

The opposite may be true for retirees, or even for younger individuals with fewer marketable skills.

Of course, the right approach depends on how human capital relates to the broader financial picture and interacts with an individual's unique risks.

Bringing human capital into the total wealth picture

Ultimately, I don't think advisers should treat human capital as a safe bond or simply as another line item in a planning projection.

It is a unique asset that creates wealth and carries risks. It can be protected with reserves, insurance and diversification. And, because careers give people the ability to adapt their future income, human capital can sometimes help absorb bad outcomes elsewhere.

That's why it belongs in the same conversation as the investment portfolio, private assets, real estate, liabilities, insurance and other components of a client's total wealth.

Advisers are in a unique position to see all those pieces together. When you understand the client's career as part of that broader financial structure, you can move beyond simplistic rules of thumb and start asking a more useful question:

What can we do to help the client navigate their key risks and maximize their wealth potential?

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Editor's note: This is part one of a two-part series on how financial professionals can help their clients avoid costly retirement mistakes.

For many pre-retirees, the transition into retirement doesn't unfold as carefully as they expected.

After years of disciplined saving, the focus suddenly shifts to income — and that's where things can feel rushed. Decisions are made quickly. Accounts are tapped without a clear sequence. Tax consequences show up later.

In other words, their approach is: Ready, shoot, aim.

At Wealthcare Advisors (WCA), we believe retirement income planning isn't something clients should figure out on the fly. This is where they need a skilled and knowledgeable financial advisor.

Before your client locks in their retirement date, there are several key questions — and more importantly, the how and why behind them — that deserve attention. That's what we'll look at in this two-part series.

Which accounts should you tap first — and why?

Retirement income doesn't come from a single paycheck. It comes from a coordinated strategy across different types of accounts:

• Tax-deferred (IRAs, 401(k))
• Tax-free (Roth IRAs)
• Taxable brokerage accounts

The question for clients isn't just, "Where do you pull money from?" It's also, "Which order makes sense for your situation?"

A structured withdrawal strategy can prolong the life of their assets, smooth out tax exposure over time and create flexibility in future years.

For example, drawing only from tax-deferred accounts early may seem logical, but it can create larger required minimum distributions (RMDs) later, potentially pushing a client into higher tax brackets and increasing Medicare premiums.

On the other hand, using taxable or Roth assets strategically in earlier years may allow them to proactively manage their tax position before RMDs begin. The difference-maker is intentional design — not convenience.

How do market conditions affect withdrawal decisions — and how should advisors respond?

Market volatility doesn't stop at retirement, but your client's strategy should account for it differently. The biggest risk isn't just market decline — it's withdrawing income during that decline. That is where sequence of return, or sequencing, risk becomes a reality.

So, how should you respond? Collaborating with your team and developing a plan mitigates much of this quote unknown risk.

A thoughtful income plan may include maintaining a short-term income "buffer" to avoid selling assets in down markets, adjusting which accounts clients draw from based on current market conditions, and diversifying income sources so they're not relying solely on portfolio withdrawals.

Instead of reacting emotionally, the goal is to build a system that anticipates market cycles and adjusts accordingly. You and your clients can't control the markets — but together, you can control how and where they get their income.

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• How to Turn Wealthy Clients' Charitable Giving Into a Cohesive Plan
• Old Annuities Contain Untapped Potential for Clients and Advisers: Here's Why
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you have a pension and substantial retirement savings, your tax situation could look very different from that of the average retiree.

You might have heard the statistic: Roughly 80% of retirees pay no federal income taxes. If you have a pension and a million dollars or more saved for retirement, you might read that statistic and think, "There's no way that applies to me."

You're probably right.

As a CERTIFIED FINANCIAL PLANNER® and the founder and CEO of Peak Retirement Planning, we work primarily with what we call the 2% Club — people who have pensions and $1 million or more saved (I wrote a book about this group — you can request it for free here).

We see a pattern that runs counter to the retirement advice many of us have heard throughout our working years. We were told that we would be in a lower tax bracket once we stopped working, but for retirees with substantial pensions and significant tax-deferred savings, that outcome isn't guaranteed.

In fact, you might find yourself in the same or an even higher tax bracket.

The good news is that having to pay taxes in retirement is hardly a bad problem to have. It means you have income and assets that many retirees don't.

However, I don't believe you should pay a penny more than necessary, and the key is understanding why most retirees can avoid federal income taxes and why your situation may require a different strategy.

You can watch my video on this topic:

Why so many retirees pay no federal income tax

The primary reason is the standard deduction. The standard deduction allows taxpayers to exclude a certain amount of income from federal taxation. For retirees with relatively modest income, that deduction can eliminate much or all of their taxable income.

Consider a hypothetical retiree with $500,000 in an IRA, no pension and Social Security as their primary source of income. At age 73, that person would begin taking required minimum distributions (RMDs). A roughly 4% withdrawal from a $500,000 account would generate about $20,000 of taxable income.

That isn't a particularly large amount of income when compared with the standard deduction, especially when additional deductions available to older taxpayers are considered.

Social Security also isn't necessarily fully taxable, as the amount of Social Security benefits included in taxable income depends on a retiree's overall income, and in this case, little or none of their benefits will be taxable.

That's how you can arrive at a retiree with retirement income who still owes little or even $0 in federal income taxes.

Now let's change the equation.

A pension can change everything

A pension is one of the greatest retirement benefits you can have. It provides something that millions of Americans don't have, which is a predictable income for life.

But from a tax-planning perspective, that guaranteed income often creates a challenge. Instead of starting retirement with relatively little taxable income, a pension holder frequently has three significant sources of retirement income:

• A pension
• Social Security
• Withdrawals from tax-deferred accounts such as 401(k)s, IRAs, TSPs or 403(b)s

I call this the three-legged stool of retirement income. It can provide tremendous financial security, but it can also create a substantial tax bill.

If your pension alone provides $50,000, $100,000 or even several hundred thousand dollars annually, you have already moved well beyond the situation facing the retiree with $500,000 saved and no pension.

Then add Social Security and eventually RMDs, and your taxable income can climb even higher. That's why I tell pension holders to stop comparing their tax situation with the average retiree. Your retirement income strategy needs to be built around your specific numbers.

Your Social Security could become taxable, too

Social Security taxation is another reason pension holders can find themselves paying more than expected. Depending on your income, up to 85% of your Social Security benefits can be included in taxable income.

For many of the clients we work with, that full 85% is taxable because their pension and other income push them above the relevant thresholds.

This can create a compounding effect. Your pension generates taxable income, which can cause more of your Social Security to become taxable, which then increases your overall taxable income.

And that's before we even get to your retirement accounts.

RMDs can become a bigger problem over time

One of the biggest mistakes I see is treating RMDs as if they're a problem for someone else. They're not. If you have substantial tax-deferred savings, you need to think about what those accounts could look like when RMDs begin.

Let's say you're 60 years old with $1 million in tax-deferred retirement accounts. If those assets grow significantly over the next decade or more, you could reach your RMD years with substantially more than $1 million.

This creates a very different tax problem. The percentage you are required to withdraw increases as you age, and you have to take those distributions regardless of whether you actually need the money for spending.

This could leave you in a situation where your pension and Social Security already provide enough income to live comfortably, yet the government requires you to withdraw additional money from your IRA. This additional income can push you into higher tax brackets and affect other parts of your retirement plan.

Medicare adds another layer

Your income doesn't just determine your federal income tax bill; it can also affect your Medicare premiums through the income-related monthly adjustment amount, or IRMAA.

If your income increases enough, you will find yourself paying more in premiums for Medicare Part B and D for the exact same coverage as someone with a lower income.

This is one reason I don't think retirement tax planning should focus solely on the federal tax bracket you're in. The real question is: What is your all-in cost?

This includes federal income taxes, Social Security taxation, Medicare premiums, capital gains and, depending on where you live, state income taxes.

Tax diversification can give you more control

Most diligent savers we work with did exactly what they were told to do throughout their careers: They put money into their 401(k), IRA, TSP or other tax-deferred accounts, received the tax deduction and kept saving.

That's a great way to build wealth, but there's a potential downside when you reach retirement: You could have too much of your wealth sitting in one tax bucket.

If nearly all of your retirement savings are tax-deferred, you don't have complete control over your future tax bill, and when you need additional income, you typically have one option: To recognize more taxable income.

That's why I like the concept of tax diversification. Instead of having all your money in tax-deferred accounts, consider building a combination of:

• Tax-deferred accounts. Traditional IRAs, 401(k)s, TSPs and similar accounts
• Tax-free accounts. Roth IRAs and Roth 401(k)s
• Taxable accounts. Brokerage and other investment accounts

The goal isn't necessarily to maximize one category but to create flexibility. If tax rates are high, having money in a Roth account could give you a source of retirement income without creating additional taxable income, and if tax rates are lower, you could draw from tax-deferred accounts instead.

You can't predict exactly what tax laws will look like 10, 20 or 30 years from now, but you can build a portfolio that gives you choices.

Roth conversions could be especially valuable for pension holders

This is where Roth conversions enter the conversation. A Roth conversion allows you to move money from a tax-deferred account into a Roth IRA, paying the applicable taxes on the converted amount today. Once the money is in the Roth, qualified withdrawals are tax-free, and Roth IRAs don't have RMDs during the original owner's lifetime.

For a pension holder with substantial tax-deferred savings, this can be a powerful planning tool, but I don't recommend converting money simply because someone says, "Roth is tax-free."

The question is more nuanced: What tax rate are you paying today compared with the tax rate you could face later?

If you have a large pension, substantial retirement savings and years before RMDs begin, you could have an opportunity to gradually move money into the Roth while managing your tax bracket.

For example, someone with a $100,000 pension has a very different future tax picture from someone with no pension. Add $1 million or more in tax-deferred accounts, and future RMDs could become significant.

A Roth conversion could reduce the size of those future RMDs while also creating a pool of money that grows without future RMDs for you.

But there's an important caveat: Don't convert blindly. Converting too much may push you into a higher tax bracket, increase your Medicare premiums or create other unintended consequences.

Converting too little might leave valuable lower tax brackets unused. The objective is to find the right amount, not simply the biggest amount.

Don't forget about the widow's penalty

There's another tax issue that married couples need to consider long before it happens: The so-called widow's penalty. While you're married, you generally file a joint return and benefit from married-filing-jointly tax brackets and deductions. When one spouse dies, the surviving spouse eventually files as a single taxpayer.

At the same time, the surviving spouse could lose one Social Security benefit while continuing to have pension income and retirement assets. In other words, income declines while the tax brackets become less favorable.

That's why I encourage couples to plan for both spouses, not just the tax situation they have today.

One strategy could be taking larger withdrawals or completing Roth conversions during the years when both spouses are filing jointly. Doing so could reduce the amount of tax-deferred money that remains for the surviving spouse. It's essentially risk management for your tax plan.

Your retirement goal matters, too

Tax planning isn't only about minimizing taxes; it's about aligning your tax strategy with what you actually want to do with your money.

If your goal is to spend your savings during retirement, it could make sense to take advantage of the earlier years of retirement, when you're healthy enough to travel, pursue hobbies and enjoy the wealth you've accumulated. I call these the "go-go years."

If your goal is to leave a significant legacy, the strategy could look different. A Roth conversion could turn tax-deferred assets into a potentially tax-free legacy for your heirs while also eliminating lifetime RMDs on the converted Roth assets.
Either way, your retirement tax strategy should start with your goals, not simply a desire to pay the lowest possible tax bill this year.

You might not be able to join the 80%, but you can still pay less

If you have a pension and substantial savings, you probably aren't going to replicate the tax situation of a retiree with modest income and no pension. And that's OK. I'd rather have a large pension and substantial retirement savings and pay some taxes than have no taxable income because I didn't save enough.

But there's a big difference between paying taxes because you have significant income and paying more taxes than necessary because you didn't plan ahead. If you're a pension holder with significant retirement savings, start by asking yourself some questions:

• How much taxable income will my pension create?
• How much of my Social Security will be taxable?
• What will my RMDs look like at 73, 75 and beyond?
• Could my RMDs push me into a higher tax bracket?
• Could my income increase my Medicare premiums?
• How much of my retirement savings is tax-deferred vs tax-free?
• Would Roth conversions make sense while I'm still working or early in retirement?
• What happens to my spouse's tax situation if I die first?
• What happens to my heirs if I leave them a large tax-deferred account?
• Where will I live in retirement, and how will state taxes affect the equation?

You might not be able to eliminate your retirement tax bill. But with the right planning, you can potentially reduce it, spread it out and gain more control over where and when you pay it.

That's the goal we have for our clients: Pay your fair share, but not a penny more.

Related Content

• 8 Retirement Tax Strategies Your CPA Won't Tell You
• When Is a Roth Conversion a Bad Idea? 6 Situations Retirees Should Consider Carefully
• Why a Roth Conversion Is Wrong for Most People But Often Right for Pension Holders
• 13 Things to Know About How Your Pension Affects Your Taxes in Retirement
• Many Retirees With a Pension and $1 Million-Plus Do These 7 Things (and Regret It Later)

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Retirement doesn't unfold in a straight line. It behaves more like a lake. Every financial decision, whether a withdrawal, major purchase, tax strategy or claiming choice, creates ripples that spread across a retiree's financial future.

Some ripples fade quickly. Others reshape the entire retirement landscape. Understanding those ripples is key to building a retirement plan that is resilient, flexible and sustainable.

Every decision has an outcome or a consequence. Every financial decision does, too. Your experience is what clients need to navigate them.

Here's how we use the lake metaphor at Wealthcare Advisors.

Lifetime savings: The first major ripple

Lifetime savings form the depth of the lake — the reservoir that determines how much flexibility your retiree or soon-to-be retiree client has when making major decisions later. Choices made during the accumulation years shape their entire retirement.

Key drivers include:

• Savings behavior. Consistency, contribution levels and discipline
• Asset location. Taxable, tax‑deferred and tax‑free positioning
• Liquidity reserves. Cash availability for large purchases
• Volatility exposure. How much risk the portfolio carries into and through retirement

These choices determine how disruptive a major expense will be later in life. A deep lake absorbs ripples. The second ripple, tax planning, magnifies them.

Tax planning: The second major ripple

Tax planning is the bridge between accumulation and distribution. It determines how efficiently your client can access their savings and how long those savings will last. Important tax ripples include:

• RMD exposure
• Roth conversion windows
• Withdrawal sequencing
• IRMAA thresholds

This is where real‑world decisions, such as buying a car or a home, become powerful teaching moments.

Imagine your clients decide to buy a $50,000 car at age 70. That single decision creates a cascade of ripples across their "retirement lake." We would frame it like this:

Ripple one: Liquidity shock. The source of the $50,000 determines the size of this ripple.

Should the clients decide to make a tax‑deferred withdrawal, that may lead them into a higher tax bracket, IRMAA penalty risk and reduced Roth conversion space.

Using assets within their taxable account may lead to additional capital gains and reduced future income‑producing asset base.

If the decision is to use some of their cash reserves, they may be concerned about lower emergency liquidity and higher portfolio withdrawal pressure.

A combination of two or all three of these sources may solve the issue.

Ripple two: 18-24 month spending impact. A $50,000 purchase will often reduce discretionary spending for 18 to 24 months. Here are just a few decisions that may be affected:

• Planned travel may be delayed and home projects postponed
• Gifts to family or charitable giving are reduced
• The clients may have to lean harder on the assets you manage as portfolio withdrawals may also need to be increased

This is the ripple clients feel most immediately — the stone hitting the water.

Lifetime income planning: The third major ripple

This is where all prior ripples converge. Lifetime income planning (LIP) is the art of turning savings, tax strategy and spending decisions into a coordinated, predictable income stream. And LIP is the most crucial and difficult of these tasks.

At Wealthcare Advisors, we explain it this way. Clients will have assets they "lean on," assets they "live on" and a legacy they will "leave behind." LIP is the successful combination of our first two. Key components include:

• Sustainable withdrawal strategies
• Bucket or time‑segmented planning
• Guaranteed income tools
• Longevity protection
• Sequence‑of‑returns mitigation

Using our prior example, a $50,000 car purchase becomes part of the client's income plan — not an isolated event. That may require adjusting withdrawal rates, rebalancing accounts or shifting guaranteed income sources to maintain stability.

Social Security claiming: The last major ripple

Once spending, taxes and lifetime income have been coordinated, the final major planning decision is often Social Security claiming strategy.

Social Security can either calm the lake or amplify the waves. It interacts directly with spending decisions, tax strategy and income planning and gives us several scenarios to consider:

• A major purchase may influence whether delaying benefits is still optimal
• Claiming now may reduce portfolio withdrawals in the future
• If planning for a couple's lifetime, how do survivor benefits fit into the plan?

Finally, we need to scope out exactly how Social Security interacts with other taxable income and IRMAA.

For example, if a client had planned to delay claiming to age 70 but now needs cash flow, claiming earlier may reduce strain on the portfolio but permanently reduces lifetime benefits. This is why Social Security must be evaluated after lifetime income planning, not before.

The question is more complex than, "When should I/we claim?" It's "How do I/we design the income bridge so delaying benefits becomes sustainable in practice, not just on paper?"

Why the lake metaphor works

Clients instantly understand:

• The stone = the decision
• The ripples = the consequences and trade-offs
• The shoreline = long‑term impact and outcomes

It is intuitive, visual and memorable. And it reinforces your core message: The ripples never stop.

Retirement planning is not a series of independent decisions. It is an interconnected process where every choice influences the next. A withdrawal affects taxes. Taxes affect income. Income affects Social Security strategies. And together, these decisions shape a retiree's long-term financial security.

Like a stone cast into a lake, every financial decision creates ripples. Some are small and short-lived. Others travel far beyond the initial event and can impact a client's lifestyle, legacy and confidence for years to come.

The advisor's role is not simply to react to the ripples, but to anticipate them and help clients understand their potential consequences.

When savings, tax planning, lifetime income planning and Social Security claiming are coordinated through a thoughtful process, clients are better positioned to allocate assets according to their goals and priorities.

They gain the confidence to spend what they have worked so hard to accumulate, support the people and causes they care about, and enjoy a retirement that is meaningful, secure and dignified.

At Wealthcare, we believe that understanding the ripple effect of every retirement decision helps advisors deliver more than a financial plan. It helps them provide clarity, confidence and a road map for lasting retirement success.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Many families reach a point when a loved one requires part-time or full-time care due to health issues or aging. In families with multiple children, caring for an aging or ill parent often falls on one sibling more than the rest.

Caregiving in any capacity can take a financial toll, known as the "caregiver penalty." Research from the Employee Benefit Research Institute finds that caregivers are likely to have fewer financial assets than non-caregivers, and more debt. This isn't shocking, since caregivers typically have to sacrifice career growth and associated wages.

Typical estate plans compound the problem, since many parents split their assets equally among their children even when one child stepped up to provide care more than the others. This inevitably penalizes the caregiver, even if unintentionally. But there are ways around that.

Here's how parents can make things right when one child sacrifices their own financial well-being to provide care.

Create a caregiver contract

Some parents choose to reward their children for providing care through an inheritance. But that's not the only avenue to explore.

"If parents want to pay for their child to care for them, they can create a caregiver contract that outlines the caretaker duties, how much they will be compensated, and mileage for driving parents," says Kelsey Simasko, attorney at Simasko Law. That agreement can have a specific equity clause designed to compensate the caregiver using property, home equity, or other assets.

As Simasko explains, a caregiver contract can be worded to make it clear that the payments are not a gift, but for services rendered. This allows a grown child who may be working less and therefore earning less to receive compensation immediately, thereby reducing near-term financial stress.

Of course, Simasko recognizes that not all parents have the funds to begin paying their child for caregiving services.

"If this is not the case, then providing their compensation as inheritance may be a better option," she says.

But if you do decide to pay a child for caregiving services, you should have an elder law attorney create a contract for you so you can be sure it complies with Medicaid rules, Simasko insists.

Misty Ralston, owner and attorney at Ralston Law, says a caregiving contract should spell out the caregiving duties and associated compensation. She also says such a contract should ideally be in place before services are rendered, and that the caregiver should maintain a log of the hours they work.

"Otherwise," she warns, "those payments will be treated as a gift or uncompensated transfer for Medicaid or might be considered as something coerced upon the parent as an afterthought rather than a true contract for services."

Keep in mind that Medicaid uses a five-year look-back period, so the transfer of certain assets may compromise eligibility.

Ralston also says that before drafting such a contract, it's best to research what the average professional is being paid for these services. Also, she insists, "You want to make sure that the person signing has capacity to do so, and get a letter from the doctor stating the person’s capacity as well as the need for these services."

And, Ralston says, "If the child doing the work is also the power of attorney, they should not sign for the parent. Allow the parent to sign themselves [and] have the parent meet with their own attorney."

Before putting such a contract in place, Ralston recommends having a family meeting to discuss what is happening and why. All family members should sign a written acknowledgment confirming they understand the arrangement. Many families find discussing inheritance difficult, so we have tips to get you started in How to Talk to Your Adult Kids About Their Inheritance.

Finally, any family entering into a caregiver contract should consult a tax professional. The parents paying for care may owe a "nanny tax." And the adult child receiving compensation may have to report it as taxable income.

Compensate the caregiver with a larger inheritance

In a caregiving situation, it's often easier, logistically and financially, to give a caregiving child a larger share of an inheritance. Ralston says there are several ways to do this.

One option is to make a specific bequest that provides a preset sum to the caregiver as a thank you for stepping up during the parent's time of need. That can sometimes be "easier to swallow," she says, "than an extra percentage of the estate."

Another option is to gift the home to the caregiving child. If they lived with the parent for two years prior to going into a nursing home for Medicaid, they may be entitled to use the Caregiver Child Exemption during estate recovery.

"Since the house might otherwise have to get sold to pay for the Medicaid 'bill,' why not give that to the child that has been caring for the parent and for the home all this time?" Ralston says.

Otherwise, a parent might choose to designate a certain account or life insurance policy to the child.

"It doesn't matter what option one chooses," Ralston says. "What matters is how it looks to others."

Simasko agrees. While adjusting a will or trust to give a caregiving child a larger inheritance than their siblings is always an option, "this always carries the risk of the siblings fighting," she says.

One approach Simasko recommends is having parents adjust each child’s inheritance from time to time to ensure it reflects the actual amount of care needed. The flipside, though, is that amending a trust costs money, so adjusting beneficiary designations could get expensive, even if it's only done once a year.

No matter which option you choose, the key is to have open conversations at the family level before one sibling starts providing consistent care. That way, everyone is on the same page, and there are fewer surprises, conflicts or ill feelings.

More Trillion Dollar Talk

• Why Leaving an Equal Inheritance to Your Children Could Backfire
• 8 Estate Planning Secrets You Can Borrow from the Ultra-Wealthy
• Why So Many Families Are Unprepared for the Great Wealth Transfer — and What You Can Do About it

The sharp spike in mortgage rates may hobble older homeowners who plan to use their homes as a key source of retirement cash. With the average 30-year fixed-rate mortgage climbing above 7%, the so-called "golden handcuffs" of low rates are keeping many retirees trapped in homes they'd otherwise leave, says Robert Laura, founder of the Retirement Coaches Association. Trading a super-low rate for a higher one can easily wipe out the savings of downsizing.

Since housing wealth in primary residences is the largest asset held by U.S. households, according to the Federal Reserve, figuring out the right way to extract housing wealth is a key personal finance challenge for aging Americans.

The golden handcuffs are also forcing pre-retirees who plan to sell their existing home in the next one to five years to weigh closing a deal now, versus waiting until borrowing costs fall, or nixing the sale and aging in place instead.

"It's paralyzing," says Laura. It's also freezing retirees' mobility.

Where are mortgage rates heading?

Simply hoping for lower rates isn't really a strategy. Why? Mortgage rates aren't expected to come down anytime soon, with sticky inflation, elevated oil prices, and ballooning U.S. government deficits. The 30-year fixed-rate mortgage is expected to hover close to 7% through 2028, according to the Mortgage Bankers Association (MBA). The MBA's latest forecast has the benchmark mortgage rate averaging 6.7% in 2027 and 2028.

Most economists and consulting firms agree with this "higher for longer" outlook. "We're not calling for any rate relief anytime in the near term," said Alex Thomas, research manager, macro, at John Burns Research & Consulting.

Rising rates are hurting affordability and are a big reason why home prices in many areas are falling. The median sale price of an existing home was $429,100 in August, down 3.1% from $442,800 in June, according to the National Association of Realtors (NAR).

Higher borrowing costs could crimp selling prices at a time when retirees are looking to sell their homes and downsize.

So what should a retiree or pre-retiree do to monetize their home? Get creative, Laura advised. Multiple strategies can help nullify or offset the worst impacts of the rising-rate environment. A retiree's financial profile should dictate how to proceed. Someone who owns their home free and clear and can downsize to a home they can pay for in cash is less impacted by higher rates. In contrast, an older homeowner who sells their current home and needs to take out a new, likely more expensive mortgage to buy a new home could face a financial squeeze.

Older homeowners with no mortgage less impacted by rate spike

If you have enough equity in your home and can buy your downsized home in cash, today's higher mortgage rates are unlikely to interfere with your quest to downsize or relocate to a place with lower housing costs, experts say. The only catch is if rates keep climbing and affordability becomes so tight that buyers dry up. One way to overcome that obstacle is to accept a slightly lower price to expand the pool of potential buyers who can afford it.

If you're like most homeowners, you likely have sizable equity in your home, which can make selling at a tad lower price easier to swallow financially and emotionally. The average homeowner with a mortgage now has $310,000 in equity (meaning the house is worth $310,000 more than what’s owed on it), according to the September Home Equity Insights Report from Cotality. Buyers who purchased in 2020 hold roughly $86,000 more equity than buyers who purchased in 2023, according to Cotality.

"A high share of baby boomers actually own their homes free and clear," says Selma Hepp, chief economist at Cotality. Nearly 71% of Americans aged 65 to 74 who own homes are mortgage-free, according to the Federal Reserve.

When it comes to moving or downsizing, Hepp says the decision goes beyond interest rates. "It's more about: Do I need to move right away? What is the potential savings or non-savings from relocating? Timing the mortgage market is a very tricky proposition."

If you're a homeowner sitting on hundreds of thousands of dollars in home equity, getting "10 or 20 grand less (on the sale of your home) isn't really going to matter all that much," says Jeff Ostrowski, housing market analyst at Bankrate. If you fit into this category, you'll likely have a good chance of buying a new home with cash and having money left over to supplement your retirement nest egg.

Retirees with lots of equity in their homes also have the advantage of not having to sell. They can simply wait a few years for high rates to dissipate and market forces to become more favorable, experts say.

How older homeowners can navigate the spike in mortgage rates

It's a different ballgame for older homeowners who can't buy a downsized home in cash and must take out a mortgage at twice their current home loan rate. Here are some strategies to consider if you want to downsize despite the higher rate hurdle.

1. Roll future interest costs into sale price

If you'll need a mortgage on your new home, add the extra interest costs you'll incur over the next two to three years to your existing home's sale price. "Bake the extra costs into your asking price," says Laura. If you live in a seller’s market because of a housing shortage or high demand, you can increase your home's price by an amount that will cover higher future interest costs for several years.

Let's say the new home mortgage will cost you $500 more per month. If you were thinking of an asking price of $400,000 for your home, you could list the home for $412,000 instead. If you get your price, you could use the extra $12,000 to cover two years of higher mortgage payments, buying time until you can refinance at a lower rate, says Laura.

Laura says older homeowners nearing retirement who try to time the mortgage market and wait for lower rates face another risk: they could have trouble getting approved for a mortgage if they retire and no longer have a paycheck. "If you need to qualify for a mortgage, you want to apply while you're still working,” says Laura.

Let's run the numbers. A year from now, the 30-year fixed-rate mortgage will be 7.43%, predicts LongForecast.com. So, for a median-priced home of $429,100 with 20% down, the monthly payment a year from now would be $2,381, or $97 more than at today’s 7% rate. Long Forecast, however, expects the 30-year fixed-mortgage rate to fall to 6.88% in September 2028 and down to 5.35% in September 2029. At 5.35%, the monthly payment would be just $1,917, or $367 less than at 7%. Of course, these are predictions. No one really knows for sure where mortgage rates will be in the future.

2. Sell in a seller's market and buy in a buyer's market

Just like opportunistic selling in the stock market can be profitable, so too can selling in a hot market and buying into a cooler housing market, says Ostrowski.

"If you're getting close to retirement and maybe want to move to (a less-expensive) state, it definitely would be smart to start thinking about selling now," says Ostrowski. "But it depends on what part of the country you live in." He notes that housing markets in parts of the Northeast and Midwest are still strong, whereas prices are weaker in places like Florida and Texas, giving you some (price) leverage when shopping for a home. "It's a pretty favorable trade because you're moving from a seller's market to a buyer's market," says Ostrowski.

For older homeowners who expect to keep working for, say, three more years but plan to move in retirement, it could make financial sense to sell into a strong housing market now and rent for a few years. That way, you can cash in on the hot seller's market and hopefully buy into a different, less-pricey market in another state in a few years, when rates are hopefully lower. "That (could be) a really good tradeoff, but it's an individual decision," says Ostrowski.

If you’ll need financing for your next home, comparing current mortgage rates can help you estimate how a move could affect your monthly housing costs.

Use the tool below to search and compare some of today's top mortgage offers:

3. Buy new construction homes with incentives

Homebuilders in many parts of the country that overbuilt are now looking to reduce inventory. "In some of these home communities, builders are offering pretty substantial incentives," says Thomas. Many builders are "covering closing costs, offering design credits, and probably most significantly, interest rate buydowns. They’ll buy down your mortgage rate so that it is significantly below market rates. And that can really make a difference in terms of your monthly payment."

4. Age in place if your house is suitable

Another option is to retrofit your existing home and stay in it for the long haul or at least until interest rates fall enough to make the downsizing math work in your favor. Under this scenario, you can still benefit from your existing low mortgage rate. You can also borrow against your home via a home equity line of credit (HELOC) — albeit at a higher rate — to renovate your home. While the HELOC rate will likely be higher than your current mortgage, you won’t be forced to finance a new home at an interest rate that is double what you currently have.

There's one big caveat to aging in place. If your current home isn't age-friendly now or will be hard to make safe as you age, Laura says you're likely better off selling and moving on. (Here's how to know if your home is ready to age in place.)

"Spending a bunch of money on a three-story condo (with stairs) is a lot more difficult than renovating a one-story ranch or being able to create a main floor master bedroom," said Laura.

If you stay put and have an adjustable-rate mortgage that might reset at a higher rate, you should consider refinancing into a fixed-rate mortgage. That move will lock in a payment that won’t change or spike substantially in the future and hurt cash flow.

What you don't want to do is spend so much on a renovation that it puts you in a worse financial situation than when you started, warns Thomas. "You don’t want to get into a scenario where you spend $100,000 on a bathroom remodel and home prices go down and you don't get your money back on it," says Thomas. "You have to run the numbers carefully. Not every renovation pays for itself."

5. Be careful what you wish for

Those waiting for lower rates risk getting what they asked for, but at a cost, warns Thomas. If rates come down a lot, it will likely be due to a weak economy and subsequent job losses, which may make it harder for pre-retirees or retirees to sell their homes and downsize.

"You have to think about what the situation would be if you did see a significant reduction in mortgage rates," says Thomas. He notes that rock-bottom mortgage rates became available in the past two major economic downturns in the U.S.: the great financial crisis in 2008-09 and during the COVID-19 pandemic in 2020-21. "If rates come down to a point where you're getting a meaningful impact to affordability, it's likely the economy is not in a great place. And that impacts (the ability to) sell your house as well."

The bottom line: "I think just going forward with the assumption that we're in this higher-for-longer rate environment is probably the best route to take," says Thomas.

Read More

• The Cost of Staying Put: Aging in the Neighborhood You Love
• You May Not Want to Downsize in Retirement: Here's Why
• 10 Things You Should Know About Tapping Home Equity
• We Are Retired, Mortgage-Free, With $970K in Savings. My Husband Wants to Downsize to Lower Our Costs, but I Love Our House. Help!

Travel the country in an RV. Build the wine cellar in the basement. Who doesn't have big dreams for when they retire? But instead of paying for these items outright, like so many retirees do, the smarter approach may be to rent instead.

Just ask any RV owner who can't afford the gas. Or the homeowner who spent thousands on power tools for one project, only to never use them again.

Cash is king in retirement, and to keep more of yours, here are five things retirees are better off renting than buying.

1. Recreational vehicles

Seeing the country from behind the wheel of an RV is the quintessential retirement dream. But buying an RV can quickly turn into a financial nightmare for several reasons. RVs are expensive to buy and maintain. Plus, they depreciate very quickly.

Let's not talk about insurance and ROI, or the number of times you'll have to use the RV to get your money's worth. To read more about what can go wrong with owning an RV, click here.

A cheaper option is to rent an RV. Options abound when it comes to renting, including:

-Peer-to-Peer services: Platforms including RVshare, Outdoorsy and RVezy let you rent an RV directly from private owners. RV options range from camper vans to Class A motorhomes, with rates ranging from $50 to $300 per night. This approach gives you the most options.

-Traditional Rentals: Rental companies including Cruise America, Indie Campers and El Monte RV let you rent a range of RVs in locations across the country. Some let you rent it in one location and drop it off in another. Rates range from $80 to $250 per night.

2. Recreational boats

Number two on many retirees' lists, especially for snowbirds or those who retire to Florida full-time, is recreational boats. What better way to soak up the sun? But like an RV, recreational boats come with many costs, starting with the hefty price tag.

At last check, the average new power boat costs $25,000 to $150,000. Add maintenance, docking and fuel to the mix, and owning a boat can cost you $2,500 to $15,000 per year.

A luxury cruise, on the other hand, would cost about $5,500 per person. Even if you wanted to rent your own private yacht, that would set you back $50,000 for a week at sea. Do that four times a year for ten years, and you are still ahead in savings versus owning a boat for the same time period. But for modest retirees, you can rent pontoons, fishing boats, speedboats, sailboats, and yachts ranging from around $200 to $10,000 a day or $1,000 to $50,000 a week.

GetMyBoat, Boatsetter and Click&Boat are P2P marketplaces for renting boats, while MarineMax, Freedom Boat Club and United Yacht Sales let you rent boats directly. There are also local marinas, boat clubs and waterfront charter operators you can rent from.

3. Vacation homes

Diversifying your portfolio, building generational wealth and having a place where everyone can gather are all wonderful reasons to buy a vacation home in retirement.

But sometimes those dreams don't pan out. Your kids may not want to visit that often. Upkeep can become a headache, and instead of building wealth, the second property can start to drain your cash flow.

Another option is to rent a vacation home instead of owning one. By renting, you save on property taxes, insurance and ongoing maintenance. You can also potentially choose a different location for every trip. Even if you want to visit the same place over and over, there are benefits to renting instead of owning in retirement, including:

-More financial flexibility: Your capital stays invested in liquid assets like stocks or high-yield savings rather than tied up in real estate.

-No off-season stress: You don't have to worry about the home when it's vacant.

-Avoid HOA fees or Special Assessments: You avoid costly homeowner association dues and surprise repairs for shared amenities like roofs or pools. The average median monthly HOA fee in America is $135, but more than 3 million residents pay more than $500 per month.

-You're not stuck: If your health changes, you can easily get rid of the rental. You don't have to worry about selling a property.

4. Power tools

Who doesn't have a list of home improvements they plan to complete when they finally retire? Maybe it's the wine cellar, the she-shed, or the flower boxes for the garden. And what respectable home improvement project wouldn't be complete without a set of new tools?

But new tools can set you back hundreds, if not thousands, of dollars. After all, a high-end remodeling miter saw costs up to $1,000, while a heavy-duty rotary hammer drill can set you back up to $1,100. Meanwhile, a commercial paint sprayer can be as much as $1,200. That's a lot of money you've spent before you even spend on supplies.

A cheaper option is to rent the tools you need or, even better, borrow them from your local library. Granted, your choices will be limited with the latter option, but libraries across the nation let you borrow everything from power drills to power washers, and all you need is a library card.

As for rentals, Lowes, Home Depot, and local tool rental companies let you rent power tools for the day or week. Renting a cordless hammer drill from Home Depot costs $29 a day, while a medium paint sprayer costs $104 a day.

5. Medical equipment

If an illness or injury in retirement requires short-term medical equipment, buying it outright can seem easier — no worrying about damages or monthly payments. However, renting can yield significant savings that outweigh those minor hassles, especially for equipment needed for less than a year that Medicare won't cover.

If you need equipment for less than a year, renting is cheaper than buying. Consider the pricing: The average cost for a wheelchair is $2,500, while a stair lift starts around $2,900. By comparison, renting a wheelchair costs $50 to $150 per month, depending on the model, and gives you the option of standard, lightweight or motorized. You can rent a stairlift for $300 to $500 per month, plus installation and removal fees.

You can rent wheelchairs and stairlifts through local durable medical equipment (DME) suppliers, national mobility equipment providers, and online medical rental services.

Preserve you time, money and freedom

Retirement should be about enjoying your time and freedom, not worrying about asset depreciation, maintenance schedules, or high upfront costs. Whether it’s hitting the open road in an RV, getting to that remodeling project, or recovering from a temporary health setback, renting allows you to enjoy all the perks of ownership without the long-term financial burden. Before writing a big check, check your rental options first. Your nest egg will thank you!

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For most of our working lives, we know exactly how we get paid. We go to work, receive a paycheck, pay taxes and bills, save some money and spend the rest.

Then retirement arrives, and the paycheck often disappears.

That makes retirement one of the few "jobs" people take without knowing exactly how they'll be paid, how much they can spend or how long their money needs to last.

Yet many people still focus primarily on reaching a particular savings number, assuming that once they hit it, they're ready to retire.

The reality is that there is no magic retirement number. What matters more is having a plan for turning your savings into sustainable income that can support you throughout retirement.

Start with your income floor

Before retiring, determine how much income you'll need to maintain your lifestyle. This is your retirement income floor — the amount needed to cover your essential expenses and the lifestyle you want to maintain.

Start by looking at what you spend today, including household expenses, insurance, transportation, food, entertainment and housing. Then consider expenses that might become more significant in retirement, such as travel and healthcare.

As you age, you might need more frequent medical care, hearing aids, home healthcare or long-term care. You could also face major home repairs or need to replace a vehicle.

Once you have a reasonable estimate of your monthly expenses, compare it with your expected retirement income from sources such as Social Security, pensions and your retirement accounts.

Does the math add up?

If your essential expenses exceed your predictable income, you need to address that gap before retiring.

Build a retirement paycheck

Accumulating assets and creating retirement income are two different financial challenges.

During your working years, the goal is generally to save and invest for growth. In retirement, the focus shifts toward distributing those assets in a way that supports your lifestyle without prematurely exhausting your savings or overpaying in taxes.

Investment portfolios, dividend-paying stocks and real estate can all play important roles in a retirement strategy. But relying entirely on market performance to pay your monthly bills can leave you vulnerable when markets decline.

Creating a dependable income floor can provide greater stability. Social Security, pensions and certain guaranteed income products can potentially provide predictable income that continues throughout retirement.

When reliable income covers essential expenses, your investment portfolio might have more flexibility. You don't necessarily have to sell investments if the market is down and you need money to pay the electric bill or buy groceries.

Instead, your investments can have time to recover while also providing money for discretionary goals such as travel, hobbies and other experiences.

Don't underestimate what can drain your savings

Healthcare is one of the most obvious threats to retirement savings, but it's not the only one.

Believe it or not, one expense that often gets overlooked is generosity.

Retirees might feel obligated to help adult children or grandchildren with a car purchase, mortgage problems, debt or other financial emergencies.

Helping family is admirable, but every withdrawal from your retirement savings reduces the money available for your own future and the potential for the money to continue growing.

Before giving away a significant amount, consider how many years your retirement savings might need to support you. Protecting your own financial security isn't selfish; it's part of responsible retirement planning.

Time spending around your lifestyle

Retirement spending isn't constant. Many new retirees spend more during their early years. They travel, play golf, dine out, visit family and finally have time to pursue the activities they've delayed.

Later, spending patterns could change as people become less active, while healthcare and long-term care costs can become more important.

That's why a retirement income strategy shouldn't simply assume you'll spend the same amount every year. Instead, consider how your lifestyle and expenses might change throughout retirement and build a distribution strategy around those different stages.

Don't retire with just a number

Ultimately, the goal of retirement planning isn't to accumulate the largest possible portfolio. It's to create enough reliable income to enjoy your retirement without constantly worrying about running out of money.

Before retiring, ask yourself three questions:

• How much will I need?
• How much predictable income will I have?
• How will I fund the gap?

Retirement is a new job, and unlike your previous jobs, there will be no employer providing a paycheck. Creating that paycheck yourself is one of the most important steps you can take to make your money last as long as you do.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

If you've felt torn between paying your parents' medical bills, helping your young adult child make a car payment and trying to save for your own retirement, you're not alone.

Millions of Americans in the sandwich generation face this financial and emotional challenge.

A few recent statistics underscore the issue's scale:

• One in four adults is a caregiver, and roughly 29% of them are supporting both children and aging adults, according to the Caregiving in the US Research Report 2025
• A record 19% of adults ages 25 to 34 live with their parents or grandparents, according to John Burns Research and Consulting

Why is this happening now?

Multiple pressures are converging for many people in midlife.

• Aging parents are living longer
• More adult children remain financially and emotionally dependent
• You still need to manage your career and prepare for your retirement
• Financial strains such as inflation and unexpected expenses can create additional burdens

This leaves many middle-aged adults unable to absorb the financial shock.

Even celebrities aren't immune. In a 2025 article from The Hollywood Reporter, Tina Fey described having her kids and an aging parent under one roof as wonderful but also as something that takes a real toll.

What challenges do aging parents present?

The primary concern for aging parents is medical expenses. One strategy is to make sure they're enrolled in the right health plan.

For example, Medicare Advantage could help limit out-of-pocket costs significantly.

The cost of assisted living is another pain point. If it's feasible, have a parent move in with you or another family member to reduce or eliminate that expense. Create a network of siblings, other family members and close friends who can pitch in with caregiving duties instead of paying for in-home healthcare.

Other nonmonetary resources you can provide are time, transportation and meal prep. Sharing the load this way saves money and can often strengthen family bonds.

It's also worth exploring what government or community resources might be available. Many families don't realize how much financial relief programs can provide until they investigate those avenues.

What challenges do adult children present?

For adult children, the issue is often less about a single expense and more about boundaries. If your child relies on you financially but doesn't have a clear path toward independence, it might be time to help them build one — whether that's finding a job, budgeting for their own apartment or creating an emergency savings account.

Have an honest conversation about money and expectations with your child. It might not be comfortable, but it's often necessary for both their and your long-term success.

You might also need to practice saying no, which is never easy for a parent. It's OK if they stumble a bit as they become more independent. That's how we all learn.

Consider ways to support your children that won't drain your bank account. Babysitting your grandchildren instead of paying for daycare is one example that benefits everyone. You can also save on food costs by having a large family meal at least once a week.

Don't forget to celebrate the small wins to help them build confidence.

How does this affect your retirement?

While it might be tempting to dip into your retirement savings to help family members, remember you spent decades building your nest egg. Once those funds are spent, it's nearly impossible to rebuild them in a meaningful way, as time is one resource you can't get back.

Additionally, your children might not be able to return the favor when you're the aging parent.

Sound advice in most situations is to prioritize your own health and treat your retirement savings as a last resort for helping family, not a first response. This doesn't mean you should avoid helping your family — you need to explore alternative ways to support them.

Where do you go from here?

Taking emotion out of financial decisions is difficult but essential. Try to approach each decision with a clear head and lean on your financial adviser to help you separate what feels urgent from what's sustainable.

Together, you can walk through your options and build a plan that balances caring for the people you love today with protecting the retirement you've worked so hard to build for tomorrow.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Diane spent 32 years as a hospital administrator. She walked miles of corridors every day, climbed stairs between buildings and moved constantly through a campus that never stopped moving.

She didn't belong to a gym. She didn't follow a fitness regimen. She didn't think of herself as someone who exercised.

She retired at 65, in good health and good spirits. Within 18 months, she had gained weight, felt consistently fatigued and noticed that the mental sharpness she had always taken for granted was beginning to slip.

She was baffled. She told her doctor, "I've always been active."

Her doctor asked what she meant by "active." It was the first time she had no ready answer.

The workplace had been her gym, though she had not known it at the time.

The environmental design problem

The research on retirement and physical activity identifies a pattern that is both consistent and largely ignored in retirement planning conversations: The activity level people attribute to personal discipline is more often a function of their environment than of their character.

The average office worker walks 2 to 4 miles per day without thinking of it as exercise. Add a commute, meetings across floors, lunch trips and the physical demands of a working day, and the structure of employment quietly delivers a significant share of the daily movement the body requires.

Remove the structure, and the movement disappears. The default, without intentional design, is sedentary.

This is not laziness. It is what happens when the architecture of a life is rebuilt, and the physical dimension is overlooked. The workplace provided environmental design, making good choices automatic.

Retirement removes that environment. The retiree who wants to maintain the same activity level must now design it deliberately, because the structure that produced it is gone.

Diane was not inactive during her career. She simply was not intentional about it.

In retirement, the difference between the two matters considerably.

What exercise actually does

Most retirement planning conversations that include exercise treat it as a consideration for healthcare costs. The research frames it differently: As an asset class with measurable returns.

A 2020 Lancet Commission report identified 12 modifiable risk factors accounting for roughly 40% of dementia cases worldwide. Exercise acts on six of them: Physical inactivity, hypertension, diabetes, obesity, depression and social isolation. Few interventions available to a retiree touch half the list.

A 2025 meta-analysis confirmed that regular aerobic exercise reduces the risk of depression and cognitive decline in adults over 65, with an effect size comparable to pharmacological intervention for mild to moderate cases.

The biology is direct: Exercise increases BDNF, a protein that supports the growth of new neural connections. The brain that moves is a brain that continues to build.

The financial calculation, stated plainly, looks like this. According to Morningstar, the average cost of long-term care in the United States reached $242,373 in 2025. Seventy percent of adults turning 65 will require some form of long-term care.

Exercise is the single intervention most consistently identified by research as capable of deferring, reducing and, in some cases, eliminating the conditions that necessitate long-term care: Falls, muscle loss, cardiovascular disease and cognitive impairment.

An investment in physical fitness that defers long-term care by two years yields a financial return that most portfolio strategies cannot match. Yet it appears on no financial statement and is rarely included in a retirement plan as a line item.

Financial advisers calculate the rate of return for different asset classes. Exercise offers one of the highest returns available to a retiree. It generates that return in a currency money cannot replicate once it is gone: The capacity to move through the world independently.

The social multiplier

Among the forms of exercise the research identifies as most protective for retirees, three consistently rank at the top:

• Golf
• Cycling
• Pickleball

The reason is not only cardiovascular. All three involve social engagement. All three produce walking, outdoor exposure and relational texture that compound physical benefits into cognitive and emotional benefits simultaneously.

The research on social isolation and cognitive decline is unambiguous. Social engagement ranks among the most powerful protective factors for cognitive performance in later life, outperforming brain games and supplements in longitudinal studies.

Exercise that is inherently social does not choose between physical and cognitive protection. It delivers both.

A walk with a friend three mornings a week is not a fitness plan. It is a retirement health strategy that addresses physical fitness, emotional well-being and cognitive engagement in one commitment.

The retiree who designs for social exercise is not doing three things at once. They are compressing the investment.

Among the five pillars of a fulfilling retirement identified by the research, exercise is the only one that simultaneously yields returns in the other four. Move with purpose and in relationship, and the return compounds.

Designing it in

The prescription the research supports is less about intensity and more about consistency and design.

The first principle is environmental. Make the right choice the easy one. A retiree who keeps walking shoes by the bed is more likely to walk than one who has to retrieve them from a closet.

A neighborhood walking group that meets at 7 a.m. creates a social accountability structure that makes movement a natural consequence. The commitment is to show up; the exercise is automatic.

The second principle is social. Solitary exercise is better than no exercise. Social exercise is measurably better than solitary exercise. The social dimension is not a preference; it is a return multiplier.

The third principle is incremental. Research on sustained behavior change in older adults consistently supports gradual progression over aggressive starts. Not transformation, but steady accumulation.

A retiree who adds 10 minutes to a daily walk each week does not feel progress in week two. They feel it in month six. The compounding is biological and as patient as a well-managed portfolio.

Checking back in with Diane

Diane now walks every morning with two neighbors, golfs nine holes twice a week and hasn't weighed what she weighed at 18 months post-retirement in over two years.

She recently told me she doesn't think of it as exercise. She thinks of it as her calendar's most important appointment.

She is not wrong. For the first time, she is intentional.

Your financial plan tells you how long the money will last. Your physical fitness determines whether the person spending it will be present, capable and willing to spend it.

Both questions deserve an answer before you retire.

To learn more about designing a fulfilling retirement, pick up my new book, Your Encore Years: The Psychology of Retirement.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Investors have piled into artificial intelligence stocks over the last couple of years as the values of the so-called Magnificent 7 tech stocks and artificial intelligence companies have skyrocketed.

The tech-heavy Nasdaq 100 index gained about 49% over the last two years. Investors who placed early bets are no doubt elated. Notable stocks include AI chip maker Nvidia, which is up 81% over the period, including dividends. Google parent Alphabet returned 109%.

Even the gold standard of diversity — the S&P 500 — has been overwhelmed as the Mag 7 companies now account for one-third of its total market value.

At the same time, the AI boom has created a borrowing frenzy of tens of billions of dollars. Those loans, combined with higher borrowing costs and tech revenues that aren't climbing as fast as stock prices, could lead to a stock market crash. You should have a plan for how to handle the worst case scenario — especially as an older investor who may not have enough time to weather a prolonged downturn.

Overall, the sector is providing gains, which encourages individual investors to continue buying, but continued gains are not guaranteed. "AI can be transformational, but it still creates investment risks," says Richard Yashenek, chief investment strategist at Intech, an investment management firm.

Ed Zitron, CEO of the media relations and research firm EZPR, provides ample data on why to be worried. Big tech companies have invested a lot of money in AI but so far have generated relatively little revenue from those investments. For instance, he writes that Amazon will have invested $650 billion into AI by 2028. For all of 2025, estimated AI revenue was a little over $171 billion, accounting for 26% of the investment. Amazon's first-quarter 2026 data suggests $180 billion this year.

Other companies have similar outcomes so far. Moreover, much of the cash raised for AI investment has been generated by corporate bond sales. Between 2019 and 2025, companies raised a cumulative $917.8 billion in bonds, according to S&P Global Market Intelligence. That wouldn't matter if the yield of U.S. 30-year Treasurys hadn't risen to 5.2% from 2.58% in 2019.

That means all companies are paying more to borrow money. If the AI companies aren't making enough to cover their increasingly expensive debt load, they may begin to default.

Not everyone shares this fear. "Our premise is not aligning with those concerns and we think that borrowing is not a problem," says Bill Northey, U.S. Bank's senior investment director. "The data centers AI buildout will reap rewards over time. It doesn't mean all will be winners or successful."

Nevertheless, if a major AI stock defaults on significant debt, it could create a domino effect. "A lot of times you have bear markets triggered by debt problems," says Sam Stovall, chief investment strategist at research firm CFRA.

There are many historical instances of similar events: the financial crisis of 2007-2009, when the S&P 500 fell 57%, and the dot-com crash of 2000-2002, when the Nasdaq index fell 78% and didn't recover for 15 years. So to paraphrase Bette Davis, "Fasten your seat belts, we could be in for a bumpy ride."

Here are five steps older investors should take if the AI bubble bursts.

1. Don't panic

Investors must remember not to panic. Don't let your emotions become your worst enemy," says Stovall. "That can turn market volatility into a real financial loss." That advice is easy to give but difficult to follow, especially when TV and radio shows are blasting the airwaves and terrifying the audience.

So turn off the TV. The media thrives on fear, uncertainty and doubt (there's even an acronym for that, FUD).

By limiting how much media you consume, it will be easier to stand tight until the market settles, experts say.

2. Don't think you have to sell

You lose money when you sell stocks in a crash. "If you are a dividend investor, you will still get paid based on the number of shares you own ... the share prices are cut in half," says Stovall.

3. Diversify your portfolio

"A broad selloff doesn't mean a company has become less valuable, and a drawdown is not a signal to sell," says Intech's Yashenek. Having a diversified investment portfolio is important.

And it should be diversified "before things go wrong," he adds.

Warning: The stalwart S&P 500 index-tracking exchange-traded funds don't fit the bill. The large tech stocks dominate the index. If those mega stocks have problems, then all the stocks will fall, at least for a while. Look for stocks with strong cash flow, growing revenue and limited debt.

4. Rebalance or look to buy when the time comes

You'll know when the market has troughed, Stovall says. On average, when 15% or fewer S&P 500 stocks are trading above their 200-day average, then it's likely to hit bottom.

Historically, stocks that get hit the most in a market downdraft will likely recover the most as the market returns to normal. Likewise, those that had the lowest stock depreciation will have the smallest bounce back, CFRA data shows. So, it pays to buy the most pummeled stocks at the market bottom.

5. Get used to it

"Capital markets include inherent volatility; investors should expect volatility over time," says U.S. Bank's Northey.

Financial advisers should help clients understand that volatility isn't bad in the long term, but people who are retired or preparing to retire typically have a shorter risk horizon. When risk horizons are low, portfolios need to have lower-volatility assets overall.

Market volatility can be unsettling, particularly when you’re approaching or already in retirement. But the right response depends on your time horizon, income needs, risk tolerance and how your portfolio is structured. A financial adviser can help you review your investments, identify areas where you may be taking too much risk and build a plan designed to weather market downturns.

Use the tool below to connect with a vetted financial professional today:

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

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Dear Wealth Wise: My spouse is 77. I'm 79. Our combined portfolio includes two traditional IRAs totaling $3.5 million and two Roth accounts totaling $600K. Our non-retirement brokerage account is worth $2 million. We have no mortgage or debt. Social Security pays $4,200 monthly plus my spouse has a monthly pension of $1,700. We don't have long-term care insurance. We make annual cash/stock gifts to two adult children and two adult grandchildren. Are we set up to self-fund long-term care? Three of our four parents lived to 94+, and one lived to 101. — Not Quite Immortal

Dear Not Quite Immortal: Fidelity puts the average cost of healthcare in retirement at $185,000 for a typical 65-year-old today. But that estimate does not include long-term care, which could easily surpass that figure.

CareScout's long-term care data and calculator reveal some staggering numbers. Here is the breakdown of annual costs in 2025 and projected 20 years forward to 2045, when our readers will be 97 and 99.

Source: CareScout. State-level medians are provided for in-home private duty nursing and adult day health care. Assumes 3% inflation.

It’s no wonder our couple worries about paying for long-term care, even though they're quite wealthy. They might need to shell out over $200,000 a year for a private room in a nursing home when they are in their late 90s.

The data also shows that aging in place, while it might seem to save money, could be extraordinarily expensive if you need an in-home caregiver or nurse.

While the couple doesn’t necessarily need to worry, they’re right to be cautious. And they definitely need a game plan.

You can probably self-insure at this wealth level

There are two primary ways to pay for long-term care — buy long-term care insurance, or self-insure, which basically means saving enough money to cover the cost of extended care yourself.

Long-term care insurance can provide some financial security, but it has its drawbacks. Premiums can be high, underwriting rules can be strict, and benefits can be limited. Plus, if you don't use it, you lose the money you spent to get it.

When retirees have plenty of savings, financial planners often suggest self-insuring. And that’s what Shane O'Hara, CFP, COO, and executive vice president at ProVise Management Group, suggests here, too.

This couple "can most likely self-fund a significant long-term care need," he says. "You have significant investment assets, no debt, and more than $70,000 per year of guaranteed income from Social Security and your pension before any portfolio withdrawals. Additionally, it appears that your income is more than your current lifestyle needs because you are able to gift annually to children and grandchildren."

Jim Davis, CFP, Partner, and Senior Wealth Advisor at Aspen Wealth Management, agrees.

"On paper, this couple looks very well positioned to self-fund long-term care," he says.

But Davis cautions, "I would still want to stress-test the plan through age 100 or beyond, particularly given their family history."

As Davis explains, long-term care can become expensive quickly, especially when both spouses need it.

"For a married couple, you also have to account for the possibility that both spouses eventually need some level of care," he says.

Davis insists that at ages 77 and 79, buying a new traditional long-term care policy may be expensive and difficult to qualify for, making self-insuring the logical choice.

You still need a long-term care plan

O'Hara insists that "just because you can potentially self-insure doesn’t mean you don’t need a long-term care plan."

The good news, he says, is that even a substantial long-term care event is unlikely to jeopardize your financial security.

"Even if both of you eventually required care at the same time, your portfolio is large enough that these expenses would likely represent a manageable percentage of your overall net worth, especially when we consider the other lifestyle expenses you have now that tend to slow down or stop completely if you needed significant care," he says.

However, O'Hara insists long-term care planning isn't just about funding. It's also about decision-making.

"If one of you experiences cognitive decline, who will manage finances, coordinate care, and make healthcare decisions? For many affluent retirees, the biggest challenge isn't paying for care. It's having the legal documents, family communication, and care preferences in place before they are needed," he says.

Figure out where the money will come from

It’s clear that our couple has plenty of money to pay for long-term care. But choosing the right funds for the job is crucial.

"The more important question is not whether you can afford care, but how a prolonged care need might affect other goals," O'Hara explains.

O'Hara also cautions that with two large traditional IRA balances, required minimum distributions (RMDs) can generate a big tax hit. Because of our readers' ages, they already must take RMDs, and the percentage they must withdraw each year will continue to increase. (See our RMD Calculator for an estimate of what you might owe.)

"Depending on your tax situation, there may be opportunities to improve flexibility through tax planning strategies," he says, which should tie into your long-term care plans. For example, you could offset some RMDs from traditional IRAs through the Medical Expense Tax Deduction.

Davis says that while you may be inclined to use your IRAs to pay for long-term care if needed, that's not necessarily the best route.

"You may not want every dollar of care coming from a traditional IRA, where withdrawals can create ordinary income, or from selling appreciated investments and realizing capital gains," he says. "Roth assets and even home equity can all be part of the conversation."

As Davis explains, some families may use a HELOC or another home equity strategy to create liquidity for care rather than immediately selling investments.

"Loan proceeds generally are not taxable income, so that can sometimes give the family more flexibility while other assets remain invested. It can also preserve options for the next generation, since inherited taxable assets may receive a new basis at death under current law," he says.

To be clear, Davis says you shouldn't assume borrowing against the home is the right answer.

"Interest rates, loan terms, spending, gifting goals, and the family’s estate plan all matter. The point is simply that self-funding long-term care does not have to mean writing every check out of the investment portfolio," he says.

Give it the good old stress test

All told, our two experts are pretty confident you’ll be able to cover a lengthy long-term care event and not risk running out of money. But if you want peace of mind, both O'Hara and Davis say the next step is to stress-test your financial plan under scenarios where one or both of you require care for several years while living into your mid-to-late 90s and beyond.

"If those scenarios still support your spending, gifting, and legacy objectives, you can be much more confident that self-funding is a viable strategy," O'Hara says.

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our writers and experts in this advice column are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not and is not intended to constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial adviser regarding any questions you may have in relation to the matters discussed in this article.

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Retirement planning for couples is a complex calculus of financial as well as emotional priorities — deciding when you will each stop working, how much money you'll need, whether you can actually spend so much time together without driving each other bananas.

For couples with a big age gap, the number of moving parts multiplies. Financial planners characterize the process as essentially having to knit together two different retirement trajectories and make it work for one family.

It's a challenge many couples face. In roughly one out of four heterosexual marriages, the husband is at least five years older than his wife, according to an analysis of the Census Bureau's 2022 American Community Survey.

In an estimated 7% to 9% of marriages, husbands and wives have an age gap of 10 years or more.

Unions in which one spouse is considerably older than the other happen even more frequently among couples who remarry, a situation that is more common as people get closer to retirement age.

The Pew Research Center found that more than half of men who remarry get hitched to a woman at least three years younger than they are, compared with 35% in first marriages that have the same age gap; for 20% of remarried men, the age difference with their wives is at least a decade.

If you're a lot older or younger than your spouse, there are several key areas you need to focus on to secure a financially and emotionally satisfying retirement, advisers say. That includes devising an income and investment strategy to ensure your savings last through the younger spouse's lifespan, coordinating timelines for winding down your careers, and coming up with a plan to maximize Social Security benefits.

Younger spouses — typically wives — must also prepare for the prospect of a longer period of time as a widow, with the money challenges and emotional punch that come with that.

These preparations are personal for Burt Hutchinson, a certified financial planner and partner at Foundation Wealth Management in Media, Pa., whose wife is 11 years his junior.

"As I get older, I am really focused on when I will retire and how that could impact her finances over the long term," says Hutchinson, 57, who intends to stick with his career until he's 70. "I plan to work longer to ensure that she is financially secure."

If you and your spouse are planning for retirement and there is a considerable age gap between you, here are the steps to take now.

Prepare to stretch your retirement savings

Research from the TIAA Institute indicates that the average American spends a little less than 20 years in retirement. For a couple with a significant age gap, the combined time span for retirement could easily be twice as long, from the time the older spouse stops working through, in most cases, the rest of the younger partner's life — and savings and income need to last over that longer period.

For planning purposes, that means basing strategies and projections on the younger spouse's life expectancy, although the health of both partners also factors into the equation, says CFP René Bruer, co-CEO of Smith Bruer, a financial advisory firm based in Tallahassee, Fla.

"It's all about expectations," he says. "Can your money and the assets that you have support you once you're no longer earning income?"

To help ensure the answer is yes, advisers recommend that age-gap couples invest their long-term savings with an eye toward continued growth, keeping more of their money in stocks than the older spouse might choose based on his expected retirement age alone.

For instance, a 65-year-old about to stop working might typically have an investment mix of 40% to 60% in stocks and the rest in fixed-income securities to balance growth with the need to protect the portfolio from market volatility and losses.

But for an age-gap couple planning for a retirement timeline of 40 years or more, 65% to 75% in stocks might be appropriate, says CFP Eric McClain, partner at Approach Retirement Advisors in Birmingham, Ala. "That money has got to last a lot longer," he says.

Although an older spouse may be eager for his partner to join him as soon as possible once he retires, advisers say that from a strictly financial standpoint it might make sense for the younger spouse to keep working, earning income and contributing to retirement accounts to continue to build savings.

That's especially true if an employer matches a portion of 401(k) contributions or if the couple are able to take advantage of higher catch-up contribution limits. (Savers 50 and older can contribute a total of $32,500 for 2026, compared with a maximum of $24,500 for younger workers; people between the ages of 60 and 63 have a super catch-up limit of $35,750.)

Later in retirement, in cases where one spouse is more than 10 years older than their partner, a couple may be able to further stretch retirement savings by taking smaller required minimum distributions (RMDs) from an IRA.

As long as the younger spouse is the primary beneficiary on the account, couples with that age difference can use the IRS Joint and Last Survivor Life Expectancy Table to calculate RMDs instead of the standard Uniform Lifetime Table, resulting in lower withdrawals. (See IRS Publication 590-B for details.)

Coordinate your exits from the workforce

What's best from a strictly financial standpoint, though, isn't the only consideration. A gap of several years in retirement dates can leave couples navigating conflicting priorities: The spouse who is no longer working wants to travel and pursue hobbies with their partner during the healthy, active early years of retirement, while the other spouse either has to keep working for financial reasons or enjoys their job and doesn't want to give it up. By the time the younger spouse retires, the older spouse might not have the desire or the physical capability to keep up.

That friction can pop up anytime there's a big difference in retirement timing between spouses, but may be exacerbated by a sizable age difference. "I have a client who's still working, and his wife is in his ear at every meeting," the adviser says.

The client is several years older than his spouse but doesn't want to quit his job; the wife no longer works and wants them to begin their next chapter before her husband is too old to enjoy an active retirement together. Hutchinson says, "She asks him, ‘When's it going to be our time?'"

To ease this kind of tension, planners say it's helpful to stop thinking of work or retirement in black-and-white terms. "There's a ton of gray areas you can take advantage of," Bruer says.

In some cases, couples compromise by having one or both partners transition to part-time or gig work. That gives them the freedom to pursue the lifestyle they want and continue earning some income as well, reducing the amount they need to draw from their nest egg to maintain their lifestyle.

Figuring out how you'll get health insurance also factors into the decision on when age-gap couples retire. If a younger spouse gets coverage through their partner's employer and both spouses intend to retire at 65 once they become eligible for Medicare, the younger spouse will have to find an alternative.

You may be able to bridge the gap with COBRA coverage, remaining on your spouse's former employer's plan for up to 36 months. But the cost will be much higher because you lose the employer subsidy that lowers workplace health insurance premiums.

If you're working, your employer's health insurance plan is an option; if you're not in the workforce, taking a part-time job that offers health benefits is a possibility. The Affordable Care Act marketplace is another, especially if your income is low enough to qualify for subsidies.

Tax credits to defray the cost of premiums are available for people who earn between 100% and 400% of the federal poverty level — $84,600 for couples in most states in 2026. Some states also offer additional subsidies.

Another consideration: A couple with one spouse still earning a high income and the other on Medicare needs to budget for the possibility of higher Medicare costs. Medicare assesses income-related monthly adjustment amount (IRMAA) surcharges on Medicare Part B, which covers doctor visits, and Part D, which covers prescription medications, on high-income households.

IRMAA surcharges, which are indexed to inflation, kick in at incomes above $218,000 in 2026 for married joint filers (based on your returns from two years ago), with tiers for higher income levels. Income of even a single dollar above each threshold can mean sharply higher premiums.

For instance, couples with joint income from $274,001 to $342,000 each pay $405.80 per month, double the standard monthly premium of $202.90 in 2026.

Offset a possible drop in income

Between the typical dynamic of older men marrying younger women and women's longer average life expectancy (women outlive men by about five years in the U.S.), retirement planning for age-gap couples needs to take into account the likelihood of a longer period of widowhood for a surviving spouse than same-age couples experience.

Financial planners say the sudden drop in income that is common after a spouse's death often catches women by surprise, especially if both partners have already retired and are collecting Social Security.

In that case, the surviving partner is entitled to whichever benefit was larger but not both payments. Meanwhile, big expenses such as housing payments, property taxes, homeowners insurance and utilities won't change unless the surviving spouse moves to a less expensive home or area.

"That concern becomes even more significant when there is a substantial age difference between spouses," because a younger widow has to make her money last for a longer period of time, says Heather Schreiber, founder of HLS Retirement Consulting in greater Atlanta.

The surviving spouse also becomes a single tax filer, which leads to higher tax bills — what financial pros call the widow's penalty.

"Your tax bracket's going to change, all things being equal," Bruer says. You'll hit a higher marginal tax rate with a lower amount of income, and the standard deduction will be cut in half as well.

Life insurance can provide a buffer. Most payouts aren't taxed and don't contribute to your taxable income — key considerations for a new widow who has suddenly been bumped into a higher tax bracket. "Make sure you consider whether you need life insurance on the older spouse," says CFP Morgann Zimmer, director of financial advisory services at Goodman Financial Corporation in Houston.

Perhaps the most consequential decision an age-gap couple has to make, though, is when to claim Social Security benefits, especially if the older spouse earns considerably more. The key is to try to maximize the higher earner's benefit, because the lower earner's benefit drops away for the surviving spouse.

"If the older spouse is the higher earner, there's usually a strong case for that partner to delay until 70," says Zimmer. "The younger spouse will step into those higher benefits as survivor benefits and receive that bigger benefit for a much longer time."

That additional income can be substantial. If you begin claiming Social Security at 62, you forfeit 30% of the benefit amount you would get if you waited until your full retirement age (FRA), which is 67 for people born in 1960 or later.

Conversely, retirees can boost their benefit by taking advantage of Social Security's delayed-retirement credits, which increase the payment for each month between a beneficiary hitting full retirement age and turning 70, with benefits rising by 8% for each year they wait.

"For a younger spouse who may collect that survivor benefit for 20+ years, the difference between claiming at 62 and 70 can be hundreds of thousands of dollars over a lifetime," noted Ben Carlson, director of institutional wealth management at Ritholtz Wealth Management and author of the blog A Wealth of Common Sense, in a recent Facebook post.

Meanwhile, he added, the lower earner may want to claim their own benefit early, even at the reduced amount, because that won't affect the survivor benefit they will eventually receive.

If the older spouse is entitled to a pension and hasn't yet claimed it, choosing a joint-and-survivor payout over one that provides benefits only during the pension holder's lifetime also ensures additional income for a surviving spouse.

The survivor payout options typically range from 50% to 100% of the pension holder's benefit, usually for life, but will reduce the amount the couple gets while both spouses are alive.

Opting for the lowest payment during both spouses' lifetimes generally yields the highest survivor benefit. Some pensions also give retired workers the option of having the amount revert to their full benefit in the unlikely scenario that the younger spouse dies first.

Annuities are another way to provide a guaranteed income stream that will augment Social Security. Hutchinson says choosing a simple single-premium immediate or deferred annuity is one of the most straightforward options:

You pay a lump sum and get monthly payments, starting soon (typically between a month and a year after the purchase) or at a future date of your choosing. A $100,000 annuity might generate between $500 and $1,100 or so a month, depending on factors such as the type of annuity and your age. (You can comparison-shop at sites such as ImmediateAnnuities and AnnuityAdvantage.)

The peace of mind can be as valuable as the money itself, says Hutchinson, who turned part of his nest egg into an annuity to create an income stream for his wife to supplement Social Security and retirement account distributions.

"My wife would be very hesitant to spend money from savings. She'd be more concerned about running out of money," he says. "This way, there's cash flow coming in the door, and she doesn't have to think about it."

Look ahead to a solo stage

Widows older than 65 often outlive their husbands by 10 to 15 years. For age-gap couples, the duration of widowhood can be even longer.

That means an extended period when the younger spouse, typically a woman, will have to manage money on her own — a prospect that may be challenging if the husband previously took charge of investing and long-term planning, and the wife is not up to speed on their finances or is uncomfortable stepping in.

Rick Kahler, a CFP and certified financial therapist in Rapid City, S.D., says couples who avoid talking about end-of-life issues risk their long-term financial security, even as a younger spouse's longer life expectancy raises the stakes.

For younger spouses who haven't been involved in managing the couple's finances, he suggests doing a dry run to get practice and boost confidence.

Says Kahler, "Just for one month, let the other spouse handle everything," and if a snag comes up, the partner who has been in charge of the money can walk the other spouse through it.

Lining up a financial adviser the younger spouse will feel comfortable working with in advance can also be valuable, Kahler says — and, if you're already working with a pro, you may need a different candidate. "Choose an adviser who treats you both as equals," he says.

Make sure the adviser is a fiduciary, which means they're legally bound to act in your best interests. The situation you're trying to avoid is the younger spouse needing to find professional financial help right after the funeral, Kahler says.

"That's a bad time to be shopping for an adviser," he cautions, because the surviving spouse will be in an emotionally vulnerable state and at risk of being exploited by bad actors.

Long-term care is another issue that couples rarely talk about, with particular implications for partners with a big age difference. Spouses may assume the younger one will take care of the older one if the need arises, but what happens years later if the younger spouse needs help? Estimates find that 60% of women will need long-term care at some point in their lives, with 14% needing care for at least five years.

"If the younger spouse is going to be in widowhood for a long time, consider how they're going to fund long-term care," Zimmer says. Buying long-term-care insurance is one option, but it's not cheap: Industry data shows that a 60-year-old woman can expect to pay an average annual premium of $4,450.

Still, prices climb as you age, and if you wait too long, you might be locked out entirely. Nearly half of people in their seventies have been turned down when applying for a policy, an industry survey found.

An annuity combined with a long-term-care rider is another option, Schreiber says. This hybrid product can increase an annuity's regular income payouts to cover care costs if the need arises.

For instance, a $100,000 annuity with this rider might pay up to double or triple that amount for long-term-care costs for a set period of, say, five years.

Schreiber also recommends long-term-care insurance for older husbands. Or you could set aside an amount earmarked for long-term-care expenses — $135,000 is the projected average amount a 65-year-old would need to save now to cover future care costs, according to the Milliman Long-Term Care Index, although the specifics can vary significantly depending on the type and length of care needed.

Otherwise, in the event of physical or cognitive decline, whether temporary or long-term, care costs can consume a big chunk of even a sizable nest egg. That, in turn, leaves less for the couple to live the life they had planned in retirement and to sustain the surviving spouse in later years.

Says Schreiber, "It is probably the biggest thing that can derail a retirement plan" — which makes it all the more urgent to plan ahead.

Tackle a critical estate-planning challenge

Marriages in which there's a big difference in age between spouses are far more likely to be second unions for the older partner, who may have children from that earlier relationship. That can present some possibly gnarly estate-planning challenges.

For one, a large age gap increases the likelihood that the older spouse's children will be waiting many more years than anticipated to inherit a house, investment accounts or other valuables from their parent, assuming the bulk of the estate will first pass to the younger spouse, says Patrick Simasko, a financial adviser and elder- and estate-law attorney in Mount Clemens, Mich.

One way to mitigate the impact, Simasko says, is for the older spouse to buy a life insurance policy naming the children from his previous marriage as beneficiaries, so they don't have to wait for an inheritance until the younger spouse also passes away and they may be at an advanced age themselves.

If you're the older spouse and want to bequeath specific assets to your children from a previous marriage upon your death, be careful about which assets you name, warns Holly Geerdes, founding attorney at the Estate Law Center in Alpharetta, Ga.

An unfortunately common scenario, she says, is a widow being effectively evicted from the couple's home so the adult children from a former marriage can sell it. Says Geerdes, "We've had children kick out surviving spouses."

A qualified terminable interest property (QTIP) trust can help age-gap couples make sure the older spouse's financial legacy is carried out as intended, experts say. Terms for this trust can be changed during the older spouse's lifetime, but once they die, the beneficiaries are locked in.

Typically, the younger spouse gets the couple's home and an income stream via an investment account. When the second spouse dies, the assets in the trust pass to the beneficiaries — in this case, the older spouse's children.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Older generations hold $124 trillion in assets they plan to pass on to loved ones and charity over the next two decades. Many will wait until they are gone to share the wealth, but some are opting to give while they live.

It makes sense. A new survey conducted by Morning Consult on behalf of Kiplinger found that, when asked what they would want an inheritance used for, both parents and adult children said practical things such as paying down debt, buying a home or securing a retirement.

"There's a recognition that the money would be more useful in their 40s and 50s than in their 60s and 70s," said David Blanchett, head of retirement research at Prudential. "But if you wait to give them that money, you won't get to see it in action. You won't know what impact it has."

For retirees who plan to wait until they die to pass on their inheritance, fear of outliving their money can create paralysis. After all, people are living well into their 80s, which means their money needs to last longer. "There's always an element of what if I need it, I won't be able to take it back," says Michael Conrath, JPMorgan's chief retirement strategist. "Legacy and retirement are connected in terms of the math and in terms of the emotions."

To overcome the fear of running out of money, Conrath says to break retirement savings into three buckets — stable, variable and legacy. The stable bucket is for recurring bills such as rent, food, utilities and healthcare, while the variable bucket is for travel, hobbies, entertainment or other wants. The third bucket is for legacy, which is where the giving comes from.

"Once you have those two parts covered, it really gives people the freedom and the comfort knowing they have the capacity to gift money," said Conrath. "It's a way to remedy some of the fear."

Benefits of giving while you're living

There are several reasons to favor giving while you're alive, for both the giver and the receiver.

Benefits for givers:

• They can reduce the total size of their taxable estate before passing away, minimizing potential state or federal estate taxes.
• They can gift up to $19,000 per recipient in 2026 (married couples may gift up to $38,000 to an individual) without triggering gift tax filings or dipping into their lifetime exemption.
• They may gift appreciated stock to a qualified charity or an heir, thereby avoiding capital gains tax on the stock's growth.
• They may pay medical or tuition bills directly to the institution (which bypasses the $19k limit entirely), or fund a 529 plan.
• They experience the immediate joy and satisfaction of supporting loved ones during key life milestones.

Benefits for heirs:

• They can use the funds immediately to improve their financial health.
• They don't have to pay taxes on it; the federal tax code doesn't treat gifts as taxable income for the recipient. (Appreciated stocks are the exception.)
• Direct gifts eliminate potential delays and legal complications associated with going through probate court after a donor passes away.

How to give while you live

If giving while living sounds like something you want to do but you aren't 100% on board, Blanchett says to test the waters with small gifts. You don't have to give your heirs their entire estate, but you could help your adult child with a down payment on a home or pay for daycare or college tuition for your grandchild.

It can be something as small as a cash gift or an extra deposit into the 529 account. Not only can you help them now when they need it, but you're also preparing them to manage the inheritance they will receive later.

Don't sacrifice your retirement

There is a lot of joy and satisfaction in giving while living, whether it's to your adult children, grandchildren or a beloved charity. Don't start writing checks willy-nilly, though. If you plan to rely on Medicaid, you could disqualify yourself by giving monetary gifts during the 5-year look-back period. Be certain you have a locked-down plan for how to pay for long-term care, as those costs have ballooned in recent years.

In other words, giving can't be at the expense of your retirement. As Pam Krueger, founder and CEO of Wealthramp, warns, you don't want to end up giving too much and being broke.

"The best answer for most people is you don't have to do it all now, and you don't have to do it all later," said Krueger. "Protect your own financial security first and foremost, and then say, 'OK, I can give this much now while I'm alive and this much when I'm dead.'"

Editor's note: Want more help making this decision? Take our quiz on giving while you live vs waiting until death.

We know this can be a contentious conversation. If you want to share your opinion, reach out to us at KipInheritanceTalk@futurenet.com.

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Give while you're living or wait until you die? That's the choice for many retirees sitting on a sizable nest egg as they live out their golden years.

At last check, an estimated $124 trillion in assets are expected to be passed on in the Great Wealth Transfer, according to research firm Cerulli Associates. While most of it will go to heirs after their deaths, many people want to give while they are still alive.

After all, a new Morning Consult survey conducted on behalf of Kiplinger found that when asked what they would want an inheritance used for, both parents and adult children cited practical uses such as paying down debt, buying a home or securing retirement, all of which can benefit heirs now or in the future.

On the one hand, if you wait until you die, the money has more time to grow and compound; on the other, if you give while you live, you can enjoy the fruits of your labor or help someone now. You can also do a little bit of both: give a little while you are alive and leave the rest for when you're gone.

Which giving approach works best for you depends on your financial goals, risk tolerance and personal values. To determine which type of giver you are, take our quiz.

Editor's note: We know this can be a contentious conversation. If you want to share your opinion, reach out to us at KipInheritanceTalk@futurenet.com.

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In today's litigious society, just being involved in a lawsuit — even if you ultimately win — can be an exhausting, expensive and stressful ordeal.

The reality is that "the process is the punishment." The legal battle itself, with its endless paperwork, court appearances and mounting fees, often causes more harm than the final court decision.

For many, the best form of defense isn't waiting to fight but preventing certain lawsuits from being filed in the first place. The key is to create legal "moats" around your more valuable assets — carefully structured legal protections that make it difficult or impossible for creditors or claimants to reach them.

What does it mean to build a "moat" around assets?

Imagine your assets as a castle. Without protection, attackers (in this case, lawsuits or creditors) can easily breach the walls and seize your valuables. A moat is a defensive barrier that surrounds the castle, deterring or outright preventing attackers from getting close.

In the legal world, these moats come in the form of strategic asset protection planning. It involves using legitimate, well-established legal tools — such as trusts, limited liability companies (LLCs) and insurance — to isolate assets and safeguard them from being seized in the event of a lawsuit.

Why build asset protection moats?

1. Discourage lawsuits from the start

Most lawsuits are only filed if there is money or assets to reach at the conclusion — they are often filed because the plaintiff believes there is something worthwhile to recover. If your assets are structured in a way that they are legally out of reach, potential claimants will likely make the cost/benefit analysis and be discouraged from even attempting to sue you. Why spend time and money chasing an empty target?

2. Create a strong position for settlement

Even if a lawsuit is filed, having assets protected can give you significant leverage to negotiate a favorable settlement. A well-protected personal or company balance sheet signals to opposing parties and their attorneys that lengthy and costly litigation may not pay off. This environment frequently leads to settlements on terms more advantageous to you, saving you time, money and stress.

3. Reduce financial and emotional consequences

Lawsuits are draining — not just financially but emotionally and professionally. Protecting your assets allows you to weather legal storms without jeopardizing your financial foundation or your peace of mind.

Common tools for building asset protection moats

Irrevocable trusts (domestic and foreign): Assets placed in special trusts in the right jurisdiction (venue) generally are no longer considered your personal property, shielding them from personal creditors.

Limited liability companies (LLCs) and corporations: By owning assets through these business entities, personal liability can be limited, separating personal wealth from business risks.

Equity stripping: This involves using loans secured by assets to reduce perceived equity and limit access to those assets.

Insurance: Umbrella policies and other liability insurance can act as a first line of defense, absorbing potential claims before they reach your assets.

Asset protection requires planning in advance. The law frowns on attempts to hide assets after a lawsuit arises, often viewing such moves as fraudulent and voiding protections. A proactive strategy ensures your moat stands strong before any claimant appears.

Choosing the right partner

Asset protection planning can be complex. Choosing experienced legal professionals who understand your unique financial situation and risk profile is essential. They can design a tailored strategy that balances protection with flexibility, ensuring your assets remain productive and accessible to you while safe from potential legal threats.

While no strategy can guarantee immunity from lawsuits, building strong legal moats around your selected assets is one of the most effective ways to discourage lawsuits before they start and to put yourself in a position of strength if litigation occurs.

Protecting your wealth is not only about financial security — it's about preserving your peace of mind, your family's future and the hard work you've invested over the years.

If you want to learn more about how to build these protective moats and shield your assets in today's litigious world, consult an experienced asset protection attorney who can guide you through the steps needed to turn your castle into an impregnable fortress.

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