Most of the conversation about Trump Accounts has focused on the beginning.

Who gets the $1,000. Whether families should contribute more. Whether a 529 plan is still the better place to save for college.

There's also been plenty of discussion about what happens at 18, when the account begins operating under traditional IRA rules. One obvious strategy is to convert some or all of it to a Roth IRA while the young adult is still in a low tax bracket.

As a financial adviser with more than 25 years of experience, I see that that's where planning gets more complicated.

An 18-year-old college student with little income might look like the perfect Roth conversion candidate. Under the kiddie tax rules, that assumption can be expensive.

What changes at 18

A Trump Account is a traditional IRA with special rules during childhood. Money generally can't come out before January 1 of the year the child turns 18. After that, it's generally treated as a traditional IRA.

Family contributions aren't deductible, so they become basis and come back tax-free. The government's $1,000 pilot contribution and qualifying employer contributions don't create basis. They're taxed as ordinary income when withdrawn, along with all the growth.

Here's a hypothetical: Ignoring the $1,000 pilot contribution for simplicity, a family that contributes $5,000 a year for 18 years and earns 7% ends up with about $170,000: $90,000 of contributions and $80,000 of growth.

Left alone until 65, it grows to roughly $4 million, nearly all of it taxable when withdrawn. That's why a Roth conversion is so appealing.

Why the kiddie tax changes the math

The kiddie tax generally applies to children under 18, to 18-year-olds whose earned income doesn't cover more than half their support and to full-time students ages 19 through 23 who don't meet that earned-income test. A taxable Roth conversion is unearned income for this purpose.

For 2026, the first $1,350 is effectively sheltered, the next $1,350 is taxed at the child's rate, and net unearned income above $2,700 is generally taxed using the parents' rate.

There's a second constraint. You can't convert only the tax-free dollars. Basis is spread pro rata, so every conversion carries the same taxable percentage as the whole balance.

Trump Accounts have an unusual twist: the IRS applies that calculation to the Trump Account separately from any other IRAs. In our example, about 47% of every dollar converted is taxable.

Here's what timing does, holding the balance constant and using 2026 federal rates.

Converting everything at 19 as a full-time dependent student. About $80,000 is taxable, and almost all of it above $2,700 is taxed at the parents' rate. For parents in the 24% bracket, the federal tax is about $18,700.

Converting over two years after graduation, on a $45,000 salary. Each year adds $40,000 of taxable income on top of the salary. The added federal tax is about $13,300.

Converting over two years once the kiddie tax no longer applies, with little other income. A young adult who is no longer a dependent gets the full $16,100 standard deduction and the 10% and 12% brackets. The federal tax is about $5,200 total.

Same account, same conversion and a difference of more than $13,000. The lesson isn't to convert at a particular age. It's to identify the right tax window.

The FAFSA problem

Because a Trump Account is a type of traditional IRA, the balance should generally fall under the FAFSA's exclusion for retirement accounts.

The conversion income is the issue. It lands on the student's tax return, the FAFSA uses tax information from two years earlier, and student available income, after applicable allowances, is assessed at 50%.

If need-based aid could be significant, model the FAFSA effect before converting, and consider avoiding large conversions in tax years that will feed into an application.

What families should do now

Keep records of every contribution. After-tax dollars are basis, and the young adult will need to document it on Form 8606. That applies to grandparents' contributions, too.

Give each account its own job. For college, the 529 is still the right tool. Qualified withdrawals are free from federal tax, and a parent-owned 529 gets favorable FAFSA treatment.

Up to $35,000 of leftover 529 money can also roll to the beneficiary's Roth IRA, subject to annual limits and other requirements, if the account has been open at least 15 years. The Trump Account is better suited to money the family doesn't expect to need for decades.

Plan the conversation, not just the conversion. Your child owns the account from the beginning, even though a responsible party manages it during childhood. By adulthood, the conversion decision is theirs. The families who get this right will be the ones who explained the plan at 16, not the ones trying to explain it at 22 while the tax return is being prepared.

The rules are still developing

Treasury and the IRS have issued guidance and proposed regulations covering the pilot contribution, account administration, employer contributions and eligible investments. But several regulatory provisions remain reserved for future guidance, and some of the regulations are still proposed rather than final.

Everything here reflects the law and guidance available as of September 18, 2026. Revisit the strategy as additional guidance arrives, and certainly before the first conversion.

The bottom line

For families who qualify, the $1,000 pilot contribution provides a free head start. But that isn't where the most important planning happens.

Treat the Trump Account as what it is: an IRA with an 18-year runway. What happens after that runway ends can have a meaningful effect on the account's after-tax value. Getting the timing right could ultimately matter more than the original $1,000.

Tax rates and limits reflect 2026 federal law as of September 18, 2026 and may change. Examples are hypothetical, assume constant 7% returns, hold balances constant where noted, exclude the $1,000 pilot contribution, and are for illustration only. They do not represent any specific investment or client. State taxes are not included. This article is educational and is not tax or legal advice. Radiant Wealth Management operates under NewEdge Advisors, LLC and is not affiliated with the U.S. Treasury or any account provider mentioned.

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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.

One of my clients, a single woman in her early 50s, inherited an IRA of $900,000. She earns about $200,000 a year before her bonus, which puts her firmly in the 24% federal tax bracket. She didn't need the money right away, and with 10 years to empty the account, there was no obvious rush.

But if she simply took out about $90,000 a year, most of every withdrawal would be taxed at 32% or 35%.

The 10-year rule isn't always as simple as it sounds, either. Depending on when the original owner died, you may have to take money out every year. And even if you follow the minimum requirements perfectly, waiting too long to take larger withdrawals could leave you with a much bigger tax bill toward the end of the 10-year period.

Before December 31, there are five things every inherited IRA beneficiary should understand.

1. Make sure you're following the right rules

Not everyone who inherits an IRA follows the same schedule. Most adult children who inherit an IRA from a parent who died in 2020 or later fall under the 10-year rule. The inherited account generally has to be completely emptied by December 31 of the 10th year after the owner's death. So if a parent died in 2021, the inherited IRA would generally need to be emptied by December 31, 2031.

There are exceptions. Spouses have additional options, and different rules may apply to certain disabled or chronically ill beneficiaries, minor children of the account owner and beneficiaries who are close in age to the person who died.

You don't need to memorize every IRS category. You do need to know which one you fall into and the exact year your account has to be emptied.

2. Find out whether you need to withdraw money this year

For many inherited traditional IRAs, whether annual required minimum distributions (RMDs) are required depends on whether the original owner had already reached their required beginning date.

If the owner died after reaching that point, the beneficiary generally has to continue taking annual RMDs while also making sure the entire account is gone by the end of year 10. If the owner died before reaching that point, annual withdrawals generally aren't required during years one through nine, although the account still has to be emptied by the deadline.

The IRS provided temporary penalty relief for certain missed inherited IRA RMDs from 2021 through 2024, but that relief has ended. Missing a required distribution can now result in a 25% penalty on the amount that should have been withdrawn, which drops to 10% if the mistake is corrected in a timely manner.

Before year-end, make sure you know whether an RMD applies to you and whether the correct amount has already been taken. IRS Publication 590-B includes the life expectancy table used to calculate it.

3. Don't just think about this year's tax bill

Withdrawals from a traditional inherited IRA are generally taxable income, so the timing of those withdrawals matters.

Suppose you get toward the end of the 10-year period and still have $300,000 sitting in the account. If the deadline arrives, you may have no choice but to withdraw that entire balance on top of your salary or other retirement income, pushing a large portion of it into higher tax brackets.

Instead, look at the entire 10-year period. Compare what happens if you take only the required minimum each year, take roughly equal withdrawals, or intentionally take larger amounts during certain years. The goal shouldn't simply be to pay the least tax this year. It should be to manage the tax bill over the entire life of the inherited account.

4. Work the inheritance into your retirement plan

If you're still earning a high salary today but plan to retire in a few years, it may make sense to take smaller distributions while you're working and larger ones after your paycheck stops. But pensions, Social Security, withdrawals from your own retirement accounts, Medicare premiums and, if you retire before 65, health insurance costs all affect that calculation.

That's the approach we took with the client I mentioned earlier. For the next few years, she is taking only the minimum withdrawals while she is earning significant money.

Our plan is to have her retire early and liquidate the IRA over a three-year period. She will still land in a higher tax bracket in those years than the one she's in while working, but she will pay less in tax overall than if she simply took out 10% of the account each year.

That is the difference between simply following the 10-year rule and actually planning around it.

5. Look for lower-income years

Maybe you retire halfway through the year. Maybe you change jobs, work fewer hours or have a down year in your business. Those years can be an opportunity to take more from an inherited IRA while your other income is temporarily lower.

For example, imagine an additional $40,000 withdrawal would all fall into a 22% federal tax bracket this year but could fall into a 32% bracket later. Ignoring other tax considerations, that's the difference between $8,800 and $12,800 of federal income tax.

A low-income year shouldn't go to waste without at least running the numbers. Before December 31, look at your projected income, determine how much room you have in your current tax bracket and decide whether taking more than the minimum makes sense.

The inherited IRA rules can feel complicated, but the planning questions are fairly simple: When does this money have to come out, and when would it make the most sense for it to come out? Those answers aren't always the same.

Good planning can also begin years before an inheritance happens. If your children are likely to be in a higher tax bracket than you when they inherit your IRA, Roth conversions on your own accounts may be worth a hard look while you still have the ability to change the outcome.

Your loved one likely spent decades earning and saving that money. Taking the time to build a withdrawal strategy can help make sure more of that inheritance goes toward your family's goals instead of being dictated by a tax deadline.

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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.

When people think of Roth options, most think of a Roth IRA. Even though 95% of employers offer a Roth 401(k) plan, less than 20% of employees take advantage of it.

I worked as a consultant in the retirement industry for decades and I was part of the 80% that didn't contribute to Roth in my 401(k). Almost five years into retirement, it's one of my biggest regrets.

The statistics show that, like me, most people continue to contribute pretax to their 401(k). They don't question the conventional wisdom that their tax bracket is probably higher while they're working than it will be in retirement. They take the deduction now and defer the income tax until retirement when they're likely in a lower bracket. It makes sense.

For a lot of Boomers and Gen Xers, Roth 401(k) wasn't an option they skipped — it simply wasn't available. Roth in 401(k) plans didn't exist until 2006, and most employer plans didn't add them for years after that.

As a Gen Xer, that was me: Roth didn't reach my plan until my mid-forties, when I was in my highest-earning years and wanted to reduce my taxable income as much as possible.

Now, almost five years into retirement, I wish I had given Roth 401(k) more consideration. I'm not alone in feeling this way.

Roth conversions increased 41% year-over-year as of Q1 2026, according to Fidelity, indicating that many people who previously contributed on a tax-deferred basis now want the benefits of tax-free growth.

Why the regret?

1. Paying tax on the compounding when it could have been tax-free

Reducing my taxable income while I was working helped, but it was only going to help once. Had I contributed to Roth instead, it could have grown tax-free for decades. And the income tax I'd have avoided on all that growth would have outweighed the tax I saved on the contributions themselves.

When you contribute on a pretax basis, you're not just deferring tax on what you put in, you're deferring it on everything that money earns for decades.

Take a person earning $100,000 who contributes 6% to a 401(k) and receives a 4% employer match over a 40-year career, working and retiring in Florida (no state income tax) at 65. Over those 40 years, they earn a 5% annual return.

For simplicity, this assumes a flat $100,000 salary with no raises, a 22% federal tax rate while working, and a $75,000 annual draw in retirement taxed at 15%.

Real careers and tax brackets are messier than that. The point isn't to predict your exact outcome — it's to illustrate how the tax owed on decades of compounding growth compares to the tax saved on the contribution alone. Before making the Roth versus pretax decision, it's important to run your own numbers with your tax accountant or financial adviser to see how it plays out for your specific situation.

This example also assumes the employee contributes the same dollar amount either way. The Roth contribution reduces take-home pay more because the tax is paid upfront. A pretax saver could invest the tax savings elsewhere, which would narrow the gap. But many people don't, and that's part of the point.

The company match stays pretax in both scenarios, since only about one in five plans currently offer a Roth match.

In this example, if you elect Roth contributions throughout your career, you'd get to retirement with $761,000 of income-tax-free money. You contributed, invested and paid income tax on $6,000 every year for 40 years ($240,000 in total). The other $521,000 is pure tax-free growth. Compare that to the pretax side, where the entire $1.2 million balance is taxed. It feels different, doesn't it?

2. A greater long-term average rate of return widens the gap

The example above uses a conservative 5% return. If the stock market's long-term return is higher, the difference can become more pronounced. Here's the same example: Same contributions, same 15% tax rate, using a 7% return instead of 5%.

The only thing that changed is investment performance, and by contributing to Roth the difference nearly doubled. The better you do as an investor, the more this decision is worth.

These are hypothetical examples and not representative of any specific situation. Your results will vary. The hypothetical rates of return used don't reflect the deduction of fees and charges inherent to investing.

3. Where you work and where you retire both matter

To keep the math simple, the example above assumes no state income tax. But state taxes can change the equation.

Work in a high-tax state and retire to one with no income tax, and pretax may work in your favor.

But if you flip it — work in a no-tax state and retire in one that taxes retirement income — those same pretax dollars could end up subject to both federal and state tax on the way out.

4. Pretax only means grossing up every withdrawal to get what you want

Want to withdraw $10,000 out of your pretax 401(k)? You'll have to take out $11,765 if you're in a 15% tax bracket to net the $10,000. With Roth, if you want $10,000, you withdraw $10,000.

5. Roth conversions mean writing a check you feel

You have to pay income tax regardless of whether you contribute to Roth initially or convert the assets down the road. But paycheck withholding happens automatically, before the money ever reaches your account. A conversion means writing the government a bigger check, since you're also paying tax on the earnings. And writing a check just doesn't feel the same.

6. Roth 401(k): No RMDs

With the SECURE 2.0 Act, as of 2024, original owners of a Roth 401(k) (or Roth IRA) don't have to take RMDs from that account during their lifetime.

7. Heirs inherit money and the tax

When my dad passed away in 2018, he left me some money in his traditional IRA. I was 50, still working and in some of my highest-earning years, so every required distribution added to my taxable income at the worst possible time.

Because he passed in 2018, I was able to stretch those distributions over my own lifetime. That option largely went away for non-spouse heirs beginning in 2020. Those heirs now have 10 years to empty an inherited pretax account, which means bigger distributions and bigger tax bills, often during their own highest-earning years.

When I've had to take RMDs on my dad's IRA, I've paid tax at whatever rate I happen to be in that year. Had it been Roth, those withdrawals would have been income-tax-free.

To Roth or not to Roth?

Whether you plan on "dying with zero" or leaving a legacy to your heirs, to Roth or not to Roth is something to carefully consider. And it doesn't have to be either/or — it can be both.

When you're living in retirement on a fixed budget, having some portion of your assets income-tax-free is confidence that's hard to put a number on.

I can't go back and change my 401(k) contribution elections. But if you're still working and have a Roth option sitting unused, you can. It's worth considering during annual enrollment this year.

Related Content

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• Roth 401(k) Changes: New Rules to Know for 2026 Taxes
• Roth 401(k) Contribution Limits for 2026
• Should You Convert Your Traditional 401(k) to a Roth?
• I'm a Retirement Consultant: This Is the Single Most Important Planning Step I Learned After I Retired

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.

The late hip-hop artist the Notorious B.I.G. likely didn’t have estate planning in mind when he recorded his chart-topping hit, "Mo Money Mo Problems." But the sentiment rings undoubtedly true. The more wealth you have, the more complex the estate decisions surrounding everything from taxes to paperwork.

As an estimated $124 trillion begins to change hands, many families are now trying to figure out how to end up on the winning side of the "Great Wealth Transfer."

Someone with an estate of $5 million or more, experts say, sits in "very-high-net-worth" territory, where a simple will no longer cuts it. At this level, where you live and what you own ultimately determine what stays with your estate and how easily your heirs can inherit it.

As Matthew Chancey, CFP® and founder of Tax Alpha Companies, frames it, "At $5 million, the question isn’t how much you leave. It’s what kind of money you leave."

Federal and state estate taxes

Despite the ominous name, the federal "death tax" is not what most people — even many high-net-worth individuals — have to fear. That's because the federal estate tax exemption is $15 million per person, or $30 million for a married couple. So a $5 million estate sits comfortably below that threshold.

However, that doesn't mean your estate is totally off limits. "The federal estate tax probably isn't your problem, but your state's might be," says Jeff Judge, CFP® and founding partner of Chesapeake Financial Planners. He says couples often mistakenly assume the big federal number protects them.

Twelve states plus Washington, D.C., levy their own estate tax, and five impose an inheritance tax, often with exemptions far below the federal level. For example, Judge points to his home state of Maryland, which has an exemption of just $5 million per person, a top rate of 16% and a separate inheritance tax. Other states bite even sooner, such as Oregon, where the estate tax starts at $1 million.

To minimize the state tax hit, Clark Randall, CFP® and director of financial planning at Creekmur Wealth Advisors, suggests including a provision in your will to create a credit shelter trust (CST), sometimes called a spousal bypass trust. It "allows the executor to shelter the assets from taxation at the death of the first spouse to die while still providing for the survivor's living needs," he says.

Where you live can, therefore, become an estate planning decision in itself. Eileen Olson, CFP® and founder of Emerald Wealth, had one family weigh the cost and choose to stay put to remain near their children and grandchildren.

"What matters," Olson says, "is making the choice knowingly."

Leaving heirs an inheritance, not a tax bill

With an estate of this size, advisers say planning should focus more on income tax than estate tax. What heirs keep is largely determined by the type of money involved — generally, the split between pre-tax and taxable assets.

Under the SECURE Act, most non-spouse heirs must empty an inherited IRA or 401(k) within 10 years. Should your heirs inherit your IRA during their highest-earning years, when every withdrawal stacks on top of their salary, it becomes a major tax burden.

Roth conversions offer one option. By converting pre-tax savings to a Roth during lower-income years, the tax is paid at your rate instead of your children's. "We have used low income tax years for many clients to do partial Roth IRA conversions that create a true tax-free legacy for heirs," says Jorge Padilla, CFP® and wealth adviser at Meira Wealth.

How you handle substantial appreciated assets also shapes the tax situation your heirs will face. Appreciated assets — a home, a business, a portfolio of stock — get a stepped-up basis at death, erasing the built-in capital gain for your heirs. Therefore, it's often best to wait, as handing them over while alive transfers the original, lower cost basis to your kids, sticking them with the capital gains tax.

"I wouldn't go crazy giving assets away to the next gen when you can grow that wealth and get a step-up in basis at your passing," says Marianela Collado, CFP® and wealth adviser at Tobias Financial Advisors.

To avoid this mistake, Chancey suggests a simple rule of thumb: "Give cash, not the things that have grown, or your kids get your old tax bill with the gift."

What if most of your wealth is illiquid?

If much of your wealth is tied up in a business, real estate or concentrated stock, heirs can be forced into a fire sale to cover taxes and expenses.

"Illiquid estates fail on cash, not on value," Judge says. He describes a client with a paid-off home, a rental property and a large IRA, whose children stood to inherit the real estate and a tax bill with nothing liquid to pay it. In this situation, he recommends life insurance held outside the estate, a buy-sell agreement for a business and a written plan for who runs what.

Equally overlooked is protecting the inheritance once it lands. Leaving money to adult children outright can expose it to their creditors, lawsuits and divorces. Collado offers a sobering scenario: you give everything outright to a child who the next day causes an accident and gets sued, and that inheritance becomes fair game. She says if you leave it in a trust instead, "that lawsuit wouldn't be able to touch those assets. That is something people rarely think about."

Gifting and giving while living

You can also shift wealth during your lifetime, tax-free, in bite-sized pieces. Those who want to give an early inheritance, for instance, might consider cash or other alternative financial gifts.

In 2026, you can give up to $19,000 per recipient ($38,000 for a couple) to as many people as you like, pay someone's tuition or medical bills directly, or "superfund" a 529 college plan with five years of gifts at once.

Charitable giving deserves special care, because which account you give from matters. Padilla recalls a client whose trust left 20% to charities and university foundations. On review, his team had her redirect that gift to come from her IRA instead, which spared her heirs the 10-year tax bomb while they inherited the step-up assets. "That move alone saved tens of thousands of dollars in taxes to her family," he says.

People and paperwork

So what does $5 million actually require? Judge says that while a $1 million estate needs a will, powers of attorney and current beneficiaries, a $5 million estate would benefit from adding layers like a revocable trust, state-tax planning and a liquidity plan.

But there's a risk of making your estate more complex than it needs to be. Padilla warns that elaborate structures are sometimes sold "to justify high fees when a simpler approach may be sufficient." His advice is to coordinate among a team consisting of an estate attorney, CPA and financial adviser to help.

The most important people to speak to might be those closest to you. Communicating your intentions heads off the conflicts that could erupt, especially as life and laws change. That's why Olson recommends treating an estate plan as a "living plan," one that should change "when a child or grandchild is born, when a marriage begins or ends, when you move, and when the law changes."

After all, you worked hard to make more money and don't want to leave more problems.

Read More

• Protect Your Family's Future: Avoid These 12 Common Estate Planning Mistakes
• The 'Die With Zero' Rule of Retirement
• Don't Wait Until You're Gone: Why Retirees Are Giving Away Wealth Early
• How 30 Everyday Millionaires Are Splitting Their Inheritances and Discussing Money With Their Kids

Something interesting is happening among young Americans: Even young conservatives are becoming more skeptical of capitalism.

A Wall Street Journal opinion piece (paywall) recently cited a survey showing that 53% of conservatives under 40 support government-run grocery stores. Harvard's Fall 2025 Youth Poll found that just 39% of young Americans support capitalism, down from 45% in 2020, with only 19% describing themselves as capitalists.

Those numbers are striking. However, I don't think the explanation is as simple as young Americans suddenly embracing socialism. I think they're frustrated, and a lot of that frustration is justified.

Housing is expensive, education and healthcare costs have risen. People who already own homes and stocks have benefited enormously from rising asset prices, while those trying to enter the market are paying significantly more to do so.

A 25-year-old looking at that landscape has every reason to ask whether the system is working for them.

But there's another part of the equation that I think gets overlooked.

I've spent more than 25 years as a tax attorney focused on retirement accounts and wealth creation. One of the hardest things about convincing someone in their twenties to care about retirement is that the reward feels impossibly far away.

You put $7,500 into an IRA at 25. A year later, maybe it's worth $8,500. That's not exactly life-changing money.

The mistake is evaluating that decision at 26 instead of 65.

Capitalism has a similar problem. Its benefits often take time, and we increasingly live in a culture that expects results immediately.

Starting out has never been easy — but it's different today

When I started practicing law in New York in 2001, I made about $125,000 a year. That was a very good salary for a 25-year-old.

I still had a roommate.

I didn't buy my first house until I was 37. Of course I would have liked to own one sooner. But at the time, I didn't interpret not owning a home in my twenties as evidence that the economic system had failed me. I was building my career, saving money and starting a business. I assumed the payoff would take time.

There is an important difference today.

Young Americans aren't imagining the affordability problem. Housing costs are real, and rising asset prices have disproportionately benefited people who already own stocks and real estate. Someone starting from zero today can reasonably look at the cost of a home and wonder whether patience alone is enough.

We shouldn't dismiss that concern, but we also shouldn't make the opposite mistake and conclude that because the path has become harder, the principles behind building wealth no longer work.

Social media shows the finish line

When I was 25, I wasn't carrying around a device that showed me hundreds of wealthy people every day.

Today, someone can open TikTok and immediately see a 27-year-old entrepreneur stepping onto a private jet, an investor talking about making millions in crypto or an influencer showing off a house that most people historically wouldn't expect to own until much later in life.

What you don't see is the race.

You don't see the 10 years of work, the failed businesses, the bad investments or, in some cases, the family money behind the lifestyle.

At the same time, sports betting and speculative investing have made the idea of getting rich quickly feel more attainable. Pew Research found that 31% of Americans ages 18 to 29 bet on sports in the past year, compared with 22% of adults overall. A 2026 Urban Institute study found that 15% of young bettors saved less because of it.

My concern isn't that placing an occasional bet is going to destroy capitalism.

It's the mindset.

Real wealth creation is usually boring: Work. Save. Buy assets. Reinvest. Avoid major mistakes. Repeat.

The real divide is ownership

This is where I think young Americans are identifying a real problem but sometimes drawing the wrong conclusion from it. Capitalism rewards owners.

If you own a home and its value increases, you benefit. If you own stock in a growing company, you benefit. If you own a business, you participate in the value that business creates.

If you own nothing, you are primarily dependent on your labor, and that divide matters.

But if the problem is that too few people participate in ownership, the answer isn't to reject ownership. It's to help more people become owners earlier.

Retirement accounts are one of the simplest ways to do that.

Imagine someone invests $7,500 annually from age 25 to 65 and earns an average 8% return. That account could grow to roughly $1.9 million, even though only about $300,000 came directly from the investor's contributions.

That's what time does.

A person investing $10,000 annually at 8% would have roughly $145,000 after 10 years, $1.2 million after 30 and $2.6 million after 40.

The investor didn't suddenly become smarter in year 30.

Their capital had time to work.

Young Americans are right to want more

None of this means telling a 25-year-old struggling with rent, student loans or healthcare costs to stop complaining and wait 40 years.

That's not a serious response.

If we want younger Americans to believe in capitalism, they need a realistic opportunity to participate in it. That means making it easier to save for retirement, improving financial education, expanding access to investment and creating more pathways into home and business ownership.

It also means recognizing something uncomfortable: Previous generations benefited from economic conditions that aren't identical to those facing young people today.

But acknowledging that doesn't require abandoning the basic principles of long-term wealth creation. In fact, I would argue the opposite.

If rising asset prices have widened the gap between owners and non-owners, becoming an owner matters more, not less. Young Americans have access to investment tools my generation could barely imagine at their age. You can open an IRA in minutes, buy fractional shares and invest with virtually no commissions.

What young people have most of all is something nobody can buy later: Time.

Capitalism isn't perfect. It doesn't guarantee success, and legitimate structural problems deserve legitimate solutions.

But neither capitalism nor retirement investing should be judged solely by what they produce in a year or two.

At 25, you're not supposed to have already built wealth. You're building the foundation for it.

The question shouldn't be whether young Americans are patient enough to accept an economy they believe isn't working for them. It should be how we help more of them become owners.

Our retirement system may be the best tool we have to do that. A 401(k), IRA or Roth IRA gives almost every working American a tax-advantaged way to own stocks, businesses, real estate and other assets. And young Americans have the greatest advantage of all: Time.

At 25, they have four decades for ownership and compounding to work in their favor. If the economic divide is increasingly between those who own appreciating assets and those who don't, the answer isn't to abandon ownership.

It's to create more owners, and give them enough time for ownership to matter.

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• Trump Accounts Are a Great Start, But They Could Be Better

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.

I started to focus on retirement income planning about 15 years ago. One thing that struck me early in this journey was just how much our clients detest required minimum distributions (RMDs).

A large percentage of our clients were federal retirees with large pensions under the old system. They didn't need the money.

It wasn't that they were mad about having to take the funds — it was the taxes. On top of the taxes, there were also the other dominos that could fall — the phaseout of certain deductions, higher capital gains taxes and, perhaps the most hated, Medicare premium hikes (IRMAA).

Today, many of our clients still hate RMDs. This is not just because they all have large pensions, but many have put themselves in strong financial positions and do not like paying taxes on money they don't need. It's like paying the tolls on the Jersey Turnpike but having no desire to actually get where you're going.

We use many strategies to lower our clients' lifetime tax bills, but these three very niche strategies are designed to stop or delay the actual income you don't want, in turn, reducing or deferring the taxes.

1. Skip your first RMD

Everyone is eligible to defer the RMD in the year they hit their RMD age. This can be 70½, 72, 73 or 75, depending on your year of birth. This sounds better than it is, but it can make sense in the right situation.

Let's say you were born in 1960. Your RMD age is 75, and you will hit that in 2035. You can defer your 2035 RMD until 2036. Here's the catch: You'll then have to take two RMDs in 2036, one by April 1 and one by December 31.

Doing this without running the numbers can really backfire, because that lumpy distribution is more likely to cause more bad dominos to fall than if you'd split the distribution over two years.

Here are some situations where we've seen it make sense to skip the first RMD:

• You retire in 2035 and will have a significant income drop in 2036
• You sell your business in 2035

You have a lump sum from any other source in 2035 that causes your income to spike (unpaid leave, inheritance, inherited IRA distribution, home sale, etc.)

You see the theme. If your income is much higher in 2035 than you expect it to be in 2036, it could be beneficial to skip your first RMD. We rely on financial planning software to project out tax rates to make that determination. You can access a version of what we use.

2. Buy a qualified longevity annuity contract, or QLAC

When interest rates were hovering around zero, it rarely made sense to turn to a QLAC. Income guarantees move in the same direction as interest rates, so if there is any silver lining to inflation, it's that most fixed annuity rates moved up as the Fed raised rates to combat inflation. Merry Christmas!

A QLAC is a type of deferred annuity, basically meaning you give money to an insurance company in exchange for a future income stream. This is a unlike a single premium immediate annuity (SPIA), with which payments start immediately.

I believe that you need to approach this as longevity insurance first and as a tax tool second. Because many of these contracts will defer income until age 85, you are making a big bet on longevity.

The tax benefit is that you can move up to $210,000 per person (2026 limit) from your IRA into a QLAC. Round numbers: If RMDs start at 4%, you are delaying just $8,400 per year in RMDs.

"Delaying" is the key word. When that money does come out, it is still taxable.

Once again, this makes sense if you are already considering an annuity as a longevity hedge and like the idea of guaranteed income later in retirement.

3. Keep working

This one is not complicated but is often misunderstood. A costly mistake. If you are still working in any capacity as an employee and own less than 5% of the company, you can defer RMDs from your current employer retirement plan, but not from all your retirement plans.

Take the example of the client who started a manufacturing business that he sold to his employees. The business is his life. He tells me he'll work until the day he dies. I tell him he'll work until the day the new owners decide they can't take him anymore. He sort of laughs. He can defer RMDs until that day.

More commonly, we see clients continuing to work part-time in retirement. For anyone who is still working, and for employer retirement plans that accept rollovers into the plan, you may be able to roll funds from your IRA into your current employer plan and avoid RMDs on a much larger chunk of money.

This is the definition of the tax tail wagging the investment dog, which most textbooks caution against. But if you've got a good retirement plan at work and don't plan to stop working, it may make sense.

Most retirees spend more than their RMDs every year, so this is really an uptown issue for those who are really focused on taxes, as we are in our practice.

It is important to note that there are very few ways to completely eliminate the tax consequences, as you would if you did a qualified charitable distribution (QCD), so it's important to note that there is no prize for being the best tax deferrer. It only makes sense if your future tax rates will drop.

Related Content

• Missed Your RMD? 4 Ways to Avoid Doing That Again (and Skip the IRS Penalties), From a Financial Planner
• The 7 RMD Tax Traps Waiting for You in Your 70s — and How to Start Disarming Them in Your 60s
• New RMD Rules: Starting Age, Penalties, Roth 401(k)s, and More
• Got $2.5 Million Saved for Retirement? Here Are the Huge RMDs You Must Take at 73, 75, 80 and 85
• 5 Costly RMD Mistakes That Will Put a Dent in Your Savings (and How Early Planning Can Help)

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.

A proposed bill could be a game changer for families with well-funded 529 plans. Sens. Ted Cruz, R-Texas, and Lisa Blunt Rochester, D-Del., are calling for an end to a current law that places a $35,000 lifetime cap on rollovers from 529 education savings plans to Roth IRAs.

Both sponsors of the bipartisan bill, dubbed the 529 Retirement Enhancement Act of 2026, say it will give parents and 529 account owners more flexibility to save and invest in a child’s future.

If passed, the bill would further reduce the uncertainty about what happens to unspent money in 529 plans, adds Paul Stanley, a wealth adviser at Arca.

"It would be a positive development," says Stanley. "One of the biggest impediments to people saving money in a 529 was the risk that the money was going to just go to waste (and be subject to taxes and penalties) if the kid didn't go to college."

While 529s are not so-called "use it or lose it" plans, if you withdraw savings for nonqualified educational purposes, the earnings portion is taxed as ordinary income plus a 10% federal penalty. Account holders, though, can retain the funds for future qualifying educational expenses or change the beneficiary to an eligible family member, such as a sibling.

However, having the ability to roll over more 529 dollars into a Roth IRA, a retirement fund that offers tax-free withdrawals, enables parents to avoid taxes and penalties to access unspent 529 savings and gives their child a jumpstart on retirement savings.

The SECURE Act 2.0, passed by Congress at the end of 2022, allows individuals to roll over $35,000 from a 529 plan into a Roth IRA. Aside from eliminating the $35,000 lifetime cap on unused funds, the proposed legislation keeps all other requirements from the 2022 law, which allows excess 529 assets to be transferred into a Roth IRA over time rather than leaving the assets stranded in 529 accounts.

"The initial SECURE Act was a really, really great idea," explains Ernie Wingard, a financial adviser at Capital Choice Financial Group. "This proposal (if passed) will make it even better."

How the new bill could boost financial flexibility

When introducing the bill, Cruz said the existing law "penalizes" families who build up savings in a 529 plan but don't use all the money because their child got a scholarship, went to a less expensive school, or chose not to attend college.

The new bill, adds Blunt Rochester, gives 529 savers other uses for the money if education plans change.

"Families should be able to preserve financial flexibility regardless of what their child's education decisions are years down the road," says Blunt Rochester.

529s are a popular educational savings tool. Funded with after-tax dollars, the money in these savings accounts grows tax-deferred. While there's no federal upfront tax deduction for contributions, some states offer deductions for in-state 529 plans, according to Fidelity Investments.

Increasingly, the dollar amounts that pile up in 529s can reach sizable numbers. Why? There's no annual federal contribution limit for 529 plans, although each state's plan sets a maximum total balance per beneficiary. For gift-tax purposes in 2026, contributions of up to $19,000 per person ($38,000 for a married couple) per 529 beneficiary qualify for the annual exclusion. What's more, in 2026 a 529 contributor can front-load 529 deposits, giving five years of annual gifts in a single year, or $95,000 per person or $190,000 for a married couple.

These huge balances can potentially result in unused dollars. The downside of using leftover 529 dollars for nonqualified educational expenses is that they are subject to income tax and a 10% federal tax penalty on any earnings associated with the distribution, according to Fidelity.

"That's where a transfer to a Roth IRA could make sense," according to a Fidelity blog post.

Four things to know about 529 to Roth IRA rollovers

Consider a few things before transferring unused 529 dollars to a Roth IRA.

1. The 529 plan in the beneficiary's name must have been open for at least 15 years prior to the rollover. The new rollover IRA must also be in the beneficiary's name.

2. The amount rolled over in any given tax year must not exceed the Roth IRA annual contribution limit applicable to the beneficiary. The Roth contribution limit for 2026 is $7,500 for those under 50. Because transfers are capped annually, moving a large 529 balance into a Roth IRA can take many years — meaning families must start the process early while the child is still working and earning income.

3. The transfer amount must come from contributions to and earnings from the 529 account at least five years prior to the transfer date.

4. The beneficiary must have earned income that equals or exceeds the amount rolled over to a Roth IRA in any given year.

Turning leftover college funds into a multimillion-dollar nest egg

Passing the bill would likely boost 529 savings plans, as parents would no longer have to worry about the downside of this savings product if their kid doesn't go to college. "It gives the 529 more power," says Wingard.

Extending the amount of time 529 savings can stay tax-deferred can add up to huge dollars for beneficiaries through compounding. Under current law, Wingard notes that a 22-year-old who rolls over the maximum $35,000 and earns a 9% annual return can watch that money double every eight years, turning it into $1.12 million by age 62.

"That’s why I think this bill is huge," says Wingard.

But eliminating the lifetime cap takes that growth potential to a whole new level, as shown in the table below.

Under the proposed bill, if that same 22-year-old has $75,000 in excess 529 plan funds, they could roll over the entire amount over 10 years. By age 62, those tax-free contributions could compound into an estimated $2.1 million nest egg.

"Financial flexibility is incredibly important," says Stanley.

Currently, families concerned about penalties for non-educational distributions from 529s are reluctant to put all college savings in a single 529 bucket.

In contrast, the new bill "allows planners to look at planning purely from the perspective of saving in the best tax-preferred way we can," says Stanley.

Will the bill pass?

Financial advisers are split on whether Congress will pass the bill. Stanley thinks the odds are low, citing high U.S. deficits and lost tax revenue. But Wingard thinks the odds are higher, as both parties would benefit from making it easier for families to save for their children's futures.

The bottom line: If the child goes to college, the money grows tax-deferred under the proposed changes. And if the child takes another route in life, the dollars keep growing tax-deferred and become a retirement nest egg.

"That’s going to give your kid a leg up in retirement," says Stanley.

Read More

• 529 Plans and College Savings: 4 Urgent Questions
• Best 529 Plans of 2026
• Grandparents' Guide to 529 Plans for College and Private School
• Roth IRA vs 529 Plan for College Savings

Required minimum distribution season sneaks up on many retirees.

RMDs are the amounts you must withdraw from tax‑deferred retirement accounts once you reach the required age, which is 73 for individuals born from 1951 through 1959 and 75 for those born after 1960.

Failing to take an RMD can be an expensive mistake. Vanguard research estimates that missed RMDs cost investors as much as $1.7 billion a year, and most of that loss is avoidable with better organization and planning.

Every year, millions of people log into their IRA, withdraw the smallest amount required and move on. The RMD becomes a chore to complete before December 31.

This approach misses the point. An RMD is one of the most important annual decisions in retirement planning. How you handle it can influence your:

• Taxes
• Medicare premiums
• Charitable giving
• Investment allocation

It can also affect the legacy you leave to heirs.

The question is not how to merely satisfy the RMD requirement, but how this year's distribution should fit into your spending, tax strategy, charitable goals and estate plan.

Get organized, then get clear on what you need

One of the biggest challenges with RMDs has nothing to do with taxes. It is simply tracking down every account and calculating what you owe, which turns into a headache when your savings are scattered across several institutions.

If you are approaching retirement, consolidate your retirement accounts wherever possible. Fewer accounts require a simpler calculation, and a simpler calculation means fewer costly mistakes.

Once your accounts are in order, determine how much money you actually need from your IRA.

If the full RMD covers your living expenses, the decision is straightforward.

If it does not, the RMD becomes a spending plan waiting to be written, one that can support charitable giving, fund a Roth conversion, get reinvested or build a cash cushion.

That shift — treating the RMD as a cash flow event rather than an automatic spending requirement — unlocks everything that follows.

Let charitable intent drive a QCD and watch your AGI

A qualified charitable distribution, or QCD, lets anyone who is 70½ or older send money directly from a traditional IRA to a qualified charity, excluding it from taxable income entirely.

For 2026, the limit is $111,000 per person, and each spouse with their own IRA gets a separate limit.

The temptation is to treat this purely as a tax trick. Resist that. Start instead with a simple question: How much were you already planning to give to charity this year?

If the answer is $25,000, a QCD is simply the most efficient way to move money you were donating anyway.

Here is where the strategy gets powerful. Picture a 75-year-old with a $1.5 million traditional IRA and a $60,000 RMD. She needs only $20,000 for living expenses and already gives $25,000 a year to charity.

Instead of taking the full $60,000 as taxable income and separately writing a $25,000 check, she can direct $25,000 straight from the IRA to charity through a QCD. That portion never touches her tax return. The remaining $35,000 comes to her as a normal distribution. Same total withdrawal, same charitable gift, considerably less taxable income.

The reason this matters goes beyond the tax bracket. Most people fixate on their marginal rate and stop there, but a QCD reduces adjusted gross income (AGI) directly, and AGI quietly drives a lot of other costs in retirement.

A higher AGI can trigger Medicare IRMAA surcharges, increase the taxable portion of Social Security benefits and push you past thresholds tied to other deductions.

Before adding an additional $30,000 or $50,000 to your income, do not just ask what tax bracket that lands in. Ask what it does to your entire financial picture for the year.

Time your RMD deliberately

There is a common instinct to take the RMD in January and be done with it. Unless you need the cash immediately, there is usually no advantage to rushing.

Waiting lets the year's full tax picture come into focus first, including income, charitable plans and whether a Roth conversion makes sense.

The RMD portion itself cannot be converted to a Roth IRA, but you can take the required distribution first and then, separately, convert an additional amount if your bracket allows it.

The real annual question becomes a combination of:

• How much goes out as the RMD?
• How much becomes a QCD?
• How much room remains for a Roth conversion?

Getting that mix right, year after year, is where real tax savings accumulate.

Also, remember that any amount withdrawn beyond your RMD does not carry over to reduce next year's requirement, since every year resets on its own. Extra distributions should have a clear purpose, whether that is a large expense, a gift or a Roth conversion, rather than being taken casually on the assumption they will count later.

Timing extends to the assets themselves, not just the calendar. When it is time to raise the cash, do not simply sell whatever happens to be sitting there. Look at the full portfolio first.

If stocks have run up and your allocation has drifted more aggressive than intended, the RMD is a natural chance to trim appreciated positions, generate the required cash and rebalance at the same time, turning a required withdrawal into a disciplined investment decision instead of an afterthought.

Think beyond this year

For retirees with substantial IRAs and genuine charitable interests, QCDs can become part of a longer-term legacy strategy.

IRA assets left to heirs are generally taxed as ordinary income when withdrawn, while assets given to charity through a QCD are not taxed at all.

Directing a portion of the IRA to charity during your lifetime, rather than leaving the whole balance to be taxed later, accomplishes the same charitable goal more efficiently than doing it through your estate. And by drawing down the IRA instead of a taxable account, which gets a step up in basis at death, you may leave your noncharitable heirs better off, too.

The retirees who handle this best treat it as an ongoing process rather than a once-a-year fire drill.

Early in the year, estimate income, review charitable intentions and identify the right RMD and QCD amounts.

Confirm everything is executed well before the December rush and keep simple records of every QCD, including the charity, the date and the amount, since documentation matters for tax reporting.

Markets shift, tax laws change and personal goals evolve, so an RMD strategy built once and never revisited will eventually fall out of step with your life.

The retirees who get the most value out of this season stop thinking of it as a withdrawal requirement and start treating it as one of the most useful planning conversations they have all year.

Related Content

• The 7 RMD Tax Traps Waiting for You in Your 70s — and How to Start Disarming Them in Your 60s
• Got $2.5 Million Saved for Retirement? Here Are the Huge RMDs You Must Take at 73, 75, 80 and 85
• 5 Costly RMD Mistakes That Will Put a Dent in Your Savings (and How Early Planning Can Help)
• Good Job on Cutting Costly Investment Fees, But These 8 Tax Traps Can Hurt Far More
• Five Keys to Retirement Happiness That Have Nothing to Do With Money

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 retirees are asking AI the money questions they used to ask financial advisers.

The appeal is obvious. AI chatbot answers arrive in seconds, nothing is embarrassing to ask, and it costs nothing. The problem is that a wrong or incomplete answer looks exactly like a right one.

This guide explains why AI gets retirement questions wrong and provides seven steps you can use to check an answer before you act on it.

Why AI gets retirement numbers wrong

A chatbot does not look anything up. It was trained on a large body of text gathered up to a cutoff date, and it answers by predicting which words most plausibly come next. When it states a figure, it is reproducing what appeared most often in that text — it's not reading a current government page.

Retirement rules are badly suited to that, because most of the important numbers change every year.

Contribution limits are the clearest case. For 2026, the amount that can go into a 401(k) rose to $24,500, and the IRA limit to $7,500. A year earlier, they were $23,500 and $7,000. A model trained before that announcement would provide last year's figures with complete confidence, and nothing in the phrasing would suggest the numbers are stale.

Other figures can be changed by legislation, after the former figure has circulated for years. For example, the age when retirees must start taking required minimum distributions (RMDs) used to be 70½, then it was 72, then 73, and it reaches 75 in 2033. All four ages appear across the internet, usually with no date attached.

Basically, AI handles concepts reliably and specifics unreliably. The seven steps below are built around that split.

Step No. 1: Check the year on every number

Any answer containing a dollar amount, an age, a percentage or an income threshold needs a date attached before it is worth anything.

Ask the chatbot directly which tax year the figure applies to. When asked, a chatbot will often admit its information may be outdated, even though it volunteered the number without hesitation a moment earlier.

Consider any figure with no year attached suspect.

Step No. 2: Ask which agency sets the rule

This is the one question a chatbot answers reliably, because it is a concept question rather than a numbers question.

Information about contribution limits, RMDs and tax treatment should come from the IRS.

Benefit amounts and claiming ages should come from the Social Security Administration.

Information about Medicare premiums and income surcharges (IRMAA) should come from Medicare.gov and the SSA.

Pension rules sit with the Department of Labor.

Knowing which agency oversees the rule turns vague verification into a single page to open.

Step No. 3: Verify at the source

Once you get an answer from a chatbot, go to the agency's own site rather than simply reading a summary. For example, federal agency pages will state which year a figure applies to.

Skipping this step could be expensive. Missing an RMD triggers a penalty of 25% of the amount that should have been withdrawn, reduced to 10% if corrected quickly.

On a $40,000 distribution, that is $10,000 for a deadline a chatbot might have gotten wrong.

Step No. 4: Feed it your own circumstances

A chatbot answers in generalities unless you provide specifics.

Supply the details that actually influence the outcome: Age, types of accounts, pension income, state of residence and marital status, including whether your spouse has their own earnings record. (Never provide details that are personally identifiable, though.)

Then compare the answer with the answer you get when you provide none of those details.

If the response barely changes, then the advice for your particular situation cannot be trusted.

This matters most when it comes to thresholds. Medicare's IRMAA works as a cliff rather than a gradual increase — income above $109,000 in 2026 for a single filer and $218,000 for a couple.

A chatbot that suggests you do a Roth conversion without making any reference to IRMAA can lead to you facing four figures in annual premiums two years later (since IRMAA is based on your income two years ago).

Step No. 5: Ask the same question twice

Pose the question again in different words, ideally on a different day, and see whether the original response holds.

Then change one detail, such as adding five years of age or removing pension income, and check that the answer moves in a direction that makes sense.

Answers that swing wildly when you rephrase the question are being generated, not recalled. When two responses conflict, the tie gets broken by checking the relevant agency's page, not by asking the chatbot a third time.

Rawad Baroud, CFO of ZeroGPT, says that consistency should never be confused with accuracy when evaluating AI-generated information. "Generative AI can produce an answer that is clear, detailed and convincing without having verified the facts behind it.

"Asking the question again can expose inconsistencies, but getting the same answer twice doesn't prove it is correct. For financial information, the final check still needs to be against an authoritative source."

So use repetition as a warning system, not as proof of accuracy. Whether the answers are different or the same, you should always verify any important numbers or rules.

Step No. 6: Ask what it left out

Chatbots answer the question asked and rarely flag what sits outside it.

Two prompts do most of the work here:

• Ask what assumptions the answer depends on
• Ask what would make this the wrong move

A recommendation to convert to a Roth, for instance, should surface the tax due this year, the effect on Medicare premiums and the five-year rule before it counts as complete.

According to Gregor Emmian, deputy chief growth and finance officer at Rise, "The most dangerous AI answers are the ones with no caveats attached. If a chatbot tells you to convert to a Roth or claim (Social Security) early without mentioning what could go wrong, that's not a complete answer — it's half of one.

"Retirees should treat 'what am I not being told?' as a mandatory follow-up question, not an optional one."

An answer that mentions no downside is incomplete — every retirement decision requires tradeoffs.

Step No. 7: Consult an adviser when an irreversible decision is involved

Some actions cannot be undone once you do them. Claiming Social Security, converting a large sum to a Roth, buying an annuity or taking a pension as a lump sum all belong in that category.

The cost of a wrong turn here is permanent. Claiming Social Security at 62, for someone whose full retirement age is 67, reduces the monthly benefit by about 30% for life, and that reduction extends to the survivor's benefit.

On a $2,400 benefit, it is roughly $720 a month, or more than $8,600 a year, for as long as either spouse lives.

For anything in this category, print the chatbot's answer and take it to an adviser or accountant. Ask which parts are wrong and why.

That conversation will be quicker and less expansive than one you start from nothing, and it puts the specifics in front of someone who can be held responsible for them, which no chatbot can.

The bottom line: If you're using AI this way, the main thing you should keep in mind is that the moment an answer sounds the most authoritative is the moment when you should question its accuracy and explore further, preferably through the relevant agency.

Related Content

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• An Expert Guide to Your Financial Priorities Decade-by-Decade: What to Focus on in Your 30s, 40s, 50s and 60s

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.

Related Content

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• The Inheritance Dilemma: How to Pass Down Wealth Without Destroying Ambition
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• 3 Things That the Ultra-Rich Do to Protect Their Wealth That You Can Do, Too

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'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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• Boost Your Retirement Savings in Your 50s with These Six Moves
• Retirement Milestone Ages Most People Miss (And What to Do About Each One)
• 5 Habits to Help Make Your Retirement Planning Highly Effective
• 4 Smart Ways to Use Your Tax Return for Financial Planning

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

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• 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
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• 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.

When Mike and Liz retired at age 63, they were looking forward to finally having an easy tax return. No more working meant no more worrying whether their company withheld enough taxes on their incentive plan payouts and stock vesting.

They'd hit their "retirement number" and had almost $2 million saved, much of it within traditional IRAs and 401(k)s. Required minimum distributions (RMDs) from these accounts were still more than a decade away.

Their initial plan was to live off their savings as well as withdrawals from their brokerage accounts until they took their Social Security benefits at the maximum amount at age 70.

So, when Mike and Liz came into my office for our quarterly meeting, they were quite surprised when I suggested that they make a sizable, taxable Roth conversion from their traditional IRA.

Liz asked, "Why would we voluntarily pay more taxes right now when our income is finally so low?"

I answered, "Because this may be the lowest tax rate you see for the rest of your retirement. It could be a once-in-a-lifetime planning opportunity."

Mike and Liz are in their "golden tax planning window" — the time between when you retire and when your RMDs start at 73 (or 75).

This is when the tax planning focus should shift from, "How do I enjoy a low tax rate today?" to, "How do I use this low-tax-year opportunity to create a strategy that could lower my lifetime taxes?'

What is the golden tax planning window?

The golden tax planning window is usually the period between when you stop receiving a paycheck and when you start receiving significant taxable retirement income.

For many retirees, this starts the year they retire and ends when they start taking Social Security, collecting a pension, or reach RMD age.

Not everyone has the same window, and you can't time it around your age alone. Some retirees might only have one or two years before a taxable income source kicks in. Others might have five to 10 years.

And if you have a large pension, deferred compensation payouts, passive income from owning a business or renting a property, or significant capital gains, you might not get a golden window at all.

Why Roth conversions are often recommended

While they were working, Mike and Liz were focused on lowering their current year's taxes through contributions to traditional IRAs and 401(k)s.

Entering retirement, they heard of Roth conversions but initially dismissed them because of two thoughts they had that many of their fellow retirees share:

• "I can't Roth convert. I don't have any income."
• "My account balances are so large. The conversion tax bill would be huge."

Yes, once you stop working, you may no longer have the taxable compensation needed to make a regular Roth IRA contribution. But you can still convert traditional IRA money to a Roth IRA, without earned income or contribution limits.

And Roth conversions don't involve the entire account. You can choose the amount you'd like to convert — from one penny up to the maximum amount within the account that's eligible to convert.

Which is why I believe the golden rule of Roth conversions is:

Choose the right year and the right amount of Roth conversions.

Roth conversions are often recommended when the tax rate you expect to pay on a conversion today is lower than the projected tax rate on traditional retirement account withdrawals in the future.

Your golden window helps you identify the right years to make the conversion and the right amount to convert in each of those years.

How to identify your golden tax planning window

Once you stop working, your monthly paycheck disappears. Your annual bonuses or stock compensation goes away.

That drop in income often creates an opening in the lower tax brackets to convert money from your traditional retirement accounts into a Roth IRA at a low tax rate.

You have the opportunity to report income from your traditional retirement accounts, during this time frame, at a current rate that may be lower than your projected future withdrawal tax rates.

This opportunity doesn't last forever. As your expected retirement income sources like pensions and Social Security start, your tax planning window starts to close.

If you're still in a relatively low tax bracket when you reach RMD age, this often signals the end of your golden tax planning window. The added taxable income from RMDs can often make more of your Social Security taxable, creating a higher tax cost than expected.

Another life transition that often signals the end of the golden tax planning window is the death of a spouse.

When the first person dies, the surviving spouse moves from the wider "married filing jointly" tax brackets to the much narrower "single filer" tax brackets. But the household's annual taxable income doesn't usually get cut in half like the brackets and standard deductions do.

Within the narrower single filer category, the widow's income can more easily reach the higher tax brackets, creating a tax hit called the "widow's penalty." While unpleasant to think about, this change in tax situation should be a key piece of proactive planning.

Finding the right Roth conversion amount

Once I'd explained to Mike and Liz the scale of the opportunity in front of them, they agreed that they should take advantage of their golden window.

"Let's do it! Should we convert our whole nest egg right now?" asked Mike.

"Not yet," I told them. "We need to look at each part of your retirement planning first, not just your tax picture."

Taxes are an important part of your retirement planning — but they are just a part of the whole picture. You need to coordinate your decisions on how much to spend in retirement, how to take Social Security and pensions, how to plan your taxes, how to invest and how to set up your estate plan.

I call the process of coordinating your retirement decisions your Retirement Master Plan. I share how to follow this process in five simple steps in my book Retire Today.

For Mike and Liz, we decided together when each of them would take Social Security. Then we mapped out their future tax situations in each year of their expected 30-year retirement.

Once they could see their projected tax rates each year, they could find the years when their tax rates were expected to be higher and lower.

For them, their marginal tax rates were projected to increase when they started their RMDs. They saw the rates projecting lower in the years before they were both claiming Social Security.

They were then able to determine how much to target for Roth conversions, when to do them and how best to pay the tax withholding for each year.

How to take advantage of your golden tax planning window

Mike and Liz spent decades planning how much they could put into their retirement accounts every month.

When they hit retirement, they thought the hard work had ended.

Thankfully, they discovered in time that the beginning of retirement is often the beginning of a golden tax planning window.

It's the time to think ahead and decide how you can intentionally pay taxes, through Roth conversions, to potentially manage your projected lifetime tax liability.

When you hit retirement, don't just push off your tax decisions until RMD time.

Project your taxes now and at each big change in your financial situation, such as starting Social Security, starting a pension and starting your RMDs.

Find out whether your golden tax planning window is open, how long it may stay open and how much of it you could use for Roth conversions each year — before that opportunity closes.

Related Content

• 8 Retirement Tax Strategies Your CPA Won't Tell You
• I'm a Financial Planner: If You're Converting to a Roth IRA, Don't Do It Like This
• Claiming Social Security Soon? 5 Smart Moves to Make Before You File
• Retiring in the Next 12 Months? Answer These 3 Questions Before Your Paycheck Stops
• 5 RMD Mistakes That Could Cost You Big-Time: Even Seasoned Retirees Slip Up

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.

When celebrating a major moment — a big birthday, graduation, marriage — no one wants to consider the financial implications.

But it could be a costly mistake not to take some time to figure out how each life milestone could impact your life savings.

I'm not suggesting leaving the party early. But afterward, find out what, if anything, you should do as a result of having a teenager, getting married or turning another year older.

Here are 11 significant life events and financial considerations for each, coming to you from the vantage point of an experienced senior wealth adviser at Carnegie Private Wealth.

1. When your child turns 13

There's no need to throw cold water on your new teen's celebration but having a 13-year-old means that your Child and Dependent Care Credit expires on the big day.

You'll need to adjust your tax withholdings, stop using pretax Dependent Care Flexible Spending Account (DCFSA) funds for that child's care (any expenses incurred on or after the 13th birthday are ineligible) and prepare for higher out-of-pocket costs for such things as after-school care and summer camp.

Thirteen is when your child becomes eligible for teen-specific bank accounts, which is convenient, since it's also when they can start earning independent income. That's an opportunity to drive home the money lessons you've been teaching up to now.

Money in a piggy bank isn't earning interest. Money in a real bank can. If you want to get serious about saving, consider a brokerage account for your teen.

2. Graduating from high school/turning 18

This is when parents can transfer full control of custodial accounts to their (now adult) child.

At 18, you have the legal right to sign independent financial contracts, open standard bank accounts and apply for credit cards without a co-signer.

Your 18-year-old should already understand the value of saving and the slippery slope credit card debt can be. Does your young adult understand how credit cards affect their credit and the importance of paying off the balance each month?

Before they head to the bank to apply for what might look like "easy money," impress upon them what an 18% to 22% interest rate means — and that building a good credit history is going to make life a lot easier.

3. Graduating from college/starting a first job

You'll need a budget that includes an emergency fund. Saving for long-term goals is important, too, but don't lose sight of the immediate future. A flat tire, a visit to urgent care, reduced work hours or a layoff are all reasons to keep some of your savings readily accessible.

Continue building a solid credit history. If you took out student loans, paying them back should be a priority.

4. Getting married

First, have honest discussions about your current financial standing. Discuss attitudes toward debt. It's very important to sign a prenup.

Becoming a two-income household means it's time to update your budget.

• Maximize your savings
• Decide if you'll have a joint account or separate
• Determine who's paying the bills
• Start a financial organizational system so passwords and account information are safely stored but accessible to you both

Either of you should be able to step in and handle the other's financial "job" if necessary.

5. Having a baby

Along with sleepless nights, you're about to encounter sticker shock over the price of diapers, formula, baby food and everything else little humans require.

But you'll be so enamored with your baby, you'll hardly notice. Now's the time to:

• Open a 529 college savings plan
• Add Junior to your health insurance
• Consider buying life and disability insurance
• Update your will — or get one, if you haven't yet

6. Buying a first house

Time for another new budget. While you're building equity as you pay down your mortgage, you'll also want more cash on hand for the inevitable home repair — because when the HVAC goes out, there's no landlord to call.

Set aside money for maintenance and repairs so an expensive surprise doesn't have to go on a credit card.

7. Turning 50

In my experience, that's when people really start to get serious about firming up retirement planning. It's a good time to evaluate: Do I have enough? And if I don't have enough, what do I need to do to catch up? There's still plenty of time.

8. Turning 65

The Medicare birthday is a big one. You can stop worrying so much about the health insurance burden and shift your thinking to long-term care. Talk to your financial adviser about where to invest the money, you're suddenly not having to spend on health insurance premiums.

9. Turning 75

Depending on when you were born, you might already be taking required minimum distributions (RMDs) from tax-deferred retirement accounts. RMDs generally begin at 73, but the starting age rises to 75 for people born in 1960 or later.

The government eventually requires you to start taking money out of most tax-deferred retirement accounts, and those withdrawals generally count as taxable income.

Talk with your financial and tax professionals about what you're required to withdraw and what to do with money you don't need for living expenses. If charitable giving is important to you, ask whether qualified charitable distributions make sense.

Between 75 and 80 is also when seniors — and their adult children — need to think about quality of life. Community is important as we age. I believe what keeps people excited about life is having friends and something to look forward to.

Loneliness and isolation are devastating to health and well-being. If you don't have people you enjoy spending time with, all the money you set aside for retirement is going to waste.

• Try a new hobby
• Get outside
• Make time for old friends and cultivate new ones

Your longevity depends on it.

10. When you become a grandparent

If you're able to help pay for a grandchild's education, a 529 plan is often a great place to start. The money can grow tax-free, and withdrawals are generally tax-free when used for qualified education expenses.

Before you start writing checks, think about your family as a whole. If one adult child has children and another doesn't, consider whether your giving creates an imbalance you didn't intend. Fair doesn't always have to mean equal, but it should be intentional.

11. Death of parents/inheritance

Receiving an inheritance can be emotional as well as financially complicated, so resist the urge to make major decisions immediately. Start by understanding exactly what you inherited — cash, taxable investments, retirement accounts, real estate or other assets — because different assets come with different tax rules.

You'll want to work with a CPA and your financial adviser before selling, moving or withdrawing inherited assets.

For example, inherited property generally receives a new cost basis based on its fair market value at the owner's death, while many non-spouse beneficiaries of inherited retirement accounts must empty those accounts within 10 years and might have distribution requirements along the way.

Before spending an inheritance, consider how it could strengthen your own financial future.

Life's milestones are worth celebrating. Just remember that once the bubbly is gone and the cake is eaten, a little financial planning can help you focus on what matters and make the most of what comes next.

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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.

Roth conversions get a lot of enthusiastic press, and most of it is deserved. Moving money from a traditional IRA into a Roth can reshape your tax picture for decades and ease the required minimum distribution burden later in retirement.

But somewhere along the way, "conversions can be smart" curdled into "conversions are always smart," and that's where I start to worry.

A Roth conversion is a tool, not a virtue. There are specific situations where they're the wrong move — and sometimes an expensive one. Knowing when to hold off is just as valuable as knowing when to act.

Here are five times a Roth conversion usually doesn't make sense.

1. You're in a high-income year

The entire logic of a conversion rests on paying tax now, at today's rate, to avoid tax later. That only works in your favor if today's rate is lower than the rate you expect to face down the road.

Convert during a peak earning year, when your income is already pushing the top of a bracket, and you're doing the opposite: Paying tax at one of the highest rates you'll ever see.

If you're still working and at the height of your career, or you had an unusually large income event this year, that's generally the worst possible time to stack a conversion on top.

The better move is often to wait for a lower-income year, which for many people arrives after they stop working but before required minimum distributions begin at age 73.

2. You'd have to use the IRA itself to pay the tax

This one is a quiet deal-breaker that people miss. A conversion works far better when you can pay the resulting tax bill from outside funds in a taxable brokerage or savings account.

If the only way to cover the tax is to pull extra from the IRA you're converting, you erode the whole benefit. You're shrinking the amount that actually makes it into the Roth, and if you are under 59½, the portion withheld for taxes could itself trigger a penalty.

Picture converting $100,000 and needing roughly a quarter of it to pay the tax. If that quarter comes out of the IRA rather than a separate account, only three-quarters of the money reaches the Roth, and you've lost years of potential growth that qualified Roth withdrawals would have delivered tax-free.

When there's no outside cash to pay the tax, a conversion frequently doesn't make sense. The answer is to wait until you have the liquidity to do it right, or to convert a smaller amount you can actually afford to cover.

3. You expect your tax rate to fall in retirement

Not everyone faces higher taxes later. Plenty of people will drop into a lower bracket once the paychecks stop, especially if they don't have enormous traditional balances generating large future RMDs.

If you genuinely expect your retirement tax rate to be lower than it is today, converting now means voluntarily paying a higher rate to avoid a lower one. That is backward. The conversion crowd sometimes assumes everyone's taxes are headed up, but that is an assumption, not a fact, and it deserves to be tested against your actual projected income.

For some people, simply taking ordinary distributions in retirement at a modest rate beats prepaying tax today. The only way to know is to project your retirement income honestly, including Social Security and any pension, rather than assuming the worst about future rates.

4. The money will pass to heirs who get a step-up anyway

Estate considerations can flip the entire calculation. Consider someone late in life with a serious health situation, whose assets are likely to pass to heirs before long.

Traditional IRA dollars left to heirs are taxed as those heirs withdraw them, which is a real consideration. But other assets, like appreciated stock in a taxable account, generally receive a step-up in cost basis at death, which can wipe out the embedded capital gains for the heirs.

In a case like that, spending energy and tax dollars converting a traditional IRA may make less sense than simply leaving the accounts as they are and letting the estate planning rules do the work.

This is exactly the kind of situation where a reflexive "always convert" instinct can cost a family money rather than save it. It is worth coordinating with an estate planning attorney before acting.

5. State taxes erase the federal benefit

Federal brackets get all the attention, but your state often wants a cut of a conversion, too. If you live in a high-tax state today and realistically plan to retire somewhere with low or no income tax, converting now can mean paying state tax you could have sidestepped entirely by simply waiting until after you move.

The federal math might look fine in isolation, but once you layer your current state's tax on top of the conversion, the case can fall apart.

The decision and your geography are tied together, and analyzing the conversion without your specific state in the picture can lead you somewhere you wouldn't choose if you saw the full bill.

The pattern worth noticing

Look at these five situations and a theme emerges. A Roth conversion isn't good or bad on its own. It's good or bad relative to your specific circumstances:

• Your current bracket vs your expected future bracket
• Whether you have outside cash to pay the tax
• Your estate plans
• Your state

Strip away those specifics and "always convert" is just a slogan. What makes the slogan dangerous is that it sounds responsible. It carries the glow of disciplined, forward-thinking planning, which is exactly why people follow it without checking whether it fits their own numbers.

I'm not arguing against conversions. Used in the right years, with the tax paid from the right place, they remain one of the more useful planning tools available to people heading into retirement.

I am arguing against treating them as automatic. The same move that helps one person in a low-income gap year can hurt another who is at peak earnings, short on outside cash or about to relocate to a no-tax state.

Before you convert, the honest question isn't "Should everyone do this?" It's "Does this make sense for me, this year, given everything else?"

Sometimes the answer is an enthusiastic yes. Sometimes the most valuable thing a conversion analysis produces is the decision to wait.

Both are wins, and knowing the difference is what separates a real strategy from a popular one.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59½ or prior to the account being opened for five years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Related Content

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• Why a Roth Conversion Is Wrong for Most People But Often Right for Pension Holders
• Timing Is Everything for Roth Conversions: An Expert's Guide to the Right Strategy
• How to Coordinate Claiming Social Security With Your Tax Bracket
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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.

You spend 30 or 40 years doing almost everything right.

Save instead of spend. Max out the 401(k). Invest the bonus. Live below your means. Think twice before splurging. Let compound growth do its work.

Then retirement arrives, your financial adviser tells you that you have plenty of money, and suddenly the rules are supposed to change.

Go ahead. Take the trip. Remodel the kitchen. Fly first class. Help the grandchildren. Enjoy yourself.

For some lifelong savers, shifting from accumulating wealth to spending it can be one of the hardest financial transitions of retirement. I’ve heard this repeatedly from financial advisers who work with affluent retirees. Some clients have multimillion-dollar portfolios and financial plans that remain solid well into their 90s, yet they still hesitate to spend $10,000 on a family vacation or upgrade a home that no longer meets their needs.

The problem often isn’t whether they can afford it; it’s whether they can give themselves permission to spend it.

When $8 million still doesn’t feel like enough

Tessa Steinemann of True Alpha Wealth Management in Sandusky, Ohio, works with a retired woman we’ll call Suzie.

Suzie, 65, and her 75-year-old husband have more than $8 million in investable assets. Yet when she considered spending about $10,000 to take her family away for Christmas, she struggled with the decision.

The couple hardly touches its portfolio other than the husband’s required minimum distribution from his IRA. Financially, the trip wasn’t going to derail anything.

Emotionally, it was another story. "A lot of the hesitation to spend with the baby boomer generation comes from their parents living through the Great Depression," Steinemann says.

Suzie’s parents were extraordinarily frugal. Their children worked while growing up, spending was closely monitored and the family absorbed a powerful lesson: Money needed to be protected. Those lessons can remain long after the circumstances that created them disappear.

Steinemann reviewed Suzie’s financial plan and showed her what the couple could comfortably spend each year. But she also reframed the decision around something a spreadsheet can’t measure very well: time.

Suzie’s adult children have successful businesses and don’t need a large inheritance. For them, a family vacation today could be worth far more than receiving additional money decades from now. So Suzie booked the trip.

The episode illustrates an irony I’ve noticed in writing about retirement: The people who become particularly good at accumulating wealth can sometimes become particularly uncomfortable using it.

Disciplined savers question purchases. They comparison shop. They avoid waste. They delay gratification. Those are excellent habits when you are 45 and trying to build a retirement portfolio, but they can become restrictive at 70.

Spending your portfolio can feel scary

For many retirees, the difficulty begins with something more fundamental: After a lifetime of receiving a paycheck, spending from investments feels wrong.

"It’s a tricky process to go from savings to spending," says Lisa Kirchenbauer of Omega Wealth Management in Arlington, Va.

Kirchenbauer recently began working with a high-net-worth Washington, D.C.-area couple in their early 60s who are transitioning from executive careers into retirement. They had never worked with an adviser and brought several common worries with them: spending too much, long-term care costs and the possibility of a major market downturn.

They also have no children, adding another question to the retirement calculation: Who will take care of us when we are old?

The couple has significant financial resources and recently built a dream home in a community they love. Kirchenbauer is helping them develop an aging-in-place strategy while also modeling their future spending.

But the numbers are only part of the job. Some clients want to see detailed projections. Others need frequent reassurance. And for couples who have spent decades measuring financial progress by how much they've saved, drawing money down can feel like going backward.

Advisers like Kirchenbauer sometimes find themselves doing something retirees never imagined they would need: permitting them to spend their own money.

When watching the balance rise becomes the reward

Ryan Maynard of Vaquero Private Wealth in Dallas has seen another version of spending guilt. For some wealthy clients, he says, the pleasure of accumulating money wasn’t primarily about what the money might someday buy. The pleasure was watching the number get bigger.

"Once you understand that, the spending guilt behavior makes sense," Maynard says. "Spending doesn't feel enjoyable; it feels like losing ground."

One of his clients built a uniform-manufacturing business that eventually produced several million dollars of wealth. She had worked so hard for so many years that she rarely traveled. After retiring, the habit continued. Travel felt unfamiliar and intimidating, and she still found herself thinking she didn’t have enough time or money.

Maynard worked with a multimillionaire who continued to live in a high-crime neighborhood despite ongoing safety concerns, because she believed she couldn’t afford to move. Another client, in his 80s and with millions of dollars in excess capital, resisted accessibility improvements to his house even after multiple falls landed him in the hospital. The money was there, but changing the behavior was harder.

Maynard sometimes runs a financial plan twice: once including the expense that’s holding clients back and once without it. Seeing two nearly identical long-term outcomes can help a client understand how little a purchase may affect overall financial security.

Your spouse may have a different money story

Spending anxiety becomes more complicated when couples see money differently. One spouse may view their savings as a tool to enjoy retirement. The other may still see the portfolio as protection against everything that could go wrong.

Maynard had one couple in which a spouse became more comfortable traveling after they set aside three years of spending needs in cash. Another client needed monthly financial planning reviews before she felt comfortable continuing to spend as planned.

The solution wasn’t necessarily earning higher returns, but identifying what would make the fearful spouse feel safe.

Derek Wittjohann of Premier Path Wealth Partners in Madison, N.J., saw the power of family history with a client whose father died without leaving enough financial support for his mother. The son watched his mother struggle and made himself a promise: That would never happen to his family.

Years later, he had significantly exceeded his own retirement savings goal. He understood intellectually that the family had enough. Emotionally, the childhood lesson remained powerful. Wittjohann stress-tested the portfolio using conservative assumptions and mapped income from Social Security, pensions, investments and required distributions.

But one of the most productive conversations came when the client’s wife joined the discussion. She talked about the experiences they wanted together and what postponing retirement was costing them in time.

Bottom line: The client was effectively trying to improve an already extremely strong retirement plan while sacrificing years when he and his wife were healthy enough to travel and enjoy it.

Give your money a job

For retirees who find the idea of "spending more" uncomfortable, smaller buckets can help. Evan Mills of Scholar Advising in Winston-Salem, N.C., might tell a client that $30,000 a year is specifically available for travel rather than simply saying, "You have plenty of money. Spend more."

"If someone has $500,000 available annually, the number may feel extravagant. Divide it into $200,000 for living expenses, $100,000 for travel, and $200,000 for family gifts, for example, and each dollar suddenly has a job. It makes it look less like reckless spending and more like permission to spend," Mills says.

That doesn’t mean retirement should turn an Applebee’s regular into a five-star restaurant connoisseur.

One of Mills’ clients had accumulated about $20 million in company stock before retiring from a senior executive position in California and moving to Georgia. The client didn’t want a flashy new lifestyle that might create distance from friends.

So the upgrades were modest. They still traveled, but sometimes flew first class. They hired a black car instead of an Uber. In Italy, they chose private tours. At familiar restaurants, they might order the better bottle of wine and leave a little more for the tip.

Their lifestyle improved without forcing them to become people they didn’t recognize or wondering if their neighbors would talk about them.

Spend it, gift it — or leave it?

For some families, the question eventually becomes less about whether the money will be spent and more about when it will be transferred.

Wittjohann calls it the "warm hand versus cold hand" decision: Do you give money to loved ones while you are alive and can see them use it, or leave a larger inheritance after your death?

He works with a 70-year-old woman whose family recently sold a successful New York jewelry business. She wants to provide for her children but also worries about protecting the money from possibilities such as a future divorce.

There is no universal answer. Some retirees care deeply about leaving a large legacy. Others would rather pay for a family vacation, help with a first home or fund a grandchild’s education today.

The first step is deciding what you actually want your wealth to accomplish.

What was all that saving for?

Perhaps that is the question lifelong savers eventually need to ask themselves. Saving is usually attached to a future purpose. For decades, retirement itself may have been that purpose. Once retirement arrives, the job of the money can change.

Your portfolio might provide security. It might create experiences with family. It might support children, grandchildren or charities. Or it might simply give you the freedom to make life a little easier and more enjoyable.

As Maynard puts it, the purpose of accumulated assets is different for each person. The goal is to understand what you want the money to do for you.

You don’t need to abandon the habits that made you financially successful. But after a lifetime of saving, retirement means finally learning to enjoy what you've built.

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Bob and Sue thought they had it made when they retired at 63. They had hit their savings goal of $2 million, and their house was paid off.

They felt their work stress slip away as they settled into their retired life.

Their morning commute turned into coffee on the porch. The only deadline they had was signing up on time for their pickleball league. And their projection of lower taxes at retirement was spot on.

With Social Security and a pension covering their bills, and their savings account covering "extras" like travel and gifts to the grandkids, their first retirement tax bill was much lower than when they were working.

Life was carefree — until they turned 73 and they got their first notice for required minimum distributions (RMDs).

Thankfully, their retirement money had grown. But now, more than $3.2 million in their traditional retirement accounts was subject to RMDs.

They were required to take out more than $120,000 in taxable income each year, and their RMDs were projected to grow even higher in the future.

When they retired, Bob and Sue figured their RMDs would push them into a higher tax bracket, but they didn't think it would be that bad.

But when they got there, they wished they had done something about the RMD problem sooner.

Sadly, Bob and Sue — and far too many others in their 70s — had missed what I call their "golden tax planning window." In their 60s, they could have chosen how much of their retirement income would be taxable, instead of being required to take a minimum taxable amount when they hit RMD age.

They thought they had their taxes set in their 60s because they had a lower tax bill each year than when they were working.

Yet they were unknowingly making a huge tax mistake each year by failing to use tax planning strategies that would help them avoid nasty tax surprises in their 70s.

Here are the three biggest mistakes I believe retirees can make during the golden tax planning window.

Tax Mistake No. 1: Missing the best years for Roth conversions

Bob and Sue were actually enjoying tax season in the early part of retirement. They were in a lower tax bracket than when they were working and they really weren't worried about how much they owed, or whether they were facing a tax penalty.

But then they were faced with their first RMD of more than $120,000.

That caused their Social Security to go from a small amount showing up as taxable to the maximum 85% showing up as taxable income.

And it pushed them from regular Medicare costs to paying extra through the IRMAA (income-related monthly adjustment amount) Medicare surcharges.

Each low tax year of their 60s felt like a win. Instead, it was a missed opportunity to take advantage of their lower tax bracket by making use of Roth conversions.

A Roth conversion allows you to intentionally pay taxes — within the tax bracket you'd like — by choosing the timing and amount of your traditional IRA that shows up on your tax return.

This level of control on the timing of your tax payments is generally the biggest during your golden tax planning window — the time between when you retire and when your RMDs start at 73.

When you retire in your 60s, your taxable income is generally the lowest it's been in decades. This allows you to convert part of your traditional IRA to a Roth IRA so that your future gains can grow tax-free — and won't be subject to required taxable distributions later on as an RMD.

Here is a three-step action framework I created to help retirees in their 60s make the most of their golden window:

Find your lower-income years: Usually these are the gap years between when you stop working and when guaranteed retirement income (pensions, Social Security benefits, RMDs) begins.

Estimate your future RMDs: Using the IRS' formula, calculate what your traditional IRA balances will be at your RMD ages, how large those RMDs will be and how much you'll have to pay in taxes.

Compare your current versus future tax brackets: If your tax rate on a Roth conversion during your golden window is lower than the tax rate on an RMD will potentially be in the future, that's your opportunity to reduce your overall lifetime taxes.

Tax Mistake No. 2: Forgetting the tax component of Social Security

Bob and Sue were like many retirees who view Social Security strictly as an income decision.

They were like many of their friends, who took their Social Security right away because it helped them get enough income to retire.

Other retirees look at the near 8% growth on waiting to file Social Security and they choose to delay their claiming, so they get the most income later on.

Whether you take Social Security early or late, focusing just on the income component may often mean you overlook the tax flexibility and lifetime tax bill that your Social Security decision can create.

Start claiming Social Security too soon, and you might drive up your taxable income for the rest of your retirement. This could potentially slam shut your golden window for Roth conversions, resulting in higher RMDs later on.

On the other hand, if you start claiming maximum benefits at 70, and you haven't already made moves to reduce the taxable impact of your RMDs, you could be facing the same basket of tax problems.

Sure, in a vacuum, letting your Social Security benefits grow by approximately 8% per year is a smart move. But maintaining long-term financial flexibility and reducing your lifetime tax liability are also parts of the Social Security equation.

Before claiming your Social Security benefits, remember to:

Evaluate your claiming age: Calculate how your projected benefits at various ages affect the other parts of your financial plan — especially taxes and your golden window for Roth conversions.

Compare your tax projections: Run scenarios showing how your taxes could look if you claim at 62 versus claiming at full retirement age and later.

Target Roth conversion opportunities: Once you start taking Social Security, your golden window for Roth conversions starts to close. Make the most of these low-tax years before you are on Social Security so that you're taxed less in the future as well.

Tax Mistake No. 3: Leaving the survivor with the 'widow's penalty'

No one wants to imagine a world without them or their spouse in it. But preparing for both of those difficult scenarios is an important part of retirement planning.

Bob and Sue were fortunate to both be living as they hit their RMD age of 73. But at some point, one of them will pass away. The other could be faced with the same RMD amount but with the single taxpayer brackets, instead of married filing jointly brackets.

When you transition from a married couple filing taxes jointly to a single filer, the tax brackets and the standard deduction are cut in half. But RMD percentages often stay relatively the same — and the taxable RMD amount stays relatively the same.

With a similar taxable distribution, and half the room in each bracket, the widow runs through the tax brackets quicker, getting to the higher tax rates quicker.

For a surviving spouse, the taxable income often stays nearly the same, yet their tax bill goes up.

To avoid this "widow's penalty," you can take the opportunity during your golden window to:

Model survivor tax projections: What will each spouse's income and tax brackets look like if they become a single filer at various ages?

Consider Roth conversions while filing jointly: Take advantage of the wider married filing jointly tax brackets while you both are still living. The more money you can convert into a Roth IRA now, the more potential tax-free money a surviving spouse will have in the future.

Evaluate the long-term household tax burden: Too many 90-year-old widows are living off the income and tax decisions their husbands made decades ago. Couples should plan for each survivor's long-term tax scenario before they start claiming Social Security.

Create your tax-smart retirement plan

When you consider not just this year's taxes, but your lifetime tax bill, your 60s might be the most valuable decade of your entire life.

And while each of these three mistakes — missing out on Roth conversions, forgetting the tax aspect of Social Security and leaving the survivor with the widow's penalty — can be costly, I believe the biggest retirement planning mistake you can make in your 60s is not realizing how each decision coordinates with the other.

The key to retirement planning, which I cover in more detail in chapter 5 of my book Retire Today, is to follow a system that helps you make retirement decisions in a coordinated manner.

During the golden window you can often manage your tax strategy for the rest of your retirement by:

Using your lower-income years intentionally: Pay lower taxes today "on purpose" through Roth conversions.

Evaluating Social Security through a tax lens: Don't just claim benefits because you stopped working. And don't delay taking benefits just to maximize them. Consider, as well, using your Social Security plan to help lower your lifetime taxes.

Planning for the survivor tax situation before it happens: Try to avoid the "widow's penalty" by shifting taxable IRAs to the tax-free growth potential of Roth IRAs while you still have the advantage of larger tax brackets on your married filing jointly tax return.

Remember: Once the golden tax planning window closes, it's likely closed for good. Unlike Bob and Sue, use the lower tax brackets you might find in your 60s to lower your tax bill over your lifetime.

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• Don't Get Caught by the Medicare Tax Torpedo: A Retirement Expert's Tips to Steer Clear
• Retiring in the Next 12 Months? Answer These 3 Questions Before Your Paycheck Stops
• Are Roth Conversions for Retirees Dead in 2026 Because of the New Tax Law?

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.

Each week in our Ask the Tax Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at four tax questions from readers on retirement plans and IRAs, including a big change to 401(k) catch-up contributions. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. 401(k) catch-up contributions

Question: I am 53, and I make tax-deferred contributions each month to my employer's 401(k) plan. This year, I intend to max out my regular contributions and also make catch-up contributions to the plan. However, I was told by my employer that, because of the amount of my annual salary, I can put catch-up contributions only into my employer's Roth 401(k). Is this true?

Joy Taylor: Yes. This change, which was enacted under the 2022 Secure 2.0 Act, first takes effect this year. Employees who are 50 and older, and whose annual compensation exceeds $150,000 in 2025, can make 401(k) catch-up contributions only to a post-tax Roth 401(k). Note that the IRS offered a grace period until 2027 for employers and plans to implement the rule in good faith, but many employers have already done so.

2. Roth IRA conversions

Question: I am 75 years old. I am thinking of converting a portion of my traditional IRA to a Roth IRA. Can I do that before taking my required minimum distribution (RMD) from my traditional IRA for the year?

Joy Taylor: No. You must first take your annual RMD for the year before doing the Roth conversion.

For people with multiple traditional IRAs, the rule that you must take your annual RMD before doing a Roth conversion for the year can be tricky. That’s because if a person has multiple traditional IRAs, the total aggregate RMD for the year must be withdrawn during the year before doing a Roth conversion from any of the traditional IRAs. (Note that this doesn’t include RMDs from 401(k)s or other workplace retirement plans.)

3. IRA inherited from spouse

Question: My wife passed away last year in late December. She had a traditional IRA, and I am the beneficiary. After she died, I elected to have her IRA funds added to my traditional IRA, but that didn't happen until February of this year. How do I calculate my RMD for 2026?

Joy Taylor: Since you rolled your deceased wife's IRA into your own IRA, you are treated as owning the IRA. So you determine your RMD as if you were the owner, beginning the year you are deemed to be the owner (that would be 2026, when you added the funds to your IRA). You would then determine your RMD for 2026 using your life expectancy. I am guessing your wife, while alive, already took her RMD for 2025, the year of her death. If not, you have until December 31, 2026, to do so.

4. Inherited Roth IRA

Question: I inherited a Roth IRA from my uncle earlier this year. Do I have to take annual RMDs?

Joy Taylor: No. Roth IRA owners do not need to take RMDs. You should, however, be aware of the 10-year rule for inherited IRAs. Similar to the rules for traditional IRAs, many non-spousal beneficiaries of Roth IRAs inherited after 2019 must clean out the account by the end of the 10th year after the owner’s death.

Because Roth IRA owners are not required to take annual RMDs, beneficiaries of inherited Roth IRAs needn’t worry about whether the original account owner died before or after the starting date for taking RMDs. Roth IRA beneficiaries can opt to clean out the account in year 1, wait until year 10 to take out all the Roth IRA funds, skip years, or take annual distributions, provided they fully deplete the Roth IRA within the 10-year period.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups. So keep those questions coming!

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 editors and experts, in this Q&A series, 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 or tax advisor regarding any questions you may have in relation to the matters discussed in this article.

More Reader Questions Answered

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• Ask the Editor: Estimated Tax Payments and Withholding
• Ask the Editor: Questions on Selling a Home
• Ask the Editor: 10-Year Rule for Inherited IRAs
• Ask the Editor: Tax Questions on Roth IRA Conversions
• Ask the Editor: Tax Rules for Landlords

When we talk about financial literacy, the conversation almost always runs in one direction: How to budget, how to manage debt, how to start investing. These are the right lessons to teach, and we should keep teaching them.

But after more than three decades working in retirement services, I've come to believe we're missing a critical and significant part of the story. We spend enormous energy teaching people how to build savings and comparatively little teaching them how to hold on to what they've saved.

I'd go further: Preservation isn't just a neglected topic within financial literacy — it may be the best evidence we have of whether or not financial literacy is actually working.

Budgeting and investing are skills a person can learn in a classroom. Preservation is what happens later, out in the world, when that knowledge gets tested against a job change, a cash crunch or a moved-and-forgotten retirement account. It's less a lesson than a track record.

What's at stake?

Consider what actually happens over the course of a career:

• A worker leaves a job and is handed a check for their 401(k) balance instead of rolling it into a new plan or an IRA
• A saver facing a cash crunch takes a hardship withdrawal and, once the crisis passes, never rebuilds what was taken out
• Someone borrows against their retirement savings account and then changes jobs before the loan is repaid, triggering taxes and penalties on what's left outstanding
• A small account from a job held a decade ago simply sits forgotten, never consolidated, never growing, until the person who owns it loses track of it entirely

None of these moments feels dramatic when it happens. A cashed-out check for a few thousand dollars doesn't feel like it's undoing years of discipline. But that's exactly what it's doing.

Money withdrawn from a tax-advantaged retirement account doesn't just disappear from a balance sheet — it disappears from the compounding process that makes retirement savings work in the first place.

A $5,000 withdrawal at age 30 is not a $5,000 loss by age 65. Depending on market returns, it can be tens of thousands of dollars in lost growth. Multiply that across a career in which the average worker changes employers roughly a dozen times, and the scale of the problem comes into focus.

According to the Employee Benefit Research Institute (EBRI), about $92 billion in savings was lost through premature cash-outs in 2015 alone.

The damage is greatest for the savers who can least afford it — younger workers, lower-income workers and workers of color, who are disproportionately likely to hold the small balances most at risk of being cashed out.

The problem with 401(k) rollovers

Here's the uncomfortable part: This usually isn't a failure of literacy at all. It's a failure of infrastructure. A worker who changes jobs and wants to roll over a small balance is, in most cases, on their own — filling out paper forms, making phone calls and coordinating between two institutions that have no standard way of talking to each other.

Faced with that friction on the way out the door of a job they're leaving, most people take the path of least resistance. That path is usually a cash-out.

Behavioral research backs this up: Defaults shape outcomes more reliably than education alone. When we ask someone to make a good decision under time pressure, we get inconsistent results, no matter how well we've taught them.

When we build systems that carry a saver's account forward automatically unless they choose otherwise, we get consistent ones.

Some retirement plans have begun building this in directly — automatically carrying a small balance into a new employer's plan unless the saver opts out, rather than requiring them to request a rollover themselves.

It's worth asking your HR department or plan administrator whether your new employer's 401(k) has this kind of feature, since it can mean your balance follows you with no action required on your part.

It's a structural fix to a structural problem: It makes preservation the default and removes the friction that leads to cash-outs in the first place.

None of this means financial literacy doesn't matter — it means we've defined it too narrowly. Teaching someone to save is necessary but insufficient if we don't also teach them that a small, forgotten 401(k) is not "found money" to be cashed out at the first opportunity — it's the same nest egg of retirement savings they've been building all along, just sitting in a different account.

Teaching someone to invest is necessary but insufficient if we don't also teach them that a 401(k) hardship withdrawal, however justified in the moment, comes with a cost that compounds long after the hardship has passed.

Four ways to hold on to your savings

So what does preservation look like in practice?

• If you're leaving a job, default to rolling your 401(k) into your new employer's plan or an IRA rather than taking a check. Even a small balance benefits from decades of continued compounding.
• If you've taken a hardship withdrawal, treat rebuilding that balance as a goal with the same seriousness as building it the first time.
• If you have an outstanding loan against your 401(k) and you're changing jobs, find out the repayment deadline before you leave. Most plans require repayment shortly after separation, or the balance is treated as a taxable distribution.
• If you suspect you have a left-behind account from a past job, there are tools that can help you track it down, such as the Retirement Savings Lost and Found Database, which was established under SECURE 2.0.

If financial literacy is going to mean anything over the course of someone's working life, it has to expand beyond the accumulation phase, and it has to be reinforced by systems that make preservation the easy choice rather than the disciplined exception.

Preservation isn't the end result of financial literacy — it's the proof of it.

Building wealth and protecting it are not the same skill. It's time we started teaching and building for both.

Related Content

• Is Your IRA Rollover Stuck in Neutral? This Simple Mistake Can Cost You a Lot of Money
• Portable Retirement Plans: Switching Jobs and Keeping Your Savings Gets Easier
• How to Roll Over a 401(k) in Five Steps
• How 401(k) Auto Portability Boosts Women's Retirement Savings
• What to Do With Your 401(k) When You Leave Your Job

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.

While Roth conversions are often talked about in retirement planning, they aren't the right strategy for everyone.

For retirees with modest savings and no pension, leaving traditional accounts untouched until it's time to start RMDs can work well. But retirees with pensions face an entirely different tax reality.

In a recent article, Joe F. Schmitz, a CFP® and CEO of Peak Retirement Planning, explains why Roth conversions are so important for retirees with pensions. Schmitz is a regular contributor to Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation.

Check out these five questions to test your knowledge about Roth conversions, pensions and taxes.

Good luck! (Don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

Related Content From Adviser Intel

• Why a Roth Conversion Is Wrong for Most People But Often Right for Pension Holders
• When Is a Roth Conversion a Bad Idea? 6 Situations Retirees Should Consider Carefully
• If You're Converting to a Roth IRA, Don't Do It Like This
• 5 Reasons Roth Conversions and Pensions Work Well Together
• 7 Times to Dip Into Your Roth IRA if You Have a Pension (and When to Leave It Alone)

Roth conversions have become one of the hottest topics in retirement planning. Browse financial headlines long enough, and you'll likely encounter conflicting advice.

Some experts argue that everyone should convert their traditional IRA to a Roth. Others insist it's a costly mistake. The truth is far more nuanced.

As a CERTIFIED FINANCIAL PLANNER® and CEO of Peak Retirement Planning, I can tell you that for most Americans, a Roth conversion probably isn't necessary. However, retirees with pensions often live by a different set of tax rules (I wrote a book for those with pensions, The 2% Club, that you can request for free here.)

Their guaranteed income can create tax challenges that don't apply to the average retiree, making Roth conversions worth a much closer look.

Before deciding whether a Roth conversion belongs in your retirement strategy, it's important to understand the factors that actually determine whether the math makes sense. You can learn more about this in my YouTube video:

The only question that really matters

Many investors focus on whether they can afford to pay the taxes on a Roth conversion today. While that's certainly part of the equation, it isn't the deciding factor. The more important question is this: Will your total tax rate be lower today than it will be later?

That "total tax rate" extends beyond your federal income tax bracket. A Roth conversion can also influence:

• State income taxes
• Medicare IRMAA surcharges
• Social Security taxation
• Capital gains taxes
• Estate planning outcomes

When viewed together, your true tax cost could look very different than your federal bracket alone suggests.

Why most people don't need a Roth conversion

For many retirees, taxable income will naturally decline when they stop working. Someone who retires with modest retirement savings, no pension and Social Security as their primary income source usually remains in relatively low tax brackets throughout retirement.

In those situations, paying taxes today through a Roth conversion could result in paying more tax than necessary.

Roth conversions are frequently overpromoted, as they can be powerful, but they aren't universally beneficial.

Pension holders face a different tax reality

Rather than seeing their income in retirement decline, retirees with pensions often have multiple sources of guaranteed retirement income arriving simultaneously:

• Pension payments
• Social Security benefits
• Required minimum distributions (RMDs) from traditional retirement accounts

Each source adds taxable income, and together they can keep retirees in higher tax brackets for decades.

For households that have accumulated substantial balances in tax-deferred accounts, such as 401(k)s, IRAs, TSPs or 403(b)s, RMDs can make the situation even more challenging as they grow over time.

That's why many pension recipients find themselves paying as much, if not more, in taxes during retirement than they did while working.

Today's tax environment creates planning opportunities

Another consideration is today's tax landscape: Current tax laws provide relatively favorable tax rates and expanded standard deductions compared with historical norms.

While no one can predict future legislation, many economists expect government revenue needs to increase over time because of rising national debt and the long-term funding challenges facing programs such as Medicare and Social Security.

If future tax rates eventually rise, converting portions of traditional retirement accounts while rates remain relatively low could produce meaningful lifetime tax savings. The objective isn't simply to pay taxes sooner, but to pay them when they're expected to be lower than they otherwise would be.

Don't look only at your tax bracket

One of the biggest mistakes retirees make is evaluating Roth conversions using only the federal tax tables. Your retirement tax picture is much more interconnected.

Increasing taxable income through a Roth conversion could:

• Cause more of your Social Security benefits to become taxable
• Push you into a higher Medicare IRMAA bracket, increasing Medicare Part B and Part D premiums
• Raise your capital gains tax rate
• Increase state income taxes

This is why comprehensive tax planning frequently produces better results than simply converting up to the top of a particular tax bracket.

The widow's penalty can create future tax problems

Married couples regularly overlook one significant future risk: When one spouse dies, the surviving spouse generally transitions from married filing jointly to single tax status. At that time:

• Tax brackets and IRMAA thresholds shrink
• The standard deduction lowers
• One Social Security benefit typically disappears
• The surviving spouse often continues receiving pension income and RMDs

The result can be substantially higher taxes for the surviving spouse. Completing Roth conversions while both spouses are alive allows couples to take advantage of the wider married tax brackets before this transition occurs.

Your children's tax situations matter, too

If leaving money to your children is one of your goals, their future tax bracket deserves consideration as well.

Under current law, most non-spouse beneficiaries must empty inherited retirement accounts within 10 years. A child inheriting a large traditional IRA might be required to recognize hundreds of thousands of dollars of taxable income during that period, potentially pushing them into significantly higher tax brackets.

On the other hand, if your children are likely to remain in relatively low tax brackets, leaving them traditional retirement assets instead of paying higher taxes through Roth conversions today could prove more efficient.

Estate planning isn't one-size-fits-all, and understanding your heirs' financial circumstances is an important part of the analysis.

Tax diversification provides flexibility

Many retirees have accumulated the vast majority of their wealth inside tax-deferred retirement accounts, and that creates a challenge. Every dollar withdrawn becomes taxable income, leaving retirees with limited flexibility when tax laws or personal circumstances change.

Building assets across multiple account types — including traditional retirement accounts, Roth accounts and taxable brokerage accounts — creates what many planners call tax diversification.

Having multiple "tax buckets" allows retirees to decide where retirement income comes from each year, making it easier to adapt to changing tax laws, Medicare thresholds or unexpected expenses.

Where you live can affect the timing

State taxes can also influence whether a Roth conversion makes sense. Someone planning to relocate from a high-income-tax state to one with no state income tax could benefit from delaying Roth conversions until after the move.

Conversely, someone expecting to move into a higher-tax state might decide to accelerate conversions before relocating.

State taxes generally receive less attention in planning than federal taxes, but they can meaningfully affect lifetime tax costs.

A common Roth conversion myth

One objection frequently raised against Roth conversions is that paying taxes today means losing years of investment growth. That argument overlooks an important concept: Taxes on a traditional IRA already represent a future liability.

Paying that liability earlier doesn't necessarily reduce long-term wealth if tax rates remain unchanged — it simply satisfies the government's share sooner.

Where Roth conversions can create additional value is by reducing future RMDs, potentially lowering Medicare premiums, limiting Social Security taxation, providing greater withdrawal flexibility and protecting against higher future tax rates.

The comparison isn't simply about investment growth — it's about maximizing what you keep after taxes over the course of retirement.

The bottom line

Roth conversions aren't appropriate for everyone. In fact, many retirees with modest savings and no pensions might be better off leaving their traditional retirement accounts untouched.

Pension holders, however, ordinarily face a different reality. Guaranteed income, RMDs and long retirement horizons can create tax burdens that make proactive planning far more valuable.

Rather than asking whether Roth conversions are "good" or "bad," ask a better question: Will paying taxes today likely cost less than paying them later?

For retirees with pensions and substantial retirement savings, the answer is often worth exploring through a comprehensive, long-term tax strategy that considers not only income taxes but also Medicare premiums, Social Security taxation, estate planning and future tax flexibility.

Because when it comes to retirement, it's not just about how much you've saved — it's about how much you'll ultimately keep.

Related Content

• Do You Know Why a Roth Conversion Isn't Right for Everybody? Test Your Knowledge With This Quiz
• 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)
• 10 Retirement Fixes You Can Implement Today to Strengthen Your Financial Plan
• When Is a Roth Conversion a Bad Idea? 6 Situations Retirees Should Consider Carefully

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 millions saved in your 401(k) and IRA, that feels like a win, and it is. But there's one way a large balance quietly works against you: The more money sitting in tax-deferred accounts, the more likely the IRS is to tax the maximum allowable portion of your Social Security check.

That happens by default, unless you plan around it.

Most people who reach this point spent decades doing everything right: Saving consistently, maxing out their 401(k), following the advice they were given. That advice was built for accumulation, not for the withdrawal phase.

This is often called the Social Security tax torpedo. It shows up the same way in almost every retirement plan I, as the founder of MOKAN Wealth Management, review for the first time. It's not a mistake. It's what happens when there's no planning for the tax impact of retirement withdrawals.

How the IRS decides what gets taxed

The IRS uses a number called provisional income to decide how much of your Social Security check gets taxed: Your regular income, plus any tax-free interest, plus half of your Social Security benefit.

Once that number crosses certain levels, your Social Security starts getting taxed, and those levels have never been adjusted for inflation.

Married couples filing jointly start owing tax at $32,000 of provisional income. Above $44,000, up to 85% is taxable. Single filers cross at $25,000 and $34,000.

Frozen since the 1980s and 1990s, these thresholds mean a couple with a modest combined income can land at the maximum simply because the numbers are so outdated.

In retirement, income piles on top of itself:

• Your IRA withdrawal gets taxed
• Your Social Security gets taxed on top of that
• Medicare premiums climb along with both

If almost all your savings sit in a traditional IRA or 401(k), every dollar you pull out to pay the bills is fully taxable, and adding half your Social Security on top pushes most retirees past every threshold in year one, often by a wide margin.

Nobody made a bad decision. They just never built a different kind of account to draw from.

The one exception is a Roth IRA. Money pulled from a Roth doesn't count toward provisional income, doesn't show up on your tax return and doesn't raise Medicare premiums. It's the one source of retirement income the IRS leaves alone.

The three buckets every retirement needs

Think of your savings in three buckets:

• Money you've already paid tax on (a brokerage account, where you owe tax only on the growth)
• Money you haven't paid tax on yet (a traditional IRA or 401(k), where every dollar withdrawn is taxed as ordinary income and where most people hold nearly all their savings)
• Money you'll never pay tax on again (a Roth IRA, which grows and comes out tax-free and is invisible to the IRS)

When almost everything sits in the second bucket, every dollar you withdraw pushes more of your Social Security into the taxable zone.

Tax diversification means having enough in each bucket to choose which dollars to spend each year based on what creates the smallest tax bill.

Roth conversions: Moving money to the third bucket

The most reliable way to build the tax-free bucket is through a Roth conversion: Moving money from your traditional IRA into a Roth IRA and paying income tax on the converted amount that year.

After that, the money and all its future growth come out completely tax-free and never count toward provisional income again.

The window to do this well is shorter than most people think. It typically opens in the years just before or after retirement, before Social Security starts and before required minimum distributions (RMDs) force taxable income onto your tax return. Income is usually at its lowest point during that stretch, which means lower rates on any conversion done then.

Three approaches work well in practice:

• Filling your tax bracket by converting just enough each year to use up room in your current bracket
• Converting larger amounts over a shorter window when a balance is too large for small annual conversions to move the needle in time
• Converting more aggressively when the market is down, since the same number of shares costs less in tax

The biggest mistake is waiting. RMDs force taxable income onto your return at age 73 or 75 whether you need it or not — on a balance that's kept growing with the tax bill still attached.

A before-and-after example

John and Karen, both 60, have $1.8 million combined in traditional IRAs, $200,000 in a brokerage account and almost nothing in a Roth. They plan to retire at 63 and need about $150,000 a year to live on. Their combined Social Security benefit is roughly $70,000 at full retirement age, or about $53,000 if they claim benefits early at 63.

On the default path, they retire and claim at 63, then pull the remaining $97,000 they need straight from the IRA. Provisional income comes out to roughly $123,000, well past the $44,000 ceiling: The 85% maximum, or roughly $45,000 of taxable Social Security, stacked on top of the $97,000 IRA withdrawal.

On the coordinated path, starting at 60 while they're still working, they convert a portion of the IRA to Roth each year, paying the tax from income and the brokerage account so the full converted amount keeps growing tax-free.

They keep converting through their mid-60s and wait until 67 to claim Social Security, when the benefit reaches its full $70,000. By then, the Roth is large enough to cover roughly $40,000 of annual spending tax-free, with the remaining $40,000 from the IRA.

Provisional income lands around $75,000 instead of $123,000: Still above the ceiling, but with substantially less Social Security taxed and a large share of spending arriving with no tax bill.

Same retirement date, same lifestyle spending, a meaningfully different tax outcome for the rest of their retirement. The only difference was starting at 60 instead of waiting until the options had narrowed.

What to do now

Most people don't choose to pay the maximum tax on their Social Security. It happens because they didn't plan for it, which also means it's predictable enough to fix.

Run your own provisional income number. Figure out how much room is left in your current bracket. Then start moving money into the Roth bucket, even a few years before retirement. The window narrows every year you wait.

The Social Security Administration's benefit estimator and IRS Publication 915 are good starting points for running your own numbers.

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• 9 Tax Surprises Retirees Don't See Coming Until It's Too Late
• I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement Income

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.

Every financial plan you'll ever see puts heavy emphasis on getting money into retirement accounts.

Contribute early, get the match, max out the IRA and let it compound. That part of the advice is sound, and most disciplined savers follow it well.

What gets far less attention is what happens after the money is in there. For some retirees who did everything right and accumulated a large IRA balance, that account can quietly turn into a complicated tax problem for themselves, a surviving spouse and, eventually, their kids.

The culprit is required minimum distributions (RMDs). Once RMDs start, at age 73 or 75 depending on your birth year, that money adds to taxable income whether you need it or not, on top of whatever else you're already reporting. That's the part most retirees eventually hear about, usually from an accountant and usually a year or two too late.

What almost nobody discusses is where that balance goes after the RMD math is finished for the year.

A large IRA won't create a tax bill only for the original owner. It can create a bigger one for the spouse who is left filing alone and a different one for the kids who inherit what's left when they're in their peak earning years.

One account, three tax bills, three different taxpayers.

John and Jane did everything right

John and Jane are 64. They maxed out their 401(k)s for three decades, didn't touch the money early and rolled everything into IRAs at retirement. Between them, they're sitting on $2.3 million in traditional IRA balances, a paid-off house and modest investment income each year.

Fast-forward to age 75, when their RMDs begin. Assuming reasonable growth and no withdrawals, that $2.3 million could be $3 million or more, generating an RMD of roughly $122,000 in the first year.

Add combined Social Security of about $65,000 and an additional $45,000 of investment income, and they're looking at $232,000 to report on their tax return. It's far more than they need, and none of it is optional.

That $232,000 lands on John and Jane's return, and it's the most straightforward of the three tax bills this balance is about to generate.

The widow's penalty

The problem doesn't stop with John and Jane filing jointly. Assume John passes first, which is statistically likely. Jane's income marginally changes. She still collects the survivor Social Security benefit, still owns the investment account and still has to take RMDs on essentially the same IRA balance.

What changes is her filing status. She moves from joint brackets to single brackets, which are roughly half as wide through most of the income range. Her standard deduction shrinks by close to half as well, pushing more income into taxable territory.

Income that used to be taxed at 12% or 22% when John was alive is now landing at 24% or 32%, even though her income hasn't moved.

Many couples model their household income. Very few model what that same income looks like once one spouse is filing alone. For a couple with John and Jane's numbers, the bracket and deduction squeeze alone can mean $10,000 to $15,000 more in tax every year, for the rest of her life.

This is what is referred to as the widow's penalty and could cost the taxpayer additional tax for decades.

The beneficiary problem

Push the timeline out further. Jane eventually leaves the remaining IRA to their two children, and by then, it's worth roughly $3 million combined, about $1.5 million to each child.

Under rules in place since the SECURE Act, most nonspouse individuals must empty an inherited IRA within 10 years of the original owner's death. Withdrawals don't have to be even, but if the original owner was already taking RMDs, annual withdrawals are typically required throughout that window, too.

For a child who's in their peak earning years, that inherited IRA doesn't always arrive as a windfall. It arrives as $150,000 or more of additional taxable income, stacked directly on top of a salary, a bonus and whatever else they've already got going on. A meaningful chunk of that inheritance can go straight to the IRS.

John and Jane spent 30 years deferring tax on that money, and their children may pay more on it than John and Jane ever would have.

Why this matters now

Two recent changes make this the right moment to make the projection.

First, RMD ages have moved. The SECURE 2.0 Act pushed the starting age to 73, moving again to 75 in 2033. That gives people born after 1959 a longer runway before distributions are forced and more years to plan around it.

Second, the One Big Beautiful Bill Act made the current tax brackets permanent instead of letting them expire at the end of 2025. For years, planners hedged Roth conversion advice with "rates might go up, might go down." That uncertainty has diminished.

Neither change fixes the underlying problem: A large traditional IRA is still going to generate a large RMD. But both make it easier to plan while there is still room to act.

The planning runway

John and Jane have an advantage most people overlook: They're 64, retired, and neither Social Security nor RMDs have started. That runway is valuable, but it won't last.

They could consider a Roth conversion. Every dollar converted gets taxed at today's rate, while their income is relatively low, instead of at a future rate stacked on top of Social Security, RMDs and investment income. A smaller traditional IRA can mean smaller future RMDs, less pressure on a surviving spouse's tax return and less taxable income passed to children.

Another move is a qualified charitable distribution, or QCD, once they turn 70½. IRA owners can send money directly from the IRA to a qualified charity — up to $111,000 per person in 2026 — and that amount counts toward the RMD without showing up as taxable income.

For the charitably inclined, it's one of the few ways to satisfy an RMD and lower a tax bill at once.

Neither move is automatically right for everyone, not even for John and Jane. The goal isn't converting for its own sake, it's optimizing the tax bill across a lifetime, and Roth conversions and QCDs are tools for that, not the whole strategy.

What matters more than picking a tactic is running the numbers every few years, since today's right answer may not be right in five years.

The real problem isn't the balance

There's nothing wrong with having a large IRA. It means the saving worked. The problem is assuming that planning is finished once the account is funded.

Left alone, a large traditional IRA sets off a chain reaction:

• Bigger RMDs than you need
• A tax increase left for the surviving spouse
• A tax bill handed to your kids on money you spent 30 years deferring

None of it is inevitable, but all of it takes years of lead time to fix.

The best time to deal with a large IRA is before the RMDs force the issue, not after.

Related Content

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• Tending to Your Estate Plan This Spring? Don't Forget to Give Your IRA Some Love
• The 7 RMD Tax Traps Waiting for You in Your 70s — and How to Start Disarming Them in Your 60s
• Why a Down Market is the Best Time for a Roth IRA Conversion
• Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very Likely

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.

One core investing principle never fails: the less you pay in fees, the more of your return you keep. As legendary Vanguard founder John Bogle warned, "The miracle of compounding returns is overwhelmed by the tyranny of compounding costs."

While you can’t control the market, you can control what you pay. That’s part of the appeal of accounts marketed as "zero-fee" individual retirement accounts (IRAs). But a new white paper from PensionBee, an online retirement account provider, finds these accounts often charge savers in ways most will never see.

To measure the toll, PensionBee modeled the costs on a $107,000 account — roughly the median retirement savings for millennials and Gen X. Even a cost-conscious retirement saver, it found, pays 0.16% to 0.32% of their balance a year, or about $160 to $340. Under common investor behavior, such as unknowingly choosing pricier funds, that can climb to around 1.3%, or $1,400 a year.

"Zero-fee does not necessarily mean free," explains Romi Savova, founder and CEO of PensionBee. "It’s basically a catchy marketing term that refers to the removal of certain flat fees, like account opening fees, but it does not necessarily apply to other costs within the account."

Avoiding those costs, experts say, comes down to a little effort on your part and a clearer understanding of how your account works.

Six hidden ways 'zero-fee' accounts can cost savers

First, a clarification. "Zero-fee" is not a new kind of IRA. As Marianela Collado, CFP® and financial adviser at Tobias Financial Advisors, puts it: "An IRA is an IRA is an IRA."

It’s the same account available at any financial institution or custodian that holds a saver’s money, and the label simply means a firm has waived some charges, not that the account is free to own.

Savova compares it with a trip to the grocery store. Walking in and out costs nothing, but your bill adds up depending on what lands in your basket.

Here are the six charges the paper identifies that can cost retirement savers without ever appearing on a statement.

1. Idle cash

When you open or roll over an IRA, your money arrives as cash — and it doesn’t invest itself. If you leave it sitting, the account provider often sweeps it into a low-yield account while keeping most of the interest, a practice known as a cash sweep.

It happens more than you might think. A Vanguard study found that 28% of rollover assets and 55% of direct contributions sit in cash a full year later, with nearly 30% of rollovers remaining uninvested for up to seven years.

"The biggest hidden tax in a 'zero-fee' IRA is the interest rate you don’t earn on your idle cash," says Sean Lovison, CFP® and founder of Purpose Built. Leave $10,000 parked, he notes, and you could forfeit $400 to $500 a year.

The fix can be as simple as choosing your investments once the money lands. "Set a calendar reminder for 48 hours after funding an IRA and actually select an investment," advises Jeff Judge, CFP® and managing partner of Chesapeake Financial Planners. "A target-date fund is a reasonable default if you don’t want to build a portfolio from scratch."

If a financial adviser is steering you into cash, Lovison adds, "make sure you know why and what you are earning."

2. Securities lending

The stocks and bonds in your account can be loaned out to large institutions that pay to borrow them. While this is often routine, the account provider usually keeps most of the fee while you carry the risk. "They make money on your money," Collado explains. "As the lender, they charge a fee that they keep."

Some programs pay the customer as little as 15% of the proceeds, PensionBee’s analysis found. Its advice: Understand how lending works before you opt in, and sit it out if you’re not comfortable with the risk.

3. Payment for order flow

When you buy or sell, your order might be routed through a middleman who pays your provider, leaving you with a slightly worse price than the market offers.

"That hidden execution drag adds up fast," warns Lovison, "which is why minimizing trade frequency remains important, even when the platform claims trading is 'free' — and why many providers will encourage you to make trades through gamification and faux educational materials."

Two factors drive the cost, according to Savova: What you trade and how often. Sticking to well-known, high-volume funds and trading rarely keeps it small. For someone who buys a few funds and holds them, this is a minor concern; it mainly adds up for frequent traders.

4. Fund choice

This is the $171,000 mistake.

An actively managed fund can charge nearly nine times what a comparable index fund does — 0.98% vs 0.11% — and the two can sit side by side with nearly identical names. As the report argues, active funds have their place for some savers, but many do not know the difference.

That gap of about 0.87% a year sounds trivial, but PensionBee estimates that on a growing balance, compounded over 30 years at a 7% annual return, it can quietly cost a saver around $171,000 in lost growth.

"The most overlooked cost is the expense ratio buried inside the funds themselves," says Judge. "A platform can charge zero dollars to open an account and still bleed a client 0.5% to 1% a year through the funds it defaults them into." To avoid the trap, he advises, "Read the prospectus, not the landing page."

5. Administration and service charges

Waiving account fees doesn’t rule out charges for specific actions. For example, wire transfers, moving money to another firm or foreign-exchange conversions.

None of it should come as a surprise, Savova notes, since "financial services companies are not charities and the products they offer will always come with a cost." There might be no single "right" price for a retirement account, she adds, but savers "should seek to balance cost against the level of service, management and portfolio grade you have selected."

6. The fine print

PensionBee's analysis found that "zero-fee" sometimes applies only below a balance limit, or that a small advisory fee — often 0.25% to 0.27% – kicks in once you cross a threshold. In other cases, a "zero-fee" account sits beside a pricier full-service option, and an accidental click at sign-up routes you into the wrong one.

Given the complexity, Savova recommends putting on your detective hat. Read the fine print and investigate any obscure charges. "Just because you don’t see a cost doesn’t mean you aren’t paying for it," she says.

Paying for professional help might be the right cost

A 2019 survey found two-thirds of Americans are not confident in their knowledge of IRAs, while assets in those accounts hit a record $18 trillion in 2026, up from $5 trillion in 2010.

For all their variety, these hidden costs can share a single root: Nobody to tell savers what to look for. That’s where professional help can earn its keep. A 2026 TIAA Institute report found that people who work with a financial adviser reported a 14- to 19-percentage-point edge in financial confidence and preparedness, and were far more likely to invest consistently rather than let their money sit.

Professional management comes at a cost, too, but typically with more transparency. As Collado puts it: "I’d rather you know what that is than have you think you’re paying $0 and then actually pay 3 times what’s normal."

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• The '401(k)-Rich and Cash-Poor' Retirement Trap

Are you 401(k) rich but cash poor? If so, your retirement nest egg might have some dangerous fault lines.

Just as being house poor can create a cash squeeze in your prime earning years, investing the bulk of your money in a traditional retirement account can make a seemingly solid retirement plan more vulnerable.

The big risk of retiring with too little cash is a costly liquidity crunch if a large unexpected expense hits. Not having adequate cash reserves might force you to take withdrawals from your retirement account at the worst possible time — when markets are tanking, and asset prices are falling.

The case of the missing bucket

There are two major downsides to forced selling of stocks and other so-called risk assets:

• It can trigger taxes.
• It can deplete your nest egg prematurely.

That's where a large cash hoard comes in. Cash, as is often said, is king — mainly because it's safe, liquid and easy to access with zero tax consequences. Financial planners recommend putting money in three separate buckets.

• An emergency savings bucket (e.g., cash savings)
• A goals bucket (e.g., car down payment)
• A retirement bucket (e.g., long-term savings, typically invested in a tax-advantaged account that holds more volatile assets with growth potential such as stocks)

Ideally, the cash bucket should be outside a traditional 401(k) so you won't have to pay taxes on any withdrawals. But in reality, many people don't have an emergency savings bucket. More than half of Americans (53%) say they don't have sufficient liquidity to cover a $1,000 emergency expense, according to Bankrate. That's where Plan B (which we'll discuss in more detail later) comes in: Holding ample cash reserves for emergencies in a retirement account, where you're likely to have the bulk of your assets.

Risk 1: A bigger tax bill

Withdrawals are taxed as regular income. Distributions from traditional 401(k)s are treated as income. That means your withdrawals will get taxed at ordinary tax rates, which range from 10% to 37%.

The tax you pay to the IRS also puts an extra drain on your account balance. Let's say you're in the 24% tax bracket and need to raise $45,000. To net that large lump sum, you'll need to withdraw $59,211 from your 401(k) to account for the $14,211 tax owed to Uncle Sam.

Withdrawals might push you into a higher tax bracket. The extra income generated from 401(k) withdrawals might bump you up to a higher tax bracket, increasing your tax bill.

Say you're at the top of the 24% bracket, and you withdraw $45,000 from a traditional 401(k). All that extra income will bump you up from the 24% bracket to the 32% bracket. The tax amount on $45,000 at 32% is $14,400, which is $3,600 more than the $10,800 tax hit in the 24% bracket.

That additional income could also inadvertently result in a future increase in Medicare Part B and Part D premiums (IRMAA) if it pushes your modified adjusted gross income (MAGI) above certain income thresholds.

Another financial drawback of keeping most of your savings within a traditional 401(k) is less flexibility in managing taxes on withdrawals.

"You don't have optionality around crafting an income tax-efficient cash flow stream," says Charles Carter, managing director at Oxford Financial Group. "You're beholden to the ordinary income tax rate. The more you take out of the retirement plan, the more your ordinary income goes up, the higher your marginal tax rate. It becomes sort of a vicious cycle."

Risk 2: The growth hit and sequence of returns risk

Withdrawing money during a down market means you must sell more shares to raise the cash you need. You now have fewer shares in your retirement account to benefit from a market rebound. That, in turn, means you lock in losses and miss out on compound growth.

This issue, known as sequence of returns risk, is particularly damaging for retirees at the beginning of retirement, as their account balance is depleted more quickly than planned, which is hard to overcome.

"Retirees who withdraw from a retirement portfolio in a down market are unfortunately steepening the already uphill battle," says Jonathan Lee, investment adviser at U.S. Bank Private Wealth Management.

Liquidating stocks, equity funds or other positions in your 401(k) permanently reduces the dollar amount and share count in your account, shrinking the amount of assets that can benefit from compounding over time. For example, at a 7% average annual return, $10,000 withdrawn 20 years before it would have been needed represents $28,697 in lost appreciation.

"We don't know what the market is going to do in two days, two months or two years," says Jason Grover, a financial planning specialist at Grover Financial Services. "What we don't want to do is be forced to sell positions to generate cash that we need to pay our everyday bills." That cash protection, Grover adds, allows a retiree to stay invested and benefit from an eventual market recovery.

Where to keep your cash buffer

Ideally, you have set up an emergency fund outside your 401(k). Financial advisers recommend retirees keep one to three years of expenses in a cash account, preferably in a high-interest savings account they can access without incurring penalties or taxes.

Grover recommends retirees set aside a cash reserve totaling at least two years of living expenses. "Anything less than that is irresponsible," says Grover. "For a client who is taking $5,000 a month (or $60,000 a year) from their 401(k), I'm going to have $120,000 minimum in cash," says Grover.

You should also pay close attention to asset location as you save for retirement. That strategy refers to having a mix of investment buckets with different tax treatments such as taxable brokerage accounts, tax-free Roth accounts and traditional retirement accounts. However, a sound plan also requires proper asset allocation — including an ample cash buffer to ride out market downturns.

If you don't have an emergency fund and most of your savings sit inside a tax-deferred (traditional) retirement account, you can still take action. Build a cash hoard inside your traditional 401(k), even though any withdrawals will be taxed as ordinary income. Having a cash allocation in your 401(k) gives you an all-important liquidity option that's not negatively impacted by short-term market movements.

"If your 401(k) is your sole bucket for cash flow, it would be risky, if not foolish, to not have a sufficient cash reserve sitting there ready and waiting," says Carter.

Actionable ways to replenish cash savings

Rebalance your 401(k) portfolio. If the lion's share of your assets is in a traditional retirement plan, a short-term fix is to rebalance your portfolio periodically to bolster your cash bucket in your 401(k), Carter advises. Ideally, opportunistically sell stocks when the portfolio's equity weighting has swelled beyond financial plan targets — and when markets are up.

"Those are opportunities to strategically raise cash," says Carter.

Consider Roth IRA conversions. Roth accounts allow tax-free withdrawals and are a valuable tool for managing cash in retirement. However, Roth conversions are a taxable event, so work with your financial adviser and run the numbers to see whether you can convert savings held in traditional IRAs or 401(k)s to a Roth account.

Buy a short-term Treasury and hold it to maturity. If you have an adequate emergency fund now but plan to spend the money in the next two years, you can replenish your bucket for year three and beyond by purchasing a short-term U.S. Treasury bond of, say, three years' duration, says Grover. "Hold the bonds to maturity," said Grover.

By holding to maturity, you'll lock in the current yield of roughly 4.25% and know the money will be there when you need it in a few years.

Commit to a savings plan to build a rainy-day fund. A long-term solution to a cash shortage is to start building an emergency fund outside your 401(k), advises Carter. Rejigger your budget and start setting aside money in a high-yield savings account or a taxable brokerage account.

"Take a thoughtful, intentional and diligent approach to saving," says Carter. Building an ample emergency fund this way won't happen overnight. It could take a few years.

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After several decades as a serial entrepreneur — launching computer magazines in the ’80s and hobby magazines in the ’90s, then running conferences for publishers for two subsequent decades — Carl Landau retired in 2019 at age 64. "I finally felt fatigue," says Landau, who lives in Sacramento, Calif. "I always had so much enthusiasm for it all and realized that I had been doing this for a long time."

That first year of retirement, though, proved challenging. Landau and his wife planned a trip to Portugal for March 2020 — the month and year the world practically shut down thanks to the COVID-19 pandemic. With travel canceled and life on pause, Landau did what entrepreneurs do: He launched a new venture, creating a wry, weekly podcast looking at life and identity post-career that he called I Used to Be Somebody.

Within months, the project had morphed into a second career. "I realized I had built another full-time job," says Landau, adding that he found he had little time to pursue his passion for pickleball, one of the activities he’d most looked forward to in retirement.

So Landau recalibrated again. He scaled back production of the podcast and a companion newsletter to once a month, and he now averages some 12 hours a week at work. The rest of his time is reserved for socializing and recreation (pickleball!). Looking back, he recommends that newbie retirees bake flexibility into their plans to accommodate shifting priorities and unexpected experiences.

"There are going to be ups and downs, particularly if you worked really hard for 40 years and all of a sudden you’re not doing that," he says.

Landau’s story is less a cautionary tale than a template for what comes next, as millions of newly minted retirees are now learning. The post-career years, especially in the beginning, are an ongoing experiment. "No matter how prepared for retirement people are, they are unprepared," says certified financial planner Ross Levin, cofounder of Accredited Investors Inc., a wealth management firm in Edina, Minn.

The impact of "Peak 65"

Thanks to the aging of the massive baby boom generation, the ranks of first-time retirees looking for financial security and purpose in the next stage of life are historically large right now.

Between 2024 and 2027, a record number of Americans will turn 65 or will have already celebrated that milestone birthday, including 4.1 million this year and about the same number next year — a cohort known as Peak 65. All boomers will be at least 65 by 2030.

Many of these freshman retirees understandably face the transition to their next chapter with some trepidation. The percentage of workers who feel confident that they have enough money to live comfortably in retirement fell by 6 percentage points from 2025 to 2026, to 61%, according to a recent survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research.

Among the concerns stoking worries about finances in retirement were inflation, debt, healthcare costs and housing expenses, as well as doubts about the future financial viability of Social Security and Medicare.

Adding to the anxiety: Many near-retirees haven’t spent much time planning for what they will actually do once they’ve put a full-time career behind them. That’s the key takeaway from a 2025 survey by the Financial Planning Association and the Journal of Financial Planning. About half of the financial planners surveyed said their clients were financially prepared to stop working, but only 11% said the people they advise were emotionally prepared for the lifestyle adjustments that retirement entails.

If you’re looking ahead to retiring soon or have recently embarked on the retirement journey, you want to make sure you have both parts of the process covered. Experts recommend these steps to ease the transition from full-time work and to ensure that you flourish in this next chapter.

Rethinking what retirement looks like

Part of the challenge you face as a new retiree is that the definition of this stage of life is changing, as people generally live longer and in better health than previous generations. Yes, the word retirement still typically signifies the end of a long career. But individual paths diverge wildly from there these days.

The classic vision of retirement as full-time leisure and relaxation remains an option. Increasingly, though, many retirees take on part-time jobs, gig work or even encore careers. Some become passionate volunteers or dedicated hobbyists; others go back to school. Some embrace an active role as grandparents or become caregivers to aging loved ones. Often, retirees pursue a mix of these roles that evolves with age.

What’s right for you? The beauty of a long retirement is that you don’t have to figure it all out from the jump or stick with a single vision. It helps, experts say, to view the first year of retirement as a period for gathering information that will help smooth the transition to this next chapter and build a strong foundation — financially, socially and emotionally — for a comfortable, meaningful retirement.

"The first year is a test year," says CFP Lazetta Rainey Braxton, founder of the Real Wealth Coterie, a wealth management firm in New Haven, Conn.

The key, experts say, is to be willing to experiment and to seek out pursuits that offer purpose, keep your body and brain active, and help you maintain social connections. You also need a good idea of how much you can safely spend to make those things happen.

In other words, you need both a purpose plan and a financial plan at the beginning of your first year of retirement. That allows for smarter decision-making and flexibility, helping you adapt as experiences and new data inform your views and the inevitable curveballs come your way.

"If you’re thriving, it’s because you have a personalized vision for what retirement means to you," says Lisa Stornaielo, cofounder of The Future of You, a Boston-based consultancy that helps individuals and corporations navigate the transition to retirement. "Your finances are an important piece.

But what we’ve found is just as important is that people are very clear not only on what they’re retiring from but also on what they’re retiring to, and there’s an intentionality around that."

Treating your first months as a sabbatical

Of course, you’ll need time at first to decompress, exercise, read, and tackle long-delayed home projects or similar tasks. There is immense value in giving yourself permission to relax and enjoy new experiences.

Think of those first few months as the equivalent of taking a sabbatical — a necessary window to recharge mental and physical energies while creating psychological distance from a lifelong work identity.

A sabbatical is temporary; retirement is not. The profound shift in navigating the transition between the working world and retirement comes down to sheer time.

Leaving a full-time career suddenly frees up roughly 2,500 hours each year, calculates executive coach Joe Casey in Win the Retirement Game: How to Outsmart the 9 Forces Trying to Steal Your Joy. "People enter retirement at different ages and with various levels of resources," he writes. "But all new retirees are time-rich."

The core question to ask yourself: How will you invest that newfound wealth of time? What is your purpose? What matters to you? "I encourage people to write some sort of business plan," Landau says. "It doesn’t have to be elaborate. Just list your goals, what you really enjoy doing and the things you don’t like."

Adapting your plan as life happens

Any entrepreneur will tell you that a solid business plan not only increases the odds of success but also accounts for the fact that the blueprint will change multiple times. Take the experience of Joy Norquist, 70, and Ron Wawrzon, 69, who retired — she from a career in insurance compliance, he from working as an operations manager for a small manufacturing company — in 2021 and 2022, respectively.

The Saint Paul, Minn., couple both have pensions, retirement savings and a long-term relationship with a financial planner. They planned to move to Chicago, where Wawrzon is from, but life intervened. Wawrzon faced a health setback (he’s fine now), and Norquist’s mother required months of intensive care following a serious fall. Those initial plans for retirement went on hold.

Meanwhile, the couple discovered part of their post-retirement rhythm almost by accident. One afternoon, for fun, they went to an open house for a condo in a high-rise building in downtown Saint Paul, and they fell in love with the view. The couple moved to the building two years ago. They joined a local walking club, they participate in a weekly study group at a local tavern, and they enjoy movie nights with neighbors and other activities.

Norquist’s mother passed away in late 2024, and the couple spent much of last year dealing with her estate. Now that’s mostly done, but Chicago may no longer beckon and Norquist and Wawrzon are taking their time to decide what comes next for them in retirement. But they view the future with optimism. "We feel like we haven’t really launched yet," Norquist says. "We’re figuring out the rest of our lives from here."

Build your core strategy

As you shift from earning and saving money to spending the fruits of your labor, retirement triggers a cascade of financial decisions, from where to live and how you’ll pay for healthcare to when to start taking Social Security benefits and how much you can safely withdraw from retirement accounts.

Yet only one in four Americans in their sixties has a formal, written financial strategy for retirement, according to a 2025 report from the Transamerica Center for Retirement Studies.

If you’re among them, now is the moment to create a plan — or revisit and update the one you already have. You need realistic data on expenses (needs and wants), liabilities, tax rates and healthcare costs to figure out where you stand and what options make the most sense for your circumstances.

You can work with an adviser (find one at napfa.org, letsmakeaplan.org or garrettplanningnetwork.com) or do it yourself using planning software, such as Boldin (free for the basic version; $12 a month for advanced features) or WealthTrace ($229 a year, standard; $289 a year, deluxe).

Maximize your Social Security payout

Among the most critical decisions to ponder in year one: when to claim Social Security benefits. The earliest you can apply is age 62 and the latest is age 70; the longer you wait, the bigger the monthly payout will be.

For instance, boomers celebrating their 65th birthday this year who wait to file until they hit their full retirement age of 67 — that is, the age at which they’re entitled to 100% of their benefits — will get a monthly benefit that is roughly 43% bigger than if they’d claimed at 62, according to the Social Security Administration. Wait until age 70, and that monthly benefit will be 77% higher than the payout at 62.

Because you can’t outlive your Social Security benefit and the payout is adjusted annually for inflation, the standard advice is to hold off filing for as long as possible — at least until your full retirement age. However, there can be good reasons to claim earlier — if, say, your health is poor, or you’d otherwise need to withdraw too much from savings to pay fixed expenses.

An adviser can help determine the optimal time to claim for your situation, or you can tap online resources for assistance, such as Open Social Security, a free strategy calculator, or planning software such as MaxiFi ($109 a year, standard plan; $149, premier). (For more guidance, see "Perfect Timing: When to Claim Social Security," April.)

Master your portfolio withdrawal strategy

You’ll also need to tackle the puzzle of how much money you can safely withdraw from your retirement portfolio. One common guideline is the 4% rule, developed by retirement researcher William Bengen in the mid ’90s.

It suggests taking out 4% in the first year of retirement (it assumes the portfolio is split roughly 50-50 between stocks and bonds), then adjusting subsequent withdrawals annually for inflation. Historically, Bengen calculated that strategy would ensure you would never run out of money, even in the worst-case scenario for financial markets.

Although the 4% rule is a simple and convenient metric, experience has shown that strictly adhering to it often leads retirees to withdraw less than they can afford to spend, potentially stopping them from enjoying this chapter of life to the fullest. Many experts, including Bengen himself, have revised the initial withdrawal rate upward to the 4.5%-to-6% range.

In his 2025 book A Richer Retirement, for instance, Bengen suggested 4.7% would be a better starting point for withdrawals, and he changed his model portfolio to hold as much as 65% of long-term savings in stocks.

Likewise, CFP Rainey Braxton typically recommends that you withdraw up to 5% the first year — ideally somewhere between 4% and 5% — and possibly a little more, depending on what she calls "the nuance and art of knowing the client’s circumstances."

A popular alternate approach is the bucket strategy, initially developed by CFP and wealth manager Harold Evensky, chair of the Coral Gables, Fla., financial planning firm Evensky & Katz. As Evensky said in a Morningstar interview last year, the strategy was "designed so the client wouldn’t get panicked if the market was falling apart because [they’d know] where the grocery money was coming from."

The basic idea is to set aside enough cash to cover, say, one or several years of living expenses, when combined with Social Security and any other guaranteed sources of income, such as a pension.

Money that you won’t need for several years is then invested in a diversified portfolio of fixed-income securities and equities, which offer the prospect of higher long-term returns but at greater short-term risk. The cash cushion offers peace of mind that you’ll get through the inevitable market slumps without needing to sell depreciated stock or bonds.

Despite the differences between the two strategies, the central takeaway is the same: Spending plans should be dynamic. In essence, the first year of retirement provides a trial run to implement a fluid strategy, allowing you to track your actual lifestyle costs while remaining flexible enough to make adjustments if market or economic conditions or personal priorities shift.

"People think they need to have it all figured out right away," says Andrea Eaton, a CFP at Cornerstone Wealth Advisors in Edina, Minn. "It takes a year to figure out your actual cash needs. It really is a guesstimate initially, and that can be changed up or down. It simply takes time getting used to taking money out versus putting money in."

Discovering your post-career purpose

Newbie retirees often feel unmoored when they are no longer defined by their job and the need to make a living. So it’s important to build a new sense of purpose for your retirement years and have good reasons for getting up in the morning.

"You should be working on what your life will look like before you even retire," Eaton advises. "What is your greater purpose? How are you getting involved in your community? What gives your life meaning beyond working for an income?"

How do you find that purpose now? Stornaielo, who spent 21 years at Fidelity in human resources and executive coaching, warns against getting too caught up in pretentious visions about purpose. She recalls a three-day retreat focused on purpose that she attended while still at Fidelity. The retreat was very serious and high-minded. At the end of it she declared her purpose was to be "the yeast in the bread of life," she laughs. "Whatever that means."

Her purpose mantra now is far simpler and grounded: "Helping people achieve their potential." Also helpful, she says, is not to think of your retirement as the end part of your life. "Don’t get hung up on how much time is left. [The focus should be] what I can do today to feel like I’m making the most of my time."

Finding meaning through community, learning, and giving

For Laura and Ben Cooper, giving back to their community is what’s providing that feeling and sense of purpose in retirement. Laura, 78, a former law professor at the University of Minnesota, became a volunteer teacher in a citizenship program in the Twin Cities when she first retired in 2018.

Along with Ben, 79, a former mathematics professor at Augsburg College in Minneapolis, they’ve since branched out to support a variety of causes that include local arts organizations, environmental groups, nonprofits focused on refugee rights, and their local library system. Freed from the busyness of active careers and raising their now-grown son, they were able to ask themselves, says Laura, "What do we really care about?"

The Coopers manage much of their giving through a donor-advised fund, a tax-advantaged charitable-giving vehicle that works like a personal investment account for philanthropy.

Added benefits of their philanthropic work, they’ve found, are the sense of community and opportunities for continued learning it has given them. They’ve joined outings with Nature Conservancy scientists, attended private theater rehearsals to hear from actors and directors, and learned from experts about international human rights. "Learning is absolutely vital, and we have pretty diverse interests," says Laura.

Conversations with family, friends and acquaintances are a rich resource for thinking about purpose. One technique is to pay close attention to the tasks, conversations and projects that leave you energized rather than drained. Introspection helps, too.

Think back to other major life transitions and see what consistent core values carried you through those shifts. Volunteering, mentoring, taking a course or learning a new skill are activities that also offer useful information.

And some resources can help. Among the books that might provide both inspiration and practical suggestions are: Who Do You Want to Be When You Grow Old? The Path of Purposeful Aging, by Richard Leider and David Shapiro; The Big Shift: Navigating the New Stage Beyond Midlife, by Marc Freedman; and The Second Mountain: The Quest for a Moral Life, by David Brooks.

Evaluating year one to recalibrate year two

At the end of your first year of retirement, Eaton suggests conducting a personal audit.

Ask yourself, What activities brought you the most joy and fulfillment? Which were a waste of time? Are you feeling lonely? Do you need to inject more intentional social interactions, clubs or group hobbies into your life? How is your budget holding up against the reality of retirement? Do you need to scale your spending up or down based on your actual first-year cash flow?

The answers to those questions will help you shape year two of retirement, which in turn will help guide year three. Retirement is iterative by nature — a series of continuous recalibrations. You want to be continuously asking yourself, says Eaton, "What didn’t go well? And how do I want next year to be?"

Know this: Your first year probably won’t look exactly as you imagined it would before you stopped working full-time, and that is perfectly fine. Year one isn’t supposed to be the final draft of your retirement; it is simply the initial run of a grand experiment.

Build a personalized plan with confidence

Retirement is full of important financial decisions, from creating a sustainable withdrawal strategy to deciding when to claim Social Security. A financial planner can help you build a personalized plan with confidence.

Use the Bankrate tool below to connect with a vetted financial planner who can help you create a retirement income strategy that fits your goals:

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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While tax laws are complex, certain provisions can create valuable opportunities when used thoughtfully.

One such opportunity, sometimes informally referred to as the Big Beautiful Bill, offers a potential tax benefit for retirees who meet specific income thresholds.

Understanding how it works, and how withdrawals are structured each year, can make a noticeable difference in after-tax income. As a financial adviser and owner of New Smyrna Beach Retirement Solutions with more than a decade and a half in the financial industry, I can help with that.

What is the Big Beautiful Bill?

The Big Beautiful Bill is a colloquial term used to describe the One Big Beautiful Bill Act (OBBBA), a tax law that, among other things, allows eligible retirees to claim an additional deduction when their taxable retirement income stays at or below $150,000 per year.

For individuals age 65 and older, this bonus deduction can help reduce taxable income and lower overall tax liability.

On the surface, the rule appears simple. Stay under the income threshold and qualify for the deduction. In practice, however, many retirees exceed income limits unintentionally because they do not fully understand how different income sources are taxed or how withdrawals interact with one another.

Pensions, Social Security benefits, required minimum distributions (RMDs) and investment withdrawals can all contribute to taxable income in different ways. Some income is fully taxable, some partially taxable and some not taxable at all.

Without a clear strategy, it is easy for income to creep higher than expected.

Why withdrawal strategy matters

In retirement, income often comes from multiple sources. Traditional IRAs and 401(k)s are generally taxable when withdrawals are taken. Roth IRAs may provide tax-free income if certain requirements are met. Taxable investment accounts can generate income through interest, dividends and capital gains.

The key to taking advantage of income-based tax deductions is deciding how much to withdraw from each type of account in a given year. Drawing too heavily from tax-deferred accounts may push income above the threshold, while a more balanced approach could help keep taxable income within qualifying limits.

This is where coordination matters. By intentionally selecting the portion of income that comes from taxable, tax-deferred and tax-free sources, retirees may be able to manage their income level more effectively and preserve eligibility for valuable deductions.

This does not mean one account type is always better than another. It means coordination matters.

When withdrawals are planned intentionally, retirees may have more control over their taxable income and greater flexibility to adapt as tax rules and personal circumstances change.

Know what actually counts as taxable income

A practical first step is gaining clarity around what income is fully taxable, partially taxable or not taxable at all. Many retirees assume that income equals cash received, but the tax code treats different sources differently.

Understanding how Social Security benefits are taxed, how RMDs affect income and how capital gains are calculated can help prevent surprises. This awareness creates a foundation for better decision-making before withdrawals are taken.

Map out income before the year begins

Rather than reacting at tax time, retirees may benefit from projecting income at the start of each year. Estimating how much income is needed to support spending allows withdrawals to be structured more intentionally.

This forward-looking approach can highlight potential issues early. For example, it may reveal that a full RMD combined with other income sources would exceed the $150,000 threshold for the bonus deduction for older people. Seeing that in advance creates opportunities to adjust.

Use account diversification to your advantage

Retirees who have savings spread across taxable, tax-deferred and tax-free accounts often have more flexibility. If one source would push income too high, another may help fill the gap without increasing taxable income as much.

This might involve taking smaller withdrawals from traditional accounts in certain years, supplementing income from Roth accounts or being mindful of capital gains in taxable accounts.

Over time, this type of coordination can help preserve eligibility for deductions and reduce unnecessary taxes.

Pay attention to timing

Timing matters in retirement income planning. Some retirees experience lower taxable income in the early years of retirement before RMDs begin. These years can offer planning opportunities.

Others may face income spikes due to large withdrawals, one-time expenses or changes in investment income.

Recognizing when income is likely to rise or fall can help guide withdrawal decisions and avoid crossing important thresholds unintentionally.

A strategy that requires annual attention

Unlike some financial decisions that can be made once and left alone, income planning is ongoing. Tax brackets change, RMDs increase, and personal needs evolve.

Because of this, strategies designed to capture income-based deductions should be reviewed annually. Even small adjustments can make a difference. A slightly different mix of withdrawals, taken at the right time, may help preserve tax benefits that would otherwise be lost.

Regular reviews also help retirees adapt to changes in tax law and market conditions without making reactive decisions under pressure.

The bottom line

The OBBBA's provisions are examples of how thoughtful income planning can support a more tax-efficient retirement. While the bonus deduction for older people may seem modest, the cumulative impact of managing withdrawals carefully over many years can be meaningful.

For retirees, the broader lesson is clear. How income is structured often matters just as much as how much income is received.

Taking proactive steps to understand income sources, coordinate withdrawals and review strategies regularly can help ensure that available tax benefits are not overlooked and that retirement savings are used as efficiently as possible.

Related Content

• Four Keys to Planning Your Retirement Income Distributions
• I Tried a New AI Tool to Answer One of the Hardest Retirement Questions We All Face
• From Buying a New Car to Having a Baby: How the OBBBA Affects Everyday Taxpayers
• 5 Ways the OBBBA Rewards the Midwestern Millionaire: You Won't Want to Ignore These Tax Planning Opportunities
• Should You Jump on the Roth Conversion Bandwagon? A Financial Adviser Weighs In

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.

Proposed legislation targeting "mega" retirement accounts has put high-net-worth IRAs and 401(k)s back in Washington's crosshairs.

The bill would force wealthy account holders to take mandatory distributions and block new contributions — a response to data showing some investors have accumulated multi-million-dollar balances through early-stage private equity and startups.

But while similar proposals have stalled in the past, this bill may reflect a broader policy trend. The legislative effort coincides with recent U.S. Department of the Treasury measures targeting other "aggressive planning" strategies like Section 351 ETF exchanges.

So whether this specific measure advances through Congress or not, the debate highlights key considerations for long-term tax, liquidity, and asset-location planning.

Here's what high-earning IRA account holders need to know in 2026.

Newly proposed limit cap on IRAs and 401(k)s

Sen. Ron Wyden (D-Ore.) and Rep. Richard E. Neal (D-Mass.) recently introduced legislation to cap IRA and 401(k) balances for high-net-worth accounts.

But the proposed restrictions don't apply to everyone with a large account balance. Instead, to trigger mandatory withdrawals and contribution bans, a taxpayer must meet two criteria in the same tax year:

• High-income floor: Modified adjusted gross income (MAGI) over $400,000 for single filers (or $450,000 for married couples filing jointly).
• Total asset cap: Combined retirement balances exceeding $10 million across all traditional IRAs, Roth IRAs, and defined contribution plans (like 401(k)s and 403(b)s).

If passed, the legislation would bar any individuals meeting both rules from making further contributions to their tax-advantaged retirement savings accounts for that year.

Additionally, forced withdrawals of the aggregate excess would be required (more on that below).

The two-tiered forced withdrawal rule

For high earners with over $10 million in affected accounts, the proposal requires accelerated withdrawals from tax-advantaged accounts. Yet the withdrawal rules are slightly different depending on how much you have saved for retirement.

Traditional IRAs and 401(k)s are normally subject to required minimum distributions (RMDs) beginning at age 73 or 75, under the SECURE 2.0 Act. By requiring a 50% payout of the aggregate excess over $10 million, this proposal creates a much steeper payout schedule that applies regardless of age.

Additionally, while Roth accounts are funded with after-tax dollars and allow tax-free withdrawals without lifetime RMDs, the bill targets high-net-worth Roth IRAs by requiring excess funds to be transferred to standard taxable accounts (if an account is worth $20 million or more).

Once forced money leaves a Roth, it enters a regular brokerage or bank account. From that day forward, any dividends, interest, or capital gains generated by those funds are subject to annual federal and, where applicable, state income taxes.

Why it's proposed (and why it faces resistance)

Wyden and Neal introduced their mega-IRA cap legislation in conjunction with Joint Committee of Taxation (JCT) data showing that over 32,000 Americans hold more than $10 million in tax-advantaged accounts.

Notably, the data presented a core group of about 200 individuals who hold an average of $409 million each — largely through early-stage private equity or startup investments placed inside self-directed IRAs, as reported by The Wall Street Journal.

"Tax-preferred retirement accounts are not supposed to be a loophole for the ultra-rich to shelter immense fortunes," Wyden stated in a press release. "They’re a lifeline for working Americans who may not otherwise have a dignified retirement.”

However, this is not the first attempt at a cap. A similar provision was included in early drafts of the Biden-era Build Back Better Act before lawmakers removed it from the final bill.

The primary pushback came from the financial services industry, including groups like the Retirement Industry Trust Association (RITA) and alternative asset custodians.

Critics claimed that forcing rapid distributions on private equity, startup stock, or real estate assets would force account holders to sell non-public assets at fire-sale prices just to satisfy cash distribution mandates.

Congressional Republicans and conservative think tanks, like The Heritage Foundation, also opposed these measures. They claimed that forcing new distribution rules onto existing balances would unfairly penalize investors who followed the law as originally written.

What high-net-worth investors should watch in 2026

While the debate over this specific bill continues, the renewed discussion signals that mega-retirement accounts remain in the legislative limelight. High earners and savers can use these proposed rules as a "stress test" for their long-term estate and tax plans:

• Diversify across account types. Holding all your wealth in a single tax-deferred vehicle can create legislative risk, or, at the very least, increase your total lifetime tax burden. Spreading assets across traditional, Roth, and taxable brokerage accounts gives you flexibility to manage your adjusted gross income (AGI) if distribution rules or federal tax brackets shift.
• Build liquidity alongside private assets. Self-directed IRAs containing private equity, startup stock, or real estate face liquidity risks when required distributions apply. Maintaining liquid buffers, like public equities or cash equivalents, may help prevent forced sales of illiquid assets during regulatory changes or normal RMD years.
• Keep alternative asset valuations audit-ready. IRAs holding private stock or real estate may draw increased IRS scrutiny because misvalued assets can trigger accidental "self-dealing" or other prohibited transactions. Thus, keeping annual, independent appraisal records could help your portfolio stay compliant if valuation enforcement tightens.

For high earners, watching Washington is wise, but you don't have to wait for a final vote on a key piece of legislation. A flexible tax plan built on true asset diversification remains one of the single best protections against an ever-shifting tax code.

Read More

• 6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)
• SECURE 2.0: New Retirement Savings Changes to Know
• 2026 IRA and 401(k) Contribution Limits
• 5 Retirement Tax Traps to Watch This Year

People with retirement savings in a traditional IRA or 401(k) often experience a moment of panic when their balances grow and they realize they'll soon be on the hook for required minimum distributions (RMDs). RMDs can not only create a tax headache but also have additional consequences, such as raising retirees' income to the point where higher Medicare costs apply.

That's what makes Roth conversions so appealing. By moving money from a traditional IRA or 401(k) into a Roth IRA, you can enjoy tax-free gains in that account, take tax-free withdrawals, and avoid RMDs completely.

That is the scenario facing a 69-year-old engineer with a full-time salary earning $140,000 a year, a case recently considered by financial experts. With RMDs looming at age 73, there's a narrow four-year window to move money into a Roth IRA before mandatory withdrawals begin. And while that conversion may be smooth sailing if you're sitting on a $200,000 or $300,000 balance, converting a $1.2 million account is a whole other story.

The problem is that Roth conversions are a taxable event. If you convert one-fourth of your $1.2 million account per year over four years and continue collecting a $140,000 salary, your near-term tax bill could be huge. And you could end up costing yourself a lot more money in Medicare premiums if that conversion results in income-related monthly adjustment amounts (IRMAAs), or higher IRMAAs than what you're facing now.

That doesn't mean you don't have options, though. Here's how to pull off a Roth conversion under these circumstances.

Focus on tax brackets, not dollar amounts

If you're looking to convert a $1.2 million account before RMDs set in, you may be inclined to move $300,000 per year to achieve that goal. James Comblo, partner at Prosperity Capital Advisors, cautions that this approach may not work out in your favor.

"I would not divide $1.2 million by four and assume $300,000 a year is the answer," Comblo says. "Where I usually start with clients is by looking at how much room is available in each tax bracket. Filing status changes the entire calculation."

As Comblo explains, at a $140,000 salary, a single taxpayer is already in the 24% federal tax bracket before converting a single dollar. A married couple filing jointly, however, could land in the 12% bracket if they have enough available deductions.

In other words, depending on filing status, "the same salary can create two completely different conversion budgets and outcomes," Comblo says.

Running the numbers, we see that for a single tax-filer, adding a $300,000 conversion would push a meaningful amount of income into the 35% tax bracket. For a married couple, Comblo explains, most of that same conversion would fall into the 22% and 24% brackets. Only a small portion would reach 32%.

Social Security could complicate things

If you're 69 years old and earning $140,000 a year, you may not need Social Security. But the delayed retirement credits awarded to filers who hold off on taking benefits past full retirement age stop accruing at age 70. As such, that's typically considered the latest age to file for Social Security.

Comblo cautions that once Social Security starts, your taxable income increases, making it harder to stay within lower tax brackets during a Roth conversion.

"A Roth conversion can also cause more of the Social Security benefit to become taxable. The two decisions affect each other," he says.

A conversion could impact Medicare costs

Another issue with making a Roth conversion that is too large in any given year, says Comblo, is that it increases modified adjusted gross income.

"Medicare looks back two years when calculating Part B and Part D surcharges," Comblo explains. "A large conversion at age 69 could raise Medicare premiums at age 71."

IRMAAs aren't necessarily a reason to avoid Roth conversions, Comblo says. However, he advises, "It does mean the extra premiums need to be included in the calculation."

Re-evaluating the RMD "crunch"

Another thing Comblo cautions against is assuming leaving money in a traditional retirement account creates a crisis.

"A $1.2 million IRA at age 73 would produce a first-year RMD of roughly $45,000 under the current IRS life-expectancy factor," he explains. The taxes you pay on your RMDs may be lower than the taxes you'd pay on conversions.

Comblo also points out that starting RMDs at 73 does not end the Roth conversion window.

"The RMD has to come out first, and it cannot be converted," he says. "Once the required amount has been distributed, additional dollars can still be converted to a Roth. The planning becomes more complicated after 73, but the opportunity does not disappear."

Leveraging legacy goals

A Roth conversion may not be totally necessary in the situation above. From a tax perspective, leaving the money where it is could result in lower taxes.

In fact, Robert Jeter, CFP, founder and financial planner at Back Bay Financial Planning & Investments, LLC, says, "It's likely that they are in peak earnings of their career, and doing a Roth IRA conversion will almost certainly increase their lifetime tax bill."

But while a Roth conversion may not be the savviest move from a tax-minimization standpoint, Jeter says it could support an estate-planning goal — namely, reducing beneficiaries' tax liability.

"One of the best levers for Roth IRA conversions is talking about legacy goals as well as understanding the financial situation — specifically, the income situation of the beneficiaries," he says.

If your children, for example, inherit your Roth IRA, their distributions won't be taxable. If they inherit a traditional IRA, they'll owe taxes on their withdrawals, which they'll be forced to take so as to empty the account within 10 years. And if your heirs end up having to take those withdrawals during their peak earning years, at the family level, your total tax bill could be higher.

That, says Jeter, could make the case for a Roth conversion now despite having a large salary.

"I always categorize this as keeping money in the family," he says.

If your motivation to do a Roth conversion stems from wanting to leave a tax-free inheritance, one compromise is that your heirs could cover the conversion taxes with the understanding that more dollars would likely come back to them later, Jeter explains.

Four conversion strategies to compare

Ultimately, says Comblo, in this situation, there are four basic strategies worth looking at:

• Don't do any conversions. Let the IRA grow and take RMDs as required.
• Convert enough each year to fill the 24% tax bracket.
• Convert and use part of the 32% bracket, but only if the long-term projections support paying that rate today.
• Complete smaller conversions while collecting that $140,000 salary and do larger conversions once you're no longer working.

For each strategy, Comblo recommends comparing lifetime taxes, Medicare premiums, future RMDs, after-tax cash flow, the Roth balance at different ages, and what ultimately reaches beneficiaries, if that's important.

But ultimately, he says, "The conversion amount should come from the math, not from the size of the IRA."

Read More

• Should You Convert a Traditional IRA to a Roth after 60?
• A 'Mega Backdoor Roth' Can Save Thousands More for Retirement
• Should Fully Funded Retirees Invest Like 30-Year-Olds?
• Why a Down Market is the Best Time for a Roth IRA Conversion

Wealth Wise is Kiplinger's advice column on navigating retirement-related dilemmas. Got a question? See below for how to send it to us.

Dear Wealth Wise: My partner and I are both 75, with an approximate net worth of $1.5 million. I am retired and he is still working. When he retires, we will both have fairly generous pensions and Social Security. Right now, we have a fairly aggressive portfolio with a tenth of it invested in a momentum tech stock. We are around 60% stocks and 40% fixed income (the classic 60/40 portfolio). The fixed income is primarily held in bonds and high-interest CDs. Is our strategy too aggressive for our age? We live modestly and have no debt. I have a long-term care policy. He does not. — Comfortably Cautious

Dear Comfortably Cautious: Between your partner’s current salary and your future guaranteed income from pensions and Social Security, you are in an enviable position relative to the retirement savings and income of most people in their 70s. Given this scenario, you have the luxury of letting your $1.5 million portfolio continue working hard in the market, but with some limitations.

When you're in the process of building wealth for retirement, it's generally a good idea to invest heavily in the stock market, whether by holding individual company shares or relying on exchange-traded funds. Once you're actually retired or getting close to retirement, it's important to be more careful.

This doesn't mean you need to dump your stocks altogether. But retirees are commonly advised to limit their stock holdings to protect against market volatility. Let's see what the experts have to say.

A portfolio that's 60% stocks is generally reasonable

It's important to maintain a reasonably robust stock allocation in your portfolio during retirement so your money is able to grow and, ideally, outpace inflation.

Nathaniel Tilton, private wealth adviser and owner of Tilton Wealth Management, says this investment mix can certainly be reasonable.

"The key question," he says, "is whether your portfolio is designed to support your lifestyle or to maximize growth. At this stage, it should primarily do the former."

Matthew Gaffey, President at Corbett Road Wealth Management, says a 60% portfolio may not be too aggressive for some retirees. But it really depends on the specifics of your situation.

"If the majority or all of your expenses are covered by your pensions and Social Security, it's highly likely that you're not too aggressive and could potentially even take on more risk if creating a legacy was of higher importance and you chose to do so," he says.

However, Gaffey cautions, "If the pensions and Social Security are only covering a fraction of your projected spending, it would be critical to examine your withdrawal rate relative to the remainder of your portfolio to determine an appropriate level of risk."

Finally, given that your partner is still working, you are presumably not drawing down the investment portfolio. That also points to your ability to take on more investment risk.

Concentration risk is an issue

While a 60% stock allocation in retirement doesn't automatically scream trouble, Tilton says you may be taking on undue risk with your specific approach.

"The biggest concern isn’t your overall allocation. It’s the concentration risk. Having 10% of your portfolio in a single momentum-driven tech stock introduces a level of volatility that’s typically unnecessary at this stage of life," he says.

As Tilton explains, a sharp decline in that single position could have an outsized impact, even if the rest of the portfolio is well-constructed.

"I’d suggest gradually reducing concentrated positions, maintaining a diversified allocation, and ensuring your fixed income is structured not just for yield, but for liquidity and flexibility," he says.

Keep in mind that selling off 10% of a $1.5 million portfolio ($150,000) in a highly appreciated stock could trigger a huge capital gains tax bill. Consult a tax adviser for a strategy to unwind this holding efficiently.

Your reaction to volatility makes a difference, too

Gaffey cautions that too much portfolio risk could be a dangerous thing, more so because of your potential reaction than a short-term portfolio decline.

"For many," he says, "a different mindset sets in after their normal working paychecks stop. … It was easy to ride out market volatility when they were working. … After they flip the retirement switch, suddenly the money they've saved for years becomes more real to them, and they become more sensitive to the potential impact that every price movement in the market could have."

The danger, Gaffey explains, is "the investor overestimating their risk tolerance in an up market, followed by a risk adjustment and overreaction to market volatility."

In other words, if you don't actually have as high a risk tolerance as you think you do, you may be tempted to liquidate assets out of fear when the stock market takes a dive. That could result in permanent portfolio losses that are tough to recover from, so it's important to be mentally prepared for a temporary decline in portfolio value.

Make sure you're looking at the big picture

A portfolio like this isn't overly concerning to Christopher Walsh, financial advisor at Capital Choice Financial Group.

"If you’re both getting pensions and Social Security and living modestly with no debt, you likely aren't going to need to touch that $1.5 million for day-to-day living," he says. "In that case, the market can do its thing, and a little aggression isn't likely to hurt you."

A potentially bigger issue, says Walsh, is where that $1.5 million is being held. If it's in qualified accounts subject to required minimum distributions (RMDs), such as traditional IRAs or 401(k)s, Walsh explains, Medicare surcharges known as IRMAAs could become a real issue.

"The tax conversation is way more important here than the asset allocation conversation," Walsh says.

The other thing that jumps out to Walsh is the long-term care gap.

"Traditional long-term care coverage at that age is going to be difficult and expensive," says Walsh, referring to the fact that only one of you has a policy. However, he says, "If you have non-qualified assets, there are asset-based long-term care options worth looking at. The RMDs are actually going to push money into non-qualified territory over time anyway, so that's worth a real conversation."

You're not in bad shape, but the plan needs some tweaks

All told, you can relax (for the most part)! You're in a reasonably strong place when it comes to retirement income. But a few modifications to your plan and investments may be warranted.

"Overall, you’re in a good position, but a bit more emphasis on simplicity, diversification, and risk management would go a long way," says Tilton.

Walsh agrees.

"The investments aren't what I'd lose sleep over here," he says. "The taxes and the long-term care gap are the things that could actually hurt you."

Addressing those key factors could put you in an even more solid position as you glide into this next stage of life.

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.

More Wealth Wise Retirement Advice

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• 'Subsidized Adulting': Can You Afford to Help Your Children Financially?
• Should Fully Funded Retirees Invest Like 30-Year-Olds?
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Watching your retirement portfolio take a hit is painful, but it offers an unexpected gift: a discount on your future tax bill. Converting to a Roth IRA during a down market lets you pay taxes on depressed share prices now, turning market losses into years of tax-free growth.

Kiplinger's investing experts expect the second half of 2026 to remain strong. At the same time, there are signs that some asset classes or industries (such as AI) may struggle, which could provide an opportunity for savvy investors to convert holdings that see a significant drop.

The benefits of doing a Roth conversion in a down market

Since the amount you pay in taxes on a Roth conversion is based on the dollar amount you convert, a lower account balance means you’ll pay less to the IRS.

"The tax payment on the conversion is going to be smaller since the account value is lower," says Ben Rizzuto, wealth strategist with the Specialist Consulting Group at Janus Henderson Investors.

When moving a specific position, a smaller account balance doesn't mean the number of shares you convert to a Roth will be lower. In a down market, the value of the stock, mutual fund, or exchange-traded fund (ETF) may be depressed — but you'll still be able to convert the same number of shares.

How a Roth conversion in a down market works

Let's say you planned on converting a traditional IRA balance of $100,000. But the asset you own in the retirement account, say, an AI memory chip maker, suffers a 20% drop, reducing your balance to $80,000. The big decline in the stock price means you'll be able to convert all of your shares to a Roth IRA while only recognizing $80,000 in taxable income.

The depressed shares you convert to a Roth will benefit from an eventual market recovery inside the tax-free Roth wrapper. The upside? The future growth of those converted shares benefits from a longer runway to compound without IRS taxation, compared with a traditional IRA, which is taxed as ordinary income in retirement.

The best time to do a Roth conversion is in a year when not one but two financial forces are working in your favor.

The first, as discussed above, is a market pullback (a drop of 5% to 9.99% from a high), a correction (a 10% to 19.99% drop) or a bear market (a decline of 20% or more). Or, even if the market remains strong, you may be able to take advantage of a price drop in an industry or asset class.

The second is when your taxable income is lower than normal. In years when you report less income, you can convert more dollars to a Roth at a lower tax rate.

"That's a double benefit," says Steven Conners, founder and president of Conners Wealth Management. You end up converting fewer dollars and get taxed at lower rates.

How to decide if this Roth conversion strategy makes sense for you

Financial advisers, however, stress that a big market drop isn't the only factor a retirement saver should consider before doing a Roth conversion. Timing a Roth conversion based on market conditions is akin to trying to time a stock's purchase or sale.

The biggest factor by far when deciding whether to do a Roth conversion is the overall tax impact. Saving some money on taxes by doing a conversion during a down market doesn't necessarily mean doing the conversion is a slam dunk, financial pros say. You must look at the bigger tax picture you face in any given tax year.