For millions across the country, the 2026 midyear mark is as much a time for financial planning as it is for celebration. This summer marks America's 250th birthday — a historic milestone for our country's independence.

But while the nation was founded on a rebellion against unfair taxes, tossing your computer into the nearest harbor probably wouldn't work when it comes time to pay the IRS; December 31st is the final deadline for most 2026 tax year money moves.

Instead, you might just want to look to the wisdom of founding father and financial thinker, Benjamin Franklin, this planning season.

Franklin famously noted that, "nothing can be said to be certain except death and taxes." And though you can't escape either, you can control how much you overpay the government.

By applying Ben Franklin's wisdom to midyear tax planning today, you could help secure your retirement nest egg, fund intergenerational wealth, and potentially lower your tax bill in 2026. Here's how.

1. "The Doors of Wisdom are never shut."

Popularized in the 1755 edition of the Almanac, Franklin quoted this proverb to challenge the status quo in how we do things; it's easy to fall into a routine of wash, rinse, and repeat.

But routinely doing your taxes the same way every year can cost you. Gain a little midyear tax wisdom through the following ways:

• Learn midyear strategy. You don't have to wait until April to learn a new tax strategy. Platforms like the IRS Video Learning Portal and tax software academy portals offer free, year-round webinars to help you spot planning opportunities before the year-end deadline strikes.
• Revitalize your filing plan. Your revenue streams may change, and so should your taxes. For instance, if your financial situation has simplified, you might no longer need an expensive tax professional anymore. Alternatively, if you've bought property or started a business, doing taxes yourself might cause you to overlook certain tax deductions and credits.
• Save with free tax tools. There are several ways to file your taxes for free each year. For example, the IRS reports that millions of taxpayers have saved over a billion dollars collectively using IRS Free File alone. Evaluate free filing tools available to you now, while you're outside of the chaotic tax season stress.

2. "Beware of little expenses; a small Leak will sink a great Ship."

In the Almanac, Poor Richard warns that "a little punch" or extra tea now and then might seem like "no great Matter," but accumulated tiny expenses can sink your long-term financial ship.

In terms of midyear tax planning, the lesson is simple: Don't miss the small stuff. Now is the perfect time to audit your tax records before the end-of-year holiday chaos.

• Audit your health accounts. Check your Flexible Spending Account (FSA) or Health Savings Account (HSA) balances. Ensure your medical procedures, prescriptions, and qualifying purchases are properly documented with clean receipts (no matter how small), and budget out your remaining FSA funds if your plan has a strict year-end deadline.
• Track new tax provisions. If you plan on claiming provisions from the 2025 Trump tax bill, tracking documentation is key. For example, the car loan interest deduction allows you to deduct up to $10,000 in interest, but only if the vehicle was bought new, is used primarily for personal use, and had its final assembly in the U.S. Make sure you qualify for all the tax deductions and credits you plan on claiming.
• Organize the paper trail. Start digging through your kitchen junk drawer or email folders. You'll want to make sure you have your tax mileage log on file if you're, say, a ride-share driver, or have your gambling tax documentation if you've placed a bet this year. Start the family's designated "tax folder" now to avoid unnecessary stress later.

3. "Early to Bed and early to rise, makes a Man healthy, wealthy, and wise."

Printed in the 1735 edition of the Almanac, this phrase originally praised the discipline of an industrious lifestyle. Let's modernize that approach and polish it into a midyear tax mantra:

"Early to check and early to optimize makes you more planned, less stressed, and energized."

Corny, sure.

But a midyear checkup ensures you aren't accidentally giving Uncle Sam an interest-free loan — or worse, setting yourself up for an IRS underpayment fee or penalty. Here's the phrase broken down:

For more information on how to plan your tax payments and optimize your withholdings, check out Kiplinger's reports on Estimated Tax Payments and 13 Things Every Worker Needs to Know About Withholding.

4. "Having been poor is no Shame, but being ashamed of it is."

Printed in 1749, this quote reminds us that financial struggle is often a consequence of shifting circumstances, not a lack of virtue. In tax planning, knowing how to handle these financial pivots — and leveraging the IRS code to protect your downside — can be a key tool in your tax toolbelt.

Here's how we can relate that to our midyear tax planning strategy:

• Harvest your investment losses. Know when a position isn't working out. Through tax-loss harvesting, you can sell underperforming equities to counteract your capital gains. If your losses exceed your gains, you can use them to offset up to $3,000 of ordinary income, carrying the rest over to future years.
• Strategize charitable giving. If you want to support a cause close to your heart, plan those donations now rather than scrambling in December. Strategizing early helps you maximize itemized charitable deductions and navigate the new 2026 rules on charitable giving.
• Utilize a QCD. If you're age 70½ or older, you can make a qualified charitable distribution (QCD) directly from your IRA to an eligible charity. This counts toward your required minimum distribution (RMD), the minimum annual amount you must withdraw after reaching a certain age, and also helps keep that money out of your AGI, potentially lowering your tax bill.

5. "Money can beget Money, and its Offspring can beget more."

Moving away from the Almanac, this quote comes from Franklin's 1748 essay, "Advice to a Young Tradesman." Franklin was explaining compound interest, noting that money is of a "prolific generating nature."

Retirement accounts and legacy planning are perfect examples of compounding wealth while avoiding high taxes. And midyear is a great time to double-check that your savings vehicles are on track.

• Maximize pre-tax contributions. If you're currently working and in a higher tax bracket than you expect to be in retirement, maximize your traditional 401(k) or other traditional IRA contributions now. It lowers your taxable income today and gives you more immediate cash flow to save or invest. Later, when your federal tax bracket is (hopefully) a little lower, you'll be taxed on the contributions when you withdraw them.
• Plan the "perfect" Roth conversion window. If you anticipate an upcoming low-income year — maybe you're freshly retired but haven't started drawing Social Security or reaching your RMD age yet — plan a potential Roth IRA conversion ahead of time. Converting traditional retirement funds into a Roth during a low-income year allows you to pay a low tax rate on the conversion, but while there are six reasons to convert to a Roth, there are reasons not to.
• Evaluate your estate tax plan. Check in with your financial advisor about your new estate tax exemption amount. Are you optimizing for the stepped-up basis of inherited assets, leaving appreciated equity without capital gains after death? Also, review whether you should use the annual gift tax exclusion to pass tax-free assets to children or grandchildren in 2026.

From shifting brackets to new legislative bills, tax planning is typically a moving target that requires at least a bi-annual checkup.

While a great financial professional can help you tailor these moves to your specific roadmap, keeping these five pieces of financial wisdom in mind may help you avoid being caught off guard and keep you focused on what matters most this summer — celebrating.

Happy planning!

This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws (including state taxes) are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.

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The aphorism "If you fail to plan, you're planning to fail" is commonly attributed to Benjamin Franklin.

Even if the words are his, he wouldn't have been thinking about income taxes when he wrote them. Those were introduced in 1862 to temporarily fund the Civil War. The 16^th Amendment made them permanent in 1913.

Today's income taxes are quite complex compared to the type of taxation people would have known in the days of the Founding Fathers. And you'll need to take an active, strategic approach to managing them if you want to optimize your financial position.

In general, for income of $150,000 or under, there are specific concerns and ways to approach the planning. For those with $500,000 and more in income, there are different concerns and approaches.

There is no doubt that proper tax planning helps at any level, but in the "messy middle," between $150,000 and $500,000, there is more complexity than necessary.

The challenges of active tax management

One of the biggest challenges in active tax management is synthesizing all the information to uncover what can reduce your tax burden as much as possible in the future, and not just in the current year.

You might be unaware of various deductions, state-specific rules and thresholds that can kick you into a higher bracket, eliminate or phase out a deduction, or cause other unforeseen expenses now or later.

It is a balancing act that is based on and informed by income sources, assets, ways assets are owned, taxation attributes of types of assets, financial goals, expectations about the future of taxes and sometimes even legacy intentions.

For many, the complexity requires a professional to dig into the details, ask the right questions and help devise the best strategy or mixture of strategies. An expert can provide objective analysis that identifies missed deductions and potential opportunities, ensures regulatory compliance, mitigates risks and increases net after-tax long-term wealth.

Whether you do your own tax planning or hire a tax professional, the important point is being intentional — making tax planning a priority in your financial plan (at the very least giving it equal importance to investment, income, legacy and protection planning) and making choices to ensure you are protecting as much of your savings and assets as possible for the long term for the best possible taxation.

Learning the tax implications of your income range

The starting point in active tax management is figuring out your likely income range and optimal tax strategies for now and for retirement. Tax rates can change in the future, but the important approach now is to identify an income range where you think you could settle tax liability at reasonable rates, avoid paying unnecessary taxes and set up a future where you have some flexibility to manage brackets later.

Let's focus on the tricky messy middle — those with between $150,000 and $500,000 in income. For the 2026 tax year, that range of income spans three tax brackets (22%, 24%, 32%) for married couples filing jointly and three for single/married filing single (24%, 32%, 35%).

That range points out the importance of active tax management not only because of the various tax rates, but also because there are numerous deduction phase-outs and additional tax triggers.

Here are just some of those (based on the 2026 tax year).

Net investment income tax (NIIT). This is an additional 3.8% federal tax on certain types of investment income. It applies to individuals with modified adjusted gross income (MAGI) exceeding $200,000 (for single filer/head of household) and $250,000 (married filing jointly/surviving spouse).

Once you cross into these ranges, every dollar of investment income becomes less efficient, making proactive tax planning significantly more valuable. The NIIT applies to income such as interest and dividends, capital gains (stocks, real estate, funds), rental and passive income and certain annuity income.

Long-term capital gains rates. Another negative impact of the NIIT: It effectively raises long-term capital gains rates to 18.8% (15% + 3.8%) or 23.8% (20% + 3.8%), depending on your filing status and income level.

Qualified business income (QBI) deduction. The QBI deduction is a tax break allowing eligible self-employed individuals and pass-through business owners (partnerships, LLCs, S corps) to deduct up to 20% of their qualified business income from their personal taxes.

In 2026, the phase-out range (for some in specified trades or businesses) is $403,500 to $553,500 for married joint filers, $201,775 to $276,775 for single filers.

Child tax credit. The phase-out starts at $200,000 for single/head-of-household filers and $400,000 for married couples filing jointly. The credit amount is reduced by $50 for every $1,000 of income above these thresholds.

Deduction for those who are 65-plus. A new $6,000 deduction for individuals aged 65-plus phases out between a MAGI of $75,000 to $175,000 for singles and $150,000 to $250,000 for married joint filers. The deduction reduces by six cents for every dollar over the limits.

State and local tax deduction (SALT). With MAGI just over $505,000, you begin to lose the increased SALT deduction, but for now, for many with income under $500,000, a higher deduction may mean itemizing for the first time in a while.

Charitable contributions. Donations are only deductible to the extent they exceed 0.5% of your adjusted gross income (AGI). For example, with an AGI of $300,000, only donations over $1,500 are deductible as an itemized deduction, and then only if you itemize. There is now a small "above the line" deduction for those not itemizing. (A note for those in the top tax bracket: A limitation on itemized deductions comes into play for you.)

Increased Medicare premium surcharges. The income-related monthly adjustment amount (IRMAA) is a surcharge added to Medicare Part B and Part D. It is based on your MAGI from two years prior. Single filers with income ranges from $109,000 to $500,000+ pay progressively higher surcharges, as do those filing married jointly from $218,000 to $750,000+.

For example, a married couple filing jointly with a MAGI of $280,000 would pay approximately double for Medicare premiums relative to those who make $215,000.

This is an especially tricky one to navigate and is not felt until two calendar years later, based on how Medicare premiums are determined. You go over a threshold by just a dollar, and it could cost you hundreds, if not thousands.

The widow's tax penalty. This is a surge in federal income tax liability and Medicare premiums that occurs when a surviving spouse shifts from married filing jointly to single status, typically one year after their spouse passes away.

For higher-income individuals, the penalty can be severe because they often have income sources (pensions, IRAs, investments) that do not decrease when a spouse dies.

Most often, the surviving spouse spends about the same money and needs the same amount of funds to accomplish that, which means the same amount of income while the brackets have been cut in half. The IRMAA charges are higher at lower income levels, too, for the surviving spouse.

Take control and reap the rewards

Active tax management is no longer beneficial for just the ultra-wealthy; it is a necessity for anyone and beneficial for those navigating the increasingly complex $150,000 to $500,000 income range.

This bracket is filled with hidden triggers, phase-outs and surtaxes that can quietly erode wealth if left unaddressed. The difference between reactive and proactive planning can mean thousands of dollars kept or lost each year and over a lifetime.

Understand what you have, what you can do now and what you can do later, so you can either defer income or settle tax liability when it makes sense. That approach allows you to optimize your current and future tax situation.

By understanding how the various ingredients and thresholds interact — and by making intentional, forward-looking decisions around income, investments and timing — you can take greater control of your financial outcomes and your net after-tax dollars.

Remember, you do not get to spend pre-tax dollars — it is only the after-tax dollars you get to spend. As the great Yogi Berra once said, "If you don't know where you are going, you'll end up someplace else."

Dan Dunkin contributed to this article.

Appearances on Kiplinger.com were obtained through a paid public relations program. The author received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

The information contained herein is for educational purposes only. It is not intended to provide, and should not be relied on for, any tax, legal or investment advice. You are advised to seek the advice of a qualified professional prior to making any decision based on any specific information contained herein. The specific tax consequences of any investment or strategy will depend on your specific tax situation.

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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.

The financial professionals who contribute to Kiplinger's Adviser Intel are always here to make sure you have the information you need to make critical decisions about your retirement planning, estate planning and tax planning.

They've recently written about the growing number of Americans working past retirement age — and why the consequences can be more complicated than you might think in terms of Social Security, healthcare and tax.

This quiz is designed to test what you've learned. Let's see what you know! (And don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

Please note that this quiz has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or financial advice.

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• Social Security, Healthcare and Tax: The Potential Complications of Working Past Retirement Age
• Still Working While Receiving Social Security? A Financial Adviser's Guide to the Earnings Test
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If you have retirement savings in an IRA or 401(k), Uncle Sam is your partner on that money because every dollar you pull out of it is taxed.

Consider this common scenario: One spouse in a retired household passes away and the surviving spouse becomes a single taxpayer, which affects their overall tax liability, even though their income goes down.

Let's say the couple's total income was $200,000 a year. While they were married, this meant they had an effective tax bracket of about 15%.

When the husband passes away, the wife's income goes down to $180,000 because she loses the smaller of their two Social Security checks. But going forward, she will file as a single taxpayer, so she is now in the 20% tax bracket.

Additionally, if her RMDs and her income grow each year, her tax rate could keep climbing. And that doesn't even factor in future tax increases. (It's unlikely taxes will stay as low as they are now, considering our nation's debt of $39 trillion.)

Proactive tax planning could have helped protect her from the impact of higher taxes after losing her partner.

For retirees in higher tax brackets looking to help their spouse (or adult children) avoid this kind of tax trap in the future, partial Roth conversions now can help.

1. Protecting the surviving spouse

If you're a married couple, you're in a joint taxpayer bracket. And once both spouses reach age 65, you become eligible for specific additional tax benefits.

For example, with a taxable income of $148,300, you fall within the 12% tax bracket for married couples filing jointly after the deductions.

The $148,300 figure includes a $32,200 standard deduction based on your filing status. You would also receive the $3,300 additional standard deduction for both being over age 65 – this consists of $1,650 for each spouse, as determined by the One Big Beautiful Bill for taxpayers over 65. On top of this, there is an additional $12,000 bonus deduction for those over age 65 (up to a certain income limit).

However, when one spouse dies, the surviving spouse (usually the wife) jumps up to the 24% tax bracket.

If your income is higher, it's an even larger jump in taxes for the surviving spouse.

For example, if your taxable income as a married couple is $250,000 a year, you can see on the chart below that you're in the 24% tax bracket because you're "married filing jointly."

However, if the husband dies first, the surviving spouse is now a "single filer" with taxable income of $250,000. You can see she has now jumped up into the 32% tax bracket.

A Roth IRA may help protect the surviving spouse from higher taxes as a single taxpayer because you already paid the taxes while you were both alive as joint taxpayers.

2. Protecting non-spouses

When you die and leave your IRA to your children, they only have 10 years to empty your IRA completely.

Let's assume the IRA you leave to your children will earn 4% annual returns over the 10-year period after you leave it to them. This means that your children will have to take out approximately 14% of the IRA balance every year.

This would allow them to take out the 4% annual earnings along with 10% of the principal, so the entire IRA is drained over that 10-year period without a potential big tax hit in year 10.

However, this 14% annual IRA withdrawal could put your heirs in a higher tax bracket.

While a Roth conversion would mean paying income tax now, that could be a bargain compared to the potentially higher income tax brackets your heirs might have to deal with after you're gone — and any state income taxes they may also have to pay.

Additionally, if your children live in a state that has a state income tax (such as New York, which has a 10.9% top state tax bracket), they may be subject to federal income taxes and up to an additional 10.9% in state income taxes as well.

We use software called Holistiplan that helps identify the maximum amount to withdraw year by year to take advantage of today's tax brackets, and will work alongside an accountant or a tax professional.

When appropriate, we recommend our Strategic Roth Integration (SRI) plan to clients so that they can take advantage of today's income tax rates and never pay taxes on their Roth IRA again.

If you'd like to learn more, check out my new book, IRA Owners: Help Defuse Your Ticking Time-Bomb, co-authored with Steven Kao.

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

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

I've worked with enough successful business owners to know that almost every one has the same gap in their plans.

Take a scenario I see all the time: Dave built a widget company from nothing into a $30 million business. He's sharp, disciplined and completely focused on growth.

But when I ask him what his plan looks like after the company's sale, he stares at me like I've asked him to solve a riddle in an unknown language.

Dave isn't unusual. Most successful entrepreneurs pour every ounce of energy into building a business and almost none into planning for what happens when it turns into liquid wealth.

It's not carelessness. Building the company is the priority. If it doesn't succeed, there's nothing for which to plan.

The problem is that by the time the exit is real and there's a signed contract and a closing date, the biggest wealth-building opportunities have already passed. The cost of that timing gap can run well into the millions.

Three things business owners aren't considering

The same three blind spots come up again and again:

• The first is business structure. How the company and the owner's personal stake are organized for tax purposes. Whether you're a C corp, S corp, LLC or LLP affects not just annual income taxes but the tax treatment of any future sale. Get this wrong at formation, and you could be locked in for decades.
• The second is succession planning. For a business to command a strong valuation, it needs to be transferable. This means there is management in place, client relationships are institutional rather than personal, and operations can run without the founder. Buyers pay a premium for businesses they can take over immediately.
• The third is exit and estate planning. This one costs families the most money. A successful sale creates a massive tax event. Without years of advance planning, your options to reduce that burden shrink dramatically.

Why the math gets worse as the business grows

Valuation multiples expand as revenues grow. A company with $200,000 in EBITDA might sell for five times, or $1 million. Scale to $3 million in EBITDA and a 10-times multiple puts the value at $30 million. At $35 million in EBITDA, a 20-times multiple can push it to $700 million.

Industry and revenue quality directly impact these numbers, but the pattern holds: The bigger the exit, the bigger the tax event.

The federal estate tax rate above the exemption is 40%. The current lifetime exemption is $15 million per person ($30 million per couple), which is the most generous in U.S. history.

But Congress can change that number. A sale that pushes your estate above the exemption can trigger an enormous tax bill for your heirs if you haven't planned ahead.

What early planning looks like

If a business owner shows up with a signed purchase agreement and asks what can be done to reduce the tax hit, the honest answer is: Not much. The valuation is set. The structure is locked. The die has been cast, as we say.

The difference between the business owner who plans five years out and the one who plans five months out can easily be eight figures.

Let's revisit Dave's scenario. Five years before his planned exit, we started working on a strategy. Dave created an irrevocable trust for the benefit of his wife and children and transferred 50% of his company, valued at $15 million at the time, into that trust.

When the company sold for $60 million, the trust's half was worth $30 million, and that $30 million was outside Dave's taxable estate.

He paid long-term capital gains of 20% on the sale rather than ordinary income rates of 37%, and by moving assets out of his estate at a much lower valuation years earlier, he avoided what could have been $12 million in estate taxes on the growth alone. All told, early planning saved Dave's family north of $20 million.

Two types of trusts come up most often in these conversations:

• A spousal lifetime access trust (SLAT) is an irrevocable trust that names the spouse as beneficiary during their lifetime, then passes to children and grandchildren. It works well when the business owner might still need access to income or assets from the trust.
• An intentionally defective grantor trust (IDGT) skips the spousal access and goes directly to children and grandchildren.

Both of these options share the same critical advantage: The assets are valued when they go into the trust. For a growing business, that means transferring at a relatively low valuation years before the exit and letting all that appreciation happen outside the taxable estate.

Charitable strategies can strengthen the plan further. Donating appreciated stock to a donor-advised fund — or, for private company shares, to an organization that accepts them — delivers meaningful tax benefits over donating cash. These tools work best when built into the strategy early.

Four things to do now

If you own a business and think you might sell it someday (even if "someday" feels like a decade away) here's where to start.

1. Find the right wealth manager. Look for someone who works specifically with business owners and can help you build a long-term plan that connects your business goals to your personal financial picture. This isn't a one-meeting exercise, it's an ongoing relationship.

2. Assemble your full team and get them on the same page. Alongside your wealth adviser, you also need an attorney and an accountant, all working from the same playbook. These professionals shouldn't be operating in silos. The value comes from coordination. To ensure this, I encourage you to ask your team four questions:

• What is the plan?
• How are we going to get there?
• Who else needs to be involved?
• What are we not thinking about? This is the one most people forget.

3. Start three to five years before any potential sale. This is the window when the most powerful strategies, including trust planning, ownership restructuring, estate tax reduction, are still available to you. If you wait until a deal is on the table, most of those doors close.

4. Execute aggressively. An unexecuted plan is worthless. Once the strategy is in place, move on it. Every year of delay is a year that asset values grow inside your taxable estate instead of outside it.

The future will arrive faster than you think. Time is your single greatest ally in wealth planning but only if you use it.

The entrepreneurs who start early, build the right team and execute with urgency are the ones who keep the wealth they spent a career creating.

The ones who wait? They pay for it.

Related Content

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

For retirees and those closing in on retirement, understanding how to manage required minimum distributions (RMDs) is essential.

These government-mandated withdrawals must be taken from tax-deferred retirement accounts, such as traditional IRAs and 401(k)s, starting at age 73. Yet, as a longtime financial adviser, I've learned that many investors nearing that age aren't familiar with how RMDs work or prepared to deal with the extra taxes they can trigger.

Even those who know something about RMDs aren't always aware of recent rule changes or useful strategies that might help reduce their RMD tax burden. That means they could easily make costly missteps that impact their retirement savings.

What are RMDs?

The IRS doesn't allow retirement savers to keep money stashed in their tax-deferred accounts indefinitely. Once you turn 73, you must begin withdrawing a minimum amount annually (based on an IRS formula) and pay ordinary income taxes on that amount.

These mandated withdrawals are called required minimum distributions. And failing to take the appropriate distribution at the correct time can result in a hefty penalty.

The RMD rules apply to all tax-advantaged plans except Roth IRAs because those account owners have already paid taxes on their contributions.

Common mistakes with RMDs

1. Taking RMDs without advance tax planning

RMDs start at age 73 for most people born between 1951 and 1959. And those born in 1960 or later will start at age 75. But I recommend planning for these complicated withdrawals long before you're required to take them.

When you hear retirees complain about paying much more in taxes than they expected in any given year, it's often because they weren't ready for how RMDs would affect their taxable income.

For example, your RMD could push your income past the IRS threshold that determines whether your Social Security benefit will become taxable and at what percentage it could be taxed.

Your withdrawal could also trigger the income-related monthly adjustment amount (IRMAA), a surcharge on your Medicare premiums. Planning ahead could help you avoid these and other RMD-related tax traps.

2. Waiting until the last minute to take your first RMD

RMDs generally must be completed by December 31 of the current calendar year. In the year you turn 73, however, you'll have the option to delay taking your RMD until April 1 of the following year. (For example, if you're turning 73 in 2027, you'll have until April 1, 2028, to take your first RMD.)

But there can be consequences for postponing. If you decide to make two withdrawals in one year, your taxable income will likely be higher for that year, which could mean facing a steeper tax bill. Before you decide to double up, you may want to run the numbers to be sure it makes sense.

In fact, waiting until the last minute in any year could cause problems if you suddenly get busy, can't afford or simply forget to take your RMD.

If you haven't withdrawn the full RMD amount by the deadline, you could face a 25% penalty on the amount you haven't withdrawn. (That drops to 10% if the RMD is corrected within two years.)

If you decide to wait until the RMD deadline, you also may have to sell investments in a down market. Spreading out your withdrawals could help reduce market risk.

3. Forgetting inherited IRA rules

Planning to leave what's left in your accounts to your beneficiaries? They, too, will have to take distributions based on IRS rules. And they, too, could face a penalty if they don't correctly calculate and take their required withdrawals at the proper time.

The rules for when account beneficiaries must take RMDs vary based on the inheritor's relationship to the original account holder. A spouse who inherits a retirement account usually has more flexibility, for instance, when it comes to determining how soon RMDs will begin and how they'll be calculated.

But most non-spouse beneficiaries are required to empty their inherited account and pay taxes on this income within 10 years of the original account holder's death. Which means adult children often end up having to take RMDs from an inherited account during their highest-earning years.

If you expect to leave money in a 401(k) or similar account to your loved ones, it's important that they have a chance to do their own tax planning. Your financial adviser should be able to suggest strategies to help them maximize your generous gift.

4. Missing out on qualified charitable distribution opportunities

It may be difficult to predict exactly how much your RMDs will be from year to year — or how much they might impact your taxes. But just knowing they're coming will give you an opportunity to prepare.

If charitable giving is part of your financial plan, a qualified charitable distribution (QCD) can help you further your philanthropic goals and reduce the tax hit from your RMDs.

QCDs allow individuals age 70½ and older to make tax-free donations directly from an IRA to a qualified charity, potentially satisfying all or part of the annual RMD amount due from their eligible accounts.

A QCD doesn't offer a tax deduction, but the amount of your QCD won't be included in your taxable income. And you can make a QCD from several different types of tax-deferred retirement accounts — although there are rules regarding using a SIMPLE or SEP IRA, and you can't make a charitable contribution from a workplace retirement plan, such as a 401(k).

5. Ignoring Roth conversion strategies before RMD age

Converting a traditional IRA to a Roth IRA can help you avoid RMDs altogether — or at least lower the amount you'll have to withdraw each year.

Unlike traditional IRAs, Roth IRAs don't require that you take RMDs during your lifetime. This means you can keep your money invested for as long as you want, allowing it to grow tax-free. And if you pass on a Roth IRA to your heirs, they can take their RMDs tax-free.

Of course, you'll have to pay taxes on the amount you convert, so timing — and planning well in advance of your RMD age — is important. Minimizing your income sources in the year you plan to do the conversion can help keep your tax liability as low as possible.

Many retirees find the "sweet spot" for completing a conversion is after they've stopped working but before they begin receiving Social Security benefits or pension payments.

Your adviser can help you determine if and when a Roth conversion makes sense for your needs.

Don't put off RMD planning

If you expect to withdraw the IRS's required amount — or more — each year to cover your living expenses in retirement, RMDs may not be a concern for you. But if RMDs will impact your income, tax and estate planning, you may want to seek guidance.

The rules are complex, and making a mistake can be expensive.

The IRS website offers basic information regarding the overall RMD regulations. But if you want more specific advice and ongoing support, consider talking to a financial adviser ASAP.

Kim Franke-Folstad contributed to this article.

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

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• New RMD Rules: Starting Age, Penalties, Roth 401(k)s, and More
• You're Stuck Taking RMDs: Now What?
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• 8 Factors to Consider When Considering a Roth Conversion

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.

Meet Mike, a 67-year-old who has owned the same set of small Texas rental properties for 31 years. He's ready to step back.

The tenant calls, the late-night plumbing emergencies, the property taxes that climb every year? He's done. So he sells one of his appreciated properties (the highest-maintenance one!), and starts the 1031 exchange clock.

Forty-five days to identify a replacement property. One hundred eighty days to close.

In the past three years, that has sometimes been a challenging window. Replacement properties have been thin on the ground. Sellers and buyers couldn't agree on the price. Lenders have been cautious. Mike, three years ago, might have spent his 45 days in a panic and pulled out, paying the tax he was trying to defer.

Today, Mike has a different problem. Not too few options — too many.

Last week, Mountain Dell Consulting reported that the Delaware statutory trust market is now sitting on the largest inventory of investable equity it has ever had. About $3.9 billion of available equity across roughly 100 DST offerings, according to Mountain Dell associate Seth Anderson, who shared the figures with Bisnow on May 29.

The previous high-water mark was $3.2 billion, recorded in May 2023. And that's just what's open for new capital. Through May 2026, sponsors had already raised an additional $3.75 billion, up nearly 24% from the same period in 2025 ... with Mountain Dell projecting $10 billion to $11 billion in total DST sales by year-end.

That is a meaningful shift. And if you're sitting on a property sale, considering a 1031 exchange, or wondering whether passive real estate makes sense in your retirement plan, you must understand what just happened.

What is a Delaware statutory trust (DST)?

If you're new to the conversation, a DST is a legal structure that holds title to commercial real estate on behalf of multiple investors. You buy a fractional interest. A professional sponsor (typically a real estate firm) handles the work: Acquisition, financing, property management and eventual sale.

The IRS confirmed in Revenue Ruling 2004-86 that a DST interest qualifies as "like-kind" replacement property under Section 1031. So an investor selling a rental house, an apartment building, an office park or raw land can roll the proceeds into a DST and defer the capital gains tax — the same as if they had bought another property directly.

The minimum investment for most DSTs is about $100,000. Some go lower, some significantly higher.

For a 1031 exchanger facing the 45-day clock, a DST is often a safety net. Increasingly, though, it's the main event.

Why DST inventory hit a record high in 2026

Two forces are pushing equity into the DST space.

The first is the supply side. Major institutional names like Ares, Hines and Blue Owl currently lead the DST market by volume, while recent entrants, including Apollo, Nuveen, Fortress and Invesco, have launched their own DST funds in the past two years.

Fortress launched its DST fund in March, targeting housing for older people, student housing and multifamily.

Nuveen rolled out a DST last year that converts property sellers into investors in its $2.1 billion nontraded real estate investment trust (REIT).

Through May 2026, Ares alone accounted for nearly 22% of all DST equity raised — more than twice the next-largest sponsor.

The second is the demand side. Replacement property inventory in the broader market is tight; financing terms have stayed expensive. The bid-ask gap between sellers and buyers has been wide enough to kill plenty of deals.

First American Exchange Company, a national qualified intermediary, reported that its DST transaction volume rose 55% from 2025 to 2026. President Julie Baird told Bisnow the 1031 market is "fundamentally different than it was even five years ago."

Investors are choosing the certainty of a fully structured, professionally managed property over the uncertainty of chasing a direct deal in a difficult market.

What the record DST market means for 1031 exchange investors

Three things change when there is $3.9 billion in inventory, rather than $2 billion, waiting for capital.

First, you have selection power. You can be picky. You can compare a multifamily DST in Phoenix against a net-lease retail DST in Charlotte, against an industrial DST outside Atlanta.

Five years ago, 1031 exchangers were grateful for any DST they could close on inside the 45-day window.

Today, you can build a small portfolio across asset classes and geographies inside a single exchange.

Second, sponsor quality matters more than ever. When inventory was tight, you took what was available. With this much equity competing for investor attention, sponsors have to put their best deals forward to differentiate.

That said, not every offering on the market is a good one. The 1031 timeline pressures investors into decisions, and sponsors know it. Some offerings still arrive with thin reserves, optimistic distribution projections or debt that will be in trouble at the next refinance. It's critical to differentiate.

Third, and this is the one Mike cares about, DSTs are increasingly being used as a starting point for a longer wealth strategy, not just a one-time tax move. Some DST sponsors are affiliated with REITs and offer a future exit through a 721 UPREIT, in which DST holders contribute their interests into a REIT's operating partnership in exchange for partnership units. Tax-deferred.

That is a separate and complex topic — one I wrote about in my article Can You 1031 Exchange into a REIT? — in which the exit options are wider than they used to be.

DST investment risks every 1031 exchanger should know

A record inventory is good news for buyers … but it's not a free pass.

A handful of DST sponsors have had financial trouble in recent years. Properties carrying debt placed in 2020 or 2021 (when borrowing was cheaper) are facing refinancing realities that the original projections never modeled.

Some vintage 2019 and 2020 DSTs have struggled to deliver the distributions investors were originally shown.

Baird at First American said it plainly to Bisnow: "There have been some DST sponsors that have had some financial challenges, and so it really is incumbent upon those interested in those types of investments to understand the mechanics of the transaction and who's backing it."

That is the right framing.

5 questions to ask before investing in a DST

If you're evaluating a DST inside a 1031 exchange, or evaluating whether to consider one at all, here are five questions I would put on the table before signing anything.

1. Who is the sponsor, and how have they performed on prior DSTs over the past 10 years? Not their pitch deck. Their record.

2. What is the debt structure on the underlying property, and when does the loan mature? If the loan matures during a tough rate environment, the projected returns may not survive the refinance.

3. What does the lease tail look like? If a major tenant's lease expires in three years and the DST's expected hold is seven years, somebody is going to have to re-lease the space.

4. What is the income yield investors should reasonably expect, net of all fees? Not the gross number on the cover page. The net.

5. What happens if the property doesn't perform? Reserves, contingencies, sponsor obligations. Read those sections of the offering documents twice.

These are not "gotcha" questions — these are the basics. A sponsor who answers them clearly is a sponsor worth considering.

A sponsor who deflects is telling you something.

How to evaluate today's DST market in a 1031 exchange

Anderson at Mountain Dell told Bisnow he expects the DST market to remain in a "heightened level of sensitivity for the next three or four years." For investors, that sensitivity is an opportunity dressed in caution.

Mike, our 67-year-old hypothetical seller, will close his 1031 exchange this summer with three DST positions across two states. He will trade his late-night plumbing calls for monthly distributions. He will keep his deferred tax intact.

And because of the basis step-up at death, he will be in a stronger position to pass real estate equity to his children than he was with the rental properties he had 10 years ago.

That outcome is available to more investors than ever before in the history of the DST market.

The bigger questions are whether it fits your specific situation and which of the 100-plus current offerings are worth your money.

That is the conversation worth having before inventory tightens up again. (Which, historically, it always eventually does.)

Related Content

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• Do Self-Storage REITs Deserve Space in Your Portfolio? It's a Yes From This Investment Adviser
• How Well Do You Know Delaware Statutory Trusts? Test Your Knowledge
• I'm a Real Estate Investing Pro: This Is How to Use 1031 Exchanges to Scale Up Your Real Estate Empire
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells

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 and more retirees are "retiring" from retirement.

Data from the National Institute for Occupational Safety and Health shows the number of retirement-age Americans in the workforce is growing.

And in a survey by Asset Preservation Wealth & Tax, 51% of respondents who'd reached retirement age said they plan to work indefinitely.

The reasons for retirees planning to work into their later years vary. Some simply have to from a financial perspective, while others want to live an active, purposeful life.

However, working during retirement brings challenges and trade-offs, especially when it comes to Social Security benefits, taxes and healthcare. The decisions you make about when to start claiming Social Security and whether you plan to keep working can have lasting consequences.

The pitfalls of claiming Social Security too early

A common phrase we hear is, "I'll just take my Social Security benefits at age 62." While it's true this is the first age you can start claiming benefits, doing so can backfire, particularly if you keep working.

If you claim and continue working before reaching your full retirement age, which is between 66 and 67 depending on your birth year, a portion of your benefits may be temporarily withheld owing to Social Security earnings limits.

For 2026, you can earn up to $24,480 before benefits will be withheld. In the year you reach full retirement age, the earnings limit increases to $65,160. After you reach your full retirement age, there are no earnings limits.

Upon reaching full retirement age, your benefit amount will be recalculated to give you credit for any benefits reduced and withheld.

Additionally, once you've started collecting Social Security, stopping and starting benefits is complicated and can permanently reduce your lifetime payments. It's not a switch you can easily flip on and off.

Bridging the healthcare gap: Age 62-65

Another major issue for people who claim Social Security benefits early is healthcare. Medicare eligibility doesn't begin until age 65, so if you leave your employer's health plan and retire at 62, you'll need to find coverage on the open market, which can get expensive.

Working part-time may provide access to employer healthcare, but that could put you at risk of exceeding the Social Security income limits. You could turn to private insurance, but the premiums can easily use up a large portion, or even all, of your Social Security check.

The three-year gap between age 62 and 65 is one of the most overlooked in retirement planning. I recommend sitting down with a financial adviser to go through all of your options before claiming early and potentially setting yourself up for financial failure, watching sky-high out-of-pocket premiums drain your savings faster than expected.

Income, taxes and the cost of working in retirement

Even after reaching full retirement age, when the Social Security earnings limit no longer applies, income from work can still impact your finances. That's because it depends on your total income.

If you're single and your combined income, the sum of your adjusted gross income (AGI), non-taxable interest and half of your Social Security, exceeds $25,000, or $32,000 for married couples, up to 85% of your Social Security benefits may be taxable.

In other words, the more you earn from working, the more you may have to give back in taxes. It's not necessarily a reason to stop working, but it does highlight the importance of strategically coordinating your income sources.

Knowing when to claim

Many people think waiting to claim Social Security until age 70 is always the best option, since benefits grow by about 8% each year after full retirement age until age 70. While that may maximize the amount you receive every month, it's not right for everyone.

For some retirees, the time value of money may matter more. For example, some may start taking benefits at 67 or 68 and use that income strategically by reinvesting it, reducing portfolio withdrawals or using it to strengthen their overall retirement cash flow.

There's also a break-even point, where the total amount collected by claiming early can surpass what you'd get by delaying. For married couples, it often makes sense to strategically stagger claims, with one spouse claiming earlier and the other delaying for a higher survivor benefit.

At the end of the day, there's no one-size-fits-all when it comes to claiming Social Security. It all comes down to finding the right balance of longevity, income needs and your overall financial plan.

Social Security should supplement, not replace, your income

Social Security was never designed to be the sole source of retirement income. It was meant to supplement, not replace, your paycheck.

You will likely need around 70% of your pre-retirement income to maintain your current lifestyle, and Social Security was only meant to cover about 40% of that.

That isn't to say Social Security doesn't matter. After all, those benefits come from decades of contributing payroll contributions. It's money you've earned. While the benefit may not be life-changing, it can still help cover major expenses, such as housing, travel or healthcare.

The importance of having a plan for claiming Social Security

Working in retirement can be incredibly rewarding, personally and financially. But it also requires strategic planning, especially if you plan to claim Social Security early.

Deciding when and how to claim Social Security is one of the most important financial choices retirees make because reversing your initial decision can be complicated and costly.

Before you claim, make sure you understand how your job, income and healthcare could affect your benefits. Working with a financial professional who can help you strategize Social Security with your overall financial plan can make a big difference. The right timing and strategy can help you keep more of what you've earned and lead to a more confident retirement.

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

It's not unusual to feel a flood of relief as soon as tax season subsides, especially if you're a business owner.

After weeks spent pulling documents, reviewing expenses, answering CPA questions and finding cash for a final payment, you'll probably feel like closing the folder immediately and not thinking about taxes for another year.

But that pause can be expensive.

Q2 is one of the few points in the year when the return is recent enough to teach you something, and the calendar still gives you time to align. The IRS expects taxes to be paid as income is earned, not just when a return is filed.

For many business owners, that means staying current through withholding or estimated payments.

For individuals, sole proprietors, partners and S corporation shareholders, it's when you generally need to make estimated payments if you expect to owe at least $1,000 at filing.

What often gets called tax planning is, in practice, more like tax reporting in advance. Now is the time to make sure you don't fall into that trap.

Model the tax impact before major decisions

Most large tax outcomes begin when a business owner hires, buys, sells, restructures, takes on a partner or changes how income flows through the company.

A decision can look profitable in the operating model and still create a tax position that weakens the economics.

For instance, a new senior hire may bring growth, but the full cost includes payroll taxes and mandated government benefits, which will definitely bring changes to cash flow.

Similarly, a major equipment purchase may qualify for depreciation benefits, so timing and income level matter.

Q2 gives owners time to run those numbers before the decision is locked. As a CPA, I'd recommend leveraging that time because fixing tax problems later can be slow and costly.

For context, during fiscal 2025, the IRS processed about 1.6 million business amended returns and took an average of more than 13 months to process them.

It's always best to involve a tax adviser before making any move. Ask your CPA to show the after-tax effect of the decision, or the estimated cash needed to support it, or anything that would affect the result, such as deadlines.

The goal is not to nitpick every small purchase or watch every action round the clock. It is to identify which decisions can materially change taxable income, deductions, credits, entity treatment or estimated payments before you commit.

Use last year's bill as a diagnostic for this year

A higher tax bill can feel like you're finally growing your business. And in some cases, it is. When revenue rises, the owner's income often rises with it, and so do taxes.

But that bigger payment is not always just a sign of success. It can point to a structure that no longer fits, or planning that may have started too late.

Q2 is the right time to review what drove those numbers while the return is still fresh.

• Look at the categories that changed most from the prior year
• Review whether revenue growth reduced deductions or moved income into a higher tax bracket
• Confirm whether personal and business expenses were clearly separated

Small-business tax surprises often stem from one or more of these.

The purpose of this review is to spot the opportunities you missed so you can course correct quickly and get ahead of any patterns that are likely to repeat this year.

• If revenue grew, is it likely to grow again, and what bracket will that put you in?
• If a deduction was missed, what needs to change in the books before December?
• Does your entity structure still serve you?

These are the questions you should be asking now.

For high-earning business owners, key opportunities may involve retirement plan design, cost segregation for real estate, R&D credits, Qualified Small Business Stock (QSBS) treatment, entity optimization or charitable giving with appreciated assets.

At Gelt, we can never emphasize enough that these strategies require proactive planning rather than a return-preparation mindset.

In a nutshell, check whether the bill increased because the business performed better, or because the tax plan failed to keep up with the business. Those are two very different problems.

Decide whether your CPA relationship has kept pace

Early-stage business owners often just need a CPA to file for them with accuracy and keep them compliant. But as income grows, that level of support may no longer be enough.

Compliance looks backward at what has already happened. Strategy looks forward at the decisions that can still be changed. If the only conversations with your CPA are happening in March or April, the relationship may be limited to just reporting the year instead of shaping it.

Sadly, that gap is common. In fact, reports say 90% of business clients are interested in advisory or consulting services from their accountant, but more than half say they are not fully using their adviser's full range of services.

This is another reason why Q2 is a practical time to assess the relationship, because both sides have more room to think. Ask whether your CPA specializes in clients with your income type, entity structure, industry and long-term goals.

Think about whether they meet with you quarterly, explain your effective tax rate, flag deadlines in advance and help model major financial events before they happen.

Ensure their scope of work is clear, so you know what is included and what is not.

Make Q2 the start of next tax season

The tax return you filed in April should become the first milestone for the rest of the year. If the bill was higher than expected, Q2 is the time to understand what happened and what the rest of your year might look like.

Look at the income that changed, the deductions that were missed, the estimated payments that fell short, and the business decisions that created tax consequences no one modeled in advance. That review gives you a wider view for the next eight months.

From there, update your income projection, adjust estimated payments before the next deadline, review whether your entity structure still fits your revenue and bring your CPA into decisions such as hiring, equipment purchases, real estate transactions, partner changes or compensation planning before they are finalized.

Waiting until Q4 leaves less room to act. Q2 gives business owners the time to correct what caused last year's bill and make tax planning part of the decisions that shape this year's growth.

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• The Tax Trap Snares Many Business Owners: A Financial Pro's Guide to 11 Strategies You May Be Missing

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 financial professionals who contribute to Kiplinger's Adviser Intel are always here to make sure you have the information you need to make critical decisions about your retirement planning, estate planning and tax planning.

Annuities are a regular topic. Because of their complexity, they're often misunderstood.

This quiz is designed to test what you've learned about annuities. Let's see what you know! (And don't worry if you miss an answer: You can follow the links below the quiz to brush up on your knowledge.)

Please note that this quiz has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or financial advice.

READ MORE

• The Truth About Annuities: The Question Isn't 'Are They Good or Bad?' It's 'Are They Appropriate for You?'
• What are Annuities? The Different Types and How They Work
• Annuities: Do You Need Guaranteed Income In Retirement?
• The Key to Choosing the Right Annuity: Do Your Homework
• Why So Many Experts Consider Annuities a Win for Retirees

Most people spend decades following the same advice: Save consistently, invest wisely, defer taxes. It works — until you retire.

Retirement doesn't eliminate taxes. It changes how and when they show up. Most people aren't ready for that shift.

After working with hundreds of pre-retirees, I've found the same pattern again and again: It's not the markets that derail retirement plans. It's the tax surprises people never saw coming.

The good news? Most of them are predictable and avoidable with the right strategy. Here are nine of the most common.

1. Not all income is created equal

In your working years, income is straightforward: a paycheck, some withholding, done. In retirement, you're pulling income from a mix of source accounts, and each source is taxed differently.

• IRA and 401(k) withdrawals. Fully taxable
• Social Security. Partially taxable
• Investment income. Varies
• Roth withdrawals. Tax-free (if structured properly)

What matters isn't just how much you make but what shows up on your tax return. Many retirees rely heavily on tax-deferred accounts, which means nearly every dollar they spend increases their taxable income. That lack of flexibility can quietly drive up taxes across the board.

The solution: Well-planned Roth conversions before and in the early years of retirement.

2. Taxes on Social Security

A lot of people are surprised to learn that up to 85% of their Social Security benefits can be taxed. These taxes are triggered by something called provisional income. How much tax you pay on Social Security is determined by your other taxable income.

The more you withdraw from tax-deferred accounts, the more likely your Social Security becomes taxable. It's not a smooth, predictable curve. Changes in your provisional income can create what's often called a "tax torpedo," when small increases in income lead to disproportionately higher taxes.

The solution: Coordination matters. Claiming and withdrawal strategies shouldn't be separate decisions. They need to work together to optimize your overall tax picture.

3. Medicare IRMAA

Most retirees don't expect their Medicare premiums to be tied to their income. Through what's known as income-related monthly adjustment amount (IRMAA), higher reported income can increase your Medicare premiums significantly.

Here's the catch: It's based on income from two years prior, so your planning window can get complex.

A large IRA withdrawal, Roth conversion or asset sale today can increase your premiums down the road …. often by thousands per year.

The solution: The planning window matters. If you're still a few years from Medicare, that's your best window for larger conversions. If you're already on Medicare, it's about keeping annual income below the IRMAA thresholds, and coordinating every withdrawal, conversion and asset sale.

4. Forced withdrawals (RMDs)

For decades, you were told to defer taxes. Eventually, the IRS always collects. required minimum distributions (RMDs) force you to withdraw money from tax-deferred accounts starting in your early to mid-70s, whether you need the income or not.

Those withdrawals are fully taxable — and they can push you into higher brackets, increase Medicare premiums and trigger taxes on Social Security all at once. I've seen clients reporting twice the income they need to live.

The solution: The years between retirement and your early 70s are your best window to shrink future RMDs. Converting strategically during that gap, while staying within your current bracket, can reduce the forced withdrawals that cause downstream problems.

5. The surviving spouse tax increase

When one spouse passes away, the surviving spouse moves from married filing jointly to single tax brackets.

• Same assets
• Similar income
• Dramatically higher taxes

That shift alone can push the surviving spouse into a significantly higher bracket, especially when combined with RMDs and Social Security.

It's not just an emotional loss. It's often a financial one, too.

The solution: Convert early. A surviving spouse with a meaningful Roth balance has a source of income that won't push them into a higher bracket at the worst possible time.

6. No tax diversification plus bad timing

Many retirees have done a great job diversifying investments. But no one told them they needed to do the same for their taxes.

If most of your money sits in tax-deferred accounts, you've effectively created a single "tax funnel." That becomes a problem when markets are down. If you need income and your only option is to withdraw from a declining account, you're forced to sell more shares at lower prices and still pay taxes on the withdrawal.

Tax diversification means having assets in pre-tax, Roth and after-tax buckets, to give you options when timing matters most. You don't get to choose what the market does.

The solution: Build flexibility now. Spreading assets across pretax, Roth and taxable accounts means you can choose which bucket to draw from based on what the market and your tax situation look like.

7. Future tax law

Today's tax rates are historically low compared with long-term averages. But they're not permanent.

The challenge with tax-deferred savings is simple: You're betting on future tax policy — and you don't get to set the rate.

The solution: You can't control future tax rates, but you can control how much of your money is exposed to them. The more you've moved into tax-free accounts before rates change, the less it matters what Congress does next.

8. The burden your family inherits

Many retirees assume their accounts will pass cleanly to their children. But recent legislation such as the SECURE Act, changed that.

Most nonspouse beneficiaries have just 10 years to fully withdraw inherited retirement accounts. Every dollar is taxed as ordinary income. For children in their peak earning years, that can mean a substantial tax hit that could reduce the value of the inheritance by 40% or more.

What was intended as a legacy can quickly become a tax liability.

The solution: Estate planning that moves your money into a trust upon your death could provide your family with some tax relief.

9. The 1990s underspending strategy

A lot of retirement advice still reflects outdated thinking:

• Don't touch principal
• Follow the 4% rule
• Spend conservatively

On the surface, that sounds responsible. But for many retirees with large tax-deferred balances, it leads to unintended consequences:

• Larger account balances later
• Bigger RMDs
• Higher lifetime taxes

In other words, underspending early can increase taxes later. I know that's counterintuitive after a lifetime of saving. But early in retirement, you're healthy enough to enjoy it — and saving too aggressively just means handing more to Uncle Sam later.

The solution: A realistic retirement income and spending plan that accounts for the typical spending patterns across a long retirement.

The bottom line

None of these tax surprises are random. They're built into the system.

Today's retirees need to focus just as much on distribution — how and when money comes out, and how it's taxed along the way.

Retirement isn't just about how much you've saved. It's about how much you get to keep.

The difference between the two often comes down to one thing: having a plan for taxes before they show up, not after.

Related Content

• Feeling Too Guilty to Spend in Retirement? You Really Need to Get Over That
• 3 Ways to Potentially Avoid Falling Into a Tax Trap in Retirement, From a Financial Adviser
• 3 Options for Setting Up Your Retirement Paycheck: Choose the One That Suits You
• Social Security Break-Even Math Is Helpful, But Don't Let It Dictate When You'll File
• Turning 59½: 5 Planning Moves Most Pre-Retirees Overlook

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 filed your taxes last month, you know the pain of capital gains is real and often a surprise come April.

I recently wrote two surprisingly long and complicated columns on strategies to minimize the tax hit that comes when you press the "sell" button on an appreciated stock.

In one of those columns, I talked about the "gift up" strategy, which is incredibly effective if executed properly. Short version: You give assets, typically to your parents, and when they pass, they (as long as all goes according to plan and you follow the rules) pass them back to you with a step-up in basis.

This is a similar idea, but the gift is down, i.e., to your kids.

We work with folks in or near retirement, which is typically the sweet spot for such a strategy. We also work with people who tend to be comfortable financially, when they can say with a level of confidence that they'll be OK. That allows the flexibility to think about how they can help their kids.

Make sure you're financially secure first

When you give stock to a child, it's considered a completed gift, which means you're not getting that money back.

You should double-check your financial plan to make sure you're going to be financially secure before considering this.

If you don't have a plan or want to double-check the one you have, you can access a free version of the software we use.

The idea here is simple. Want to give your kids money for a down payment? Want to help cover daycare expenses? Instead of writing a check, transfer stock into their account.

When you transfer stock, there is a carryover in basis. That means if you bought XYZ stock for $50 and now it's worth $250, there is still a $200 unrealized gain that will be realized when they sell.

Why do it? This works in a situation of tax arbitrage. In English, this works if their capital gains rate is lower than yours.

What to know about tax rates

There are several income tax brackets, and most people have a general sense of their progressive nature. People might not realize that the same sort of thing exists on the capital gains side.

While many people fall into the 15% capital gains bracket, you can end up paying 0%, 15%, 18.8% (net investment income tax) or 23.8%, depending on what your taxable income is.

Many states also apply their income tax rate to capital gains. In an ideal scenario, you're giving to kids who are in school or at the beginning of their careers and have capital gains rates of zero.

However, it's still a win if their rate sits anywhere below yours.

Here are the capital gains brackets without the net investment income tax, which is what adds that 3.8% for the top two brackets:

It's important to point out that these thresholds are based on taxable income, which is gross income less deductions. If your unmarried daughter is making $75,000, there still might be an opportunity here.

If you're nodding, raising your hand or both, press pause.

What's the gift's purpose?

I often caution clients that giving money can be a rope, or it can be quicksand. Most of this depends on the child, and you probably know which it is.

However, it also depends on the gift's purpose. I am a fan of helping with one-time expenses or expenses on a finite timetable. That's why I mentioned down payments and daycare.

I am not a fan of gifts without an intended goal. Those tend to disappear or reappear in the form of something that gets parked in a garage.

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

For years, the message has been simple: Max out your 401(k), take the tax deduction, and let it grow.

To be fair, that advice has helped a lot of people build meaningful retirement savings.

But for many higher-income, consistent savers — especially those now sitting on large IRA or 401(k) balances — that same strategy is starting to show a different side, not during the working years, but later, when they use money … or they're forced to withdraw it.

What looked like smart tax planning along the way can quietly turn into a tax problem on the back end.

When big balances become a different kind of asset

By the time many people reach their 60s or early 70s, their largest pool of money isn't in a brokerage account or even real estate — it's in pretax retirement accounts.

On paper, that feels like a win.

But unlike a taxable account, where gains might be taxed at favorable capital gains rates, every dollar in a traditional IRA or 401(k) is eventually taxed as ordinary income. There's no step-up in basis, no preferential treatment.

While the balance might read $1 million, $2 million or $5 million, that's not really the amount you "own" in the same way you would in a taxable account. A portion of it — sometimes a significant portion — belongs to the IRS.

If you don't need the money for spending, the situation can get more complicated, not less.

The RMD issue — even if you don't need the income

One of the biggest surprises for many retirees is how required minimum distributions (RMDs) actually play out.

Starting in your early 70s, the government requires you to begin pulling money out of those accounts. It doesn't matter whether you need the income or not.

For someone with a modest balance, this might not be a big deal.

But for someone with a large IRA — those required withdrawals can be substantial — and every dollar is taxable.

We've seen situations in which retirees are forced to take income they don't need, only to find themselves:

• Bumped into a higher tax bracket
• Paying more tax on Social Security
• Crossing thresholds that increase Medicare premiums

It's an odd outcome: After years of careful saving, they're now managing around a tax problem they didn't expect.

The part most people miss: What happens to the kids

For a long time, there was at least a partial workaround. If you didn't use all your IRA, your children could inherit it and stretch the distributions over their lifetimes.

That changed with the SECURE Act.

Today, in most cases, non-spouse beneficiaries have to empty an inherited IRA within 10 years.

That sounds simple enough, but the tax impact can be significant — especially depending on when those withdrawals happen.

Picture a scenario in which a couple leaves a $2 million IRA to two adult children. Each inherits $1 million. Those children are likely in their peak earning years, already in relatively high tax brackets.

Now they must layer in distributions from that inherited IRA over a 10-year window. However they time it, those withdrawals are taxed as ordinary income.

Not capital gains, not at a reduced rate — it's just straight income, on top of everything else they're earning.

In many cases, a meaningful portion of that inheritance goes to taxes in a relatively short period of time.

The irony: You might not even need the account

What makes this more frustrating is that the issue tends to show up most clearly for people who saved well and lived within their means.

A lot of higher-net-worth retirees don't rely heavily on their IRAs for their lifestyles. They might have other assets, or don't spend at a level that requires tapping those accounts aggressively.

But the structure of pretax accounts doesn't really allow you to ignore them. Between RMDs during your lifetime and the 10-year rule after death, those dollars are going to be taxed one way or another.

What many people thought of as a long-term asset often behaves more like a delayed tax liability.

A better way to think about it

This isn't about saying 401(k)s were a mistake. They've been incredibly effective accumulation tools.

The issue is concentration.

Just as you wouldn't want all your investments in one stock, having the majority of your wealth tied up in one tax category can create limitations later on.

More planning today is focused on building a mix across different "tax buckets":

• Pretax (traditional IRAs and 401(k)s)
• After-tax / tax-free (Roth accounts)
• Taxable accounts

That mix gives you options. In retirement, options matter.

Being able to choose where income comes from — rather than being forced into one source — can make a noticeable difference in how much you pay over time.

The window to fix it

The good news is this is something that can be managed, particularly in the years leading up to RMDs.

That might involve gradually shifting some assets into Roth accounts, being more intentional about withdrawals earlier in retirement, simply coordinating income more carefully year to year or insuring the tax liability to an extent.

"Max out your 401(k)" is still good advice. It's just not complete advice — at least not for everyone.

For those with larger balances, especially those who might not need the funds, the conversation needs to shift from just saving to how those savings will eventually be taxed.

At the end of the day, it's not just about how much you've built.

It's about how much of it stays in your family or flows in accordance with your wishes.

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

For families with a child or grandchild who has special needs, a properly drafted special needs trust (SNT) can be one of the most powerful planning tools available.

It can preserve eligibility for government benefits, provide supplemental support and create long-term financial stability.

But there's a mistake I see far too often — one that can quietly undermine everything a family is trying to accomplish: Naming a special needs trust as the beneficiary of tax-deferred retirement accounts.

At first glance, it seems logical. You want to protect your loved one, so you direct your IRA or 401(k) to their trust. Done, right?

Not quite.

In many cases, this creates a significant — and often unnecessary — tax burden that reduces what ultimately benefits your loved one.

Let's walk through why.

The problem: Tax-deferred accounts come with a bill

Accounts such as IRAs, 401(k)s, 403(b)s, SEP IRAs and deferred-compensation plans all share one thing in common: They've never been taxed.

Every dollar in those accounts is subject to ordinary income tax when distributed. When you're alive, you control when and how those taxes are paid. But after your death, that control shifts to your beneficiaries — and the rules change.

Under current law, most non-spouse beneficiaries must withdraw the full balance of an inherited retirement account within 10 years. That means the IRS is effectively saying: "We've waited long enough. Pay up."

Now imagine that the beneficiary is not an individual, but a trust.

When a trust becomes the beneficiary

When a special needs trust is named as the beneficiary of a retirement account, things get more complicated.

Trusts reach the highest federal income tax bracket — 37% — at extremely low levels of income (slightly more than $16,000 in many cases). That means that if retirement distributions are retained inside the trust, they can be taxed at very high rates very quickly.

Even if distributions are passed through to the beneficiary, the timing and structure of those distributions might still create inefficiencies.

The purpose of a special needs trust is not just to hold money; it's intended to stretch and protect it over time.

Large, accelerated taxable distributions can work directly against that goal.

The real risk: Losing a chunk of the legacy

Let's look at a hypothetical example.

A parent passes away with a $1 million IRA and names their child's special needs trust as the beneficiary.

Over the required 10-year period, that money must be distributed — and taxed.

Depending on how those distributions are handled, it's entirely possible that:

• Hundreds of thousands of dollars go to taxes
• The trust is forced into high tax brackets early
• The long-term growth potential is significantly reduced

In other words, a portion of what you intended for your loved one ends up going somewhere else.

Why this happens so often

This mistake is rarely intentional.

It usually happens because two separate planning tracks aren't coordinated:

• Estate planning (attorney). Create a special needs trust to protect the beneficiary
• Retirement planning (adviser or custodian). Assign beneficiaries to accounts

Both are done correctly — individually.

But without coordination, the result can be suboptimal.

A better way to think about it

Not all assets are created equal.

When you're planning for a special needs beneficiary, it's critical to understand that:

• Tax-deferred accounts (IRAs, 401(k)s) carry a future tax liability
• After-tax assets (brokerage accounts) might receive a step-up in basis
• Roth accounts are potentially tax-free to beneficiaries

From a planning standpoint, you want to be intentional about which assets go where.

Smarter strategies to consider

Every situation is different, but here are several strategies worth exploring:

1. Use tax-efficient assets to fund the trust.

Instead of naming the SNT as the beneficiary of a traditional IRA, consider funding the trust with:

• After-tax investment accounts
• Life insurance proceeds
• Roth IRA assets (in some cases)

These assets can often pass to the trust with less tax friction.

2. Leave tax-deferred accounts to other beneficiaries.

If you have multiple heirs, you might choose to:

• Leave IRAs or 401(k)s to individuals in lower tax brackets
• Use other assets to equalize inheritances

This can help improve overall tax efficiency across the family.

3. Consider Roth conversions during your lifetime.

Strategic Roth conversions can:

• Help reduce the future tax burden on inherited accounts
• Create more flexibility for beneficiaries
• Potentially allow tax-free distributions to the trust

You'll pay taxes now — but you might be doing so at lower rates than your beneficiaries would face later.

4. Coordinate your estate plan and beneficiary designations.

This is where many plans fall apart. Your attorney, financial adviser and tax professional should all be working from the same playbook.

If your special needs trust is central to your plan, your retirement account strategy should reflect that.

The goal: Protection without unintended consequences

A special needs trust is designed to provide stability, protection and dignity for someone you care deeply about.

But if it's funded inefficiently, it can also introduce:

• Higher taxes
• Faster asset depletion
• Less long-term flexibility

That doesn't mean you shouldn't use a trust. It means you should use one intentionally.

A simple question to ask: If you already have a special needs trust — or are planning to create one — ask, "Which assets are best suited to fund this trust, and which assets are not?"

That single question can help you avoid a costly mistake.

Final thoughts

Planning for a loved one with special needs is one of the most important — and emotional — financial decisions you'll ever make.

You're not just managing money.

You're building a system of care that could last decades.

By aligning your tax strategy with your estate plan, you can help ensure that more of what you've built serves the person it was meant for.

That's the outcome that matters most.

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

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

Nearly 40% of self-employed workers are baby boomers, according to a 2024 survey by Guidant Financial, and the number of older entrepreneurs has increased significantly in the past 25 years. Working for yourself in retirement, either full or part-time, makes a lot of sense: You can supplement your savings, stay engaged in your profession or try something new.

But if you're new to self-employment, you may not be prepared for the tax consequences of going solo.

In addition to income taxes, you'll also be responsible for paying the employee and employer portions of your Social Security and Medicare tax, which totals 15.3% of 92.35% of your net earnings. This often comes as a surprise to individuals who have spent their careers working for someone else, because employees who receive a W-2 only pay half of the payroll tax. Their employer picks up the rest. And since the employees' portion is usually withheld from paychecks, it may go unnoticed.

Fortunately, you can deduct half of your self-employment tax. You may also be eligible to deduct your Medicare premiums — a tax break many self-employed retirees overlook, financial planners say.

If you have self-employment income and are enrolled in Medicare, you can deduct premiums for Medicare Part B, Part D, Medicare Advantage, or a Medigap supplemental policy.

You can also deduct your spouse's Medicare premiums, even if your spouse doesn't work for you.

A portion of premiums for long-term care insurance is also deductible, as long as the policy is deemed tax-qualified by the IRS.

The amount you can deduct will vary depending on your age; in 2026, individuals between 61 and 70 can deduct up to $4,960 in long-term care insurance premiums. If you're 71 or older, you can deduct up to $6,200.

David Haas, a certified financial planner with Cereus Financial Advisors in Franklin Lakes, N.J., says he recently met with a self-employed client whose accountant failed to deduct thousands of dollars in premiums for Part B, D, Medigap and long-term care insurance. Fortunately, he caught the mistake before the client filed his tax return.

One possible reason for the confusion is that taxpayers who don't work for themselves are limited in the amount of medical expenses they can deduct. If you claim the standard deduction — which is the case for most retirees — you can't deduct any of your unreimbursed medical expenses. And even if you have enough deductions to itemize, you can only deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income. That usually limits the deduction to taxpayers who have very high medical expenses and low income, Haas says.

But if you work for yourself, you can deduct your health insurance expenses — including Medicare — from your self-employment income even if you claim the standard deduction. For self-employed taxpayers who file a Schedule C, health insurance is an “above-the-line” deduction, which will lower adjusted gross income.

This could make you eligible for other tax credits or benefits that are tied to your AGI, says Catherine Valega, a financial planner and enrolled agent with Green Bee Advisory in Burlington, Mass. It could help you avoid a high-income surtax on your Part B Medicare premiums, which is tied to your modified adjusted gross income (that's your AGI with a few adjustments).

There are some limits to this deduction. It can't exceed your self-employment income.

• For example, if your net self-employment income for the year was $5,000, your deduction can't exceed that amount.
• In addition, you can't deduct your Medicare expenses for any months you were eligible to enroll in an employer-subsidized health care plan.
• And, if you or your spouse are working for an employer that offers health insurance, you can't deduct your Medicare premiums, even if you opt not to enroll in the plan.

Nor can you double dip: If you itemize and deduct unreimbursed medical expenses, you can't deduct them from your self-employment income.

To get the most from this deduction, keep good records of Medicare and long-term care insurance premiums and any other expenses, such as traveling to clients, part of your internet service, and office supplies.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

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For years, retirees have been told the same thing: Protect your Roth IRA at all costs. Let it grow. Don't touch it. Save it for last. And in many cases, that advice holds up.

But if you're among a small group of Americans with both a pension and $1 million or more saved, the rules change. What works for the average retiree doesn't always apply to what we often call the "2% Club." (I wrote a book about this group, which you can request here.)

In fact, there are specific moments when tapping your Roth IRA earlier can be strategic and save money on taxes. Here are eight situations where it may make sense to take withdrawals from your Roth, even if you've spent years trying to build it.

1. When tax rates are higher than expected

Roth assets shine brightest when tax rates rise. If future tax policy shifts, or increases in your personal income push you into higher tax brackets, pulling from your Roth allows you to avoid those elevated rates.

While today's tax environment is historically low, retirees with pensions often find themselves in equal or higher brackets later in life. That's when tax-free income becomes especially valuable.

2. When you're near the top of a tax bracket

Small decisions can have outsized tax consequences. If an additional $10,000 withdrawal from a traditional IRA would push you into the next tax bracket, it may be smarter to take that amount from your Roth instead.

This strategy helps you "cap" your taxable income and avoid paying a higher marginal rate on dollars that could have been tax-free.

Think of your Roth as a pressure valve, used strategically to keep your tax situation under control.

3. During unusually high-income years

Not all retirement years look the same. You may sell a property, receive a large bonus before retiring, cash out unused vacation time or experience another one-time income spike.

In those years, adding more taxable income from traditional accounts can be costly. Roth withdrawals, on the other hand, won't increase your taxable income, making them a useful tool to maintain flexibility when your income temporarily surges.

4. If you're using the Affordable Care Act before age 65

Early retirees face a unique challenge: bridging the gap to Medicare. Health insurance through the Affordable Care Act is income-based. The lower your reported income is, the lower your premiums may be.

By withdrawing from your Roth instead of tax-deferred accounts, you can generate the income you need without increasing your reported income. This could translate into meaningful savings on health insurance during early retirement.

5. To avoid higher Medicare premiums

Once you reach age 63, another income-based threshold comes into play: Medicare premiums. Known as the income-related monthly adjustment amount (IRMAA), these surcharges can significantly increase your Medicare costs if your income crosses certain limits, even by a small amount.

Higher premiums do not change your coverage. You receive the same Medicare benefits regardless of cost.

Strategic Roth withdrawals can help you stay below those thresholds. In some cases, avoiding a relatively small income increase can save thousands in premiums.

6. To navigate the Social Security 'tax torpedo'

Few retirees anticipate how aggressively Social Security can be taxed. As your income rises, more of your Social Security benefits become taxable — up to 85%.

This creates what's often called the "tax torpedo," where each additional dollar withdrawn can trigger disproportionately high taxes.

Roth withdrawals don't count toward this calculation, making them a powerful way to access income without increasing the taxability of your benefits.

7. After the loss of a spouse

The "widow's penalty" is one of the most overlooked risks in retirement planning. After a spouse passes, the surviving partner typically moves from married filing jointly to single tax brackets, meaning higher taxes on the same (or even reduced) income.

In these years, Roth withdrawals can help manage tax exposure because they are not taxable. This provides flexibility when traditional income sources become less efficient.

Also, consider Roths when planning for your heirs

Roth strategies don't end with your lifetime — they extend to your legacy. Under current rules, most non-spouse beneficiaries must withdraw inherited retirement accounts within 10 years. If those assets are in traditional IRAs, every dollar withdrawn is taxable.

But Roth accounts? Those distributions are generally tax-free. If your children are in higher tax brackets, or you expect them to be, preserving Roth assets for inheritance while spending from other accounts can create a more efficient wealth transfer.

The bigger picture: Flexibility over rules

For retirees with pensions and significant savings, the biggest risk isn't running out of money — it's losing control over how and when that money is taxed. That's why tax diversification matters. Having assets across taxable, tax-deferred and tax-free accounts gives you options.

In retirement, options are what allow you to adapt to tax law changes, income fluctuations and life events. In the end, the goal isn't just to build wealth, but to use it wisely. So while Roth IRAs don't always have to be spent early, they should always be used strategically.

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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.

Most people with about $1 million or more in pretax 401(k)s and IRAs see a rough market year and do exactly nothing. When the market is falling, paralysis feels like safety.

But a midterm election year pullback can be one of the most powerful tax planning windows available in personal finance.

Earlier this year, a client came to us with about $2 million in a traditional IRA. The market had pulled back roughly 8% — and she was nervous.

Instead of sitting tight, we converted about $200,000 to her Roth IRA at the discounted value. That single decision is on track to potentially save her tens of thousands in lifetime taxes.

Here's why that opportunity tends to show up in midterm years — and how to recognize it in your own retirement plan.

What history actually shows us about midterm years

Since 1950, nearly every midterm election year has produced a meaningful intrayear pullback in the S&P 500. The average intrayear drop across midterm years has been about 16.7%. Uncertainty around election outcomes, potential policy shifts and investor sentiment have tended to compress returns in that pre-midterm window.

That compression may create an opportunity.

Because, historically, once the midterm passes, returns have tended to recover meaningfully.

The average 12-month return following midterm year lows has historically come in at about 36.5%. It is important to note that past performance is not indicative of future results, and these historical patterns may not repeat.

Think about what that could mean for a Roth conversion strategy. Converting during a dip may allow the potential recovery to happen inside the Roth account — where that growth could be completely tax-free for the rest of your life, assuming qualified distributions.

Why a portfolio drop may equal a discount on your tax bill

When you do a Roth conversion, the IRS taxes you on the dollar amount you convert — not on how many shares you move.

So if your IRA holds shares of a broadly diversified index fund, and those shares are down about 15% from their peak, you may be able to convert the same number of shares at a roughly 15% lower taxable value.

Same shares. Potentially lower tax bill.

Consider a hypothetical scenario (for illustration purposes only). Say you have about $2 million in an IRA and the market pulls back about 15%. Your account might be worth roughly $1.7 million. You convert about $150,000 worth of shares.

If the market then recovers — and there is no guarantee it will — that recovery would happen entirely inside your Roth account. So, no income tax on the gains. No required minimum distributions (RMDs) later. No additional tax when you eventually withdraw, assuming qualified distributions.

A down market is not necessarily a threat to a Roth conversion strategy. It may actually be an opportunity.

Who should be paying attention right now

The ideal candidate is generally between ages 50 and 65, with roughly $1 million to $5 million in pretax accounts and most of their retirement savings in those pretax buckets.

This is what I call the income valley: The window between when you stop working and when Social Security, pensions or RMDs begin. Taxable income may be temporarily lower during this period, creating space in your income tax bracket that many people never take advantage of.

In 2026, the 22% bracket for married couples went up to about $191,450, and the 24% bracket stretches to about $364,200. Converting in a year when Social Security and RMDs haven't started may allow you to stay inside those brackets.

That same conversion at about age 75, stacked on top of RMDs and Social Security, could potentially push you into the 32% bracket or higher.

One more consideration: IRMAA. A Roth conversion raises your modified adjusted gross income (MAGI) in the year you convert, which gets reported to Medicare about two years later.

A poorly sized conversion could potentially increase your Medicare premiums. Tax brackets and IRMAA thresholds are subject to change and should be verified with a tax professional.

Three steps to consider before this window closes

Step 1: Know about where you stand in your tax bracket. Review your most recent tax return and estimate how much room you have before hitting the next bracket threshold. Know your number before converting a single dollar.

Step 2: Consider your IRMAA thresholds before acting. Model the impact of your conversion on your MAGI and the potential Medicare premium effect two years out. Size conversions thoughtfully to avoid unnecessary surcharges.

Step 3: Work with a tax-first adviser before executing. The interaction between your conversion amount, tax bracket, IRMAA exposure, Social Security timing and RMD projections requires a detailed multiyear model specific to your situation. Done thoughtfully, a Roth conversion strategy over a seven- to 10-year window may potentially save significant amounts in lifetime taxes.

The window may be open — but not forever

Markets recover. Bracket space fills up. RMDs begin. The combination of a market pullback, lower income and time still available is historically one of the more favorable environments for Roth conversion planning.

For anyone with about $1 million or more in pretax accounts who has not yet run a detailed Roth conversion analysis, 2026 may be worth a closer look.

The investors who look back on this period may not remember it as the year the market made them nervous. They may remember it as the year they made a thoughtful, well-timed move.

The bottom line

Midterm election years have historically brought more volatility and deeper drawdowns than average. While that can be unsettling, it also creates a retirement income planning window that doesn't show up every year.

Roth conversions are fundamentally about paying taxes at the most efficient time. And when market values are temporarily lower, that efficiency can improve significantly.

The key isn't predicting the bottom. It's having a conversion plan in place before the next dip arrives and knowing your tax bracket, your conversion ceiling and which accounts to move first.

If you're within five years of retirement or already there, ask yourself this: If the market dropped 15% tomorrow, would I know exactly how much to convert and into which account?

If the answer is no, that's the planning gap to close now. Because sometimes, the best tax opportunities come from uncertain markets, not calm ones.

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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.

Have you ever noticed that many people only talk about working on their taxes in late winter or early spring during what's traditionally referred to as "tax season"?

I feel that's when everybody seems to be looking for tips on how to lower their annual tax bill or even get a refund (or they head to their local tax preparer with a pile of paperwork and hope for the best).

But I believe taxes aren't a once-a-year problem — not when you're working and definitely not in retirement.

To help minimize your tax burden, I think you need a plan, one that looks well beyond the year that's just gone by and lays the groundwork for many years ahead.

The difference between tax preparation and tax planning

A tax preparation service or software may provide you with strategies that can help you lower your future taxes. But its main job is to complete your return with the information you provide.

The focus of those strategies is on reporting what already happened and getting you to the best place they can with that current return.

Tax planning, on the other hand, is about looking for ways to lower taxes over your lifetime, so there aren't any surprises, especially when you reach retirement.

Many retirees expect lower taxes once they stop working, but that may be a risky assumption. Your income plan — likely a combination of Social Security and pension payments, investment earnings and portfolio withdrawals — could trigger bigger tax bills in retirement.

Knowing where taxes can hide and carefully managing your tax bracket can help protect what you've worked so hard to save and help make your nest egg last longer.

Here are some moves to consider toward accomplishing that.

Using an income lull to do a Roth conversion

If you've been putting most of your savings into a traditional IRA, 401(k) or similar tax-deferred retirement account, converting a portion of those funds to a Roth IRA could go a long way toward helping minimize future tax bills.

I think this is especially important for when required minimum distributions (RMDs) kick in at age 73 (or 75 if you were born in 1960 or later).

But you'll want to be careful about how the timing of that conversion could affect your tax bracket.

One way to help minimize the impact is to consider converting in years when you expect your income to be lower.

For many savers, I find that sweet spot is in the year or years after they first retire, before they claim their Social Security benefits, or have to take RMDs.

You may find other opportunities that also could work well — for example, during a year in which you have high health care costs or other tax-deductible expenses that could offset the cost of the conversion.

Creating a tax allocation plan

Many people have an asset allocation plan that lays out the percentage of stocks, bonds, cash and other investments in their portfolio mix.

In my experience, far fewer have a "tax allocation plan" to help guide them as they withdraw money from their taxable, tax-deferred and tax-exempt accounts in retirement.

I believe that knowing where you'll take your money from, and when you'll take it, is critical to a successful retirement plan. You may have to make some adjustments from year to year, but I think winging it is not the way to go if you want to avoid exposing your income to higher tax rates.

You might not see a single year in which you get a giant refund check — but that's not the goal. The goal is to smooth out your income so you're minimizing taxes over your lifetime.

Avoiding hidden tax traps

I think one of the most important parts of tax planning is education. It's difficult to prepare for a problem you don't see coming. Some common tax traps that can catch retirees off guard include:

Taxes on Social Security. Taxpayers receiving Social Security benefits are often unaware that they may have to pay federal income taxes on a portion of those benefits — up to 85%, based on their income and filing status.

Though the One Big Beautiful Bill Act, passed in 2025, provides a new $6,000 bonus tax deduction for those age 65 and older, it does not eliminate the tax on Social Security benefits.

That bonus deduction is temporary; it will be available only through 2028. Also, it phases out at certain income levels.

The Medicare surcharge. Medicare's income-related monthly adjustment amount (IRMAA) can more than triple Part B premiums for high-income retirees. And the IRMAA is based on a sliding scale that looks at your income from two years earlier, which can be a shock for new retirees.

Capital gains tax. Selling your business or some other highly appreciated asset (your home, a valuable collection, artwork, etc.) could result in your having to pay taxes on the realized gain.

There are multiple strategies that may help minimize this tax burden (including tax-loss harvesting and charitable giving strategies), but these moves require advance planning.

Making a major purchase. Retirees often overlook how a large purchase might affect their annual income tax bill. Withdrawing a significant amount from tax-deferred savings to pay for a new car, a family vacation or other major expense could push you into a higher tax bracket and bring about a higher tax bill.

Passing along the problem. Without planning, a generous gift can become a tax burden for loved ones. Using trusts, exemptions and other tax-efficient strategies can help preserve your assets for heirs.

The bottom line

I believe the sooner you can put together a long-term tax plan — one that will help minimize taxes over your lifetime and eliminate surprises down the road — the better.

If your financial professional isn't willing or able to talk with you about shifting from reactive tax reporting to proactive planning, it may be time to consider seeking a second opinion.

A retirement specialist with tax-planning expertise can help you evaluate the benefits of various tax strategies, run projections based on your individual needs, coordinate your tax plan with your overall financial plan and help make adjustments when necessary.

This is complex stuff, but it can help preserve your nest egg, so don't hesitate to ask for help.

Kim Franke-Folstad contributed to this article.

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

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• Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very Likely
• Three Creative Ways to Lower Your Retirement Taxes
• I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement Income
• I'm a Wealth Adviser: This Proactive Tax Strategy Maximizes What You Actually Keep After Taxes
• I'm a Financial Planner: This Is How You Can Get Started With RMDs

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

For most Americans, the weeks and months following Tax Day are characterized by a collective sigh of relief. Returns are submitted, checks are cut, and paperwork is filed away for another year.

This year, complacency is a risk you can't afford.

As a wealth planner, I view our current environment as a rare "golden hour" for taxpayers — a confluence of low marginal rates, expanded deductions and a historically quiet enforcement landscape.

However, the basic math of the U.S. deficit suggests that the IRS isn't just taking a breather; it's preparing for a significant pivot.

The convergence of favorable forces

We're currently operating under a set of rules that, by historical standards, are remarkably lenient.

The tax rate extensions confirmed in 2025 as part of the OBBBA, paired with the recent expansion of the state and local tax (SALT) deduction cap to $40,000, have provided a massive tailwind for high-income households, especially those living in high-tax states.

This isn't just "tax savings," it's "tax alpha" that can be reinvested to compound wealth.

Simultaneously, the IRS has undergone a dramatic contraction. With a workforce that has shrunk by nearly 30% to roughly 70,000 employees, the frequency of complex, multiyear audits have hit a low point.

While this might feel like the Wild West of tax leniency, it's highly likely a sign of a looming revenue crisis.

Why the 'sale' on taxes must end

The federal government essentially has three levers to pull when addressing a ballooning national debt: cutting spending, accelerating economic growth or raising taxes.

• Spending. Significant cuts to entitlements remain politically radioactive.
• Growth. While the economy remains resilient, banking on "growth exceptionalism" to outpace the debt is a strategy rooted more in hope than math.

That leaves the third lever: Revenue. When the government eventually moves to balance the scales, they won't just look for small changes; they'll likely look to roll back the very deductions and rates we currently enjoy.

In short, tax rates are "on sale," and the sale will likely expire.

Four strategic maneuvers to execute now

To build a plan that survives the next decade, you shouldn't try to predict the next election; you should focus on locking in the certainty of today.

1. The Roth 'insulation' strategy
In a low-rate environment, the Roth conversion is your most powerful tool for legislative defense. By paying the tax now at a known, discounted rate, you effectively "insulate" your future self from whatever rates Congress decides on 10 years from now. It remains one of the most efficient ways to transfer wealth to the next generation without an embedded tax liability.

2. Legacy lockdown (estate transfer)
The current lifetime gift and estate tax exemptions are at historical highs. For families with significant estates, waiting for "clarity" from Washington is a mistake. These exemptions are low-hanging fruit for future revenue seekers. Moving assets out of your taxable estate ensures your legacy is governed by today's generous rules, not tomorrow's restrictions.

3. Proactive gain harvesting
If you're a business owner eyeing an exit or an investor with highly appreciated positions, the "buy and hold" mantra needs a tax-conscious update. Strategically harvesting capital gains at today's rates allows you to reset your cost basis. If rates rise in three years, you'll be grateful you didn't defer the tax until it costs you 10% more.

4. The $40,000 SALT optimization
The expanded SALT cap is a temporary gift, but it requires surgical precision. Maximizing this $40,000 deduction requires a deliberate schedule for property tax payments and state estimated taxes. Missing the timing on these payments can mean leaving a five-figure deduction on the table.

The bottom line

The most resilient financial plans aren't built for "ideal" conditions; they're built for stress. We're currently in a period of artificial calm.

By taking advantage of the expanded SALT cap, current exemptions, and lower rates, you aren't just saving money — you're derisking your entire financial future against the inevitable turn of the fiscal tide.

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• I'm a Financial Planner: If You're a High Earner, You Need an 18-Month Safety Net

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

Editor's note: This is the final article in a five-part series about all-asset retirement planning that covers such topics as using lifetime annuities and housing wealth, making the most of tax benefits, and managing investment portfolio risk. See below for links to the first four articles.

In writing this series, we saved the topic of managing investment risks in a retirement plan for last. Not because it's either least or most important, but rather, it's an area where things could get complicated, particularly if it got into security selection or hedging strategies that go beyond our retiree's — and even our — expertise.

The reality is we have reduced the investment risk challenge through all-asset planning even before we get to this point.

Market volatility

Let me give you some context and background. Just as we did in the article Treat Home Equity Like Your Other Retirement Investments, we measure how investment markets perform by using the historical performance of benchmark portfolios over the past 30 years. No measure can predict the future, so we're comfortable with historical.

During the past 30 years, the S&P 500 index has twice dropped more than 20% for the entire year. So, with, say, $1 million in the market invested in an index fund of S&P 500 stocks, that would be a more than $200,000 reduction in market value in a single 12-month period.

Now, we know stocks recover, but if you were newly retired or late in retirement, this would be very upsetting and might cause you or your adviser to pull back on stocks — and lose the opportunity to regain that market value.

This is particularly an issue if you're liquidating a portion of your portfolio each year to fund, for instance, withdrawals/distributions (RMDs) from your IRA account.

The graphs below show the volatility of the S&P 500 using compound annual growth rates for five- and 20-year periods ending in the calendar year indicated.

Note in particular how the returns tend to stabilize as the holding period lengthens. The key appears to be to "stay the course," even in the face of adverse short-term performance.

But just as important is the understanding of how market performance could drive your plan's results.

How an all-asset plan already reduces investment risk

Let's see how all-asset planning has already reduced this risk — and made it more manageable. The first step in our planning is to combine the S&P 500 portfolio with a fixed income bond portfolio to create a Balanced Portfolio used in the rollover IRA account.

There is no return or tax reason to keep these investments separate for a rollover IRA account, and it also has the advantage of reporting a blended return. These graphs show the blended returns for those same five- and 20-year periods.

While reducing the risk over the long term by allocating to a fixed income portfolio, there is still stock market risk.

Steps to manage the investment risk

Despite the lowering of risk with a Balanced Portfolio, your plan is impacted by the stock market returns, and you may want that risk reduced.

Here are some preliminary steps already in place in an all-asset plan and covered in our first four articles of this series.

• Include housing wealth in planning. By taking a portion of income in a HECM (home equity conversion mortgage) drawdown, you're reducing IRA withdrawals. At the same time, you're building up liquid savings from, say, the HECM line of credit.
• Include lifetime annuities. While taking care of longevity risk through a SPIA (single premium immediate annuity) and a QLAC (qualified longevity annuity contract), you're reducing IRA withdrawals and, at the same time, reducing investment risk. These annuities provide fixed payments and are backed by highly rated insurance companies.
• Reduce income taxes. As described in our fourth article in this series, The 9% Solution, these first two steps in our example are reducing income taxes by as much as 50% in the first year.
• Use high-dividend portfolio for personal savings. If you're including personal savings in your plan, using this portfolio to increase cash flow from higher dividends also benefits from lower volatility and lower tax rates on dividends.

How much risk is left?

A lot of the work has already been done. For our sample investor ($1 million each in a rollover IRA, personal savings and the value of the home), about $420,000, or 14% of total net worth, is in an S&P 500 index and subject to liquidation to cover withdrawals. (If no personal savings, then it represents 21% of net worth.)

Here are two pie charts that show the allocation of all sources of income, and then focuses on those that are "safe" and not dependent on stock market performance.

The charts show that for our sample investor, a 67-year-old man, 76% of the income is not based on stock market performance.

Managing risks through plan adjustments

Whatever the protections from other assets, how do we deal with any residual risk? First, here's what we don't do in our planning:

• We don't use the HECM line of credit as a planned backstop for the stock market volatility. We have earmarked that for long-term care and unplanned expenses.
• We don't accelerate the income under the QLAC — that's already part of the planned income.
• We don't build in hedges to protect the portfolio.

What we do is look at two time frames:

• The initial five to ten years of the plan when a sharp drop in the market could reduce your retirement savings and upset your long-term plans. That's called a sequence of returns risk.
• A period of long-term underperformance where you literally might not have funds to cover the planned-for IRA withdrawals.

For the first time frame, we suggest thinking about allocating a portion to a money market fund. Our current model suggests an allocation into a money market fund of about two to three times the average IRA withdrawal during this initial five- or ten-year period.

This will be sufficient if we make withdrawals from the fund in adverse markets over the initial period.

Based on our early tests with historical performance, it pays for itself and, in particular, addresses the sequence of returns risk.

For the second long-term underperformance, we suggest you consider updating your plan and see how it works with an allocation of the reserve income to current income needs. This action may cut the amount you planned on for long-term care or to pay down your HECM loan to create a larger legacy. You'll be the judge of these options.

While the elements of the all-asset plan are correct, the allocations among asset classes should be set to meet your objectives.

If you have a chronic illness, you might skip the lifetime annuity or at least elect beneficiary protection. And if you have a favorite investment opportunity beyond our planning, then exclude it from your retirement plan and possibly accept a lower income or legacy.

About the recent news regarding inflation

With the announcement last week that inflation had jumped to 3.8% in April, we thought it necessary to address the inflation risk as one that needs management.

To put it in perspective, over the 30-year period ending in December 2025, there have been 11 five-year periods where inflation exceeded a compound average of 2.5%.

One straightforward approach would be to increase the assumed inflation rate built into the plan from 2.0% to 2.5%.

With this change, our sample investor (a man age 67) with $2 million in retirement savings and $1 million in the value of his house would see starting income drop from $131,000 to $124,000.

Now, what to do about short-term inflation jumps like the current 3.8%? You can accept the inflationary adjustments as they occur. Or, to avoid any income reduction, draw on, say, the HECM line of credit or other sources of savings.

Alternatively, you could set aside a slightly larger amount in the money market fund designed for stock market volatility and draw on it when needed to deliver the higher income.

Notably, since the most recent five-year period had a compound average of nearly 4.5%, it's smart to keep an eye on inflation.

Why now?

For decades, retirement planning has focused almost entirely on investment portfolios. The implicit assumption is that a well-diversified portfolio — managed prudently — can solve every retirement challenge.

Maybe it used to be true, but that assumption no longer holds. As suggested above, the construction of an all-asset plan can reduce the risks and the impact of adverse effects of the stock market.

Just remember, the all-asset plan is delivering the highest levels of income and liquid savings. It also has the lowest early tax rates and market risk. To find out for yourself, you can order a complimentary plan.

The other articles in this series

• It's Time to Redefine Retirement for Retirees With $500,000 to $5 Million
• Unlock Housing Wealth and Tax Benefits by Adding Lifetime Annuities to Your Retirement Plan
• Does Your Retirement Plan Ignore Half of Your Net Worth?
• The 9% Solution: An Expert Guide to Retirement Tax Breaks That Could Cut Your Tax Rate Nearly in Half

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 client sold a property for $2.5 million that they had owned for more than 30 years. Their basis was low enough that the estimated tax bill was just over $800,000. Before we talked about anything else, they asked the question most people ask: "Should I do a 1031 exchange?"

It sounds like a tax question. It isn't. It's a portfolio decision.

The fork in the road

At a high level, they had two paths:

• Pay roughly $800,000 in taxes and invest the remainder wherever they wanted
• Defer the taxes and reinvest the full $2.5 million into real estate through a 1031 exchange

On paper, the second option looks better. More capital stays invested. No immediate tax hit. But that only works if the investment that follows actually makes sense.

So, we paused the tax discussion and I asked a different question: "What are you trying to accomplish from here?"

What had changed?

For years, this client had been a hands-on owner. They dealt with tenants, maintenance, financing — everything that comes with direct real estate. But by the time they sold, their priorities were different.

They didn't want another property to manage. They didn't want to be tied to one location. They still liked real estate — but not the way they had owned it.

That distinction mattered, because a 1031 exchange doesn't just defer taxes — it commits you to another real estate investment.

A typical 1031 exchange

Most investors don't think about a 1031 exchange that way. They think: Avoid the tax, find a replacement and move on.

In reality, the structure introduces a constraint. Once the sale closes, the 45-day identification window starts. That timeline tends to drive behavior.

People don't always choose the best option. They choose what fits. That might be:

• Another property they can close quickly
• Something familiar
• A structure that solves the exchange without fully considering the long-term outcome

The focus shifts from "What should I own?" to "How do I complete this?"

A different approach

In this case, the client still wanted real estate exposure, but not direct ownership. So instead of replacing one property with another, they used the 1031 exchange to transition into a more passive structure.

That meant moving into professionally managed real estate rather than operating it themselves. For them, that solved two problems at once:

• It deferred the taxes
• It removed the day-to-day burden of ownership

That's where structures like Delaware statutory trusts (DSTs) are often used. They allow investors to participate in institutional real estate without managing it directly, and they fit within the 1031 framework.

But that still wasn't the full picture.

What happens after matters

A 1031 exchange answers the tax question. It doesn't answer the longer-term one.

Over time, this client's thinking evolved again. They weren't just trying to simplify ownership — they were trying to diversify beyond a single asset class.

That's where the next phase of the strategy comes into play.

Some investors eventually transition from direct or fractional property ownership into broader real estate portfolios through structures like a 721 exchange. Instead of owning individual properties, they own interests in diversified real estate at the portfolio level.

It's not something you have to decide on day one. But it's part of the arc for investors who want to move from concentrated ownership to something more diversified and liquid over time.

The trade-offs are real

None of these paths is perfect. Staying in real estate — whether directly or through a structure — means:

• Less liquidity than traditional investments
• Less control, especially in passive structures
• Committing capital for a longer period

Paying the tax, on the other hand, gives you flexibility but reduces the amount you're investing.

There isn't a universally "better" option. There's only the option that aligns with what you're trying to do next.

The decision most people skip

When we stepped back, the client realized something simple: They didn't actually need to decide whether to do a 1031 exchange first.

They needed to decide:

• Did they still want real estate exposure?
• If so, in what form?
• And how should this capital fit into the rest of their portfolio?

Once those answers were clear, the path followed. In their case, they used the 1031 exchange, but not in the way they initially expected.

It wasn't about replacing a property. It was about repositioning.

What this means for you

If you're facing a large gain, it's easy to fixate on the tax. But that's only one part of the decision.

The more important question is what you want to own after the transaction is complete — and how that choice affects your flexibility, your risk and your overall portfolio.

A 1031 exchange can be an effective tool. So can stepping back and rethinking your approach entirely.

The key is understanding that you're not just solving for taxes. You're deciding what comes next.

For advisers and investors working through this decision, the challenge is less about identifying the tools and more about sequencing them correctly. The difference between a 1031, a DST or a 721 structure is not just technical — it's how each fits into the broader portfolio and long-term plan.

Related Content

• Counting on Real Estate to Fund Your Retirement? Avoid These 3 Costly Mistakes
• Will Real Estate and Private Equity Start to Shine Again in 2026?
• 721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden Risks
• You May Still Be Able to Defer Your 2025 Capital Gains
• How to Turn Your 401(k) Into A Real Estate Empire — Without Killing Your Retirement

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

As we near retirement, we're often told that we'll pay less in taxes once we've retired. But is that always the case?

For some, yes, but for many, I would contend that you'll pay just as much, if not more, in taxes in retirement than you did in your pre-retirement years.

Some people have misconceptions about taxes and retirement. They believe their income will drop significantly but ignore that taxable withdrawals from retirement accounts and other income sources could put them in a higher tax bracket.

Others fail to seek tax advice as they near retirement and don't plan proactively, resulting in the lack of a tax-efficient, long-term distribution strategy.

The complexity of tax laws and how they differ for various accounts and investments is another contributing factor to unforeseen tax liabilities.

Here are some financial aspects of retirement that can lead to a tax trap.

Your lifestyle

Most experts recommend planning to replace 75% to 85% of your pre-retirement annual income to maintain your current lifestyle. While expenses such as commuting or saving for retirement might drop, others, such as healthcare and leisure (travel, entertainment, hobbies, social activities, etc.), often increase.

Without a significant reduction in expenses, you'll need to have an income similar to your later working years, likely keeping you in the same tax bracket.

Social Security

Up to 85% of your Social Security benefits can be taxable, depending on your combined or provisional income, a specific IRS formula used to determine whether Social Security benefits are taxable.

It's calculated by adding your adjusted gross income (wages, interest, dividends, pensions, capital gains and retirement account withdrawals), nontaxable interest (typically, interest from tax-exempt bonds, such as municipal or government bonds) and half the total gross Social Security benefits received during the year.

That combination could create a "tax domino effect" if you withdraw money for living expenses and unintentionally trigger higher taxes on your Social Security.

Here are the income thresholds at which Social Security benefits become taxable:

Medicare

Medicare premiums can increase due to the income-related monthly adjustment amount (IRMAA). That's an extra, income-based surcharge added to Medicare Part B (medical) and Part D (prescription drug) premiums for individuals with higher incomes.

For 2026, single tax filers with a modified adjusted gross income (MAGI) above $109,000 and joint filers above $218,000 are subject to IRMAA. The Social Security Administration uses tax returns from two years prior to determine if the additional fee applies.

Required minimum distributions (RMDs)

RMDs, which for most people begin at age 73 (it's age 75 for those born 1960 or later), could push you into a higher tax bracket. At those ages, the federal government requires people to make withdrawals from tax-deferred, pretax retirement accounts that they built over decades of their working life.

Those accounts include 401(k)s, 403(b)s, 457(b) plans, traditional IRAs, SEP IRAs, SIMPLE IRAs and Thrift Savings Plans (TSPs). The money you withdraw from those funds is considered taxable income.

The potential downside tax impacts of RMDs:

• They could potentially bump you into the next higher tax bracket
• They could increase your taxes on Social Security
• They could also increase your Medicare premiums due to IRMAA

Ways to help reduce the tax trap in retirement

How can you avoid paying unnecessary taxes in retirement? Here are a few strategies to consider.

1. Make Roth conversions (if appropriate).

A Roth IRA might be able to insulate you from future unknown taxes. Roth conversions are moving money from a pre-tax retirement account (such as a 401(k) or traditional IRA) into a Roth IRA.

You pay taxes on the amount you convert in the year you convert; the tradeoff is that you get tax-free growth and in retirement, withdrawals are tax-free. There's no limit on how much you can convert.

A Roth conversion is a popular strategy to help reduce future tax burdens, especially for those expecting higher tax brackets later or wanting tax-free inheritance for their beneficiaries. There are no RMDs for the original owner of the account.

Because Roth withdrawals are tax-free, using funds in your Roth account in retirement can help prevent you from a higher tax bracket.

2. Consider using the low tax window before your RMDs start.

Some people will experience a drop in income when they retire. A prime time to begin withdrawing or converting assets is when you're in a lower tax bracket.

Also consider that the next administration might increase taxes and make it more difficult from a yearly tax-rate perspective for some people to do such withdrawals or conversions.

Along with Roth conversions, here are other strategies to potentially take advantage of the low tax window:

• Consider early voluntary withdrawals. Start taking money out of IRA accounts after age of 59½ to lower the account balance and spread the tax liability over more years, rather than waiting for large, taxable RMDs.
• Balance tax brackets and IRMAA. Target a specific tax bracket in the years between retirement and RMDs to stay below higher tax brackets and avoid Medicare IRMAA surcharges.
• Consider qualified charitable distributions (QCDs). For those age 70½ and older, direct transfers from an IRA to a qualified charity can satisfy upcoming RMD requirements while reducing taxable income, even if you do not itemize deductions.
• "Fill" tax brackets. Purposefully take just enough income from tax-deferred accounts to reach the top of your current, lower tax bracket. You could end up paying less in taxes compared with the higher rates you might face when combined with future Social Security and RMDs.

3. Organize withdrawals by bucket.

In my experience, retirees often pull money from accounts in the wrong order, incurring tax consequences they could have otherwise avoided.

Taking too little from your tax-deferred accounts can lead to huge RMDs later in life. Taking too much early can increase your taxes and, potentially, your tax bracket.

It would be ideal to have a strategy that balances withdrawals from your taxable accounts, IRA (tax-deferred accounts) and Roth, while considering the income from Social Security and pensions.

The order in which you take withdrawals isn't a hard-and-fast rule. A sensible approach is to have three buckets of money:

• Taxable (brokerage accounts)
• Tax-deferred (IRA/401(k), etc.)
• Tax-free (Roth)

Deciding which bucket to withdraw from depends on what's going on in your life at that time.

Let's say you're married and filing jointly in the 12% tax bracket, which tops out at $100,800 of income for the 2026 tax year. Your taxable income for the year was close to that limit. You want to go on a cruise, and it's going to cost $5,000. Should you pull that amount from your tax-deferred bucket? No.

In this example, it may be better to pull it from your Roth because it's not taxable, and that $5,000 is not going to bump you into the next tax bracket.

Portfolio structure matters, especially in retirement.

• Consider placing tax-inefficient investments (e.g., taxable bonds, high-turnover funds) in tax-advantaged accounts, such as IRAs or 401(k)s
• Put tax-efficient investments (e.g., ETFs, index funds, municipal bonds) into taxable brokerage accounts
• Potentially avoid unnecessary capital gains, manage your dividends and distributions, and use tax-loss harvesting to offset capital gains and reduce tax burden

Review periodically and coordinate your plan

A retirement portfolio is not "set it and forget it." Too many things can change year to year, so make sure to review your plan periodically and adjust it as needed.

Keep these priorities in mind when reviewing:

• Income changes
• Market shifts that can affect your portfolio
• New tax laws that can affect your lifestyle, taxation and withdrawals
• Health care cost adjustments
• RMDs and Social Security

Retirement tax planning should be geared toward reducing taxes and avoiding ugly surprises, helping ensure you keep more of what you've worked hard to build and save.

If you're nearing retirement or already retired, it's important to ask yourself: Am I heading toward a possible tax trap in my retirement?

The earlier you spot the tax trap, the easier it may be to avoid and ensure you can retire relaxed and happy.

Dan Dunkin contributed to this article.

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

Related Content

• The New Retirement Math: How an Active Lifestyle Can Lower Your 2026 Taxes
• 7 Tax Blunders to Avoid in Your First Year of Retirement, From a Seasoned Financial Planner
• Will Taxes Shred Your 401(k) or IRA During Your Retirement? It's Very Likely
• Will Your Retirement Income Trigger the IRMAA This Year? (Plus, 6 Ways to Avoid it in the Future)
• The New Retirement Math: How an Active Lifestyle Can Lower Your 2026 Taxes

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.

Not long ago, a client came to me with what sounded like a simple question:
"Should I do a Roth conversion?"

It's a question I hear often — and it makes sense. Roth conversions are frequently recommended as a smart tax strategy for retirement.

But after walking through this client's situation together, it became clear that a Roth conversion might not have been the right move at that time.

That's an important reminder I share with many of my clients: A strategy that works well for someone else isn't automatically the right fit for you.

What exactly Is a Roth conversion?

A Roth conversion simply means moving money from a traditional IRA or 401(k) (where contributions were made pre-tax) into a Roth IRA (where withdrawals can be tax-free later).

When you convert funds, you pay income taxes on the amount converted now in exchange for potential tax-free growth and withdrawals in the future.

For many people, this can be a powerful long-term planning strategy — but timing and circumstances matter.

Why a Roth conversion didn't make sense in this case

In this client's situation, their primary source of retirement income was going to be withdrawals from their IRA, and retirement was only a few years away.

When you convert funds into a Roth account, a five-year rule applies. Generally speaking, you need to wait five years before withdrawing converted funds to avoid additional taxes.

Since this client expected to rely on those assets sooner than that, the primary benefit of converting simply wasn't going to apply.

In other words, the strategy sounded appealing on the surface, but it didn't support their real-world retirement timeline.

Why timing matters

For many investors, Roth conversions can be extremely valuable. Yes, you pay taxes at the time of conversion, but once the money is inside a Roth account, it can grow tax-free and be withdrawn tax-free in retirement.

Roth IRAs are also not subject to required minimum distributions, which can make them a powerful planning tool for both retirement income flexibility and legacy planning.

Still, there are several situations where it makes sense to pause before converting.

1. You're currently in a higher tax bracket.

Every dollar converted is treated as ordinary income in the year of the conversion. If your income is already near the top of your tax bracket, converting could push part of that income into a higher bracket.

Sometimes, waiting for a lower-income year can make the strategy far more efficient.

2. You would need to use retirement funds to pay the conversion taxes.

Ideally, taxes on a conversion should be paid from savings outside the retirement account. Using retirement assets to cover the tax bill reduces the amount working for you long term and weakens the overall benefit of the strategy.

3. Your income may drop in the near future.

If you expect retirement, reduced work hours or another life transition that lowers income, it may make sense to delay conversion until you're in a lower bracket.

Timing can be just as important as the decision itself.

4. The conversion could increase your Medicare premiums.

Medicare Part B and Part D premiums are based on taxable income. Because conversions increase income in the year they occur, they can sometimes trigger higher premiums.

This doesn't automatically rule out a conversion — but it's something worth planning around carefully.

Sometimes the smartest strategy is a gradual approach

In many cases, spreading conversions over several years can reduce the tax impact and create a more efficient outcome overall.

Rather than asking "Should I convert?", the better question is often: "How much should I convert — and when?"

That's where personalized planning really makes a difference.

Roth conversions are powerful — but personal

It's easy to hear about a friend, neighbor or coworker who completed a Roth conversion and assume it's something you should do, too. But retirement planning works best when strategies are tailored to your specific income picture, timeline and goals.

Roth conversions can absolutely play an important role in a well-designed retirement plan. The key is making sure they're implemented thoughtfully and at the right time.

With the right guidance and a clear understanding of the trade-offs, they can become a valuable tool — not just a popular recommendation.

Ronnie Blair contributed to this article.

Advisory services offered through Woloshin Investment Management, LLC, an Investment Adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training.

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

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• Timing Is Everything for Roth Conversions: An Expert's Guide to the Right Strategy
• Are You Getting Vague Advice About Roth Conversions?
• When Multiple Tax Rules Collide: Don't Pay a 50% Rate on Your Roth Conversion by Mistake

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 One Big Beautiful Bill Act (OBBBA) opens up several planning opportunities that could make a real difference in what you keep in your pocket — not just this year, but for years to come.

If you're like our clients, whom we call Midwestern Millionaires — hardworking, frugal and diligent savers with $1 million or more saved (I wrote a book on this that you can request here) — these are five of the most important provisions to understand for how they may affect your long-term tax strategy.

1. Lower tax rates aren't going away (for now)

One of the biggest concerns we hear from clients is whether today's historically low tax rates are about to disappear. Current legislation signals that lower marginal tax rates are likely here to stay longer than previously expected, at least for now.

This creates a great window of opportunity for both retirees and pre-retirees to execute strategies such as:

• Roth conversions
• Accelerating income into lower-tax years
• Capital gains planning

If tax rates continue to remain relatively low, planning proactively and implementing various planning strategies now can dramatically reduce your lifetime tax liability.

This is especially important for those with significant IRA balances and/or pensions that will increase their income in the future.

2. A higher standard deduction — and bonus deductions

The standard deduction has already simplified filing for millions of Americans, and the OBBBA has increased the already large standard deduction once again.

For many households, this means that itemizing deductions will become even less common. But with the OBBBA comes an additional bonus deduction opportunity on top.

Specifically, the law introduces an enhanced deduction of $6,000 for taxpayers aged 65 and older. This additional deduction phases out at higher income levels, so it's most impactful for retirees and near retirees in moderate-income ranges.

This makes it more crucial than ever to revisit your tax strategy each year, rather than assuming your situation remains the same.

For those in or approaching retirement, the potential savings here are too significant to overlook.

3. A new charitable deduction for non-itemizers

Historically, if you did not itemize your deductions, you likely have seen no benefit from any charitable giving you have done over the years, but the OBBBA has changed that.

The law introduces a charitable deduction that's specifically designed for non-itemizers, so you can finally see a tax benefit for the giving you're already doing, even if you elect to take the standard deduction.

Those who file married filing jointly can deduct up to $2,000, and those who are single can deduct up to $1,000.

4. An expanded SALT deduction

The state and local tax (SALT) deduction cap has been a sticking point for years, particularly for higher-income households and those in high-tax states.

The OBBBA has increased the deduction cap, potentially allowing taxpayers to deduct more of their:

• State and local income taxes
• Property taxes

While the impact will vary depending on where you live, this could be a meaningful change for those who have felt limited by the previous cap of $10,000.

For some households, it may even make itemizing deductions viable again, especially when combined with mortgage interest, medical expenses and charitable deductions.

5. Trump Accounts for newborns

One of the more unique provisions in the bill is the introduction of so-called Trump Accounts, which are tax-advantaged savings accounts established for newborns.

These accounts are designed to create a financial head start for future generations.

While details will continue to evolve, the broader theme is clear: Early investing is being incentivized.

For parents and grandparents alike, this could be a great thing to do for their children/grandchildren. To find out more and to sign up your newborn, visit www.trumpaccounts.gov.

The bigger picture: Opportunity requires action

Tax legislation always creates winners and losers, but more importantly, it creates planning opportunities. The common thread across all five of these tax changes is flexibility:

• Lower rates extend planning windows
• Higher deductions simplify filing while adding targeted benefits
• Expanded deductions and new account types create new ways to reduce taxes over time

But none of these matters without a strategy. The households that benefit most won't be the ones who simply react — they'll be the ones who proactively adjust how and when they recognize income, take deductions and plan for the next generation.

Related Content

• 'We Have Food at Home': The 'Midwestern Millionaire' Mentality That's Built a Fortune
• Are You a 'Midwestern Millionaire'? 4 Retirement Strategies
• If You're the Millionaire Next Door, You May Be a Terrible Spender
• Do You Have at Least $1 Million in Tax-Deferred Investments?
• The Secret to Reducing Lifetime Taxes for Retirees in the 2% Club, From a Financial Planner

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.

We're often told about the importance of seeking financial advice, but what isn't talked about as much is how to prepare for your first meeting with an adviser.

• What information should you have on hand?
• What questions do you ask?
• And how can you determine if an adviser is the right fit for you?

Understanding what to expect and how to prepare can make the process much easier.

Prepare basic paperwork

Before heading into the first meeting, do some preparation on your own. Knowing what documents to bring depends on your specific situation, but financial statements and recent tax returns are a great place to start.

If you're struggling with debt or budgeting, know your monthly income and your monthly expenses.

Having all of this information on hand will help the adviser get a better idea of your current circumstances.

Bringing whatever information you feel is important for the adviser to know will help you receive more specific and meaningful guidance.

Do your own background checks

Doing your own research into the adviser and their firm beforehand will also help you feel more confident. Before making an appointment, visit the firm's website to learn more about their services. Reviewing testimonials and media clips can also be very helpful.

You can also check advisers on sites such as FINRA's BrokerCheck, which lists certifications and disclosures. Asking those around you for their recommendations can be helpful, but it should be paired with additional independent research.

Don't hesitate to ask questions

It's easy to feel like you're being interviewed in that first meeting, but remember, it's a two-way street. You should be evaluating the financial adviser equally.

Both sides are determining whether it makes sense to move forward. Taking the time to meet with more than one adviser can also help you find the right fit.

Knowing the right questions to ask will help you better understand how a particular adviser works. Ask about their financial philosophy. What's their area of expertise or approach to financial planning?

It's also important to know what services are provided, how the adviser is compensated, any fees that are included and how often you can expect to meet. Asking these questions early can help you better identify alignment from the start.

Don't ignore red flags

Knowing what to look out for is equally as important. Firms that focus on investment returns alone can be a red flag. Financial planning is much more than simply investing. It also includes tax management, estate planning, income strategy and long-term goals.

If an adviser is talking only about returns, they could be overlooking the bigger picture, operating more like a salesperson than an adviser.

Look out for firms or advisers who say they offer limited services. This means advisers may be restricted in what products they can offer, even if a better option exists.

For example, a financial adviser may suggest keeping all of your money invested for growth, but may not address how to withdraw that money once you retire, or discuss tax planning strategies to minimize your bill. You could be receiving advice that's incomplete.

Prioritizing transparency in your search matters, too. If you don't know how the adviser gets paid or why they're recommending a certain product, how can you evaluate whether it's in your best interest?

Hidden service fees can eat into your returns, and conflicts of interest can influence recommendations that may or may not be the right solution. You should always know what you're paying for and the reasoning behind it. If the answers to those types of questions are unclear, that's a problem.

Be open to learning

As you're heading into the first meeting, know that the main focus will be on understanding your current situation and identifying areas of concern.

Over time, these conversations should develop into a more individualized, comprehensive plan. Financial planning is an ongoing process that should evolve with your life.

It's completely normal to feel hesitant or overwhelmed by the thought of meeting with a financial adviser for the first time. The fear of being judged, uncertainty about expectations, or negative financial experiences from your past can easily push you away from seeking guidance.

You don't need to have everything figured out before you go. Being open to learning and receiving guidance is enough. But taking the first step can give you clarity, confidence and a better understanding of your financial future.

Related Content

• 5 Quick and Dirty Questions to Pick a Financial Adviser
• 8 Rules for Choosing the Right Financial Adviser
• 5 Ways to Help Sort the Best From the Rest When Hiring a Financial Adviser
• Will a Financial Professional Always Act in Your Best Interests? 1 Question Will Tell You — and It's Not 'Are You a Fiduciary
• 'Fee-Only' and 'Fiduciary' Are Not the Same: A Financial Pro Sets the Record Straight

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

For many high-income households, tax planning is not just about April 15. It is about how capital is positioned throughout the year.

Business owners, executives, physicians, attorneys and other high earners often face the same challenge: Strong income, limited deductions and a need to put capital to work in assets that may produce income and long-term value.

That is one reason direct energy investing can be attractive to accredited investors.

Direct oil and gas investing is not new. The U.S. tax code has long recognized that domestic energy development is capital-intensive and comes with real risk. Drilling wells requires significant upfront capital before revenue is produced.

To support private capital in domestic energy development, certain tax incentives allow qualifying investors to claim deductions tied to the drilling and development of commercial oil and gas wells.

For accredited investors who take a thoughtful, long-term approach, direct energy investing can be appealing because it may offer current-year tax deductions, potential production income and possible long-term asset value.

Understanding intangible drilling costs

Direct oil and gas investing can create current-year deductions, including intangible drilling costs (IDCs) and tangible cost deductions through bonus depreciation.

IDCs are drilling costs that do not have salvage value. These can include labor, fuel, drilling services, well stimulation, hydraulic fracturing and other expenses needed to bring a commercial well into production.

Under current tax rules, IDCs may generally be deducted in the year they are paid or incurred. In the right circumstances, that can help accelerate deductions and reduce other taxable income.

A large part of a drilling budget is often made up of IDCs, but proper planning matters. Investors need to understand their own tax situation and make sure the investment is structured correctly.

Whether deductions are treated as active or passive depends on specific tax rules and how the investment is made.

Anyone considering direct energy investing as part of a tax strategy should work closely with their tax adviser and model the expected tax results before investing.

Tangible drilling costs and depreciation

Not all drilling costs are intangible. Some costs are tied to physical equipment and assets used in the well, such as casing, tubing, rods, wellhead equipment, pumping units, tanks, separators, flow lines and other tangible property.

Under recent tax law, certain tangible costs may qualify for 100% bonus depreciation. That means those costs may be deducted up front instead of being spread out over several years.

When combined with IDC deductions, bonus depreciation can create a meaningful way to accelerate current-year deductions for commercial oil and gas drilling and development.

Depletion: Accounting for a diminishing asset

Oil and gas wells naturally decline over time. As oil and gas is produced, there is less remaining in the ground, which means the asset is being depleted.

The tax code recognizes that reality by allowing depletion deductions. In simple terms, depletion helps account for the reduction in remaining reserves as production occurs.

There are two common types of depletion:

• Cost depletion
• Percentage depletion

Generally, the taxpayer may use the greater of the two calculations.

Cost depletion is based on production compared to remaining recoverable reserves.

Percentage depletion is generally based on a percentage of gross production income, subject to certain limits.

In many cases, cost depletion may be higher during drilling and development years, while percentage depletion may be more useful in later years when the well is generating positive taxable production income.

This is one reason direct energy investing can appeal to high-income households, but it should always be evaluated as part of the full investment picture, not just for the tax treatment.

Why direct energy investing appeals to high-income households

For high-income households, the appeal is not simply "tax savings." That framing is too narrow.

The real appeal is that direct energy investing may allow investors to align several goals at once.

Direct energy investing means participating in a real asset, typically an oil and gas working interest.

The main objectives are current-year tax deductions, potential production income and possible growth in the value of the underlying energy assets.

But tax benefits should never be the only reason to invest. The project itself has to make economic sense. Investors should look at the structure, business plan, operator, geology, drilling plan, costs, reserve potential, commodity price assumptions and exit strategy.

At King Operating Corporation, we focus on the full lifecycle of energy investing: Acquire, develop and divest. Our goal is to find opportunities where private capital can participate in oil and gas assets with a disciplined development plan.

The tax treatment matters, but it is only one part of the conversation. Asset quality, execution, operating strategy and alignment of interests matter just as much.

Direct investing vs public energy stocks

Many investors already have energy exposure through public stocks, mutual funds or ETFs. Those can offer liquidity and diversification, but they usually do not provide the same tax treatment that can come with direct participation in drilling and production.

Direct energy investing is different. It is less liquid, more specialized and generally available only to qualified or accredited investors. Because investors have indirect ownership tied to the underlying asset, the tax reporting and economics can look very different.

That difference can be valuable, but it requires education. Investors need to understand the risks, the expected holding period, how income is reported, when deductions may be available and what happens if wells underperform.

The risks should be clear

Direct oil and gas investing comes with real risk.

Wells may not produce as expected. Oil and gas prices can move quickly. Costs can rise. Regulations, operations and geology can all impact results. That is why smart tax planning and guidance from a qualified tax adviser matter.

Investors should be cautious of any opportunity that leads with tax benefits as the main reason to invest. Tax benefits can help improve the overall economics, but they do not remove the risk.

A responsible energy investment conversation should cover both sides: The upside and the risks.

A planning tool, not a loophole

For high-income households, direct energy investing can be a smart planning tool when it fits the bigger financial picture.

It gives investors potential access to domestic oil and gas production, production income, possible asset growth and tax benefits that are unique to the industry. But these advantages need to be used carefully, not rushed.

Before investing, talk with your tax adviser, financial adviser and legal counsel. The question should not just be, "How much can I deduct?" The better question is, "Does this investment make sense before and after taxes?"

When the answer is yes, direct energy investing can be a meaningful part of a high-income household's portfolio.

Related Content

• The Best Energy Stocks to Buy as Oil Prices Spike
• Tax Advantages of Oil and Gas Investments: What You Need to Know
• Who Controls Gas Prices in the US?
• 5 Mistakes to Avoid in Oil and Gas Investing (Plus, 6 Ways to Stay Focused)
• How Oil and Gas Investing Can Stabilize Returns and Shield Against Market Volatility: Tips From a Financial Pro

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.

In Morgan Housel's most recent book, he defines "wealth" as everything you have minus everything you want.

If I were to ask any engineer what "wealth" means to them, they would give me an exact dollar figure.

This is all to say that the meaning of "wealth" is subjective.

For the purposes of this column, we're going to use the figure of $3 million, because if you have that and a large share is tax-deferred, failing to get ahead with your tax planning can increase the risk of running into the "tax torpedo."

When we run tax projections, we're crossing a busy street full of tax torpedoes. We're looking:

• Left for cars (the income tax thresholds)
• Right for unwieldy motorcycles (higher capital gains rates or net investment income tax, or NIIT)
• Both ways for the silent killers, electric scooters — those are the income-related monthly adjustment amounts (IRMAAs), which penalize you via your Medicare Part B premiums when gross income crosses certain thresholds

I'll spare you from the new work-around phaseouts from the One Big Beautiful Bill (OBBB).

In an example, Joe and Susan have saved $3 million. Two-thirds of it is in retirement accounts; the rest is in a trust account. They're 65 and plan to live on the trust account until they're forced to take required minimum distributions (RMDs) at 75. They'll receive $6,000 per month from Social Security.

They spend $10,000 per month and when you look only at their balance sheet, have put themselves in a good place. However, projecting tax rates tells a much uglier picture.

Let's assume Joe and Susan earn about 7% per year on their retirement accounts and have $4 million in those pots when they hit RMD age. This means their RMDs will be about $162,000 per year.

Social Security will pay them $72,000 per year. Of that, about $61,000 will be taxable. Assuming they have $30,000 from other income sources, including interest, dividends and capital gains, their gross income is about $253,000.

This is where the math becomes more imperfect. Some tax brackets are indexed for inflation, such as income. Others aren't, such as net investment income tax. We'll use 2026 figures to make things a bit simpler.

When you have $253,000 in joint income at 75, in 2026, you're sitting in the 22% to 24% marginal income bracket. Most people might look at this and say: Not so bad. Getting hit by this car doesn't hurt as much as you thought it would.

However, if you're in the 10%, 12% or 22% bracket today, it's worth considering Roth conversions to reduce future RMDs and pay at today's rate.

I can't overstate how much easier the planning technology has made it to look at current rates vs future rates. Not to mention, it's nearly impossible to build a spreadsheet to track all of the landmines. You can access a version of what we use.

There are three capital gains brackets. Most people reading this will fall into the 15% bracket, which runs from $98,900 to $613,700 of taxable income.

You might be thinking, "Phew, dodged the unwieldy motorcycle." Not so fast.

There is a lesser-known tax cliff called the net investment income tax (NIIT), which effectively brings your capital gains and dividends from 15% to 18.8% when you cross $250,000 of adjusted gross income (AGI).

This is an important distinction because this is gross income, not taxable, which accounts for deductions.

Let's jump to the ultimate tax trigger for the retirees with whom we work. I've seen no tax in the post-alternative minimum tax (AMT) era that makes people so angry. I'm nominating tariffs as No. 2.

IRMAA is a surcharge on your Medicare Part B and D income based on your modified adjusted gross income (MAGI) from two years ago.

If you're on Medicare in 2026, your Part B and D premiums are based on your gross income from 2024. Joe and Susan would have about $150 per month in surcharges between Part B and Part D.

You can look at all of these things in isolation and say, "That's not that bad." I understand that argument.

But likely, their marginal income rate went up by about 10% at the same time that their capital gains increased by a few percentage points and their Medicare premiums jumped.

The sum can feel greater than the parts. Add to that, these numbers don't go up in a straight line, they can grow exponentially with higher income and asset figures.

Related Content

• The Tax Forms Retirees Are Receiving in 2026 and What They're For
• If You're in or Near Retirement, You Need to Know These 4 Recent Tax Changes
• Missed Your RMD? 4 Ways to Avoid Doing That Again (and Skip the IRS Penalties), From a Financial Planner
• 5 Mistakes to Avoid in the 5 Years Before You Retire, From a Financial Planner

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.

Children. Parents. Pets. Mortgage. School projects and work projects. Charitable endeavors. Sneaking in a workout during Little League practice.

Our lives leave no room for our lives, and it seems that we are all trying to balance these obligations simultaneously, with varying degrees of success.

It's no surprise we feel like a juggler, constantly adding items to the mix while trying to keep everything from crashing down.

I have been a financial adviser for nearly 20 years and have engaged clients at all stages of their lives. Some I meet when they hit a milestone, whether it's the birth of a child or accumulating enough assets to need help in investing or management.

I meet others in times of misfortune, whether it's divorce, the death of a spouse or the loss of a parent. Often, these clients are women.

What I constantly hear from these clients is that they never took the time to create a financial roadmap because it was just one more thing to do.

This is a huge misconception. That "one more thing" could align your life in a way that feels more organized and appropriate to your goals. And typically, you're most likely spending energy on it already. As Eleanor Roosevelt said, "It takes as much energy to wish as it does to plan."

Financial planning is one of the most important endeavors you can pursue, not only for your own sake, but also as a service to loved ones.

Don't be reactive — take control

As a wife, parent and member of the sandwich generation, I can attest that the mental load, often an overload, is real. The constant struggle of daily life makes women default to a reactive stance. Some call it survival mode.

The downside is that taking a reactive approach to financial planning means goals and desires often get pushed to a rarely addressed to-do list.

Financial advisers can become invaluable collaborators who share the planning burden, but it makes sense to bring them in before a life-altering event occurs.

Engaging a financial adviser early provides room to learn, consider advice or conduct research. That's exponentially more difficult during a disaster or tragedy. In these moments, springboarding into a financial decision is rarely the right choice.

Take it from someone who was hunkered down as Hurricane Helene ripped through our Asheville, North Carolina, neighborhood. Financial planning is the last thing on your mind when faced with a disaster. This is a time for grieving, rebuilding, self-care and loving connections with those who are important.

Own your 'one more thing'

Emergencies are not the ideal time to establish a new relationship either. They are times to leverage and lean on existing ones. Make time to engage a financial adviser sooner rather than later because having a long-term relationship can turn that "one more thing" into one less thing in times of crisis.

And having a trusted, familiar advisory team to guide and assist with critical financial decisions during these periods really takes more than one thing off your list.

Think of your experience with other personal and professional long-term relationships. There is a sense of ease and familiarity that only comes with time and energy spent together.

Once a relationship is established with a financial adviser, which includes a mutual understanding of your goals and values systems, that engagement can operate on autopilot for you, while your adviser does the work.

Create your support team

Developing the right advice team now makes everything easier, whether it's navigating an unexpected medical situation or buying a car.

Importantly, you must allow that team to work for you and be something that enhances your life. If you have the best adviser, lawyer and accountant, but you don't like them, it won't matter much if they are good at what they do.

Find people who share your values, see you authentically, laugh at your jokes and understand your wishes well enough to tell you the hard truths. Finding these people — your people — will get you through the hard times.

Adding this task to your to-do list and crossing it off in the very near future will make your life better. And easier. Take it from someone who has seen the rewards of doing it sooner and the risks of engaging at an emotionally challenging time. Remember, "it takes as much energy to wish as it does to plan."

Related Content

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• Women Play It Too Safe With Money: Are You One of Them?
• How Money Guilt Holds Women Back (and How You Can Send It Packing)
• 5 Simple Steps to Financial Power for Every Woman
• Death or Divorce: How Women Can Prepare for Possibilities

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 mega backdoor Roth IRA is one of the most powerful strategies available to high-income earners who want to maximize tax-advantaged retirement savings.

The name "mega backdoor Roth" sounds big and exciting, and it is. It is a way to get money into a Roth account, where it can grow tax-free and be withdrawn tax-free in retirement, once certain conditions are met.

To fully understand how a mega backdoor Roth IRA works, it helps to first look at its predecessor — the standard backdoor Roth IRA — and then explore how this enhanced version expands your retirement investment options.

A backdoor Roth IRA is a strategy designed for individuals whose income exceeds the limits for direct Roth IRA contributions. For example, if you are single and your income is higher than $153,000, you're not allowed to contribute to a Roth IRA. So if you're a high earner, then this article is for you.

So while high earners are restricted from contributing to a Roth IRA, the tax code allows a workaround with the backdoor Roth —you simply make an after-tax contribution to a traditional IRA and then convert those funds to a Roth IRA.

Because traditional IRAs do not have income limits for after-tax contributions, this process effectively bypasses the restrictions. That is the magic of this strategy.

Here is a short example comparing two high-earning investors, Alex and Sam, to show the long-term benefit.

The scenario (20-year horizon)

Both Alex and Sam have an extra $7,500 (the 2026 contribution limit for an IRA) to invest each year. Both are in a 24% tax bracket and expect to stay there in retirement.

• Alex invests in a standard taxable brokerage account
• Sam uses the backdoor Roth IRA strategy

Why Sam wins

Even though they both invested the same amount of money in the same funds, Sam ends up with roughly $52,000 more after 20 years. This is why:

• Elimination of "tax drag." In Alex's taxable account, a portion of the returns is "chipped away" every year by taxes on dividends and rebalancing. Sam's money compounds in total.
• The "never taxed again" perk. Once Sam moves the money into the Roth, those dollars — and all their future growth — are legally invisible to the IRS. Alex will eventually owe a significant chunk of his $214,000 to the government when he decides to spend it.
• No RMDs. Unlike a traditional IRA, Sam is never forced to take money out. He can let it grow for his entire life or pass it to heirs tax-free.

If you want to follow Sam's lead, the process is a simple "two-step":

• Contribute $7,500 to a traditional IRA (mark it as "nondeductible")
• Convert that money to your Roth IRA immediately

Where things get complicated

The backdoor Roth IRA can be tax-free if executed correctly. If all the funds in your traditional IRA consist of after-tax contributions, converting them to a Roth IRA does not trigger additional taxes.

However, things become more complicated if you also hold pretax funds in your traditional IRA. In that case, the IRS applies what is known as the pro-rata rule, which determines how much of the conversion is taxable.

This rule can create unexpected tax consequences, making it important to work with a financial planner to do this correctly.

While the backdoor Roth IRA is useful, it is limited by annual IRA contribution limits: $7,500 in 2026, or $8,600 for those age 50 and older.

For high earners who want to save more aggressively, the mega backdoor Roth IRA could be the answer.

Higher contribution limits

The mega backdoor Roth IRA takes advantage of higher contribution limits within a 401(k) plan.

Unlike IRAs, 401(k)s allow significantly larger total contributions when combining employee deferrals, employer matches and additional after-tax contributions.

In 2026, the elective deferral limit is $24,500, with higher limits for older workers due to catch-up contributions.

More importantly, the total contribution limit in 2026, including employer and employee contributions, can reach as high as $72,000, or even more per year for those eligible for catch-up provisions.

Just think of that. After just a short 10 years, you could stash away $720,000 for retirement, and after just 20 years, you could stash away more than $1.4 million.

After maxing out standard 401(k) contributions and receiving any employer match, some plans allow participants to contribute additional after-tax dollars.

These are not Roth contributions, but rather a separate category of after-tax funds. If the plan permits, those after-tax contributions can then be converted into a Roth IRA or a Roth 401(k). This conversion is the "mega backdoor" step.

When done correctly, the after-tax contributions themselves can be converted without paying additional taxes, since taxes have already been paid on that money. However, any earnings generated before the conversion may be taxable.

For this reason, it is important to time this properly with the help of a financial adviser. You should convert these funds as quickly as possible to minimize or avoid taxable gains.

The appeal is the scale

The appeal of the mega backdoor Roth IRA lies in its scale. Instead of being limited to a few thousand dollars per year, you may be able to move tens of thousands of dollars annually into a Roth account.

Over time, this can dramatically increase the amount of tax-free income you will have in retirement.

Additionally, Roth IRAs are not subject to required minimum distributions (RMDs) during the account holder's lifetime, offering greater flexibility and estate planning advantages.

If you want to, you can just let all that money sit in your mega backdoor Roth and grow bigger and bigger and bigger every year.

If your financial planner also has an insurance license, like I do, you can even put that money in a high-quality annuity that is guaranteed to never lose value and that can also provide you with a guaranteed lifetime income.

Not all 401(k) plans allow the use of this strategy. To find out if yours does, you can set up a free meeting with me, and we can talk about it.

Common mistakes to avoid

Don't try to do a mega backdoor Roth on your own. Mistakes can cost you thousands, or even tens of thousands, of dollars in extra taxes. Considering working with a CERTIFIED FINANCIAL PLANNER® (CFP®).

Here are some common mistakes that do-it-yourselfers make:

• Waiting too long to convert after-tax contributions, which can create earnings that become taxable
• Confusing or mixing up pretax contributions, Roth contributions and after-tax contributions, which are each treated differently for tax purposes.
• Making mistakes when handling rollovers. Improperly mixing pretax and after-tax funds during a rollover can create tax headaches
• Don't exceed IRA or 401(k) contribution limits. Because the total 401(k) limit includes employee contributions, employer matches and after-tax contributions, it is easy to get confused and exceed the contribution limits if you are not tracking everything carefully. Overcontributing can result in severe penalties.

The mega backdoor Roth IRA is a sophisticated strategy that offers substantial rewards for those who use it effectively. It enables high earners to enjoy both tax-free growth but also tax-free withdrawals.

By working with a skilled financial planner who is also a fiduciary, you can take full advantage of one of the most generous opportunities in the retirement savings universe.

Related Content

• How a Backdoor Roth IRA Works (and Its Drawbacks)
• Five Ways to Catch Up on Retirement Savings
• Roth or Traditional? Seven Considerations for High Earners
• 5 Legal 'Loopholes' the IRS Wishes You Didn't Know
• The 2026 Retirement Catch-Up Curveball: What High Earners 50 and Older Need to Know Now

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 One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made many of the 2017 tax cuts permanent — but it also introduced several new deductions and income rules that could change your take-home pay and your tax return.

While much of the coverage has focused on politics, what matters most is how the law affects everyday taxpayers. Here are seven key changes to understand.

1. A new deduction for tip income — but it's not 'tax-free tips'

This is a super important point.

The OBBBA allows eligible workers to deduct up to $25,000 of qualified tip income each year.

This is an "above-the-line" deduction, meaning you can claim it even if you take the standard deduction. But there are important caveats:

• The deduction phases out at higher income levels
• You must still report all tips as income
• Payroll taxes (Social Security and Medicare) still apply

In other words, this is not tax-free tip income. It's a deduction against taxable income.

If you work in hospitality, food service or another tip-based industry, make sure your income is properly documented and reported. And if your income hovers near the phaseout thresholds, even a small raise or bonus could reduce the benefit.

2. Overtime pay may be partially deductible

Workers who earn overtime may now deduct up to $12,500 of qualified overtime income per year.

This is an above-the-line deduction, meaning you can claim it even if you take the standard deduction. However, it's important to understand what it does — and what it doesn't do.

The deduction reduces your taxable income for federal income tax purposes. It does not reduce payroll taxes. You will still owe Social Security and Medicare taxes on your full overtime pay (because your overtime is reported on your Form W-2).

In practical terms, if you're in the 22% federal tax bracket and qualify for the full $12,500 deduction, it could reduce your federal income tax by up to $2,750. But your paycheck withholding may not automatically adjust unless you update your W-4.

Like the tip deduction, this benefit phases out at higher income levels — beginning around $150,000 for single filers and $300,000 for joint filers.

If you regularly work overtime, this provision could lower your federal tax bill. But if your income is near the phaseout range, a raise, bonus or side income could reduce or eliminate the benefit. Reviewing your withholding early in the year can help prevent surprises at tax time.

3. Car loan interest is back — with limits

For the first time in years, interest on certain new personal-use auto loans may be deductible, up to $10,000 per year.

However:

• The vehicle must be new
• The deduction phases out at higher income levels
• It does not apply to used vehicles
• Business-use vehicles are already handled under separate tax rules

If you're planning to buy a new car, this deduction could modestly reduce your taxable income. But it shouldn't be the sole reason to purchase a vehicle. Always weigh financing costs carefully.

4. The SALT cap has been raised — temporarily

Taxpayers in high-tax states will welcome this change. The state and local tax (SALT) deduction cap has been raised to $40,000 through 2029. However, the benefit begins phasing out for households with income above $500,000.

If you live in states like New Jersey, New York or California, this could increase your itemized deductions significantly — at least for the next few years.

Keep in mind that this increase is temporary. Planning strategies may still need to account for potential changes after 2029.

5. A new bonus deduction for older people

Taxpayers age 65 and older may now claim an additional deduction of up to $6,000 per person. For a married couple over age 65, that could mean up to $12,000 in additional deductions.

As with many provisions in the new law, the benefit phases out at higher income levels.If you are in retirement and living on Social Security, pension income or required minimum distributions (RMDs), this deduction could help reduce taxable income. But retirees with higher investment income should check whether they qualify.

6. Roth catch-up contributions are now mandatory for higher earners

Beginning in 2026, workers age 50 and older who earned more than $150,000 in the prior year must make their 401(k) catch-up contributions on a Roth basis.

For 2026, the catch-up limit is $8,000 for those ages 50 to 59.

This means:

• You will not receive a current-year tax deduction for those catch-up contributions
• Your paycheck may be slightly smaller
• The money will grow tax-free and can be withdrawn tax-free in retirement

If you are affected, review your payroll elections early in the year to avoid confusion.Over time, this rule may result in more tax-free income in retirement, which could be great, but it does change short-term cash flow planning.

7. Trump Accounts for newborns

The OBBBA introduces a new savings vehicle informally known as Trump Accounts. Children born between 2025 and 2028 will receive a $1,000 federal seed deposit. Families may contribute up to $5,000 per year after tax, and the account converts into a traditional IRA at age 18.

These accounts are not replacements for 529 college savings plans. Withdrawals from a Trump Account for non-retirement purposes may be taxable.

Instead, they function as long-term retirement accounts that begin compounding at birth.

If you have a child born during the eligible years, this could be a powerful long-term savings opportunity. But it works best as part of a broader financial plan — not as a stand-alone strategy.

What this means for you

The biggest takeaway from the OBBBA is much more predictability.

Many of the tax rates and structural rules are now permanent. That allows households to plan more confidently — especially when it comes to retirement savings, charitable giving and long-term investments.

But the new law also adds income thresholds, phaseouts and temporary deductions that make tax planning more nuanced.It may be worth reviewing:

• Whether you qualify for the new tip or overtime deductions
• Whether a car purchase affects your tax position
• How the increased SALT cap impacts itemizing
• Whether you qualify for the bonus deduction for older people
• How Roth catch-up rules affect your paycheck

Understanding how these provisions apply to your situation can help you avoid surprises and potentially reduce your tax bill in the years ahead.

Many of the tax provisions in the One Big Beautiful Bill Act are explained in more detail in my book, Deduct Everything! What You Need to Know About Trump's Tax Cuts and the One Big Beautiful Bill, which walks readers through hundreds of practical tax strategies and deductions.

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• Taxes May Be a Certainty, But the Amount You Pay Doesn't Have to Be
• When Are Estimated Tax Payments Due in 2026?
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• One of the Most Powerful Wealth-Building Moves a Woman Can Make: A Midcareer Pivot

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.

Do you wonder how you can save on taxes while giving more to charity? As you reflect on your 2025 tax bill, it's an ideal time to consider your charitable, financial and tax planning for 2026.

To help start your planning, we'll answer three questions:

• What tax rules affect charitable giving in 2026?
• What are some charitable giving strategies that can be used to reduce taxes?
• Why is a donor-advised fund (DAF) a tax-smart way to give to charity?

You'll walk away with ideas on how to pay less in taxes and have more money to give to charity, whether you choose to itemize deductions or take the standard deduction for your 2026 taxes.

The tax rules that affect charitable giving in 2026

Two new rules for itemizers. Under the One Big Beautiful Bill Act (OBBBA), only aggregate charitable contributions that exceed 0.5% of your adjusted gross income (AGI) will be deductible.

If your AGI is $300,000, for example, you can deduct any contributions in excess of $1,500 ($300,000 times 0.5%).

Additionally, if you're in the 37% income tax bracket ($640,600 and higher for single filers or $768,700 and higher for married couples filing jointly), the OBBBA caps the value of your itemized deductions, including charitable deductions, at 35%.

Charitable deduction limits for itemizers. Overall deductions for contributions to public charities, including DAFs, are generally limited to 50% of your AGI. The limit increases to 60% of AGI for cash contributions. For appreciated non-cash assets held more than one year, the limit is 30% of AGI.

If your charitable deduction exceeds your AGI limit in 2026, you can carry the excess deduction amount forward in up to five additional tax years (while still staying within your AGI limit for each year).

Standard deduction amounts for non-itemizers. Itemizing makes sense if your total itemized deductions exceed the standard deduction. For 2026, the standard deduction amount is $16,100 for single filers and $32,200 for married couples filing jointly.

If you'll take the standard deduction for your 2026 taxes, the OBBBA allows you to deduct an additional amount for your cash contributions to qualified operating charities: up to $1,000 if you're a single filer or $2,000 if you're a joint filer.

Note that a DAF is not an operating charity, so the charitable deduction can't be used for DAF contributions. (Read more about tax law changes.)

Charitable-giving strategies that can reduce taxes

Potentially eliminate capital gains taxes by donating appreciated non-cash assets. You can have stock shares, real estate, crypto or another non-cash asset that has gained a lot of value relative to your original cost.

While you could sell the asset and give cash to charity after the sale, donating an appreciated non-cash asset held for more than one year is tax-smart and can unlock additional funds for charity in two ways:

• First, you potentially eliminate the 15% or 20% capital gains tax you would incur if you sold the assets and donated the proceeds, which may increase the amount available for charity by up to 20%
• Second, you could potentially claim a fair market value charitable deduction for the tax year in which you make the gift, assuming you itemize (donation deduction is subject to certain AGI limitations)

Offset unexpected income with a charitable contribution and deduction. You may have a financial windfall in 2026 — a large bonus at work, conversion of a traditional IRA to a Roth IRA or equity-compensation awards. This income is taxable and could push you into a higher-rate tax bracket.

One way to reduce your taxable income is to donate to charity and claim a deduction, if you itemize, in an amount that entirely or partially offsets the additional income.

Bunch charitable contributions to maximize deductions. You may find that your total itemized deductions for 2026 are below your standard deduction amount. If you frequently give to charity, you may wish to explore a bunching strategy:

• Consolidating two years of charitable contributions (2026 and 2027) into this year to exceed your standard deduction amount
• Itemizing deductions for 2026 taxes
• Taking the standard deduction for 2027

This strategy maximizes both itemized and standard deductions and can result in larger tax savings than two years of standard deductions.

In addition, if you itemize deductions for 2026, bunching your 2026 and 2027 charitable contributions into 2026 could help you exceed the 0.5% of AGI deduction floor cited in the tax rules section above.

Why is a donor-advised fund (DAF) a tax-smart way to give to charity?

A DAF is a charitable-giving vehicle offered by a 501(c)(3) public charity. It can be used with many of the tax strategies above and provides these tax benefits:

• You contribute cash, securities or other appreciated assets to a DAF account and could be eligible for a current-year tax deduction if you itemize
• If your contribution consists of appreciated non-cash assets held more than a year, your deduction generally is the fair market value of the assets (subject to certain AGI limitations), and you can potentially eliminate capital gains taxes on the appreciation
• You may recommend how contributed assets are invested for potential growth that's tax-free, with the goal of having more money available for grants to charity

Once assets are contributed, you can use the assets for recommending grants to the charities of your choice immediately or over time.

What you can do next:

• Talk with your financial and tax advisers
• Open a DAF account
• Use the strategies above to contribute to your DAF account

Related Content

• 3 Major Changes to the 2026 Charitable Deduction
• How the One Big Beautiful Bill Will Change Charitable Giving
• A Financial Planner Takes a Deep Dive Into How Charitable Trusts Benefit You and Your Favorite Charities
• One Big Beautiful Bill, One Big Question: Will We Keep Giving?
• How to Donate Your Life Insurance Policy to Charity

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 stock market is sitting on a knife-edge, and interest rates are still top of mind, which has investors wondering what the Federal Reserve will do next.

Add in tax season being fresh in everyone's minds, and it's no surprise that many people are thinking about their retirement accounts and asking themselves: What should I be doing with my money?

While most people focus on getting their taxes filed or making that last-minute IRA contribution, this is also the perfect time to step back and look at the bigger picture. Are you contributing strategically, or are you just checking the box because you know you "should"?

For many investors, another timely question comes up: Should you consider a Roth conversion?

The buzz around Roth conversions

Roth conversions have become one of the hottest financial buzzwords in recent years. But like most trends or fads, they're often misunderstood.

In the simplest terms, a Roth conversion is when you move money from a tax-deferred account such as a traditional IRA or 401(k) into a Roth IRA. When you do this, you pay income tax on the converted amount immediately, but future withdrawals in retirement become completely tax-free.

That sounds great in theory, but it's not a one-size-fits-all solution. Deciding whether a conversion makes sense depends on several factors:

• Your current income and tax bracket
• How long until you retire
• Your ability to cover the tax bill
• Your long-term goals

The good news is that whether you're looking for tax-free income in retirement or want to leave a legacy, there are tools available to help make this decision a little clearer.

Financial advisers can run detailed reports showing the long-term benefits and trade-offs of doing a conversion, helping you see whether the numbers make sense for your specific situation.

All or nothing? Not quite

One of the biggest misconceptions about Roth conversions is that you must move all your retirement money at once. In most cases, that's not advisable. Converting everything in a single year could trigger a huge tax bill and bump you into a higher income bracket.

Instead, many people choose to convert a portion of their traditional IRA or 401(k) over several years. This allows you to stay within a target tax bracket and better manage your tax situation.

Others use conversions as part of legacy planning, converting over five to seven years so that the money they pass on to children, grandchildren or charities is tax-free.

In other words, it's not about doing it all — it's about finding the right amount to convert at the right time.

When conversions make sense (and when they don't)

Roth conversions can be a powerful tool, but they aren't right for everyone. They typically make sense for people who:

• Expect their taxes to rise in the future
• Have enough savings to pay the tax bill
• Are in or nearing retirement and want to reduce future taxable income

On the other hand, conversions often don't make sense for high earners who are already paying a top tax rate. For example, if you're earning $500,000 a year, converting your IRA might add to your taxable income without providing any real benefit. In some cases, a conversion might cost more than it would save.

What about younger investors?

For younger savers or people who've recently changed jobs, the idea of converting old 401(k) accounts to a Roth IRA can be appealing. But the decision depends on whether you have the cash available to pay the taxes now.

A smarter move would be opening a Roth IRA directly and starting to fund it as early as possible. Investing just $20 a day would be enough to max out your annual contribution limit of $7,500.

If you stick with it and invest steadily (say, in a diversified index fund such as the S&P 500), that money could grow to more than $1 million over a 40-year career — and all of it would be tax-free when you retire.

That's an incredible opportunity for anyone in their 20s or 30s, and one that's far easier to achieve than people think.

More than just income taxes: How Medicare complicates conversions

Roth conversions are not just about income taxes. They can also affect your future healthcare costs.

When you hit retirement age and enroll in Medicare, your Part B and D premiums are based on your modified adjusted gross income from the two years prior to enrollment. Large withdrawals from a traditional IRA or 401(k) can increase your income and, with it, your Medicare premiums.

By converting some of your traditional retirement savings to a Roth earlier in life, you might be able to reduce your taxable income later and avoid those higher costs. It's one of those planning details that often gets overlooked, until it's too late.

Balancing buzzwords from real-life planning

Social media and financial blogs make it sound as if everyone should be doing Roth conversions, so it's easy to get caught up in the excitement. Who wouldn't want tax-free income later in life? But the reality is life isn't that simple.

With another tax season complete, now is the time to look at your retirement strategy from a fresh perspective.

• Do you have a plan for where your money is going?
• Should you open a Roth or convert part of your IRA?
• How will today's decisions affect your tax picture years from now?

Roth conversions can be an incredible tool for building tax-free wealth and protecting your future income, but they're not for everyone or for every situation. The right approach should take into account your income needs, goals and time horizon.

The most important thing you can do is make an informed decision, not an emotional or impulsive one driven by social posts and headlines.

Related Content

• Timing Is Everything for Roth Conversions: An Expert's Guide to the Right Strategy
• 8 Factors to Consider When Considering a Roth Conversion
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• 4 Pro Tips for Successfully Scaling the Medicare Mountain

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

For retirees in what we call the 2% Club — those with both a pension and $1 million or more saved — the question is not can you move in retirement, it's should you?

At this level of financial security, the decision to relocate isn't just about chasing lower taxes. It's about optimizing income, preserving wealth and designing a lifestyle that truly feels like retirement. If you're weighing a move, here's the ultimate checklist to help guide your decision:

1. Don't just look at state income tax, look at retirement income tax

It's easy to be drawn to states that have no income tax: Florida, Texas, Tennessee and others. But for retirees, that's only part of the story.

What really matters is how your retirement income is taxed:

• Pensions. Some states fully tax them, others partially and a few not at all
• IRA/401(k) withdrawals. These can be taxed differently from wages
• Social Security. While benefits are exempt from taxes in most states, they are taxed in some

For example, states such as Pennsylvania and Mississippi don't tax many forms of retirement income, while states like California may tax multiple income streams.

Bottom line: A "no-income-tax" state isn't automatically better if another state offers more favorable treatment for your specific income sources.

2. Watch for the 'hidden taxes'

States need revenue, and if they're not collecting it through income tax, they're collecting it elsewhere.

Three big areas to evaluate:

• Property taxes. High in states such as Texas, Illinois and New Hampshire
• Sales taxes. Elevated in places like Tennessee, Nevada and Washington
• Home values. Higher property values can quietly increase your total tax burden

A move that looks like a tax win on paper can end up being a wash — or worse — once these areas are factored in.

3. Compare total cost of living (not just taxes)

Cost of living plays a major role in how far your retirement dollars will go. Higher-cost states often include Hawaii, California, New York, Massachusetts and Alaska.

Lower-cost states include Mississippi, Arkansas, Oklahoma, Missouri and Tennessee.

For those with substantial assets, this isn't about survival — it's about lifestyle efficiency. Spending less in one state may allow for:

• More discretionary travel
• Greater gifting to family
• Increased charitable giving

4. Factor in healthcare costs (especially long-term care)

Healthcare is one of the largest and most variable expenses in retirement. Costs can differ significantly based on:

• State-level healthcare pricing
• Availability of providers
• Long-term care costs (which vary widely by region)

Tools such as CareScout's Cost of Care survey can help you compare the cost of living across states before you decide to move.

Here's a key question to consider: Will living in your chosen new state improve or strain your long-term care plan?

5. Don't ignore estate and inheritance taxes

This is where high-net-worth retirees often get caught off guard. While most retirees won't owe federal estate tax, some states impose their own:

• Oregon. $1 million exemption, up to 16% tax
• Minnesota. $3 million exemption, up to 16% tax
• Illinois. $4 million exemption, up to 16% tax

A $2 million estate in the "wrong" state could trigger a meaningful tax bill. Consider inheritance taxes, which are paid by beneficiaries and vary based on who receives the assets.

States such as Maryland even impose both estate and inheritance taxes. If legacy is important to you, your state choice matters more than you might think.

6. Plan around Roth conversions

Where you live can directly impact your tax strategy, especially if you do Roth conversions.

For example:

• Moving from a high-tax state (like California) to a no-income-tax state (like Tennessee) may mean you should consider delaying conversion
• Moving in the opposite direction may mean you should consider accelerating them

With today's relatively low federal tax rates, timing matters. We recommend coordinating your relocation and tax strategies at the same time, rather than focusing on taxes after the fact.

7. Consider the most popular (and least popular) retirement states

While working with retirees across the country, this is what we see:

Popular states to move to:

• Florida (no income tax, retiree-friendly policies)
• Texas (tax advantages, but higher property taxes)
• Tennessee (no income tax, higher sales tax)
• North Carolina and South Carolina (lifestyle-driven moves)

Popular states to move from:

• California
• New York
• Illinois
• New Jersey
• Connecticut

These trends are largely driven by tax burden and cost of living, but lifestyle also plays a big role.

8. Update your estate plan immediately after moving

Each state can have different rules related to wills and trusts, powers of attorney and healthcare directives.

If you relocate, it's wise to:

• Look into updating documents to reflect your new state
• Review beneficiaries and executors
• Watch out for layering amendments on old documents

A clean update can prevent confusion and costly mistakes later.

9. Lifestyle might matter more than taxes

Here's the reality for those in the 2% Club: You likely have the financial flexibility to live where you want. So, the better questions are:

• Do you want warm weather year-round?
• Do you want to be near family?
• Do you value community or access to activities, such as golf?
• Do you prefer familiarity or a fresh start?

Some retirees even split time between two states, optimizing both taxes and lifestyle. Saving a few percentage points in taxes isn't worth it if you're less happy day-to-day. (I wrote a book all about the 2% Club that you can request here.)

Relocation for those with pensions

Relocating in retirement can absolutely improve your financial picture, but for those with a pension and significant assets, the decision is more nuanced than "low-tax state = better."

The best move balances tax efficiency, long-term planning and lifestyle fulfillment. Because, at this stage, retirement isn't just about protecting wealth — it's about using it to build the life you want.

Related Content

• 'We Have Food at Home': The 'Midwestern Millionaire' Mentality That's Built a Fortune
• Are You a 'Midwestern Millionaire'? Four Retirement Strategies
• If You're in the 2% Club and Have a Pension, the 60/40 Portfolio Could Hold You Back
• The Secret to Reducing Lifetime Taxes for Retirees in the 2% Club, From a Financial Planner
• Here's What Being in the 2% Club Means for Your Retirement

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

Editor's note: This is the fourth article in a five-part series about all-asset retirement planning that is covering such topics as using lifetime annuities and housing wealth, making the most of tax benefits and managing investment portfolio risk. The first articles are: It's Time to Redefine Retirement for Retirees With $500,000 to $5 Million, Unlock Housing Wealth and Tax Benefits by Adding Lifetime Annuities to Your Retirement Plan and Does Your Retirement Plan Ignore Half of Your Net Worth?

So many details factor into retirement planning: Income needs, how much to leave to heirs, protection against long-term care costs and, just as important, leisure and travel.

And then there are taxes.

Don't read this article for advice on avoidance. Taxes must be paid. You can exert some control over how much you pay, however, and when you pay them.

In the first three articles of this series, we've talked about the components of a successful retirement plan and the Three L's — Lifetime Income, Liquid Savings and Legacy — retirees are trying to achieve.

Of course, the success of any plan is very much determined by factors outside your control — tax laws and regulations, market volatility and your health and related expenses. We've tried to address the last with a new source of liquid savings in the form of HomeEquity2Income. The next article will address how to protect your plan against market shocks.

Here we'll address the impact of taxes on the Three L's — and how to take advantage of any tax breaks in the law, especially for income.

Detailed analysis of taxation of income

First, let's look in more detail at how retirement plan income is taxed, including where taxes can be deferred and how rollover IRA and personal savings compare as sources of income and tax.

Here are the income items that make up our plans, listed by tax efficiency:

Every retiree may not enjoy the tax advantages of each income source, but understanding what is available and how they work, separately and together, helps with planning. When we discuss legacy-related taxes later in the article, remember these income advantages, too.

Income tax objectives and measures

While there are planning models that can simulate a tax return, none, according to our research, can actually "optimize" results. The tricky part may be to prepare the correct set of more limited objectives.

Here are several measures of tax effects we'll use in this article:

• Income tax rates at start and at age 85
• Before and after-tax return on investment (ROI)
• Percentage tax cost: Difference between before- and after-tax ROI

Because certain tax rules and our planning models use age 85 as a pivot point, in calculating the ROI, we assume consistent tax rates from the start date to age 84 and from age 85 to 95. We use the percentage tax cost in measuring the impact of taxes on all-asset planning models vs. traditional Investment-only planning.

The challenge is to create a plan that meets, as best it can, the Three L's on a before-tax basis and to make sure that the specific allocations and elections don't take away that advantage on an after-tax basis.

Income tax analysis for a sample investor

To show how all the pieces above fit together, we built an All-Assets Plan for a sample investor, a 67-year-old man with $1 million in each of these three buckets: Rollover IRA, personal savings and value of the house.

Set out below is a detailed analysis of the first-year tax.

You will see there is a large amount of "safe" income in this plan, or income that is not affected by the sale of an asset, and therefore is something you can count on despite market fluctuations. In this plan, only $47,000 of IRA withdrawals out of $167,000, or 28%, require that assets be sold to generate the income.

Further, the chart is based on standard deductions, which our investor is assured of. In periods of high health-related expenses or inflation on property taxes, for instance, our investor might be able to itemize and create a larger tax deduction.

The payoff is that for this "safe" plan, the taxes represent an average of 9.0% of total income. (Note that this rate will not apply to the lifetime of a plan. The rate will vary from year to year and will increase at age 85, barring any large increase in deductible expenses.)

Compare to a traditional investment-only plan

In a traditional Investment-only plan, with no lifetime annuities and no housing wealth, the following work against tax efficiency:

• Only uses investment products without special tax benefits
• Higher allocation to fixed income portfolio with interest that is fully taxed
• No allocation to "safe" lifetime annuities and no benefit from tax incentives
• No tax-free HECM drawdowns to supplement income
• Greater need for withdrawals from IRA to generate income

Under this approach, there is a greater need for Roth conversions, which create their own tax breaks by first incurring taxable conversions.

In the investment-only plan, here are the key first-year results:

• First-year income is lower at $140,000 vs $167,000
• First-year tax rate is higher at 16.4% vs 9.0%

Extending an All-Assets Plan to age 85

While the income advantage for the All-Asset Plan continues for the early retirement years, most of that tax advantage reverses itself at age 85 when certain tax breaks end. Using the same methodology as above, the tax rate goes up as the tax-deferred benefits end.

However, the income amounts go up as well, particularly QLAC, and thus there's more income from that source — again pushing out the time for withdrawals.

At 85, the All-Asset Plan develops income of $238,000 and an estimated tax rate of 17.1%. The traditional investment-only plan income at 85 is $200,000 with an 18.5% estimated tax rate.

In the All-Asset Plan, we also provide for QLAC reserve income to pay for either the higher deductible expenses, taxes or both.

Tax analysis of legacy savings

Most of the tax attention above has appropriately been on income, particularly in the early retirement years. However, the amount paid out at passing (legacy), should get your attention as follows:

• Housing wealth. Step-up in basis of the value of the original home at passing
• Sale of house. Tax paid at sale, with some significant deductions
• Personal savings. Step-up in basis at passing
• Rollover IRA. Taxable at 100%
• Roth IRA. Not taxable

As we've written about before, aging in place — if it can avoid the sale of your house — can be a huge tax benefit.

Comparison of an All-Asset Plan to traditional investment-only

To put both the income and legacy elements together, we use the ROI as a measure of the economic return, considering both before- and after-tax income and legacy. Here's the summary between all-assets and investment-only planning.

In its simplest terms, you can save money when you take into account how taxes affect your retirement. Bottom line, the tax-cost advantage of an All-Asset Plan vs a traditional investment-only plan as measured here is .7%. That seems small, but not when compared with, say, advisory fees in the .5% to 1% range.

Housing wealth, personal savings and even Social Security benefits offer potential tax deferrals and savings. When creating a retirement plan, think about other tax benefits, such as deferring certain taxable events.

The tax code offers certain tax breaks that can improve your retirement outcomes. It's up to me and others in the advisory space to point you to these advantages. As a next step, visit Go2Income, answer a few questions about your current income and future needs and start creating your own plan to grow your retirement income and liquid savings.

Related Content

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

April and Tax Day have a way of sharpening investors' attention. Even for those who planned ahead, writing a check to the IRS can prompt a familiar question: Is there a better way to manage taxes on my investments going forward?

To me, it's often the moment when investors stop looking backward at last year's returns and start asking harder questions about how their portfolios are positioned for the years ahead.

In recent years, higher short-term yields have drawn attention toward cashlike instruments and ultra-short strategies.

But a closer look at today's municipal bond market, particularly through diversified municipal bond funds and ETFs that span the yield curve, suggests that investors are overlooking a compelling part of the landscape.

Many of the same forces I wrote about late last year are still very much in place — and in some respects, they've become even more pronounced.

A steeper curve creates opportunity

One of the defining features of the current municipal bond market is the steepness of the yield curve. In simple terms, investors are being paid meaningfully more to extend maturity.

From where I sit, that steepness is one of the clearest signals in the market today, and one that long-term investors shouldn't ignore.

High-quality municipal bond strategies with longer durations are offering yields that stand out not just on a tax-adjusted basis, but in absolute terms as well.

For investors who are willing and able to look beyond the front end of the curve, that shape can translate into higher income and potentially more resilience over time.

This is especially relevant in a higher-rate environment, where tax-exempt income can play a more meaningful role in overall portfolio construction.

'Cheap' by historical standards

Beyond the shape of the curve, overall valuations also matter. By many measures, longer-dated municipal bonds appear inexpensive relative to history. Relative value ebbs and flows in every market, but it's unusual to see long municipals offering this combination of yield and relative value at the same time.

Municipal bond performance lagged behind other fixed income markets over 2025, leaving yields elevated compared with similar taxable bonds. For investors focused on after-tax outcomes, that disconnect is worth paying attention to.

Part of that value reflects how municipal bonds stack up against taxable alternatives. Longer-dated municipal yields look especially attractive relative to comparable Treasury yields, standing out vs historical norms in a way that the front end of the market does not.

Combined with the steepness of today's municipal yield curve, that relative value means investors are being paid more with additional time, with income and after-tax outcomes that can improve over time as longer‑dated exposures roll down the curve.

The behavioral gap

Despite these attributes, many investors continue to cluster at the short end of the market. That's understandable. Higher front-end yields are visible and comforting, especially after years of rising rates.

But it's also a pattern I've seen before, and it often leaves investors underexposed when the rate environment eventually shifts.

History suggests that herding into short-duration strategies can carry its own risks. Already, longer-term municipal bonds offer higher levels of income than those on the shorter end while still providing a potential hedge against equity declines due to an economic slowdown.

When economic growth expectations shift lower, longer-dated bonds often respond more positively. In those environments, longer-duration municipal bonds can benefit from both income and price appreciation, while also maintaining their tax-advantaged status.

In other words, today's caution may be tomorrow's missed opportunity.

Taxes, time and total return

One of the less appreciated aspects of municipal bonds is that they can aid in tax planning. For clients with appropriate investment timeframes, longer-term municipal bonds can enable strategies that lower future tax bills year after year.

That doesn't mean municipal bonds are a one-size-fits-all solution, or that duration risk should be ignored. But for investors thinking beyond this year's taxes and toward longer-term outcomes, municipals can play a valuable role alongside other fixed-income exposures.

It's also worth noting that access to the municipal bond market has evolved. While individual bonds remain an option, today's investors benefit from a wider range of diversified mutual funds and ETFs, which make it easier to gain broad exposure across the curve.

Regardless of the vehicle, the underlying story is the same: Today's municipal bond market offers a combination of yield, tax efficiency and relative value that deserves a fresh look.

The takeaway

April tends to focus attention on what's already happened with taxes, but in my experience, it's also one of the few moments when investors are open to rethinking what comes next.

For investors willing to move past the front end of the curve, municipal bonds today can look steep, relatively cheap and — importantly — well structured to help investors keep more of what they earn.

Related Content

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• Here's Why Munis Aren't Just for Wealthy Investors Now
• Such Attractive Yields in High-Grade Munis Are Rare and May Not Last Long
• Passive Muni Investors: Is Your Strategy Missing the Mark?
• Remembering Bogle: A New Standard for Municipal Investing

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've been getting a lot of calls lately that start the same way: "Dan, I'm done."

• Done with the volatility of their stock investments
• Done watching their portfolio swing wildly because oil prices are soaring through the roof
• Done refreshing their brokerage app at 7 a.m. and feeling their stomach drop before their morning coffee goes cold

If this sounds familiar, keep reading because what I'm about to share could turn a very bad beginning to spring into the starting point of a very smart financial move.

What's happening right now

It's been a wild ride, to put it politely. Just a few weeks ago, the market was looking wobbly, and certain sectors really got hammered. Since the Iran conflict erupted at the end of February, oil prices surged past $100 a barrel, peaking at $117 before settling back in the mid- to high-$90s.

The ripple effects were equally devastating for equities. The S&P 500 posted six straight weeks of decline. The Nasdaq and the Dow both entered correction territory, down more than 10% from their recent highs.

The market has rallied nicely since then, but the warning signs are still ominous.

JPMorgan initially slashed its year-end S&P target. Moody's recession model is at 49%, and that was calculated before the worst part of the energy shock hit.

Individual stocks look even worse. Take Tesla (TSLA): It hit nearly $499 in December and dropped to about $390 — a fall of about 22%.

Investors who bought during the AI-driven hype of late 2025 are now in the red and trying to sell.

And Tesla's not alone. Tech heavyweights across the board are bleeding, and the energy crisis is squeezing consumer-facing companies from every direction.

But here's what most panicked investors don't stop and consider: Even after a brutal decline of 20% or more, many long-term stockholders are still sitting on substantial gains. You might have bought Tesla at $180 during the spring 2025 dip, and it's now at $390 instead of $500.

You're down from the peak, sure, but you're still sitting on a hefty gain the IRS would love to tax the moment you sell.

So, the question becomes: How do you get out of the market without getting crushed by capital gains taxes on the way out the door?

The exit ramp most stock investors don't know about

This is where Qualified Opportunity Zones come in, and it's a strategy that most stock investors have never heard of, not least because the financial world tends to talk about QOZs in real estate circles, not on CNBC.

Here's how it works right now, under the rules in play today. When you sell your stock, you'll owe capital gains taxes on the profit. But if you take those capital gains and reinvest them in a Qualified Opportunity Fund within 180 days, two powerful things happen:

First, the tax on your original gain gets deferred until December 31, 2026. That's the current deadline. You don't pay it this spring; the bill comes due when you file your 2026 taxes in April 2027.

If you're selling stock today (in late April), you've got until late October to deploy those gains into a QOF and lock in the deferral. That's six months to make a smart, deliberate decision, not a panicked one.

Second — and this is the part that makes people put their coffee down — any new appreciation on your Opportunity Zone investment is completely tax-free if you hold it for at least 10 years. Not tax-deferred, tax-free.

The growth is yours, and the IRS doesn't get a cut. That's the crown jewel of this program — it's fully intact, and it isn't going anywhere.

Why this matters now

The timing is almost uncanny. You've got a stock market that's given millions of investors a reason to sell. You've got an Opportunity Zone program that's still offering its most powerful benefit. And you've got a 180-day window that's wide open for anyone selling right now.

Let me paint a picture. Say you sell $1 million in stock and realize $400,000 in capital gains. Without any planning, you're looking at a tax bill north of $100,000 between federal, state and net investment income taxes (NIIT). That's money gone.

But if you invest that $400,000 into a QOF within 180 days, you defer the tax on that gain until the end of 2026, and every dollar of new appreciation from the QOZ investment itself can be tax-free after a decade.

You've taken a market crisis and turned it into a long-term tax advantage.

Meanwhile, your money moves out of the stock market and into tangible real estate in communities poised for growth. You can see it. You can drive by it. It doesn't vanish because someone launched a missile through the Strait of Hormuz before the opening bell.

A few things to keep in mind

This isn't a silver bullet, and I always want to be straight with you about that. Opportunity Zone investments are illiquid and long term. You should be comfortable locking up your capital for a decade or more to get the full benefit.

Not every QOF is created equally; the quality of the fund, the sponsor, the underlying real estate and the geographic market all matter enormously.

And you'll need a team that knows how to evaluate these investments, because the due diligence on a QOF is very different from picking a stock.

You should also be aware that the deferral period is shorter than it was before — gains invested now will be recognized by the end of 2026, regardless. But the 10-year elimination of capital gains on new appreciation is the benefit you're really playing for, and it's as powerful today as it was the day the program launched.

What I'd do if I were you

If your portfolio has taken a beating and you're thinking about selling, don't just sell and write the check to the IRS. Not yet. Pick up the phone first. Let's look at what gains you're still carrying, what your timeline looks like and what makes sense for your specific situation.

The market gave you a wake-up call. What you do next is up to you.

Book a strategy call with our team at Provident1031.com, or call us directly at (281) 466-4843, Ext. 100. If you want to educate yourself first, our Qualified Opportunity Zones Masterclass walks you through everything — the tax benefits, the risks, the due diligence process and real examples of how investors are using this strategy right now.

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• 2026's Tax Trifecta: The Rural OZ Bonus and Your Month-by-Month Execution Calendar

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

For years, high-net-worth families and their advisers have been planning around a looming deadline: The end of 2025, when a slate of favorable tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) were set to expire.

The uncertainty drove planning decisions, accelerated gifting strategies and kept estate attorneys busy.

Then came July 4, 2025 — and the One Big Beautiful Bill Act (OBBBA). Most of the headlines focused on the politics. I want to focus on the math — specifically, what this roughly 870-page overhaul means for those who've spent decades building wealth and now need to protect and transfer it efficiently.

Here are the three provisions that should be at the top of your planning agenda right now.

1. The estate tax exemption just got a lot more breathing room

The federal estate and gift tax exemption has increased to $15 million per person — $30 million for married couples using portability. If you've been doing estate planning under the old $13.99 million threshold, your plan needs to be revisited.

This matters more than most people realize. Before the OBBBA passed, there was serious concern in the planning community that the exemption could drop to approximately $7 million per person when the prior TCJA provisions expired.

That scenario would have created an immediate taxable estate for a large number of my clients. The $15 million number removes that urgency — but it doesn't mean inaction.

Here's the real question to ask your estate attorney: Does your current plan still make sense at $15 million, or were structures put in place specifically to hedge against a lower exemption? Some irrevocable trusts funded for that purpose may now be suboptimal. A review is warranted.

One historical footnote worth noting: In 2010, the estate tax was temporarily repealed entirely. George Steinbrenner — whose estate was valued at approximately $1.1 billion — passed that year with zero estate tax liability. The $15 million exemption isn't that, but with inflation adjustments built in, it's the most durable estate tax relief high-net-worth families have seen in decades

2. The Roth conversion window is now permanently open

The reduced federal income tax rates originally enacted under the TCJA are now permanent under the OBBBA. This is arguably the most consequential planning development in this bill for high-net-worth retirees.

For years, advisers cautioned clients doing Roth conversions to act quickly before the TCJA rates potentially expired. That urgency is gone — but the opportunity isn't.

If you have significant assets in tax-deferred accounts (think $1 million or more in a traditional IRA or 401(k)), permanent lower rates change the math on multi-year Roth conversion strategies.

The question is no longer, "Should I convert before rates go up?" It's, "What's the optimal bracket-filling strategy over the next 10 years given permanent rates, my RMD schedule, and my estate plan?"

A married couple with $2 million in a traditional IRA, for example, could systematically convert into the 22% or 24% bracket each year — paying tax now at known, permanent rates rather than forcing their heirs into potentially higher tax brackets later. Run the numbers with your adviser before year-end.

While Roth strategy benefits virtually every high-net-worth retiree, the next provision is more targeted — and the fine print matters.

3. The SALT increase helps — but the fine print catches most high earners

The State and Local Tax (SALT) deduction cap rises from $10,000 to $40,000 for tax years 2025 through 2029, increasing by 1% annually. For clients in high-tax states, such as New York, California or New Jersey, this sounds like significant relief.

Read the fine print carefully. The enhanced deduction begins phasing out at $500,000 of income and disappears entirely at $600,000 — reverting to the $10,000 cap. For most of my clients, this provision is largely irrelevant because their income exceeds the phaseout threshold.

There's also a marriage penalty embedded in the structure: The $40,000 cap is identical for single and married filers, meaning two-income households effectively get half the benefit on a per-person basis compared to single taxpayers.One additional wrinkle for top earners: Under the OBBBA, those in the 37% bracket will find their itemized deductions effectively capped at a 35% benefit — a modest but real reduction worth factoring into your planning.

The clients who benefit most here are those with income in the $300,000–$499,000 range who itemize and live in high-tax states. If that describes you, the SALT increase represents real money — potentially $30,000 in additional deductions, which at the 32% bracket is roughly $9,600 in tax savings annually through 2029.

A bonus for those approaching or in early retirement: The senior deduction

One smaller provision worth flagging for clients aged 65 and older: The OBBBA includes a new $6,000 deduction per person for tax years 2025–2028. A qualifying couple could deduct up to $12,000.

The catch: It phases out entirely above $75,000 in modified adjusted gross income for single filers and $150,000 for joint filers. But for clients whose adult parents or recently retired family members fall under those thresholds, it's worth a conversation.

The bottom line

The OBBBA makes many TCJA provisions permanent and introduces new planning leverage points — particularly around estate transfers and Roth strategies. The window to optimize isn't closed, but the calculus has shifted.

Review your estate documents, model your Roth conversion runway, and check whether the SALT phaseout applies to your situation before your next tax filing.

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• Now That You've Built Your Estate Planning Playbook, It's Time to Put It to Work

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.

Private-equity investment is accelerating consolidation across the accounting industry.

More than 100 CPA firm deals were completed in 2025, according to CPA Trendlines' 2026 PE Deal Tracker, up from roughly two dozen just two years earlier, a transformation that's changing the quality of how tax services are delivered across the profession.

For most taxpayers, the shift may have little impact. Returns are still filed, deadlines are met, and refunds are processed as expected.

For wealthy families whose finances involve multiple entities, including trusts, partnerships, real estate holdings and closely held businesses, the trend raises a critical question: When tax preparation becomes more disjointed, who is responsible for overseeing the entire financial picture?

Tax season for complex households rarely involves a simple return. Sophisticated financial structures often generate multiple filings across entities, each with separate reporting requirements, deadlines and payment schedules. Even when returns are extended, income must still be estimated accurately to avoid penalties and interest.

The biggest risks in these situations are rarely caused by tax law, but more from the breakdown in the process. Missing documents, inconsistent reporting across entities or advisers working without full visibility into the overall financial structure can lead to costly errors requiring amended returns, unexpectedly large tax bills or worse — missed tax planning opportunities.

For example, a family that owns several real estate partnerships across different states may depend on information from multiple managers, advisers and accountants. If income estimates from one partnership arrive weeks after another entity's filing deadline, returns may be prepared with incomplete information. The result isn't necessarily a dramatic error, but can lead to amended filings, unexpected penalties or planning decisions that must be revisited months later.

The coordination and communication challenges are becoming more common as accounting firms grow larger and rely more heavily on technology to scale operations, outsourcing, and offshore preparation.

In working with wealthy families, integration issues surface as frequently as technical tax problems. Information arrives on different timelines, and advisers may be responsible for individual filings but not the entire family enterprise. Without someone designated as the quarterback, critical deadlines and reporting obligations can be overlooked.

Traditionally, accounting firms often provided that continuity. Senior partners maintained long relationships with clients and developed a detailed understanding of how families evolved over decades.

Industry consolidation is beginning to change that dynamic.

Change is here

As firms expand, tax preparation is increasingly distributed across teams, offices and time zones. Outsourcing and automation help firms manage rising workloads in a profession facing a shortage of experienced professionals. These developments can improve efficiency and scalability.

However, for clients with complex structures, the model is not always ideal. Some are turning instead to smaller, boutique firms.

For families whose financial arrangements reflect years of tax, estate and investment planning across multiple generations, these changes can introduce risk. Even when each portion of a return is prepared correctly, information may be omitted simply because no single party has full visibility across the entire family structure.

Mergers can also disrupt historical knowledge. When firms combine, employee turnover often follows. Context behind a family's planning — valuations supporting earlier decisions, the movement of assets between entities given their respective valuations, and the nuances of prior filings — doesn't always transfer seamlessly.

Households with simpler finances may not notice these differences. Families with multiple entities spanning multiple jurisdictions often need a more centralized approach to maintain organization, or the consequences can be significant.

Complexity can lead to complications

Tax season tends to expose the most common vulnerabilities. Families may not know every tax document they should expect to receive. Multistate reporting obligations can be missed. Advisers working in a silo may make decisions without understanding their broader implications.

The result is rarely a single dramatic mistake. More often, small coordination failures accumulate over time, creating problems that carry into future filing years.

Increasingly, wealthy families respond by establishing centralized oversight of their financial affairs, sometimes through a family office or a dedicated family CFO. The goal is to ensure that accountants, attorneys and other advisers have access to and are working from the same information.

Families should start by asking a simple question: Who has full visibility into everything?

Whether that role is filled by a family office, a family CFO or another lead adviser, someone should be responsible for organizing entity records, tracking filing requirements across jurisdictions, coordinating with accountants and attorneys, and clearly communicating what remains outstanding.

The right structure depends less on size alone and more on complexity — particularly the number of entities, jurisdictions and the degree of interdependence among investments, trusts and operating businesses.

Build the right team

When evaluating a family office, families may want to look beyond investment management alone and seek a team that can provide a multidisciplinary approach with expertise across all areas of wealth management, including tax and estate planning.

They should deliver integrated oversight: Maintaining current and historical entity flowcharts with centralized electronic document management systems, a method for tracking deadlines across jurisdictions and ensuring tax planning decisions align with broader family goals such as liquidity planning, philanthropy and generational wealth transfer.

Private-equity investment in accounting firms is expected to continue as the profession faces demographic change, a shrinking labor pool, rising technological costs and increasing regulatory complexity — forces that favor scale.

As the accounting industry evolves, affluent families with complex financial lives would benefit from a team family office who is responsible for coordinating their entire financial picture.

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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 tax-filing time arrives, people often shake their heads as they look in dismay at how much they owe and wonder what they can do to keep more of their hard-earned savings.

Unfortunately, by the time you're preparing your taxes to meet the filing deadlines, you owe what you owe, and there's little you can do about it.

April 15 may be the traditional deadline for filing with the IRS, but December 31 of the previous year is the deadline for taking measures to lower your tax bill.

That's the bad news.

The good news is you have plenty of time to start taking steps now to improve your tax situation for next year.

In doing so, you might discover a few surprising opportunities.

One example: As much as people prefer to stay in lower tax brackets when possible, that's not always the best strategy. Sometimes, it can even hurt you in the long run.

But before we go too much further into that and other tax-efficient strategies, let's examine the difference between tax planning and tax preparation.

Tax planning vs tax preparation

In a sense, you can sum this up by saying that tax preparation is about the past. Tax planning is about the future.

Tax preparation is what your CPA does: Reviewing your numbers, subtracting the acceptable deductions and telling you what you owe. It doesn't come with much wiggle room because by the time you file your taxes, you are limited by decisions you made in the previous year or years. Tax preparation is reactive.

Tax planning, on the other hand, is understanding that the actions you take now can reduce your tax bill in future years — in some cases by tens of thousands of dollars. Tax planning is proactive.

This is true even for retirees. Why? Because taxes don't end in retirement, they become more expensive. If you're not attentive and deliberate, they can eat away at the money you carefully saved over the decades.

The calendar problem

Sometimes in retirement, people have what you could call a "calendar problem." What I mean by that is you need to understand the cadence of your income as it relates to each year. If you don't, you may face trouble down the road.

This is where it may not make sense to stay in a lower tax bracket. Taking advantage of lower brackets must be put in perspective. The question is: Are you taking so much pride in reducing your tax bill now that you miss out on wonderful opportunities to reduce your tax bill even more in years to come?

An example of this would be someone who is 10 years from retirement and has saved a significant amount of money in a traditional IRA. This person is happy to stay in their lower tax bracket but fails to realize right now would be a good tax-planning opportunity, even if the move pushes them into the next tax bracket.

One problem they face (and may not realize) is that when they reach age 73, required minimum distributions (RMDs) will kick in. RMDs force you to withdraw a percentage of your money from tax-deferred accounts, such as traditional IRAs, each year, whether you want to or not. And that money is taxed.

When your heirs inherit an IRA, they pay taxes on distributions, which are added to the beneficiaries' income. If those beneficiaries are in the highest-earning stages of their lives, they may already be in a high tax bracket. Adding inherited money is likely to set them up for an unexpectedly large tax bill.

One strategy is to assess the value of Roth conversions to avoid these future taxes. With this strategy, you convert money from a traditional IRA into a Roth IRA. When you do that, you pay taxes on the money you convert, and yes, withdrawing it from the traditional IRA could push you into a higher tax bracket in the years you make the conversion.

But the tradeoff is the money then grows tax-free, future withdrawals are not taxed after five years, and there are no RMDs. In addition, your heirs receive the inherited Roth IRA tax-free.

So, this is an instance where you look at the cadence of your income and think: Do I pay the taxes now and be done with it, or do I pay them forever into the future?

Other strategies to consider

A Roth conversion is just one tool in your tax-planning arsenal. A few other options to consider include:

• Tax-loss harvesting. This strategy can be put into play if you have capital gains that will increase your tax bill. You can offset those gains by selling taxable accounts that lost value.
• Qualified charitable distributions (QCDs). A QCD allows you to transfer money from your IRA directly to a charity if you are at least 70½ years old. This transfer does not count as taxable income but can count as your annual required minimum distribution. That makes it a good way to give back to the community while avoiding extra taxes.
• Maximizing gifts. If you plan to leave a legacy to your children or grandchildren, you don't have to wait until after you are gone. You can begin giving them money now in annual gifts. For 2026, the IRS allows gifts of up to $19,000 annually for each individual. For example, if you had three grandchildren you wanted to give a monetary gift to, you could give each of them $19,000 without incurring a tax. A married couple could give up to $38,000.

These, of course, aren't all the strategies you might deploy. A financial professional with experience in tax planning can help you review your portfolio with an eye toward reducing your future tax bills.

But tax planning is not a one-time thing. It is an ongoing effort, a strategy that must be built throughout the year — and carried out in the years to come.

Ronnie Blair contributed to this article.

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

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

Many portfolios are built with one primary goal in mind: Performance. Taxes are often treated as an afterthought, addressed once the year is over and the 1099s arrive.

For many investors, tax planning means sending paperwork to a CPA and hoping for the best. But by that point, most of the decisions that drive the tax outcome have already been made.

Investment management shouldn't simply report taxes after the fact. When done well, it should help shape them.

This becomes important during major financial earnings peaks or years with unusually large capital gains, concentrated stock positions or upcoming liquidity events.

In these moments, proactive coordination between investment strategy and tax planning can deeply impact how much an investor ultimately keeps.

Facing a large capital gains year

The most common large-capital-gains scenario I see involves a long-held investment that has appreciated far beyond its original allocation. This could be a stock that performed exceptionally well, the sale of an investment property or a partial business liquidity event that creates a one-time spike in taxable income.

In high-income years, tax drag can meaningfully reduce net results if the portfolio isn't actively managed around the event. Effective strategies often include harvesting losses well in advance, managing the timing of gains, avoiding unnecessary distributions from funds and incorporating charitable strategies in gain-heavy years.

Ideally, planning begins at least 12 to 24 months before a known or expected gain. That window provides greater flexibility, particularly for loss harvesting, asset location decisions and coordinating with broader tax strategies.

If someone anticipates a large gain in the next year or two, the most impactful step they can take today is to review their portfolio through a tax lens, not just a performance lens. That means understanding embedded gains, identifying potential offsets and stress-testing different timing scenarios.

One common mistake investors make in high-capital-gains years is reacting too late. Selling assets without a coordinated plan, or ignoring tax exposure altogether, often leads to unnecessary erosion of after-tax returns.

Managing a concentrated stock position

Concentrated stock positions often develop gradually. They can come from employer stock, founder equity or a single investment that outpaced the rest of the portfolio.

At a certain point, concentration simultaneously becomes a risk to the investment and a tax problem. Procrastinating too long can leave investors feeling trapped between the tax cost of selling and the risk of staying too exposed.

Tax-aware strategies for reducing concentration risk might include spreading sales over multiple tax years, pairing gains with harvested losses, or using charitable techniques to offset part of the tax impact.

We're aiming for controlled chaos to a degree. The goal is rarely to eliminate the position all at once, but rather to reduce risk in a measured, intentional way.

One frequently missed opportunity occurs when investors delay action until the position becomes uncomfortably large. By then, fewer planning tools are available, and the tax consequences are often more severe.

Our team urges weighing the tax cost against the concentration risk, which requires reframing the decision. The question isn't simply how much tax will be paid, but what level of risk the investor carries by doing nothing. The true enemy is inaction.

Preparing for a sale or other liquidity event

While business sales and private-equity events are common, there are a range of situations that can trigger significant tax shifts of which to be aware. For instance, the vesting of equity compensation, the exercise of stock options, real estate sales or significant portfolio rebalancing.

A potential sale or exit is something a tax-focused investment strategy should prepare for well before a formal deal is on the table. Once a transaction is imminent, the available planning options narrow considerably.

Proactive investment management moves such as repositioning assets to create flexibility, managing liquidity intentionally and aligning the portfolio with the investor's anticipated post-event tax profile can also support a future event.

These strategies might include adjusting risk exposure, revisiting asset location or ensuring the portfolio isn't inadvertently compounding the event's tax impact.

A common mistake when a liquidity event is on the horizon is focusing solely on the transaction itself, without considering how the rest of the balance sheet interacts with the tax outcome.

Coordination with a CPA or tax adviser is essential during this phase, as investment decisions and tax strategy are tightly interconnected.

Advisory that is focused primarily on pretax performance is easy to measure and easy to discuss. After-tax results, however, are harder to quantify but far more meaningful.

When investment management and tax planning operate in silos, opportunities are missed. In coordination, especially during periods of change, investors gain more control of outcomes that truly matter: flexibility, risk and what they ultimately get to keep.

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

Many people who retire before age 65 rely on the Affordable Care Act (ACA) marketplace for health insurance until they qualify for Medicare. As policymakers debate whether to extend enhanced premium subsidies, some early retirees are waiting anxiously before making their next move.

For households that retire in their late 50s or early 60s, the difference between subsidized and unsubsidized premiums can be substantial — sometimes $15,000 to $20,000 a year.

But even if those enhanced subsidies remain in place, there's a bigger issue many affluent early retirees overlook. In my experience working with retirees who have $2 million or more saved in 401(k)s and IRAs, chasing health insurance subsidies can end up costing far more in the long run.

The reason? It all comes down to taxes.

Suppressing early retirement income to chase ACA subsidies

When people retire before 65, they often discover that ACA subsidies are tied to income, giving them some control over what they pay for health insurance. The lower your modified adjusted gross income (MAGI), the larger the subsidy for your premiums.

As a result, many retirees intentionally suppress their income for several years. They withdraw only the minimum they need from retirement accounts. They avoid realizing capital gains.

And most importantly, they avoid Roth conversions because converting money from a traditional IRA to a Roth IRA increases taxable income.

At first glance, the strategy might seem sensible. If a couple can save $15,000 to $20,000 a year on health insurance premiums by keeping income below certain thresholds, the savings over five years until Medicare eligibility can reach $75,000 to $100,000.

But these short-term savings often create a much larger long-term tax problem.

The hidden cost of postponing Roth conversions

For early retirees with large tax-deferred accounts, the years between retirement and age 65 can be one of the most valuable tax-planning windows of their lifetime.

During this period, income is often lower than it will be later in retirement. Social Security may not have started yet. Required minimum distributions (RMDs) haven't kicked in. And couples can still file taxes jointly.

This can make it an ideal time to convert portions of traditional retirement accounts into Roth IRAs while staying within relatively low tax brackets.

However, when retirees suppress income to qualify for ACA subsidies, they often postpone those conversions.

Meanwhile, their tax-deferred accounts continue growing. For example, a retiree who delays conversions on a $2.5 million IRA could see that balance grow to $3.5 million or more by their early 70s, assuming modest market growth over roughly a decade.

That increase alone can significantly raise required distributions and the taxes that come with them for the rest of retirement.

Three tax surprises that often follow

Several tax rules compound the impact of delaying conversions.

1. RMDs

Under current law, retirees must begin taking RMDs from traditional retirement accounts starting at age 73 or 75. These withdrawals are taxed as ordinary income, whether the retiree needs the money or not.

For a 73-year-old with $3 million or more in pretax retirement accounts, the first RMD alone can exceed $100,000, and it often increases over time. At age 75, that first RMD is $121,000 a year.

That income can push retirees into higher tax brackets and reduce their flexibility to manage taxes later in retirement.

2. Medicare premium surcharges

Higher income in retirement can also trigger IRMAA, the income-related monthly adjustment amount that increases Medicare premiums. These surcharges apply when income exceeds certain thresholds and can add thousands of dollars a year to health care costs.

Ironically, retirees who spent years limiting income to obtain ACA subsidies may end up paying significantly higher Medicare premiums later because of larger retirement account balances.

3. The surviving spouse tax problem

Perhaps the most overlooked issue occurs when one spouse dies. When a couple goes from filing jointly to filing as a single taxpayer, tax brackets become much narrower.

If the surviving spouse still has large RMDs, they may suddenly find themselves paying taxes at much higher rates on the same income. This "widow's penalty" is a common consequence of large tax-deferred accounts that were never gradually converted during lower-tax years.

When retirees run the math over a full retirement timeline, the trade-off becomes clearer. Saving $75,000 to $100,000 in ACA subsidies can feel significant in the moment. But delaying Roth conversions for several years can increase lifetime taxes by hundreds of thousands of dollars in some scenarios.The good news is that with intentional planning, many retirees can capture some subsidy benefit without sacrificing their long-term tax position.

How to avoid the ACA subsidy trap

If you're planning to retire before age 65, here are a few ways to approach ACA subsidies without undermining your long-term tax strategy:

• Evaluate taxes over your lifetime, not just this year. Before limiting income to qualify for subsidies, model how that decision impacts taxes in your 70s and beyond, especially once RMDs begin.
• Use the early retirement window strategically. The years between retirement and age 65 are often your best opportunity to complete Roth conversions at relatively low tax rates. Don't let subsidy thresholds prevent you from using that window.
• Consider partial Roth conversions. Instead of avoiding conversions entirely, you may be able to convert enough each year to stay within a reasonable tax bracket even if it means accepting a smaller subsidy.
• Plan for Medicare and IRMAA early. Higher income later in retirement can increase Medicare premiums. Managing account balances earlier can help reduce those future surcharges.
• Coordinate your withdrawal strategy. Where you draw income from — taxable, tax-deferred or Roth accounts — can significantly impact both your subsidy eligibility and long-term tax exposure.

Think in terms of lifetime planning

Health care subsidies are a real benefit worth evaluating. But for retirees with significant 401(k) or IRA balances, the more important question is whether maximizing subsidies today creates a larger tax problem tomorrow.

In retirement planning, the goal isn't to minimize taxes this year. It's to minimize them over your lifetime.

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• A Financial Planner's Guide to Planning for Retirement Health Care Expenses
• Don't Let Health Care Costs Wreck Your Retirement: Here's How
• Turning 59½: 5 Planning Moves Most Pre-Retirees Overlook
• Social Security Break-Even Math Is Helpful, But Don't Let It Dictate When You'll File

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.

Most retirees (and some planners) evaluating a Roth conversion look at the tax bracket table and think, "We're in the 12% bracket — let's fill it up."

But in retirement, your visible bracket often isn't the true rate you'll pay — and many unintentionally trigger taxes in places they didn't expect.

Here's the problem: Several tax rules can be stacked on the same dollar at the same time. These rules interact so that one extra dollar is taxed in several places at once, creating a hidden marginal rate far above your visible bracket.

This stacking effect is known as the "tax torpedo."

This effect has sharpened following the 2025 One Big Beautiful Bill tax law changes, which added a new deduction for older people that phases out as income rises. That phase-out affects marginal rate spikes in certain income ranges.

You won't see this on a bracket chart. You'll see it only if you run a detailed projection.

Scenario No. 1: A 50%-plus marginal rate in the 12% bracket

Consider a married couple, both 65-plus, living primarily on Social Security. They also have modest long-term capital gains, and minimal taxable income after deductions.

On paper, they have plenty of room within the 12% bracket for a Roth conversion. Before converting, their tax bill is essentially zero, and they convert roughly $60,000 to a Roth IRA.

Here's what happens:

• As income increases, more of their Social Security becomes taxable
• Their long-term capital gains are pushed out of the 0% bracket and into 15%
• The additional senior deduction begins to phase out

Each rule applies to the same additional dollar. The result: One new dollar can make more than one dollar taxable.

When the interaction effects are modeled, that section of income faced an effective marginal federal rate of 55.9%, more than four times higher than their 12% bracket listed on the chart.

The reason is mechanical. Extra income — say, from a Roth conversion — increases adjusted gross income, which makes more Social Security taxable. That higher income also pushes capital gains into higher brackets and reduces deductions … which raises adjusted gross income again.

One dollar triggers multiple reactions.

This doesn't include future IRMAA and state tax ripple effects. That's how a 12% bracket becomes 20%, 30%, even 50% on income that looked "safe."

Scenario No. 2: Losing the 12% bracket and the 0% capital gains rate at the same time

Now consider a couple with minimal income heading toward the end of the year. They plan to convert traditional IRA assets to a Roth and harvest long-term capital gains at the 0% rate.

Both moves look efficient on their own, but as they add income, the tax rules stack and their effective marginal rate jumps to just under 20%. As income climbs further, the marginal rate approaches 30%, despite never crossing the 12% bracket.

Even their 0% capital gains carry a hidden cost. Those gains increase adjusted gross income, which pulls more Social Security into taxation. The indirect tax rate ends up close to 10%.

The bracket table would not have revealed this.

The appeal of zero-tax retirement — and the risk of simplification

In recent years, the idea of engineering a zero-tax bracket in retirement has gained popularity. Seminars and advisory programs advocate for systematic Roth conversions to eliminate future tax exposure.

The core concept, shifting assets into tax-free accounts while rates are historically moderate — can be sound planning. The risk lies in oversimplification.

When these conversions are modeled against visible brackets, incremental income can interact with Social Security taxation, capital gains layering, deduction phase-outs and Medicare premium thresholds.

I call this bracket-guessing — relying on the chart instead of the math. In today's environment, particularly with the added senior deduction, this approach creates hidden rates and unexpected pitfalls that your taxable income doesn't reflect.

Retirement tax planning is no longer about what bracket you see. It is about how your next dollar actually changes your tax owed.

Why precision and timing matters

Capital gains thresholds change annually, Social Security adjusts with COLA, Medicare premiums use a two-year income lookback, and the new senior deduction adds additional phase-out bands. These overlapping rules make retirement income far less linear than many retirees realize.

Yet none of this is a reason to avoid Roth conversions altogether. They can be a powerful strategy for managing required minimum distributions, estate planning and long-term tax control.

But conversions should be modeled — not guessed. Timing and sequencing matter. Often, the correct move is not to avoid the strategy but to adjust the amount — converting up to the edge of a marginal-rate spike and stopping there.

A simple general rule

If you have Social Security or capital gains, assume the true effective rate on a conversion is higher than your visible bracket — until a year-specific projection proves otherwise.

The tax torpedo is not obvious from the bracket table. When multiple tax rules collide on the same dollar of income, the real cost can look very different from what your taxable income suggests — a dynamic that has only become steeper with recent tax changes.

With thoughtful planning, those hidden spikes can be managed or avoided. Without that analysis, however, a strategy meant to be an opportunity can produce an unexpectedly high tax bill.

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• Silver Lining? Four Tax Benefits of a Lower 2025 Social Security COLA
• Don't Get Caught by the Medicare Tax Torpedo: A Retirement Expert's Tips to Steer Clear

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 U.S. tax code now exceeds 70,000 pages, with hundreds more added in 2025 alone. With so much complexity, it's easy for retirees to miss valuable opportunities to reduce their tax burden.

Here are five key tax tips to consider if you're still working on your 2025 taxes and as you plan for your 2026 tax return.

Tip No. 1: Understand the new $6,000 deduction for older people

Recent tax law changes introduced a temporary deduction for people age 65 and older, designed to help offset the taxation of Social Security benefits — but it doesn't benefit everyone equally.

Here's how it works:

• You must be age 65 or older by the end of the tax year
• You can deduct up to $6,000 per person ($12,000 for married couples)
• This deduction is available even if you take the standard deduction
• It phases out starting at $75,000 (single) and $150,000 (married filing jointly)

Because of the income limits, proactive tax planning is essential. Many retirees can benefit by managing their income — either reducing it to stay below the thresholds or increasing it strategically to fully utilize the deduction during its availability from 2025 through 2028.

Tip No. 2: Know the rules on deducting car loan interest

Another notable change allows for the deduction of car loan interest — up to $10,000 per year — but with specific requirements.

To qualify, the vehicle must be assembled in the United States. You can check the VIN on NHTSA's website, or you can verify the "final assembly point" on the window sticker.

Income phaseouts begin at $100,000 (single) and $200,000 (married filing jointly).

Keep in mind, this is a tax deduction — not a credit. For example, if you pay $2,500 in interest and are in the 22% tax bracket, your tax savings would be about $550.

While helpful, this shouldn't drive your purchase decision — always prioritize your overall financial plan.

Tip No. 3: Reduce Medicare IRMAA surcharges

Higher-income retirees may pay additional Medicare premiums known as IRMAA (income-related monthly adjustment amount). These surcharges are based on your modified adjusted gross income (MAGI) from two years prior.

If your income has recently decreased due to retirement or another life-changing event, you may be able to lower your premiums.

Steps to take:

• Complete Form SSA-44
• Identify a qualifying life-changing event, such as retirement or reduced work
• Submit documentation as required

If approved, your Medicare premiums will be recalculated, and you may receive a refund for any excess IRMAA already paid.

While not technically a tax, IRMAA functions similarly by increasing costs based on income — making tax planning just as important.

Tip No. 4: Take advantage of above-the-line charitable deductions

With fewer taxpayers itemizing deductions today, many retirees have lost the ability to deduct charitable contributions.

However, starting in 2026, a new provision allows for "above-the-line" charitable deductions:

• Up to $1,000 for single filers
• Up to $2,000 for married filing jointly
• Applies even if you take the standard deduction

This creates a renewed incentive to track charitable donations. Be sure to keep receipts, as this will appear as a new line item on your 2026 tax return. The donation must be made in cash to a qualifying charity.

Tip No. 5: Use qualified charitable distributions (QCDs)

For retirees age 70½ or older, qualified charitable distributions (QCDs) remain one of the most powerful tax-saving strategies.

• You can donate up to $111,000 per person directly from an IRA to charity
• The distribution is excluded from your taxable income
• It can also count toward your required minimum distribution (RMD)

For example, if your RMD is $50,000, and you donate $25,000 through QCDs, you need to withdraw — and pay taxes on — only the remaining $25,000.

It's important to note that QCDs are not clearly reflected on your Form 1099-R, so you must report them properly or inform your tax professional.

Many custodians offer convenient ways to facilitate these donations, including direct check mailing or dedicated checkbooks for charitable giving.

The bottom line

Tax planning in retirement requires more than just filing a return — it demands strategy. With new rules and opportunities emerging, staying informed and proactive can help reduce your tax burden, manage health care costs and preserve more of your retirement income.

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

Spring is tax season, and for many people, it's typically the only time they think about their taxes. Although there are very few things you can do to change your taxation from the previous year at this point, a year-round tax plan will allow you to manage your tax bill going forward.

This is particularly important for retirees, who are often surprised by the amount of tax they owe. Even though income may be lower in retirement, Social Security income may be subject to federal taxes, and withdrawals from traditional pre-tax retirement accounts are subject to income tax.

Here's how to implement a year-round tax plan.

First, consider tax distribution

Whether it's a Roth or a pre-tax retirement account, or even a bank account, your money is in multiple places that all have various tax implications. When you're evaluating your income stream and determining which bucket of money to use, you need to understand each fund and its purpose in your tax plan.

For example, if the money is in a pre-tax retirement account, any withdrawals are subject to income tax, while Roth accounts require taxes to be paid when you contribute.

This becomes even more important when you consider your income tax bracket. If your income is less than $100,800, you are in the 12% tax bracket, but any additional taxable income above that number is taxed at a 22% rate up to $211,400 in earnings. This can make a significant difference over the course of the year.

Year-round tax planning can help you evaluate your effective tax rates, which monitor progressive tax rates, and evaluate your overall taxation, to determine which bucket is the most tax-efficient for you. At the end of the year, your goal should be to have a small refund or tax bill.

Then, consider Roth conversions to lower taxable income

There's a sweet spot when you retire and when your fixed income disappears, lowering your taxable income and potentially bumping you to a lower tax bracket.

Many retirees have money in a pre-tax retirement account, which means they have a tax bill that needs to be settled at some point. This provides an opportunity to convert that money into a Roth account and settle your tax bill in an efficient way through Roth conversions.

Taking into account tax brackets if you are married, filing jointly, and made $150,000 in a year, you have over $60,000 in 2026 to convert before you reach the next tax rate of 24%. After the money is converted to a Roth account, it grows tax-free.

We don't know what the future holds, and doing these early can benefit your entire estate. Future tax rates are unpredictable, and our health is not guaranteed.

The more money you move into a tax-free account, the less you'll have to worry about tax liability when you or your spouse passes away, and the money is passed to the next generation.

Timing Roth conversions can also depend on market volatility. If a specific investment is down in value, it may be a good time to sell that investment while it's low and convert it into a Roth, reinvest it in the same stock and experience the growth tax-free.

Last, evaluate your stock performance to prevent tax loss

Volatile markets can also be a good opportunity to rebalance your investment portfolio and manage your capital gains tax. Capital losses are tax-deductible up to $3,000.

If you have an underperforming stock, you can use tax-loss harvesting by selling it and repositioning your money in another underperforming stock. This was a useful strategy in 2025 for Liberation Day, and the current volatile market could be another opportune time.

I recommend evaluating your investments on a quarterly basis and considering rebalancing throughout the year. This can make a significant difference in your tax bill at the end of the year.

However, when it comes to your money, emotion can play a role in decision-making. Taxes can be complicated to understand, and it can take years of experience to understand the overall impact on your financial picture.

If you don't have the experience, you put yourself at risk of making irreversible mistakes if you attempt to do it yourself. A financial professional can assist you with these decisions and strategies, take a wide view of your tax burden, consistently monitor your situation and point out opportunities to be more tax-efficient.

Don't let April 15 be the last day you think about taxes until 2027. Create a tax plan and take steps to be efficient throughout the year.

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

Editor's note: This is the third article in a five-part series about all-asset retirement planning that is covering such topics as using annuities and housing wealth, making the most of tax benefits and managing investment portfolio risk. Articles one and two are It's Time to Redefine Retirement for Retirees With $500,000 to $5 Million: Here's How and Unlock Housing Wealth and Tax Benefits by Adding Lifetime Annuities to Your Retirement Plan.

For most Baby Boomers, their home represents 50% of their net worth, yet retirement planning software and advisers virtually ignore this asset in designing retirement income plans.

A Federal Reserve study shows that the share of net worth in primary residences among households headed by people ages 60 to 69 rose from roughly 40% in 1989 to just over 50% by 2022.

For those age 70 to 79, the share climbed from about 38% to 50% over the same period. In the 15 million mass affluent households led by Boomers from age 60 to 75, the principal residence has an average home equity of $750,000, out of an average net worth of $1.75 million.

In this article, we explore the reasons housing wealth is ignored and why consideration of it can increase retirement income and liquid savings to cover large health-related and uncovered expenses.

Reasons housing wealth is not included in planning

Most retirement planning leaves out housing wealth and ignores the potential of that wealth to generate income or produce liquid savings. This is despite the fact that reverse mortgages, mostly home equity conversion mortgages (HECMs), are heavily marketed.

Our research indicates that planning tools often treat HECMs simply as a "liability for loans made" rather than as a "dynamic liquidity asset" that grows over time. In fact, most planning systems treat a HECM and its growing line of credit essentially as a swap for selling the house to access that cash.

Some reasons for this planning limitation:

Possible objections to HECM. Common arguments include high closing costs and service fees, along with the fear of having the home taken because the loan eats up its value. Also, the "common wisdom" has often been "no mortgages in retirement."

Planning only for income. Income is essential, but full and robust retirement planning should also meet the objectives for liquidity and legacy. The Three L's — Lifetime Income, Legacy and Liquidity — address retiree objectives and should drive planning strategies and tactics.

Just like a business plan, if you prepare and decide first on the objectives of the Three L's, you will significantly improve your chances for a successful retirement.

Adviser licensing. Those advisers doing retirement planning for prospects or clients might be licensed to execute only a portion of a plan, from investments to lifetime annuities and finally to HECM.

They or their firms must form partnerships to implement a plan with all the product solutions that should be considered. That may require one or more large financial firms to create these partnerships or internal organizations that are multi-licensed.

Adviser training and available software. Advisers are often taught to think that housing wealth is a significant but relatively illiquid asset for retirees, which is true if selling the house or borrowing through a traditional home loan are the only approaches considered for accessing equity. Very few planning systems consider the HECM line of credit to provide liquidity.

I've read about these reverse mortgage objections from pundits and heard the same from friends, but as we are focused on providing the best retirement planning results, we had to do our own analysis.

Why housing wealth should be included in planning

Here are some reasons to include housing wealth in your retirement planning:

Addressing unmet needs. As I wrote in the previous article in this series, Unlock Housing Wealth and Tax Benefits by Adding Lifetime Annuities to Your Retirement Plan (link above), a HECM used with lifetime annuities can help mass affluent retirees secure additional lifetime income, tax advantages and liquid savings to cover late-in-life expenses beyond what their 401(k) or IRA savings alone could provide.

Events like long-term care or additional support for children and home renovation when aging in place are unpredictable, which is why an additional source of liquid savings, like a HECM, may be essential.

Cost of accessing liquid savings. There is significant savings in being able to access the value of the home without selling it. The average cost of selling a home is 10% to 15% of its sales price, not to mention the stress involved with moving.

In addition, if the house is sold at a gain, the tax cost can be another 10% to 20% — meaning that selling a house now worth $2 million to generate liquid savings might have a total cost of $250,000 or more.

Special HECM protection. HUD backs every HECM loan, ensuring that the borrower's family will not owe money at the passing of the borrower or eligible surviving spouse, even if the outstanding loan balance is more than the value of the house. HUD insurance covers any difference for the lender.

Consideration of historical results. Assumptions about HECM interest rates and projected housing values are often conservative and misunderstood, particularly if not considered as part of a full range of products.

We did our own study of the past 30 years of house prices and interest rates, available in my article Treat Home Equity Like Other Investments in Your Retirement Plan: Look at Its Track Record. You will see that the results were more positive than generally available projections.

One helpful development is that the National Association of Insurance and Financial Advisors (NAIFA) is building a curriculum that will look at this "most underutilized asset" to better understand how housing wealth fits into retirement planning conversations.

(Breaking news: We just received an invitation to a course on "Learn How to Incorporate Housing Wealth into Retirement Planning" from another organization. Do I spot a trend here?)

Retirement planning that builds in housing wealth

To design the all-asset planning method means thinking about housing wealth differently and aggregating all sources of savings — personal savings, rollover IRA savings and housing wealth — so they all work together during retirement.

Critical to that process is to design a plan with the Three L's guiding your options and using investment portfolios and lifetime annuities to manage taxes and risks. We'll cover those topics in the next two articles.

To start the process of making an informed decision about housing wealth, review one plan "with" and a second "without" that resource. Easier said than done since most planning systems are not enabled to do so.

One can also think of the "with" housing scenario as one suited for retirees who want to age in place (favored by at least 80% of retirees) and the "without" as selling your house to generate income or liquid savings and investment dollars.

The first step in the "with" plan is to access housing wealth through HomeEquity2Income, as described in my earlier mentioned article about unlocking housing wealth, by combining HECM with a qualifying longevity annuity contract (QLAC) to provide not only lifetime income, but also a source of liquidity to pay for unplanned expenses.

For the "without" scenario, we assume the house is held until sold at age 85 with the net proceeds invested as liquid savings along with other savings. A multitude of other scenarios are possible, which should be tested with the retirement planning tool.

Comparing 'with' and 'without' H2I plans

Below is a comparison of two retirement plans for our average retiree, a 67-year-old man with $1 million in each of the three savings sources. The analysis focuses on income, liquid savings and legacy savings.

What we learn from the comparison

The plan "with" H2I is able to support higher starting income ($117,000 vs $131,000) and a higher legacy at age 95 ($7.2 million vs $5.7 million) than the plan "without" H2I.

The primary sources of the "with" H2I advantage:

• HECM drawdowns from age 67 to age 84
• Avoidance of closing costs and taxes on the sale of the home

To be fair, this is a little-explored area and probably needs even more analysis.

Both plans do benefit from the inclusion of lifetime annuities and the reduction of longevity risk, as covered in the unlocking housing wealth article.

The "economic returns on investment" are consistent between the two plans, meaning that the method of aggregating and disaggregating housing wealth is more or less economically neutral.

To me, the advantages of at least considering your home's equity in retirement planning are clear. An asset that amounts to 50% of the savings built over a lifetime can benefit retirees and their families in the near future and in the long term.

Be on the lookout for the next two articles, which will cover tax efficiency and risk management of planning models.

Building a comprehensive retirement plan requires an understanding of what different products and approaches provide — as well as an understanding of how separate advisers on investments, lifetime annuities and HECM might guide you. We believe it's well worth it. To find out for yourselves, order a complimentary plan and let us introduce you to a qualified adviser.

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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.

I was meeting with a client (let's call him Arthur) for a late lunch last week. We were tucked into a leather booth near the fireplace, the kind where the noise of the city just disappears.

Arthur is the picture of the self-made American success story: He has $2.2 million in a traditional IRA, a paid-off condo in the Gold Coast and a retirement spreadsheet so detailed it would make an aerospace engineer smile.

He leaned back, exhaled and said, "Ray, thank God for the One Big Beautiful Bill Act. I thought my tax rate was going to 25% this year, but we're safe. I'm staying in the 22% bracket forever."

I smiled and raised my glass slightly. "It is a huge win, Arthur. You're absolutely right that the headline rates are safe. But," I added gently, "there is a nuance in the new law that we need to watch out for. It preserved the tax brackets, but it didn't fix the interaction with Social Security."

He looked intrigued. "How so?"

"It's the provisional income formula," I explained. "It wasn't updated by the law. So while the published rate is 22%, the 'effective' rate for someone with your specific asset mix is actually much higher. When you withdraw that next dollar, the math works out to a 40.7% marginal tax rate."

Arthur paused. "40%? But the law says 22%."

"The law says 22%," I agreed. "But the math says 40%."

The false security of 2026

Here we are in 2026. The panic over the "tax sunset" has faded, replaced by a comfortable sense of security. But while the investing world was breathing a collective sigh of relief over the extension of the Tax Cuts and Jobs Act, they missed the critical flaw that Congress failed to address.

The danger in 2026 isn't that taxes are rising, it's that they are currently "on sale." Low taxes in your 60s are a lullaby, masking the reality that your required minimum distributions (RMDs) at 73 are a mathematical certainty waiting to collide with your Social Security check.

The new law locked in the low rates, but it left the 1983 tax thresholds untouched, leaving the guidance system armed and locked on to your retirement: The Social Security tax torpedo.

The 'success' penalty

The hard data has been screaming this for years: Retirees with $1 million to $3 million in tax-deferred accounts are statistically on track to pay the most disproportionately punitive and mathematically brutal lifetime tax bills of any demographic in America.

The ultra-wealthy don't fear this. If you have a massive pension or $10 million in the bank, the torpedo strikes, but it bounces right off your yacht's hull. These eight-figure millionaires are already paying the maximum tax on their benefits, and frankly, they were never counting on Social Security to fund their lifestyle in the first place.

The tax torpedo specifically targets the "disciplined savers." I'm talking about the engineers, teachers, midlevel managers and small-business owners who executed the wealth-building playbook to perfection.

They followed the gold standard of financial advice, maxing out their 401(k)s for 30 years. They built a seven-figure nest egg, but because it's all sitting in tax-deferred accounts, they are sitting ducks.

How the '22% bracket' soars to 40.7%

This is the math that keeps me up at night. The OBBBA extended the tax brackets, but it ignored the "provisional income" thresholds that trigger taxes on your Social Security.

These thresholds — $25,000 for singles and $32,000 for married couples — were set in 1983 and have never been indexed for inflation.

Because those thresholds are so low, your IRA withdrawals trigger a "double tax." Let's say you need an extra $1,000 for a trip to Europe. You pull that $1,000 from your traditional IRA:

• That $1,000 is taxable income.
• But because you just raised your provisional income, that withdrawal also drags an additional $850 of your Social Security benefit into the taxable bucket.
• In the eyes of the IRS, your income didn't go up by $1,000. It went up by $1,850.
• When you apply the 22% tax rate to that inflated number, you aren't paying $220. You are paying $407.

The math: $407 divided by your withdrawal of $1,000 equals a 40.7% marginal tax rate.

And that is just federal. If you live in a state like Minnesota, where the state government also taxes a portion of your benefits, that combined marginal hit can skyrocket to nearly 60%. You are effectively losing more than half of your next withdrawal to a tax system that is penalizing your success.

The deferral mistake

The danger in 2026 isn't that taxes are going up — it's that you think they are low, so you're getting complacent. Many retirees are looking at the new permanent brackets and thinking, "Great, I'll just leave my IRA alone until age 73."

Wrong. If you wait until RMDs kick in, the IRS seizes control of your withdrawal schedule.

But here is the kicker: Those retirement funds don't just sit there in your 60s. If your portfolio continues to grow at a healthy clip, that $2.2 million could easily be $3 million or more by the time the government forces your hand.

This growth amplifies the problem, turning a manageable withdrawal into a massive, mandatory taxable event — landing you squarely in that 40.7% Torpedo Zone every single year for the rest of your life.

The silver lining: The 'golden window'

Here is the good news. The OBBBA kept the tax rates low, which means the Roth conversion window is still open. You have a rare opportunity — what the research calls the golden window — between the day you retire and the day RMDs begin.

During this window, your wages have stopped, but your RMDs haven't started. You can choose to systematically move money from your torpedo-prone traditional IRA into your torpedo-proof Roth IRA.

• Pay the tax now at the known 22% rate, avoiding the 40.7% surtax later.
• Shrink your RMDs. A smaller traditional IRA means smaller forced withdrawals later.
• Roth is invisible. Roth withdrawals do not count toward the provisional income formula. They do not trigger the tax on your Social Security.

Defining your retirement destiny

Back to lunch. When Arthur signaled the server for the check, he moved like an engineer who had just figured out the exact trajectory to land a spaceship on Mars — precise, resolved and completely focused on the solution.

Our white tablecloth remained pristine, save for the ghost of a footprint from a chilled glass, but the atmosphere in our cognac-colored leather booth had shifted completely. Arthur didn't order dessert; he didn't need the sugar — he had the clarity of a new mission.

As he signed the check in the leather-bound folder, he looked at the fireplace and then back at me.

"I spent 40 years playing offense to build this," he said, tapping his fingers on that meticulous spreadsheet. "I'm not about to spend my retirement playing defense against a 'phantom' tax rate."

You shouldn't either.

The government kept the rates low, but they left the trap in the code, perhaps banking on the hope that you'll be too comfortable in your 60s to notice the 40% surtax waiting in your 70s.

Don't let a season of "on sale" taxes lull you into a strategic mistake. Follow the playbook of high achievers like Arthur: Take control of your tax destiny while the golden window is still open.

I'm a Registered Social Security Analyst ® (RSSA®), and I don't take the bet that the IRS will play fair. I run the math. The "tax sunset" didn't happen, but the sun is setting on your opportunity to fix this.

Use these next few years to defuse the torpedo or be prepared to pay a "success penalty" that turns your hard-earned retirement into a windfall for the government.

Related Content

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• Five Reasons Roth Conversions and Pensions Work Well Together
• Tactical Roth Conversions: Why Now Through 2028 Is a Critical Window for Retirees
• Five Opportunities if You're in the 2% Club in Retirement
• Boomer Retirement Reality Check: The Numbers Look Bleak, But Here's What You Can Do About That

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.

America is in the middle of its biggest-ever retirement wave. And for real estate investors who spent decades building wealth, one property at a time, the exit strategy may be the hardest deal they've ever had to make.

I had lunch recently with a couple I'll call Brenda and Eddie, who are in their mid-60s, and both exhausted. They spent 30 years assembling a tidy portfolio of rental properties in the "Tony Houston" suburbs, consisting of: five houses, a small strip center and a 12-unit apartment building.

On paper, they were millionaires several times over. In practice, Eddie told me, he felt like an unpaid superintendent who couldn't quit.

"We were supposed to be in Italy this spring," Brenda said. "Instead, we're replacing a roof on one of the rental properties."

Eddie and Brenda aren't unusual — in fact, they're a demographic tidal wave. What's unusual is how few investors in their position understand all their options for getting out and how costly that blind spot can be.

The Peak 65 zone

Demographers call the period from 2024 through 2027 the "Peak 65 zone." During this stretch, more than 4.1 million Americans are turning 65 each year — roughly 11,400 every single day.

That's a sharp jump from the 10,000-per-day pace of the previous decade, driven by the heart of the Baby Boomer generation finally reaching the traditional retirement age.

Many of these soon-to-be retirees are real estate investors. They bought duplexes in the '80s, apartment buildings in the '90s and warehouses during the 2008 fire sale.

They built real wealth. But that wealth comes with strings attached, and the biggest string of all is the one no one likes to talk about: Many real estate investors feel trapped.

The three-sided trap

The trap has three walls, and most landlords don't see all three until they're already hemmed in.

Wall one: The tax bill. Sell a portfolio of long-held, fully depreciated properties, and the IRS is going to take a serious chunk. Federal long-term capital gains rates top out at 20%. Add the 3.8% net investment income tax (NIIT) that applies to higher earners. Then add depreciation recapture, taxed at 25%. Layer on state income taxes — which vary, but in many states run north of 5% — and the total take can exceed 40% of your gains.

For people like Eddie and Brenda, that's a check to the government that could easily top a million dollars.

Wall two: The reinvestment problem. Even after paying the tax, you're left with the question of where to put the money. A financial adviser may suggest a managed stock-and-bond portfolio. Under the traditional 4% withdrawal rule, $1 million in after-tax proceeds might generate $40,000 a year — a far cry from the $80,000 or $90,000 that same equity was producing in rental income.

And unlike a building, a stock portfolio can lose 30% of its value in a single quarter.

Wall three: The emotional aspect. After decades of being landlords, investors often feel trapped by their own success. They're too tired to keep going but too smart to accept the alternatives they've been shown. So, they stay. They replace the roof on the next rental property. They skip Italy.

A door most investors don't know exists

"So often times it happens that we live our lives in chains/ And we never even know we have the key."

The Eagles weren't singing about the U.S. tax code, but they might as well have been.

The 1031 exchange has been part of the code for more than a century. Most experienced real estate investors know the basics: Sell one property, buy another of equal or greater value within strict time limits and defer your capital gains indefinitely. It's one of the most powerful wealth-building tools in real estate.

But for years, the 1031 exchange had a significant limitation for people like Eddie and Brenda: It required them to buy more property. And buying more property was exactly what they were trying to stop doing.

That changed in 2004, when IRS Revenue Ruling 2004-86 allowed interests in Delaware statutory trusts (DSTs) to qualify as replacement property in a 1031 exchange. This single ruling opened a door and transformed the retirement landscape for real estate investors.

A DST is a legal entity that holds title to real estate — typically large, institutional-quality properties such as Class A apartment complexes, medical office buildings, industrial distribution centers, self-storage portfolios, senior living communities and national-brand hotels.

Many DST offerings are capitalized at $100 million or more. Through fractional ownership, smaller investors can access these properties with minimums as low as $100,000.

The mechanics are straightforward. An investor sells their actively managed property, executes a 1031 exchange and moves the proceeds into one or more DST investments. All capital gains are deferred.

The investor transitions from being a hands-on landlord to a passive owner receiving monthly income from institutional-grade real estate. No midnight phone calls. No evictions. No tenants, toilets or trash.

Because DSTs are pass-through entities, fractional owners also participate in depreciation and amortization. That often means a significant portion of the monthly income is tax-sheltered, preserving the same tax advantage investors enjoyed when they managed properties themselves.

So, what happened to Brenda and Eddie?

They did their homework. They worked with a registered investment adviser who specialized in 1031 exchanges and DSTs. They sold the strip center and three of the five houses, executed the exchange and diversified the proceeds across four DST investments:

• A multifamily complex in the Southeast
• A medical building in Texas
• A self-storage portfolio in the Sun Belt
• An industrial warehouse leased to a national logistics company

They paid zero capital gains tax at closing. Their net worth carried forward intact, generating monthly income that exceeded what the sold properties were producing, without a single tenant to manage.

They kept the apartment building and two houses for now: planning to exchange those in a future phase when they're ready.

They went to Italy. And — did I mention? — they didn't write the government a check for $1 million.

Important caveats for prospective investors

DSTs are compelling, but they aren't for everyone, and it would be irresponsible to pretend otherwise.

First, DSTs are available only to accredited investors. Under current SEC rules, that means a net worth exceeding $1 million (excluding your primary residence) or annual income exceeding $200,000 individually (or $300,000 for married couples) for each of the previous two years, with a reasonable expectation of the same going forward.

Second, DSTs are illiquid. Hold periods typically range from five to seven years. During that time, you receive income distributions but cannot access the principal.

When the real estate sponsor decides market conditions are right, the property is sold and proceeds are returned, at which point the investor can execute another 1031 exchange or recognize the gains.

Third, DST investments carry the same fundamental risks as any real estate investment: Market downturns, vacancy, property damage and interest rate shifts. The passive nature of the investment means the investor has no control over management decisions.

Finally, DSTs are SEC-regulated securities offered through broker-dealers or registered investment advisers who have been vetted by the sponsoring firms. Working with a fiduciary adviser — someone legally obligated to act in your best interest, without commissions creating conflicts — is strongly recommended.

The door is open

The 1031 exchange has survived repeated legislative attempts to cap or eliminate it. Recent legislation preserved it intact, with no limits on deferral amounts.

Combined with the DST structure, it offers a pathway that would have been unthinkable a generation ago: The ability to retire from the landlord business, defer the full tax hit and continue earning passive income from real estate you never have to manage.

For any landlords among the 11,400 Americans turning 65 today — and the 11,400 who will do the same tomorrow and the day after that — it's a conversation worth having before the next roof needs replacing.

Related Content

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• Do Self-Storage REITs Deserve Space in Your Portfolio? It's a Yes From This Investment Adviser
• How Well Do You Know Delaware Statutory Trusts? Test Your Knowledge
• I'm a Real Estate Investing Pro: This Is How to Use 1031 Exchanges to Scale Up Your Real Estate Empire
• DST Exit Strategies: An Expert Guide to What Happens When the Trust Sells

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.

In my work helping people think through retirement planning decisions, I often see people focus heavily on preparing their tax return but spend very little time reviewing it afterward.

By the time tax season ends, most people treat the document like a receipt: They file it, save a copy somewhere and move on.

But your tax return can actually be one of the most useful financial planning reviews you receive each year.

Inside that document is a snapshot of how your financial decisions played out. Taking a closer look can reveal planning opportunities that may affect future tax bills, retirement strategies and other long-term financial decisions.

Whether you've already filed your return or are preparing it now, here are four areas worth reviewing.

1. Did you take the standard deduction or itemize?

One of the first things your tax return will reveal is whether you claimed the standard deduction or itemized deductions.

For the 2025 tax year (returns filed during the 2026 tax season), the standard deduction is:

• Single/married filing separately filers: $15,750
• Married filing jointly: $31,500
• Head of household: $23,625

Taxpayers age 65 and older can also claim an additional deduction:

• Single/Head of household: $2,000
• Married filing jointly/separately: $1,600 per eligible spouse

Looking ahead, the 2026 standard deduction increases slightly for inflation:

• Single/Married filing separately: $16,100Married filing jointly: $32,200
• Head of household: $24,150

The additional age-65 deduction for 2026 also rises to $2,050 for single or head of household filers and $1,650 per eligible spouse for married couples filing jointly or separately.

In 2025, the One Big Beautiful Bill Act (OBBBA) also introduced a temporary additional deduction of up to $6,000 per eligible taxpayer age 65 or older, available through 2028. This deduction begins phasing out once modified adjusted gross income exceeds $75,000 for single filers or $150,000 for married couples filing jointly.

Another important change involves the state and local tax deduction (SALT). Taxpayers who itemize can now deduct up to $40,000 in state and local taxes under current law, although the benefit phases down at higher income levels.

What to review on your return: Look at whether your return used the standard deduction or itemized deductions. If you itemized, review Schedule A to see which categories contributed most to the deduction, such as:

• State and local taxes
• Mortgage interest
• Charitable contributions
• Medical expenses exceeding 7.5% of adjusted gross income

Why this matters: For several years, many households defaulted to the standard deduction because it was significantly larger than their itemized deductions. But with recent changes to the SALT deduction and the new senior deduction, itemizing may once again be relevant for some taxpayers.

Compare your itemized deductions with the standard deduction. If the numbers were relatively close, you may have opportunities to plan ahead.

For example, some taxpayers choose to bunch charitable contributions into a single year, coordinate the timing of property tax payments or track deductible medical expenses more closely so their deductions exceed the standard deduction threshold.

Your tax return shows which deduction strategy worked best this year and whether modest adjustments could change the outcome in future years.

2. Were any Roth conversions reported correctly?

If you converted funds from a traditional IRA or another pre-tax retirement account into a Roth account during the year, your tax return provides an opportunity to review how that decision affected your taxes.

A Roth conversion moves money from a pre-tax account into a Roth account, where future qualified withdrawals are generally tax free. The amount converted becomes ordinary taxable income in the year of the conversion.

What to review on your return: Start by confirming that the conversion was reported correctly.

You should typically see:

• Form 1099-R issued by the account custodian
• Form 8606, which tracks Roth conversions and after-tax IRA basis
• The converted amount included as income on Form 1040

Why this matters: Because Roth conversions are treated as ordinary income, they can affect several parts of your tax picture.

A larger conversion could:

• Push you into a higher marginal tax bracket
• Increase the portion of Social Security benefits that are taxable
• Affect eligibility for Affordable Care Act health insurance subsidies
• Increase future Medicare premiums through IRMAA (Income-Related Monthly Adjustment Amount)

Understanding how the conversion impacted your tax return helps determine whether the strategy worked as expected. Many retirees perform Roth conversions during lower-income years, often in the period between retirement and the start of Social Security or required minimum distributions.

Reviewing how this year's conversion showed up on your taxes can help you decide whether future conversions should be smaller, larger or spread across multiple years.

Note: Medicare IRMAA premiums are based on income from two years earlier. A large Roth conversion today could increase Medicare premiums later if income exceeds certain thresholds.

3. Did a retirement account rollover accidentally create taxes?

Another area worth reviewing involves retirement account rollovers.

Rollovers commonly occur when you change jobs, consolidate retirement accounts or retire. For example, you may have rolled over a 401(k) from a former employer into an IRA.

When handled properly as a direct rollover or trustee-to-trustee transfer, these rollovers generally should not create a taxable event. However, they will still appear on your tax return.

What to review on your return: Typically you will see:

• The total distribution amount reported on Form 1040
• The taxable amount listed as zero
• The word "ROLLOVER" next to the entry

If the taxable amount is greater than zero, it may indicate that the rollover was not completed correctly.

Why this matters: Rollovers can accidentally create taxable income if they are handled incorrectly.

This can occur when a rollover is done indirectly instead of directly. With an indirect rollover:

• The funds are first distributed to you
• You must redeposit them into another retirement account within 60 days

And if the distribution came from an employer retirement plan, the plan must generally withhold 20% for federal taxes when funds are paid directly to you, unless the distribution is sent directly to the receiving retirement account or the check is made payable to the receiving plan.

If the full distribution is not redeposited within the required timeframe, part of the distribution may become taxable.

Reviewing your tax return helps confirm that retirement account transfers were handled correctly and did not accidentally trigger taxable income.

Pro tip: Whenever possible, request a direct rollover or trustee-to-trustee transfer. This avoids mandatory withholding and eliminates the risk of missing the 60-day redeposit deadline.

4. Did you receive a tax refund or owe taxes at filing?

Your tax return also reveals how closely your tax withholding matched your actual tax liability.

As income sources change, especially during the transition to retirement, withholding may no longer align with the taxes you ultimately owe.

What to review on your return: Start by reviewing two outcomes:

• Did you receive a large tax refund?
• Did you owe more tax than expected when filing?

A large tax refund may indicate that too much tax was withheld during the year. While refunds can feel like a bonus, they often represent money that could have been available to save or invest throughout the year.

Meanwhile, owing a significant balance at filing time may indicate that withholding did not account for all sources of income.

Why this matters: The federal withholding system was primarily designed for W-2 wage income. But as people approach retirement, income often shifts toward sources such as:

• Portfolio withdrawals
• Pension income
• Roth conversions
• Social Security benefits
• Consulting or part-time income

These sources may not automatically withhold enough tax.

If your withholding did not match your tax liability, adjustments may help prevent surprises next year.

Possible adjustments include:

• Updating Form W-4 with your employer
• Submitting Form W-4P for pension, annuity or periodic IRA withdrawals
• Requesting withholding from Social Security using Form W-4V
• Making quarterly estimated tax payments

Your tax return acts as a feedback loop that helps refine your withholding strategy for the year ahead.

Keep in mind: The IRS generally avoids underpayment penalties if you paid at least 90% of your current-year tax liability or 100% of the previous year's tax. For higher-income taxpayers the threshold increases to 110% of the prior year's tax.

What to do after reviewing your return

Once you have reviewed these areas, consider writing down one or two adjustments that could improve next year's tax outcome.

That might include planning charitable contributions differently, spacing Roth conversions across multiple years, adjusting withholding or ensuring future retirement account transfers are handled as direct rollovers.

None of these decisions need to be complicated on their own. But over time, small adjustments can make a meaningful difference in how much you pay in taxes and how efficiently your retirement income is structured.

Your tax return already contains the information. Taking time to review it with a planning mindset can help you use that information more effectively in the years ahead.

Related Content

• Ask the Editor: Itemized Deductions
• Not Ready to File Taxes? 8 Things to Do Now to Prepare
• Hitting Tax Deadlines Is Smart, and Year-Round Tax Planning Is Even Smarter
• Can AI Help You Find a Bigger Tax Refund? What the IRS Says About Amended Returns
• 5 Habits to Help Make Your Retirement Planning Highly Effective

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

For much of the past decade, tax planning has felt like planning in a windstorm. Advisers and families alike navigated gusts of shifting exemption amounts, threatened sunsets, temporary provisions and headline-driven anxiety about what Congress might do next.

Today, the winds have calmed and the landscape feels steadier, creating an opportunity to plan with purpose.

Greater clarity around the estate tax exemption and more predictability in core income tax rules allow families to move from reactive decision-making to deliberate strategy. Stability means the time is right to refine, optimize and refocus.

Here are three ways families should respond.

1. Revisit your estate plan

For many high-net-worth families, the estate tax exemption is now both historically large and relatively stable. That is good news. But it also creates a subtle risk: The assumption that because the tax environment feels calmer, your documents must still be appropriate.

Estate plans drafted during periods of perceived legislative urgency often emphasized exemption "use it or lose it" techniques. Some included clauses tied to exemption amounts that may now produce unintended results. Others assumed liquidity events, business transitions or charitable strategies that have since evolved.

Estate planning is not only about tax exposure. It is about structure, flexibility and alignment with today's realities. Therefore, a review of the following is appropriate for proactive planning:

• Trustee selections and succession provisions
• Distribution standards and asset protection features
• Beneficiary designations on retirement accounts and insurance policies
• Distribution provisions for digital assets
• How your documents coordinate with current tax law

Families should use this moment to ensure their estate plan is not merely tax-efficient, but is current, coordinated and reflects their actual intentions.

2. Develop a multiyear income tax strategy

If estate tax law is calmer, income tax law has become more interconnected and complex. Marginal rate thresholds, standard deduction limitations, diminished charitable deduction benefits, capital gains rules, net investment income tax, trust taxation brackets and retirement distribution requirements now interact in ways that reward forward planning.

Rather than viewing tax planning as an annual exercise in April, families should consider multi-year modeling and should ask themselves the following questions:

• Are there anticipated spikes in income — from a business sale, concentrated stock diversification, deferred compensation or Roth conversions?
• Should charitable contributions be "bunched" into high-income years?
• How do deduction limitations affect the timing of large gifts?
• Should family trusts revisit tax status or structural elections?
• Are there opportunities to harvest capital losses to offset future gains?

Today's income tax system is more interconnected than ever — which means a single decision can ripple across multiple tax items in the same year. A Roth conversion could influence marginal brackets, Medicare premium surcharges and capital gain stacking.

It can also reduce eligibility for certain deductions and benefits, including state and local deduction limits, the enhanced standard deduction for those 65 and older, and — importantly — the charitable contribution deduction and potentially all itemized deductions.

In this environment, tax planning is no longer about isolated moves — it is about understanding how one lever shifts the entire system in real time.

3. Prioritize governance, learning and stewardship

Perhaps the greatest opportunity presented by a quieter tax landscape is psychological. When families are no longer consumed by legislative countdown clocks, they can redirect attention to the issues that ultimately determine whether wealth enhances or erodes family cohesion.

Three enduring priorities deserve renewed focus.

Governance. How are decisions made about the donor-advised fund, operating business or vacation property? Are there written policies? Clear communication channels? Defined roles? Good governance reduces friction and builds continuity.

Continuous learning. Next-generation family members do not need to become tax experts. But they should understand the basics of trusts, investment oversight and how to engage productively with professional advisers.

Families that invest in financial education produce capable participants rather than passive recipients.

Stewardship. Wealth rarely endures by accident. Reframing inherited assets not as entitlement, but as something entrusted for the benefit of future generations, can reshape family culture.

Stewardship encourages long-term thinking, philanthropy and disciplined decision-making.

Periods of instability demand agility. Periods of stability demand intentionality. With greater clarity in the tax landscape, families have a rare moment to act deliberately — to plan with purpose.

The author takes sole responsibility for the views expressed herein and these views do not necessarily reflect the views of the author's employer or any other organization, group or individual.

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• Your Legacy Is More Than Your Money: How to Plan for Values, Not Just Valuables
• Smiley Faces in Serious Places: Emoji Use Pops Up in Legal Battles Over Inheritances

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

For most high earners, the tax changes this year will feel like a stress test of how well their financial life is organized.

The One Big Beautiful Bill Act (OBBBA), passed over the summer, made several changes to the tax code that could affect the taxes you pay for 2026.

If you want flexibility for your 2026 taxes, the work starts now — not with trying to predict what Congress will do with the tax code in the future and not with trying to outguess headlines.

It starts with building a system that makes the right options available as early as possible in the year before you have to file.

Preparation matters more than new rules

To set yourself up for success, make sure key elements of your financial structure are in place at the beginning of the year.

That may include having operating or partnership agreements signed that define how income will be allocated, confirming entity structures such as S corp elections and establishing recordkeeping systems that capture activity as it happens.

Verification systems can be simple, but consistent tools such as mileage trackers, time logs for real estate activities or accounting software that records transactions and receipts in real time.

The goal is to create a reliable record from day one rather than trying to reconstruct it months later.

When you zero in on your tracking early in the year, you're securing your eligibility for strategies and optimization tools for the rest of the year.

This allows you to pivot quickly as tax rules change, without burning time trying to backfill proof after the window has closed.

A lot of the most valuable tax outcomes depend on what you can substantiate across an entire year, and you don't want to be rebuilding your year in December.

The IRS gives more weight to records kept at or near the time of your activity, meaning logs maintained as the work occurs or shortly after, rather than reconstructed months later.

If you're aiming for outcomes such as real estate professional status or similar time-based tax strategies, tracking earlier in the year is far easier to defend.

The cost of procrastination isn't always penalties, but missed opportunities. People often qualify for strategies on paper, but then they can't use them because the documentation was either not clean or not there, or planning wasn't set up early enough to support a claim.

When sophisticated planning still breaks down

High earners rarely have simple tax situations, but the issue is often not complexity — it's having the right context. Problems arise when information is scattered, making it harder to see how decisions made throughout the year affect the final outcome.

In those cases, planning often relies on assumptions and not entirely on a clear view of the facts.

Most high earners work with capable advisers. Where planning breaks down is when those advisers are forced to work with incomplete information. Small gaps can quietly change eligibility, timing or deductions, even when the overall strategy appears sound.

This is where the right tax tools start to matter. Programs such as Quicken or QuickBooks that pull information together help reduce guesswork and surface issues early, before they turn into costly surprises.

They don't replace your financial adviser, but they make it easier for everyone to work from the same complete picture.

That clarity becomes even more important at the beginning of the year. As tax provisions change, there is less room to adjust after the fact and fewer opportunities to correct mistakes.

Clean records reduce surprises and audit risk

Your tax return is only as good as your books, and that's still the most common failure point I see among business owners. Messy or unreconciled books create problems that go far beyond tax time.

When transactions are missing, overstated or miscategorized, you can operate with a false sense of your financial position.

That distortion affects whether you invest, hire, buy property or take distributions.

These "small" errors can get expensive fast. I've seen an investment loss of $60,000 reported on a tax return without the minus sign. Instead of reducing taxable income by $60,000, the number was entered as positive income. That mistake turned what should have been a $60,000 deduction into an additional $60,000 of income, effectively creating a $120,000 swing in taxable income.

I've also seen people sell their personal home and assume it's not a taxable event, but while that is often true, it works only if the transaction is reported properly and accurately.

If you leave it unreported, the IRS will assume the entire transaction is taxable, and a six-figure tax notice might be triggered.

Even if you don't owe the money, receiving that notice is stressful. Some people might pay out of fear without realizing they can dispute it.

Audit risk works the same way. Nothing guarantees an audit, but Schedule C returns draw more attention when income and deductions look mismatched.

Certain reportable transactions, including syndicated conservation easements, get higher scrutiny because the IRS looks at them as listed transactions and often requires disclosure.

On a different note, an audit is not automatically bad. If you have a clear justification for your position and the paperwork to back it up, you should have nothing to worry about.

While receipts are important, the clincher is whether the expense is properly supported and recorded in the right context.

For most business costs, you generally don't need a receipt for anything under $75, but you still need to capture the "who, what, where and why" to justify the business purpose.

The best way to prepare for your 2026 taxes is to start early. Clean books, unified data, consistent tracking and documenting decisions early are what will give you the most flexibility and opportunities to optimize.

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• 9 Ways the Wealthy Waste Thousands in Taxes: A Checklist for What Not to Miss
• New 2026 Income Tax Brackets Are Set: Will Your Rate Change?
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• Tax Season 2026 Is Here: 8 Big Changes to Know Before You File

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.