Roth conversions have recently become one of the most popular retirement tax planning strategies. Financial headlines often promote them as a way to create tax-free income, reduce future required minimum distributions (RMDs) and leave a more tax-efficient legacy to heirs.

For many retirees, those benefits are real.

But Roth conversions aren't a one-size-fits-all solution. In fact, as a CERTIFIED FINANCIAL PLANNER® and CEO of Peak Retirement Planning, I can tell you that converting retirement assets at the wrong time can result in paying more taxes than necessary and reduce your long-term wealth.

The key question isn't whether Roth conversions are good or bad; it's whether paying taxes today will save you on taxes in the future (I wrote a bestselling book all about taxes — you can request a free copy here).

Below are six situations where retirees may want to think twice before converting.

1. You don't have a pension

One of the biggest factors in determining whether a Roth conversion makes sense is your expected future tax bracket. For retirees without a pension, their future taxable income is often lower than it was during their working years, as many rely primarily on Social Security and modest withdrawals from retirement accounts.

As a result, they could remain in relatively low tax brackets throughout retirement.

Today's tax code also includes a generous standard deduction (up to $32,200 for 2026). For some retirees, that deduction might shelter most or even all of their taxable income.

If you expect to stay in a lower tax bracket for life, voluntarily accelerating taxes through a Roth conversion might not provide as much benefit.

By contrast, retirees with substantial pensions often face a different reality. Pension income can create a permanent tax floor that follows them throughout retirement, making Roth conversions far more attractive in certain cases.

2. You have less than $500,000 in tax-deferred accounts

Your account size matters. When evaluating Roth conversions, it's important to consider future RMDs. Starting at age 73 (or 75 for many younger retirees), the IRS requires withdrawals from traditional IRAs and other tax-deferred retirement accounts.

However, smaller account balances produce smaller RMDs.

For example, a retiree with $500,000 in a traditional IRA might have an initial RMD of roughly $20,000. Combined with the standard deduction and other available tax benefits, that withdrawal could have little impact on their overall tax situation.

If your retirement savings aren't large enough to create a meaningful future tax burden, converting assets today could mean paying taxes earlier than necessary without generating significant long-term savings.

3. Your tax rate today is higher than it will be in retirement

At its core, a Roth conversion is a tax-rate arbitrage decision. You're choosing to pay taxes now because you believe you'll pay the same or even a higher rate later. This strategy falls apart if the opposite is true.

Consider someone in their peak earning years who is currently in the 32% federal tax bracket. If they have no pension and moderate retirement savings, they may eventually find themselves in the 12%, 22% or even lower brackets after they retire.

In that scenario, converting assets while working could mean prepaying taxes at a significantly higher rate than what would have been owed later.

Before converting, retirees should estimate their likely retirement income rather than assuming their future tax rate will automatically be higher.

4. You're planning to retire early

One reason not to do Roth conversions today is that you could have a better opportunity later. Early retirement often creates what planners call a "tax window": A period after earned income stops but before Social Security, pensions and RMDs begin.

For example, someone retiring at age 58 might have several years when taxable income drops dramatically. During those years, they can often perform Roth conversions in much lower tax brackets than they could while working.

This window can be particularly valuable because it could allow retirees to:

• Convert assets before Social Security becomes taxable
• Avoid increasing Medicare premiums tied to higher income
• Fill lower tax brackets more efficiently
• Reduce future RMDs

Rather than converting aggressively during high-income working years, some retirees may benefit from waiting until these lower-income years arrive.

5. Your children might be in lower tax brackets than you

Many Roth conversion discussions focus on leaving tax-free assets to heirs. This can be an advantageous legacy planning strategy, but it isn't always the right answer.

Today's inherited IRA rules generally require most non-spouse beneficiaries to empty inherited retirement accounts within 10 years. Because of this rule, many parents assume they should convert everything to Roth accounts, but there are considerations to think about.

The better question is: What tax bracket will your children be in when they inherit the money?

If your children have higher incomes than you, significant retirement savings of their own or expect to remain employed during those 10 years, Roth conversions may make more sense because each of these could result in your children paying more taxes down the road than you would have paid.

But if they're likely to be in lower tax brackets than you, allowing them to inherit traditional IRA assets could result in a lower tax bill being paid across generations.

Legacy planning shouldn't focus only on your tax rate, but should also account for the tax situation of the people who will ultimately receive the assets.

6. You're single today but expect to marry

Tax brackets are not static. A single retiree who expects to get married in the near future could gain access to larger tax brackets and a higher standard deduction through married-filing-jointly status.

In some situations, waiting until after marriage to perform Roth conversions can create additional flexibility and allow larger conversions at lower effective tax rates.

This isn't a common planning strategy, but it's one that can be overlooked when evaluating conversion opportunities.

Bonus consideration: You're moving to a lower-tax state

State taxes can significantly influence the math behind a Roth conversion. Someone working in a high-tax state, such as California, may pay an additional 7% to 10% or more in state income taxes on converted dollars.

If that same person plans to retire in Florida, Tennessee or another state with no income tax, waiting would likely generate sizable tax savings.

In some cases, the difference between converting before and after a move can amount to tens of thousands of dollars.

The bottom line

Roth conversions can be an incredibly effective tool, especially for retirees with pensions, large tax-deferred balances and concerns about future taxes. But the goal isn't to convert simply because Roth accounts sound attractive. The goal is to minimize your lifetime taxes.

Related Content

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• This Changes Your Social Security Decision (Especially if You're in the 2% Club)
• 7 Times to Dip Into Your Roth IRA if You Have a Pension (and When to Leave It Alone)
• 3 Questions to Ask Before Deciding if a Roth Conversion Is Right for You

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.

Tax planning for executives can look very different from standard financial advice. The reason? Your compensation package likely includes a complex mix of salary, bonuses, company stock and deferred compensation — all of which involve tax considerations.

Last year's One Big Beautiful Bill Act (OBBBA) introduced new "tax traps" specifically targeting the executive suite.

In 2026, a $75,000 bonus could lower your net take-home pay if it triggers the wrong phase-out. At this level, what matters isn't what you earn, but what you keep.

The good news from the OBBBA

The OBBBA resolved much of the uncertainty surrounding the expiration of the Tax Cuts and Jobs Act. For high-income earners, there are a few permanent victories:

• Top-rate stability. The 37% top tax rate is now permanent. Without this legislation, the rate was set to revert to 39.6% in 2026.
• QBI deduction. The 20% qualified business income deduction for pass-through entities (S corps, LLCs, partnerships) no longer has an expiration date.
• Estate exemption. The exemption is $15 million per person ($30 million for married couples) in 2026 and is locked in through 2033.
• Bonus depreciation. 100% first-year bonus depreciation has been restored permanently, allowing for the immediate deduction of business equipment costs.

The tax traps to watch out for

While the wins are significant, several new provisions act as a "stealth tax" on executive income.

1. The SALT phase-out.

The OBBBA raised the state and local tax (SALT) cap to $40,400 for joint filers, but it comes with a catch: It only applies to those with a modified adjusted gross income (MAGI) under $505,000.

Above that, the benefit phases out entirely, reverting to the old $10,000 cap by the time you reach $600,000.

Pro tip: Participation in deferred compensation can reduce current-year taxable income.

2. The 2026 AMT reset.

The alternative minimum tax (AMT) is set to kick in harder this year. For married filers, the exemption resets to $140,000 (down from 2025 levels), and the phase-out rate doubles from 25% to 50%.

If you plan to exercise incentive stock options (ISOs) in 2026, you should run an AMT projection first to avoid an unpleasant tax surprise next April.

3. The charitable "cover charge."

Starting in 2026, charitable contributions face a new floor: You can only deduct gifts that exceed 0.5% of your AGI. On income of $800,000, your first $4,000 in donations provides zero tax benefit.

Strategy: Use bunching. Instead of annual gifts, contribute a larger sum (e.g., $50,000) to a donor-advised fund (DAF) in a single high-income year to clear the floor for a meaningful deduction.

4. The 2/37ths deduction limit.

If you're in the 37% bracket, the OBBBA now caps the value of your itemized deductions at 35 cents on the dollar.

This 2% gap makes above-the-line deductions — such as 401(k) contributions and health savings account (HSA) funding — far more valuable because they reduce your income before this cap is applied.

Equity compensation: Where strategy makes the biggest impact

Company stock is often the largest component of executive pay and the primary source of complexity:

Restricted stock units. RSUs are taxed as ordinary income at vesting. If you have the cash to cover the taxes, holding the shares allows future growth to be taxed at lower long-term capital gains rates.

Stock options. Nonqualified stock options (NQSOs) generate ordinary income at exercise. Incentive stock options (ISOs) offer potential capital gains treatment, but the lower 2026 AMT thresholds make them "riskier" than in years past.

Too often, executives, especially those deemed control persons subject to Section 16 reporting, overconcentrate their wealth in company stock.

In addition, there's often internal pressure from the C-suite for high-level executives of publicly traded companies to retain their stock. This can create difficulties in adequately diversifying one's wealth while still indicating confidence in the company.

Advanced executive moves

To maximize efficiency, executives should look beyond the basic 401(k) limits:

The mega backdoor Roth. If your plan allows for after-tax contributions, you can potentially funnel an additional $47,500 into a Roth 401(k) for 2026 (up to the total $72,000 IRS limit), where it grows tax-free.

The PTET workaround. If you're a small-business owner or have consulting income, the pass-through entity tax (PTET) election allows your business to pay state taxes at the entity level. This bypasses SALT income thresholds and remains a key tax strategy under the OBBB.

Deferred compensation (nonqualified deferred compensation or NQDC). These plans allow you to delay income — and the 37% tax hit — until retirement, when you might be in a lower bracket.

However, they're governed by strict Section 409A rules. One wrong move can trigger a 20% excise tax penalty.

Distribution elections under deferred compensation are critical — it makes sense to consult with an adviser to determine how much to defer and what distribution election is most advantageous.

The bottom line

Most executives leave money on the table because their equity, retirement and charitable strategies aren't managed in concert with one another.

In the OBBBA era, these elements are interconnected. Success requires a coordinated look at how a move in one area changes the math in another.

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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 picked up Strangers: A Memoir of Marriage by Belle Burden expecting a juicy divorce memoir. What I got was a thoughtful, sometimes uncomfortable look at how a marriage can unravel so gradually that, by the end, the person you've shared your life with feels almost unrecognizable.

Burden's memoir has all the ingredients of a page-turner: Wealth, privilege, beautiful homes, family dynamics, betrayal and a divorce that becomes increasingly contentious.

More than once, I found myself staying up later than I should have, telling myself I'd read just one more chapter.

As a financial adviser, however, I found myself reacting to different parts of the story than most readers probably would.

At one point, I wanted to reach through the pages and yell, "No! Do not take your money out of your separate property trust and put it into a jointly owned home!"

That's what made the book so compelling to me. Beneath the story of a marriage ending was another story unfolding quietly in the background: The financial decisions being made along the way.

The danger of disengaging with your finances

Burden's story reminded me how easy it is for intelligent, capable people to become passive participants in their financial lives. Not because they lack the ability to understand money, but because life is busy.

Careers demand attention. Children need to be raised. Marriages operate on trust. One spouse naturally takes the lead in certain areas, and before long, financial decisions become something that simply happens in the background — often brushed aside with a comment like, "This is all too complicated for you to understand, anyway."

Most of the time, that arrangement works just fine … until circumstances change.

The reality is that many of the financial pitfalls people encounter aren't obvious. Few people wake up worrying about how property is titled, whether inherited assets have been properly protected, whether a prenuptial agreement still reflects their current situation, or whether beneficiary designations are consistent with their wishes.

Yet these are precisely the kinds of issues that can have life-changing consequences.

What makes Strangers particularly powerful is that Burden doesn't portray herself as a victim of circumstance. Near the end of the book, she reflects on a series of decisions involving her prenuptial agreement, property ownership and her level of involvement in the family's financial affairs.

Reading those reflections, I found myself thinking less about the divorce itself and more about the dozens of moments along the way when a different conversation, a second opinion or a deeper understanding of the financial implications might have altered the outcome.

That's a lesson I see play out frequently in my profession.

Many people assume the greatest financial risks they face involve the stock market. They worry about whether they should buy a particular fund, invest in international stocks or wait for a market correction.

In reality, some of the most consequential financial decisions have little to do with investing. They happen when we sign legal documents we don't fully understand, make changes to ownership structures, neglect to update estate plans or assume someone else is paying attention to details that affect our future.

The value of expert financial advice

This is one of the reasons I believe comprehensive financial planning is so valuable. A good financial adviser doesn't simply manage investments. They help clients identify risks they may not even realize exist.

Sometimes the most important question in a planning meeting isn't, "What should I do?" but rather, "What haven't I thought about?"

And yes, you can use AI chatbots to answer questions, but you need to know what to ask them.

An experienced adviser, however, can prompt the questions that haven't yet occurred to you:

• What happens if circumstances change?
• Does this legal agreement still reflect our intentions?
• Have we unintentionally exposed assets we meant to protect?
• Is the financial structure of our lives still aligned with the reality of our lives?

Those aren't questions most people ask regularly. They're certainly not questions people ask when they're in love. Yet they're often the questions that matter most.

The power of staying engaged

That's ultimately the financial lesson I took away from Strangers. Burden's story is deeply personal, and every marriage is different. But her reflections serve as a reminder that financial security isn't created by avoiding difficult conversations. It's created by having them early, revisiting them often and staying engaged in the decisions that shape your future.

By the end of the book, I wasn't thinking about the divorce anymore.

I was thinking about all the people sitting across from me every year who assume nothing will change.

Most of the time, they're right.

The problem is not planning for the possibility that they're wrong.

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

One of the most common questions I hear from clients approaching retirement is also one of the most emotionally loaded: "Should I pay off my mortgage before I stop working?"

The honest answer is: Sometimes.

That's not a cop-out. It's the only answer that respects both sides of this decision.

Paying off a mortgage is not just a math problem. It's a cash-flow problem, a tax problem, an investment problem — and, for a lot of people, a peace-of-mind problem.

The mistake is assuming there's one universal rule. There isn't. The right answer for a homeowner carrying a 2.875% mortgage, a solid brokerage account and a reliable pension looks very different from the one facing someone with a 6.5% loan heading into heavy IRA withdrawals.

Two recent changes make the math worth revisiting.

• Freddie Mac's weekly survey puts the average 30-year fixed rate at 6.51% as of late May 2026.
• The SALT deduction cap increased to $40,000 under the One Big Beautiful Bill Act, with phaseouts starting above $500,000 in modified adjusted gross income.

Both shift the calculus for retirees in ways that weren't in play two years ago.

Start with where you are in your mortgage

By the time most clients ask this question, they're in the last quarter or third of their loans. That matters more than people realize.

Early in a mortgage, your payment is mostly interest. Later, it flips — you're paying far more principal than interest. The amount of interest you'd avoid by paying off early is probably smaller than you expect.

Here's a concrete example. Take a married couple with an original $350,000 mortgage at 6.5% and $111,000 still owed at year 26. Their annual payment runs about $26,547, but only $6,767 of that is interest. The total interest remaining in the next four years is roughly $19,670.

Compare that with the cost of paying off the loan by pulling from retirement accounts. Assuming a 24% federal bracket and 5% state tax, they'd need to withdraw approximately $140,845 to net the $111,000 after taxes, generating about $7,042 in state taxes and $33,802 in federal taxes.

That's more than $40,000 in taxes to eliminate $19,670 in interest. The numbers don't hold up.

The SALT change and why your state tax burden matters

For years, the $10,000 SALT cap made itemizing difficult for most homeowners. The new $40,000 limit changes that, particularly in higher-tax states such as Connecticut, New York or California.

At our firm, a large share of clients come from Connecticut, and this is the kind of question in which having accountants on staff pays off. The answer depends on whether you're itemizing, which depends on your full tax picture.

If you can now itemize under the new cap, your mortgage interest carries more federal tax value. That doesn't automatically mean you should keep the mortgage. It means you should compare your mortgage rate with your investment returns on an after-tax basis, not gross.

Don't drain your liquidity to feel debt-free

This is where a spreadsheet can mislead you.

Say you owe $300,000 and have $350,000 in taxable savings. Paying off the loan might feel like the right move. But if it leaves you with $50,000 outside your retirement accounts, you've traded one risk for another.

Retirees need accessible cash for home repairs, health costs, long-term care planning, tax bills, and market downturns. If paying off the mortgage means pulling more aggressively from IRAs later, you could end up with higher taxable income, steeper Medicare premiums and more of your Social Security subject to tax.

A paid-off house is comforting. But you can't spend your kitchen.

A practical framework for making the call

If your mortgage rate is below 4%, you're taking the standard deduction, and your portfolio is diversified, keeping the mortgage often makes more financial sense.

If your rate is above 6%, you get little or no tax benefit from the interest deduction, and if you have enough liquid assets remaining after payoff, paying it down becomes more compelling.

If you're somewhere in between, run four numbers before deciding:

• The after-tax cost of your mortgage (not the stated rate)
• Realistic after-tax portfolio return expectations
• Remaining liquidity after payoff
• The tax bill from withdrawing retirement funds to make the payoff

The best retirement decisions come from coordinating taxes, income and investments together. A mortgage decision is no different.

The real answer isn't "always pay it off" or "always stay invested." It's: Pay it off when the numbers work, your cash reserves stay healthy, and the peace-of-mind benefit is genuinely worth what you might be giving up.

Sometimes it is. And sometimes the spreadsheet makes that clear before your gut does.

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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.

Company stock can become one of the largest sources of wealth you'll ever accumulate.

Research from the National Center for Employee Ownership found that employees participating in stock ownership programs accumulated more than double the retirement savings of the average American, underscoring just how powerful equity compensation can be in building long-term wealth and financial independence.

But equity compensation can also quietly become a financial landmine if you don't fully understand how it works.

Without proper planning, you could face massive surprise tax bills, costly alternative minimum tax (AMT) liabilities, underpayment penalties or even pay taxes on wealth that later disappears in a market decline.

You can also become dangerously overconcentrated in your employer's stock, leaving both your paycheck and your investment portfolio exposed to the same company risk.

By the time many employees realize they have a problem, the damage is often already done.

Why equity compensation feels so confusing

You might receive restricted stock units (RSUs), stock options, employee stock purchase plans (ESPPs) or some combination of all three, and many high earners naturally assume they're taxed and managed the same way.

They're not. That confusion can become incredibly expensive.

• RSUs are company shares granted to you over time that become taxable as ordinary income once they vest. When an RSU vests, it means the stock officially becomes yours, and you can keep or sell it.
• Stock options give you the chance to buy company shares later at a price that's locked in today. If the company's stock price goes up, you can buy the shares at the lower locked-in price and potentially profit from the difference. Exercising your options means choosing to buy the shares using that special price.
• ESPPs allow you to buy company stock at a discount, often through payroll deductions.

Each type of equity compensation follows different tax rules, different vesting schedules and different planning opportunities. In some cases, taxes are triggered when shares vest. In others, taxes are triggered when you exercise options or sell stock.

You might not fully realize when those taxable events occur until you're staring at a shocking tax bill.

Once you layer in bonuses, deferred compensation, investment income and potentially multiple state tax filings, it's understandable that confusion can happen.

The tax bill that no one saw coming

One of the biggest mistakes employees make is assuming their company already withheld enough taxes.

In reality, many companies only withhold federal taxes on RSUs and stock option profits at a flat 22% rate, even if your actual tax bracket is 24%, 32%, 35% or 37%. That doesn't include state taxes, city taxes, Medicare taxes, or Social Security taxes.

That gap can quietly snowball into a massive surprise tax bill when April arrives.

Imagine receiving a large vesting event, celebrating what feels like a major financial win, only to later discover you owe the IRS hundreds of thousands of dollars you never planned for.

I recently worked with a senior executive whose RSUs vested during the same year she received a large bonus and significant deferred-compensation payouts. She assumed the taxes had already been handled automatically by her employer. They had not.

When we ran projections before year-end, we discovered she faced a six-figure tax shortfall. Had she waited until tax filing season to discover the problem, she could also have faced underpayment penalties.

The double taxation trap

Another surprisingly common mistake happens after employees sell their company shares.

Many employees don't realize they paid ordinary income taxes on RSUs when the shares vested because that income was already included on their W-2. Later, when the stock is sold, brokerage tax forms can sometimes make it appear that the full value of the sale is taxable all over again.

If your tax return isn't handled properly, you can accidentally pay taxes twice on the same money.

For high earners with large stock grants, this mistake can cost tens or hundreds of thousands of dollars.

When wealth becomes overconcentrated

Taxes aren't the only danger.

One of the biggest risks with company stock is emotional attachment. After years of working at a company, it's natural to feel loyal to the shares that helped build your wealth and career. But that emotional connection is dangerous.

Morgan spent decades building what she believed was a secure financial future through company stock and stock options. Over the years, her holdings grew to nearly $5 million. The shares represented years of hard work, promotions, long nights and professional success.

Like many longtime employees, she genuinely believed the company's best years were still ahead. Then everything started to unravel.

A major product recall triggered lawsuits. Earnings weakened. Headlines became increasingly negative. Employees watched the stock fall day after day while leadership struggled to calm investors.

Shareholders ultimately received only about 6 cents on the dollar in a corporate buyout. Her nearly $5 million position collapsed to roughly $300,000.

In a matter of months, both her career and the wealth she had spent decades building disappeared almost simultaneously.

Turning equity into long-term wealth

RSUs, stock options and ESPPs can either become one of the greatest wealth-building opportunities of your career or one of your biggest financial mistakes.

The employees who handle equity compensation most successfully are usually not the ones obsessing about the next stock surge or trying to perfectly time the market. They're the ones who proactively manage taxes, diversify before risk becomes dangerous and treat company stock as the major financial asset it truly is.

The damage is often already done by the time you realize you have an equity-compensation problem.

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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.

A prospective client told me he had it all done. He had a will in place, did his own stock picking and his wife did the taxes. What more did he need?

I went through my checklist. He had a lot of cash sitting in the bank and CDs — not ideal for high earners, since the interest is taxable. His will had no family trust, causing potential probate issues, and his adult children had no estate plan either. He was giving cash to charity, another tax faux pas. And on we went.

On the surface, financial planning can seem simple, if you are unaware of the possibilities. That is where a professional can help. And thanks to improvements in technology, today I am more excited about the opportunities to help high-income earners than ever in my 25-plus years in the industry.

Here are three examples, depending on individual circumstances, where technology may help in financial planning for high earners.

Tax-aware fixed income

High earners were traditionally advised to invest in tax-free municipal bonds in taxable accounts. Municipal bond interest is generally exempt from federal income taxes, and so high-income investors in a high tax bracket can use municipal bonds to avoid having the interest eaten up by taxes.

However, municipal bonds don't always pay the most interest on an after-tax basis. Some non-municipal bonds, such as corporate bonds and federal agency bonds, can pay more interest even after taxes.

Investment managers today can jump between different types of bonds depending on which yield pays the most after-tax interest for the client. Different bonds move at different speeds or valuations.

Munis might rally and become expensive relative to other bonds, and depending on the client's tax bracket, the manager might take gains from the munis and reposition into taxable bonds. Of course, you must pay attention to credit risk too, as different bonds have different risks.

The key is: Don't think municipal bonds always make sense. That might not be the case, and other bonds may offer different after-tax characteristics worth considering.

Robust tax-loss harvesting

If you are staring at a taxable gain on your Schedule D Tax Form, you probably need a more robust tax-loss harvesting strategy. Tax-loss harvesting — selling stock or bond losses to offset gains elsewhere in a portfolio — has been around for a long time.

However, technology has improved trading capabilities immensely. Today, tax-loss harvesting can be implemented more frequently using these tools.

There are other non-traditional tax-loss harvesting strategies appropriate for certain high-net-worth clients that can also be considered. If your tax-loss harvesting is stuck in the old way of doing it once a year around the end of the year, I encourage you to explore the new platforms that are available.

Advanced scenario planning

Moving to a state with a lower income tax? It can seem like a good idea, but it's best to check with a professional beforehand. Tax software can help show the difference in taxes between the two states, and sometimes the savings is less than expected.

I have client who wanted to see the impact of making additional Roth 401k contributions. The scenario planner showed the tax impact assuming different rates of return and different tax rates in the future. This helped put some context into the client's decision.

The software most planners use today is highly intelligent. Most of these scenarios can be done rather quickly and can lend confidence to decision-making.

My advice to high-income investors is this: If you haven't explored wealth management capabilities recently, much has changed in what a planner can do for you. The technology improvements have significantly improved the advice we can provide, and may be worth exploring.

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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.

Jim and Pam are a hypothetical couple I use with clients to illustrate what the numbers in a retirement plan can look like. They're both 62, have $2.5 million in pretax retirement accounts and $54,000 a year in combined Social Security benefits when they retire. On paper, they've done everything right.

But when Jim dies at 75, Pam's financial picture changes in ways they never planned for.

Her Social Security does not disappear entirely. The higher of the two checks continues, but one check is gone and her fixed income drops significantly overnight.

Her effective tax rate climbs from approximately 10% to between 15% and 23%, and may reach 28% by the time she is 85. Her total annual tax bill rises by approximately 145%, from roughly $11,000 to roughly $27,000. Within just a few years that increase may exceed 300%, with estimated total taxes of around $46,000 a year driven primarily by required minimum distributions (RMDs).

On top of that, a Medicare IRMAA surcharge begins approximately two years after RMDs start, ranging from an estimated $4,600 to $6,300 a year, deducted directly from her Social Security before she ever sees it.

And her RMDs, around $167,000 a year when they begin and potentially $250,000 a year as the account grows, now land entirely on a single tax return.

Same savings. Dramatically different tax bill — for the rest of her life.

This is the widow's penalty. It is not a fluke or an edge case. It is a predictable consequence of how our tax system treats a surviving spouse, and most retirement plans don't take it into account.

Four financial hits that arrive at once

When one spouse passes away, the survivor faces four simultaneous changes. Each is significant on its own. Together, they reshape the entire retirement picture.

1. Tax brackets compress immediately.

The 22% tax bracket for a married couple filing jointly in 2026 begins at $100,800. For a single filer, that same bracket kicks in at $50,400. The standard deduction also drops, from $32,200 for a married couple to $16,100 for a single filer. The first full tax year after a spouse dies is often the most financially disorienting year a surviving spouse will face.

2. Medicare IRMAA surcharges can jump.

Medicare's income-related premium adjustments are tied to income thresholds that are far lower for single filers than for married couples. A couple may be comfortably below an IRMAA tier, but when one spouse dies, the survivor can suddenly be well above it, paying thousands more a year in Medicare premiums on exactly the same income.

3. One Social Security check stops.

The survivor keeps the larger of the two benefits but loses the other entirely. For many couples, that's a drop of $25,000 to $40,000 in annual income. It doesn't get replaced.

4. RMDs don't stop.

At age 73 or 75, RMDs continue, regardless of what else has changed. The account balance is the same. But those forced withdrawals now land entirely on a single tax return, at single-filer rates, whether the money is needed or not. For a $2.5 million pretax account, that's not a rounding error.

Why don't retirement plans cover this?

Three things work against couples here. First, most retirement planning conversations focus on accumulation — saving more, investing well, managing risk. Tax planning for the surviving spouse is rarely on the agenda.

Second, advisers and clients alike tend to plan for the couple as a unit. The shift to single-filer status feels abstract until it's real, and by then the options have narrowed.

Third, these are uncomfortable conversations. It's easier to defer them. But in tax planning, time is the asset. The window for meaningful action is only open while both spouses are alive, healthy and still in a favorable bracket.

Four things to do while the window is still open

The widow's penalty is predictable. That means it's plannable. Here's where I focus with clients who want to get ahead of it.

1. Roth conversions during the married filing jointly window.

Every dollar converted from a traditional IRA to a Roth while both spouses are alive is a dollar the survivor can access tax-free, without pushing into higher brackets, triggering IRMAA surcharges or increasing Social Security taxation.

The married filing jointly bracket is one of the most valuable tax planning advantages available to couples. Most never use it for this purpose. I'd argue it's the most effective move available for reducing the survivor's future tax burden.

2. Term life insurance sized to replace the lost Social Security check.

This one surprises people. Term insurance isn't just a wealth-transfer tool. It can be a direct replacement for the Social Security income that disappears when a spouse dies. Size it to cover the income gap, put it in place before retirement while premiums are still reasonable, and the survivor has a real financial buffer during the most financially vulnerable period of widowhood.

3. Coordinate Social Security claiming with the survivor in mind.

Delaying the higher earner's benefit increases the survivor's check for life. For couples where one spouse earned significantly more, that delay can materially increase the survivor's annual income for life. The claiming decision that maximizes lifetime income for two people is often different from the one that maximizes the survivor's income alone. That gap deserves explicit attention.

4. Keep the portfolio working.

As a married couple, it can be easy to feel like the investments do not need to work as hard. Two incomes, shared expenses, a plan built around both of you. But that can change at any moment.

While both spouses are still living, keep the portfolio growing. A surviving spouse at 75 may have 20 or more years ahead and may suddenly need to draw significantly more from the portfolio than the couple ever did together.

A portfolio that becomes too conservative too early loses the growth needed to outpace inflation and fund a long retirement. Investment strategy should be built around who is still here and how long they may need it to last, not the couple's age at the time of the first death.

The penalty is predictable. So is the solution

The math behind the widow's penalty isn't complicated. What makes it damaging is that it catches couples off guard, at the worst possible time, with no runway left to act.

Jim and Pam's numbers aren't abstract. They're close to what I see across my client base, with different names. The tax bill Pam faces isn't the result of bad luck or bad investments. It's the result of a plan that was built for two and never updated for one.

The right time to fix that is now, while both spouses are here, the brackets are still favorable and the options are still on the table.

Related Content

• Widow's Penalty: Three Ways to Protect Your Finances
• How One Widow Nearly Missed Out on $213,000 in Social Security
• How to Retire at 62 and Build a Financial Bridge to a Maxed-Out Social Security Check at 70
• 9 Tax Surprises Retirees Don't See Coming Until It's Too Late
• I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement Income

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

A growing number of Americans are worried that higher taxes in the future will erode their income in retirement. Yet few people who express this concern are adjusting their financial plans to help meet the challenge.

That’s the conclusion of two recent surveys by financial services companies.

According to an Allianz Life study earlier this year, 70% of Americans are now concerned about the impact of taxes on their income once they stop working, up from 66% in 2025. Gen Xers, on the cusp of retirement at ages ranging from 46 to 61, are the most fearful, with nearly 80% of them sharing this concern.

Yet, as a Nationwide Retirement Institute survey found, only 31% of investors who expect taxes to rise are taking steps to manage their finances accordingly.

"Taxes continue to be in flux, and finding the right strategy to help maximize your retirement income is definitely key," says Kush Kotecha, president of Nationwide Annuity.

Although federal tax rates are currently at historically low levels, the massive budget debt and coming solvency problems for Social Security and Medicare have heightened fears that taxes will head up.

"We cannot continue like this," says Kelly LaVigne, vice president of consumer insights for Allianz Life Insurance.

To minimize the bigger bite of income that higher taxes in retirement could take, experts suggest these steps:

Invest tax-efficiently.

Outside of tax-advantaged retirement accounts such as 401(k)s and IRAs, interest on U.S. government and corporate bonds and short-term capital gains (profits on the sale of assets held for a year or less) are taxed as ordinary income, with rates as steep as 37%.

But the top rate for long-term capital gains is only 20%, and the rate is 0% this year for taxable income below $49,450 for singles and $98,900 for married couples filing jointly.

Actively managed mutual funds tend to trade stocks often, causing their investors to owe short-term and long-term capital gains taxes, but index funds and exchange-traded funds make far fewer transactions, reducing their tax liabilities.

You can also seek out actively managed funds whose mission is to be tax-efficient, or you can put some money in municipal bonds and muni funds, which are generally exempt from federal taxes — and sometimes from state income taxes, too.

Consider a Roth conversion or a Roth IRA.

You’ll pay income taxes now on the amount you convert or invest, but you won’t owe taxes on withdrawals in retirement, when your liability could be higher if rates rise.

"Paying taxes ahead of time isn’t necessarily a bad thing," says LaVigne.

Take RMDs on time.

You must begin making required minimum distributions from traditional 401(k) plans and IRAs beginning at age 73 (age 75 starting in 2033), and your RMD can push you into a higher tax bracket and lead to higher taxes on Social Security benefits.

That may hurt, but so will the penalty for failing to follow the rules: You’ll owe up to 25% of the amount you should have withdrawn.

A Vanguard study of clients 73 and older with traditional IRAs found that about 7% failed to take their RMDs in 2024, and 24% took out less than the required amount. More than half who miss RMDs in one year miss them the next year as well.

Be generous.

After age 70½, you can make a qualified charitable distribution, or QCD, from money in a traditional IRA — up to $111,000 in 2026.

That amount won’t be included in your adjusted gross income, so it won’t be subject to taxes. QCDs after age 73 can satisfy some or all of your RMD, too.

Stash cash in a HSA.

If you’re not yet on Medicare and have a high-deductible health insurance plan, consider contributing to a health savings account.

You’ll be able to lower your taxable income, the funds will grow tax-deferred, and withdrawals for medical expenses are tax-free. Says LaVigne, "An HSA is one of the best deals on the planet."

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Carlos owns two parcels on the south side of McAllen, Texas.

The first parcel is located in a Qualified Opportunity Zone, one of the original tracts the federal government designated in 2018. That designation expires on December 31, 2026. Less than six months from now, the line on the map vanishes.

The second parcel, three miles north, is located in a Census tract that didn't make the cut in 2018. But under the new eligibility rules signed into law last summer, that second tract just became eligible for OZ 2.0, and Carlos' governor has until late September 2026 to nominate it, or not nominate it, or pick a different tract entirely.

Carlos can't develop both parcels. He has one window of construction capital, and he needs to put it where the next decade of tax-advantaged capital will flow.

He needs to read the tea leaves. So do you.

Key dates for the 2026 governor OZ 2.0 nomination window

The Opportunity Zone program was made permanent by the One Big Beautiful Bill Act (OBBBA) on July 4, 2025. That's the good news. The complicated news is that every Opportunity Zone designation in America is refreshed every 10 years, and the first refresh is happening right now.

Here's the timeline you need to memorize.

The 90-day designation window opened on July 1, 2026, and runs through September 28, 2026. During that window, every state governor is submitting their nominations to the U.S. Treasury Department. The IRS published Revenue Procedure 2026-14 in April, spelling out exactly how the process works.

Treasury will certify the nominations late in 2026. The new Opportunity Zones take effect on January 1, 2027, and run for 10 years through 2036.

Once that map is set, it's set. Nobody is going to add your tract in March 2027 just because you missed the deadline.

So the question isn't whether your governor is making this decision. The question is whether you know which way they're leaning.

OZ 2.0 vs OZ 1.0: Eligibility changes every investor should know

Before you can guess the map, you have to understand the rules your governor has to follow.

The first big change: The income threshold dropped. Under OZ 1.0, a tract was qualified if its median family income was at or below 80% of the state or metropolitan median. Under OZ 2.0, that threshold drops to 70%. The bar is higher, the field is smaller.

The second big change: The contiguous tract provision is gone. In 2018, governors could include a tract that didn't meet the income test as long as it sat next to a qualifying tract. That loophole stitched together some of the most lucrative zones in the country. It's closed now.

The third big change: There's a new anti-gentrification trigger. A tract is disqualified if its median family income exceeds 125% of the state or metropolitan median. If your neighborhood has already been gentrified between 2018 and 2024, congratulations, but you're probably not getting another OZ designation.

The fourth major change is the rural carve-out, which is significant enough to deserve its own section below.
Net result: Under OZ 2.0, the eligible pool of tracts is about 25% smaller than it was under OZ 1.0. Your governor is making harder choices with fewer chips.

Qualified Rural Opportunity Funds: How the basis step-up works

The biggest structural shift in OZ 2.0 favors rural America. Tracts that qualify as "rural areas" under the new statute unlock a supercharged set of benefits. Investors in a Qualified Rural Opportunity Fund (QROF) get a 30% basis step-up after five years, triple what urban OZ investors receive.

And the "substantial improvement" threshold drops from 100% to 50%, meaning rural developers can renovate properties with half the capital outlay they'd need elsewhere.

That 50% rural threshold went into effect the day the law was signed, July 4, 2025. It's already in play.

For governors with significant rural economies, this is a strong incentive to lean rural in their nominations.

For investors, it offers a fundamentally better economic profile than urban OZ 2.0: A higher step-up, a lower improvement bar and the same 10-year tax-free appreciation.

Lessons from the 2018 OZ designations: What to expect in 2026

We aren't completely flying blind. The 2018 round gave us a behavioral road map.

The average OZ designated in 2018 had a 31% poverty rate, well above the 20% statutory threshold. The average tract had income at 59% of the median area, significantly below the 80% cap they could have used. Governors weren't pushing the edges. They were picking distressed tracts with project pipelines.

The contiguous tract provision, the loophole that's now closed, got used in only about 2.6% of designations. Most governors didn't lean on it.

But here's the pattern that should grab your attention: By 2022, 75% of all OZ investment had gone to urban areas, even though 45% of zones were rural. And 75% of the total investment had been allocated to real estate, mostly residential. About one-third of OZ tracts received zero outside investment over the entire program.

So governors had two failure modes in 2018: They picked tracts where capital never showed up, and they overindexed on urban projects at the expense of rural communities that Congress intended to help.

This time, with rural super-incentives baked into the statute and a smaller eligible pool, expect a meaningful pivot. Governors who got criticized last round for "rich neighborhood" picks will be more cautious. Governors with significant rural economies will lean rural.

How Texas, Washington and other states are running their OZ 2.0 nominations

Different states are running different processes.

In Texas, the governor's Economic Development & Tourism Office asked local economic development organizations and county judges to submit eligible tracts by June 26, 2026. The state is now finalizing its list and intends to send picks to Treasury by August 3. The state is selecting on three criteria: Clear federal eligibility, demonstrable local support, including incentive packages and project viability within 24 to 48 months.

That third criterion is your biggest signal. Texas is picking tracts where private capital is genuinely about to deploy. If your county has a master plan, a TIF zone and a developer with a financed project pipeline, you're in the running. If your county hasn't submitted anything? You're not.

Washington state is publishing its draft application and scoring criteria publicly. New Mexico has spelled out exactly when its final tracts will be locked in. West Virginia plans to submit by late September. Some states are running stakeholder processes you can participate in right now.

In 2018, California revised one-fifth of its nominations after public feedback. Pennsylvania accepted recommendations covering 61% of eligible tracts. The states that ran transparent processes ended up with more deployable maps.

If you want a tract designated, the time to be in the room is this summer, while the governor is still finalizing, not October, after the map is locked.

How investors can influence OZ 2.0 tract selection: A four-step action plan

Carlos has about three weeks until Texas locks its list and sends it to Treasury on August 3. Here's the playbook, and it applies whether your state's window is still open or, like Texas, is down to the final days.

Identify which Census tracts within your project area are eligible under the new rules. Both Novogradac and the Economic Innovation Group publish free interactive mapping tools that overlay the 2020-2024 American Community Survey data that Treasury is using.

Find out whether your local economic development organization has already submitted your preferred tract. If yes, great. If not, you have an urgent phone call to make this week, not next month.

Document your project pipeline. Treasury isn't going to read your business plan, but your governor's office is. The states with the cleanest project documentation are getting the most credibility on their nominations.

Watch what doesn't get nominated (this is the part most investors miss). Tracts that are eligible but ignored become public information once states publish their submissions. Some of those tracts may become opportunities in the next 10-year cycle if conditions shift.

Planning for the December 31, 2026, OZ 1.0 deadline and the OZ 2.0 transition

The end of OZ 1.0 isn't an exit from this strategy. It's a transition.

Investors who deferred capital gains into OZ 1.0 funds have a hard recognition date on December 31, 2026, with the tax bill coming due in April 2027. That's a separate planning problem worth its own conversation with your investment adviser.

But the runway ahead is longer than the runway behind. OZ 2.0 isn't a sunset. It's a permanent program with a rolling deferral, enhanced rural benefits and tightened eligibility, focusing capital where it can do the most good.

The investors who win the next decade aren't going to be the ones who watch the map. They're going to be the ones who help draw it.

Carlos has three weeks. So do you.

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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.

In many areas of the country, homeowners are feeling the squeeze as property taxes climb at a faster clip than inflation.

In 2025, the average owner of a single-family home, with an estimated value of $494,231, paid $4,427 in taxes, according to a recent study from ATTOM, a provider of property data. That's a 3% increase from the previous year, compared with a 2.7% inflation rate in 2025.

The study, which analyzed property tax data collected from county tax-assessor offices throughout the country, found that some areas saw significantly steeper increases in average tax bills. Large metro areas that had the biggest year-over-year hikes in 2025 included Memphis (up by 34%), Baltimore (27%), St. Louis (11%), Houston (10%) and Kansas City (8%).

Homeowners in the Northeast and Midwest contend with the highest effective tax rates (average annual property taxes expressed as a percentage of the average estimated market value of homes in each area). Illinois had an effective rate of 1.84%, followed by New Jersey (1.58%), Vermont (1.4%), Connecticut (1.36%) and Ohio (1.32%).

Many of the states enjoying the lowest effective rates are in the West: Hawaii at 0.33%, followed by Idaho (0.39%), Wyoming (0.4%), Arizona (0.43%) and Alabama (0.43%).

Get the tax breaks you deserve

Make sure you take advantage of any relief programs that could reduce the total property tax you pay.

Many states offer a homestead exemption of some kind, shielding a portion of residents' assessed home value from tax.

Texas, for example, has a generous $140,000 homestead exemption for all residents. And states and localities commonly offer exemptions to certain groups, such as older adults, disabled individuals and veterans, too. In Texas, disabled residents and those 65 and older can claim an additional exemption of $60,000.

If you itemize on your tax return, you can deduct as much as $40,400 in state and local taxes for 2026, depending on your modified adjusted gross income (MAGI), thanks to a provision in the 2025 reconciliation bill, known as the "big beautiful bill."

The deduction amount increases by 1% each year through 2029, after which it reverts to the pre-2025 SALT deduction cap of $10,000.

Review your assessment

When your locality sends you its assessment of your property's value, gauge whether it's accurate. (Note that your home's assessed value may be some percentage of its full market value, depending on your tax assessor's rules.)

You can review your property's record card, typically available on the assessor's website or by request, to make sure the details are in order. If it lists, say, a higher number of bedrooms than your home has or some other mistake, getting it corrected could reduce the assessed value and, in turn, your tax bill.

Also, pull up the record cards of comparable homes in your area to see how their assessments line up with that of your property. You can use sites such as Zillow or Realtor.com to search recent sale prices of nearby homes similar to yours, too. If you think your home's assessment is too high, you can appeal it. Look for instructions on your assessment notice or your local government's website.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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In today's increasingly politicized financial environment, a growing number of high-net-worth American taxpayers are exploring ways to move abroad — and take their money with them.

While it's tempting to attribute this solely to economic fears or investment optimization strategies, the reality is more complex. Americans who want to reposition their wealth internationally must navigate a labyrinth of regulatory hurdles, tax implications and strategic choices.

Why are U.S. investors going global?

Traditionally, U.S. investors have been heavily U.S.-centric. It's not hard to see why. The American stock market is the most liquid and has historically outperformed most others over long periods.

In contrast, global citizens (those with ties to multiple countries) may naturally own assets across borders.

Increasingly, wealthy Americans are starting to think more like global citizens, seeking not just financial diversification but also geographic, lifestyle, political and various other kinds of diversification.

The ease of international travel, not to mention the proliferation of second passports and the ability to purchase residency visas, are all nudging affluent investors to look outward.

It's not unusual anymore to see U.S.-based clients requesting exposure to assets and currencies beyond the U.S. dollar, even through direct ownership of foreign stocks and offshore custodial accounts.

What are the challenges?

Of course, wanting to move money abroad and actually doing it are two very different things. The Foreign Account Tax Compliance Act (FATCA) has made it very difficult for Americans to open accounts overseas.

Most foreign banks and brokers are simply unwilling to take on U.S. clients, much less U.S. residents, owing to the compliance burden and reputational risks.

That said, it's not impossible. For example, a U.S. resident may be able to open an investment account through a licensed financial adviser in Singapore who is regulated locally (for example, by the Monetary Authority of Singapore), if the advisory firm's employees and Singapore office are registered with the SEC.

There are two broad ways to invest abroad:

1. Custody your assets in a foreign jurisdiction under a non-U.S. legal framework

2. Directly buy foreign-denominated securities, even while staying in the U.S.

The first requires opening a foreign custodial account (no small feat), while the second can be done through select U.S. platforms, such as Interactive Brokers, which offer robust FX conversion and foreign market access.

Most major U.S. brokers — think Schwab, Fidelity, Vanguard — may not support international currency trading or direct foreign stock ownership outside American Depositary Receipts (ADRs). They allow access via U.S.-traded ETFs or mutual funds that hold foreign stocks.

Even when they do, the cost can be prohibitive. Some brokers may charge upwards of $50+ per trade and hundreds more in clearing fees to settle international trades through third-party custodians.

In contrast, a platform like Interactive Brokers allows a client to convert USD into euros or pounds at near spot rates, execute trades on foreign exchanges, and custody assets in those currencies, all at low cost.

This infrastructure gap is one reason sophisticated investors are working with global advisers who understand these nuances and can access compliant, efficient platforms.

Private placement life insurance

Another useful strategy for ultra-high-net-worth families is offshore private placement life insurance (PPLI). Compared with U.S.-based policies, offshore PPLI structures often provide access to a broader universe of investment options, including alternative investments and institutional-quality strategies that may not be available in domestic policies.

Offshore policies also tend to have lower administrative and insurance-related costs, while U.S. policies are generally subject to more restrictive investment rules and higher fee structures.

For globally mobile families, offshore PPLI can provide both investment flexibility and tax-efficient wealth planning when properly structured and compliant with U.S. tax reporting requirements.

Tax and other considerations

Americans abroad also face a unique tax minefield. The IRS classifies most foreign mutual funds and ETFs are classified as passive foreign investment companies (PFICs) — a category subject to punitive tax treatment.

U.S. taxpayers living abroad must avoid these products and instead invest in individual stocks or U.S.-compliant vehicles, or risk expensive tax consequences.

To complicate matters further, U.S. estate plans, health insurance and tax brackets often don't travel well. Medicare doesn't follow you overseas. Most foreign estate laws are dramatically different.

And while Europe might seem appealing, many of its countries have significantly higher effective tax rates than the U.S., plus global taxation on investment income.

Practical advice — and warnings

If you're still keen on moving wealth abroad, consider these guidelines:

• Start with your currency. If you're planning to retire in Europe, build a portfolio denominated in euros, kronas, francs, krones, even sterling. If you're moving to Singapore, consider Singapore dollar-denominated assets. Don't wait until you move — start dollar-cost averaging now.
• Work with the right adviser. Local knowledge matters. If you're American, work with someone who understands both U.S. tax law and local financial systems, or you may find yourself untangling a financial mess later. American CPAs and financial advisers living abroad will understand what you're trying to achieve.
• Avoid the local "flavor of the month." Just because you live in Spain doesn't mean the local adviser's favorite fund is right for you. If it's a PFIC, it could cost you dearly in taxes.
• Reconsider property ownership. The dream of owning a villa in Italy is romantic but rarely practical. From break-ins to opaque ownership laws and maintenance costs, owning overseas property may be more trouble than it's worth. Try renting first.
• Prepare before you leave. Your financial plan should be portable. That means health insurance, estate documents and a U.S. tax strategy that doesn't react to your new life abroad but anticipates it.

The bottom line

Moving money (and life) abroad is not a casual undertaking — it requires strategic planning, legal awareness and the right partnerships. For ultra-high-net-worth individuals, setting up a foreign family office may make sense.

But for most Americans, the most realistic path is working with robust platforms and globally fluent advisers who are licensed in your destination.

And if you're still wondering whether it's worth it? Try renting an apartment overseas for a year. You'll quickly learn that the glamour of foreign residency often gives way to the grit of bureaucracy, and that a good plan is worth more than a good view.

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 more than a year, we've been sharing the profiles of millionaires who've generously and honestly recounted how they made their first $1 million.

Our My First $1 Million series is at 61 profiles and counting (with many more to come) — from a novelist in New England and a 37-year-old banking executive (yes, 37), to the owner of a waste-hauling business and a retired middle school teacher.

Many of these millionaires have told strikingly similar stories about how they built their savings, and we noticed some trends among them, some of which we highlighted in the article 5 Key Insights We Learned From 50 First-Time Millionaires.

They've had some retirement regrets, too, which we wrote about in 5 Things 50 Millionaires Wish They'd Known Before They Retired.

This time, though, we want to turn the spotlight on you. Have you been paying attention? Do you know what it takes to become a millionaire yourself (if you're not already one!)?

Take this quiz to find out. 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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Most affluent retirees don't have an investment problem. They have a structure problem. That distinction matters.

As a financial adviser with more than three decades of experience in investment strategies, tax-efficient retirement income planning and legacy wealth building, I've seen many portfolios that look strong on paper but leak wealth in retirement.

The account balances may be high, the allocation may look reasonable and the investment performance may be acceptable. But if the structure is wrong, money can quietly drain away through taxes, forced distributions, Medicare surcharges, Social Security taxation, poor withdrawal sequencing, survivor-tax penalties and inefficient legacy planning.

That is the retirement tax trap. And it usually does not show up as one dramatic mistake. It shows up slowly. These are some ways that the trap can appear:

• A larger tax bill than expected
• A required minimum distribution (RMD) that pushes income higher
• A Roth conversion window that closed too soon
• A surviving spouse suddenly paying more tax on similar income
• Children inheriting a large IRA that is far less efficient than the parents had assumed

None of this feels urgent while the accounts are still growing. The most dangerous retirement tax problems are often created when people feel financially safest.

Accumulating vs income engineering

Most successful retirees spent decades doing exactly what they were told to do — save, defer taxes, max out retirement accounts, reinvest, avoid debt and build the portfolio. That advice helped them accumulate wealth. But accumulation is not the same as retirement income engineering.

A retirement portfolio tells you what you own. A retirement income structure tells you how much control you actually have. Those are not the same things.

If most of your wealth is inside IRAs, 401(k)s, 403(b)s, deferred compensation or other tax-deferred accounts, you do not own that money with complete freedom. You own it with a future tax claim attached.

That does not make those accounts bad. It just means that they are incomplete without a distribution strategy.

IRA expert Ed Slott has warned for years that tax-deferred retirement accounts can become a tax time bomb when people confuse tax deferral with tax elimination. His core point is simple: Tax-deferred money is not tax-free money.

Emotionally, many retirees still treat a $2 million IRA like $2 million of spendable wealth. It's not. Part of that account belongs to future taxes. The only questions are how much, when and under whose tax rates.

That is where structure matters.

If you have never modeled how your IRA withdrawals, Social Security, pension income,

investment income, Medicare thresholds, Roth conversions and future RMDs interact over time, you may not have a retirement tax plan — you may only have a portfolio. That's a dangerous distinction.

The IRS does not tax your retirement based on how hard you worked, how responsibly you saved or how badly you want the money to last. It taxes the structure.

And a weak structure creates leaks. Some leaks are obvious; others stay hidden until the planning window has already narrowed.

Preventing leaks: How to strengthen your plan structure

Wade Pfau, a professor at the American College of Financial Services, has written extensively about retirement income planning as a different discipline from traditional accumulation investing.

He argues that retirement is not just about maximizing returns. It's about building an income structure that can support spending, manage risk, preserve flexibility and survive uncertainty. That is the point that many retirees are never shown clearly enough. A pile of assets is not a plan.

A plan requires coordination:

• The investment account has to work with the tax return
• The tax return has to work with Social Security
• Social Security has to work with Medicare thresholds
• IRA withdrawals have to work with Roth conversions
• Roth conversions have to work with future RMDs
• Income planning has to work for both spouses, not just while both are alive
• Legacy planning has to account for what children actually inherit after taxes

If those pieces are not coordinated, the plan may still look fine. Until the leaks begin.

The solution is a retirement tax map. It should show:

• Where income will come from
• Which accounts will be used first
• When Roth conversions may make sense
• How future RMDs may grow
• How Social Security taxation fits in
• Whether Medicare thresholds are being managed
• What happens to the surviving spouse
• How heirs may inherit assets after taxes

That kind of planning does not guarantee perfection. But it gives the family something most retirees desperately want: Control over timing, taxes, income, survivor outcomes and how much of the family's wealth is preserved.

As you create a retirement tax map that gives you the strong structure you need, bear in mind the following:

There is an optimal mathematical balance to keep in your tax-deferred account that allows you to get your future RMDs tax-free. Creating a systematic Roth conversion timeline will help solve this.

Creating a portion of your retirement income that's not market-dependent is one of the strongest mathematical financial structures you can build.

Stress-test your retirement structure

The worst retirement mistakes are rarely obvious when they are being made.

They look responsible. They look normal. They look like what everyone else is doing until years later, when the tax bills, forced distributions, survivor issues and legacy problems finally reveal what the account statements never showed.

By then, the issue is not just money. It's regret. The feeling that the family worked for decades, saved responsibly and still overlooked a problem that could have been mitigated with better structure.

If your retirement structure has never been stress-tested for taxes, widowhood, forced distributions, Medicare thresholds, long-term income sequencing and after-tax legacy outcomes together, you may be seeing your portfolio but not your future exposure.

That is the real retirement tax trap. Not taxation itself, but waiting too long to see where the leaks are.

Dan Dunkin contributed to this article.

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

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

I've chosen to defer my tax payments until I die.

That's not a loophole. It's not evasion. It's a sequence of decisions built on top of existing tax code, executed over decades.

Depreciation is just half the story. The real game is chaining deferrals across a lifetime so you never pay the recapture — and neither do your heirs.

Here's how the sequence works.

The recapture problem

When you sell a depreciated asset, the IRS collects recapture tax at 25%. If you've spent years zeroing out your income through depreciation, the accumulated liability can be enormous.

Sell a $10 million property with $3 million of depreciation taken, and you owe $750,000 in recapture alone, plus capital gains tax on any appreciation.

Every investor eventually asks: Is there a way to avoid triggering recapture?

Yes. Don't sell.

The 1031 exchange: Selling without selling

Section 1031 of the tax code lets you exchange one piece of real estate for another of "like kind" without triggering a taxable event. You use a qualified intermediary who holds the proceeds and transfers them into the replacement property. You never touch the money, so the IRS doesn't treat it as a sale.

"Like kind" is broad for real estate. Apartments for industrial. Retail for ranch land. A duplex for a 50-unit complex. Real estate for real estate.

One critical limitation: Since 2017, you can no longer exchange equipment, vehicles, aircraft or boats. You used to be able to swap your yacht for another yacht, your plane for another plane. That's gone. Real estate is the last category standing.

The growth sequence

The 1031 exchange isn't a one-time move. It's a repeatable mechanism for scaling.

Buy a 10-unit apartment. Operate it, take depreciation, build equity through appreciation and debt paydown. Exchange into a 20-unit. Then 50. Then 100. Each exchange resets depreciation — you get a new cost segregation study on the replacement property — while deferring all prior gains and recapture.

Over a lifetime, this compounds into a large portfolio built substantially with deferred tax dollars.

But bear in mind that these properties aren't mailbox money. Apartments are active businesses with tenants, maintenance, management and capital calls. The tax benefit doesn't change the fact that you're running a business.

The mineral rights exit

At some point, you get tired of being a landlord.

The final 1031 exchange converts real estate holdings into deeded mineral rights. Mineral rights are real property — deeded interests in land — so they qualify for exchange. And unlike apartments, minerals are truly passive: No capital calls, no expenses, no management obligations. Operators drill on your mineral rights and pay you a royalty, typically 10% to 25% of gross revenue. Not profit. Revenue.

That's the endgame. You've gone from active apartment operations to passive mineral royalties without ever triggering a taxable event. Maybe you started when you were 30. Now you're 70. You've deferred all of your income and all of your taxes through your entire investing career.

And then you die.

The generational reset

When assets pass through your estate — not a trust, and that distinction matters — your heirs receive what's called a stepped-up cost basis. The IRS revalues the asset at its current fair market value on the date of death, not the original purchase price.

Here's what that looks like. You bought properties over your lifetime for a combined $1 million. Through decades of 1031 exchanges, appreciation and reinvestment, your portfolio is now worth $30 million. You've deferred millions in recapture and capital gains.

When you die, you and your spouse's heirs inherit the portfolio at a $30 million basis. The prior $1 million basis is gone. The deferred recapture is gone. The capital gains are gone. Your heirs could sell the entire portfolio the next day and owe zero in capital gains tax.

Under the One Big Beautiful Bill Act, the estate tax exemption is now $15 million for individuals and $30 million for married couples, permanently. As long as the total estate is under that threshold, the assets pass to heirs with no estate tax and a full stepped-up basis.

Fair warning: Never place 1031 exchange assets into a trust. Assets must remain in the estate to receive the step-up. If they're in a trust, heirs will inherit the original low basis, and all that deferred recapture comes due. That's the kind of mistake that undoes decades of planning. Coordinate with your estate attorney and CPA.

What could change

It's worth remembering that none of these provisions is guaranteed forever. Bonus depreciation has survived every administration for 25-plus years, across both parties, but it has changed form repeatedly — 50% versus 100%, new-only versus used, permanent versus temporary.

1031 exchange rules already narrowed in 2017 when equipment exchanges were eliminated. The $30 million estate exemption for married couples is new. The stepped-up basis provision has been a target for reform in multiple past legislative proposals.

The strategy works under current law. Build the plan, but keep a pulse on the tax code and be quick to adapt when you must.

The full arc

The sequence is straightforward: Earn income, offset with depreciation, 1031 exchange into larger properties, exchange into minerals, hold until death.

At no point in this chain does a taxable sale occur. Tax deferral, executed correctly across a lifetime, starts to look a lot like tax elimination.

Legally. Across generations.

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

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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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

• 4 Retirement Risks Business Owners Often Overlook
• When Starting a Business, the End Is a Very Good Place to Start
• The Entrepreneur's Exit: How to Sell (or Pass on) Your Business Without Losing the Family
• Planning to Leave Your Business? How to Find the Right Buyer
• To My Small Business: Well, I've Been Afraid of Changin', 'Cause I've Built My Life Around You
• The Most Important Number for a Business Owner Considering a Sale

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.

Related Content

• How to Calculate RMDs (Required Minimum Distributions) for IRAs
• New RMD Rules: Starting Age, Penalties, Roth 401(k)s, and More
• You're Stuck Taking RMDs: Now What?
• Inherited an IRA? Key Distribution Rules to Know
• 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

• Counting on Real Estate to Fund Your Retirement? Avoid These 3 Costly Mistakes
• 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.

Related Content

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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.

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

If you 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.

Related Content

• What's in Store for the Stock Market in 2026?
• 8 Facts You Need to Know About Stock Market Corrections
• Four Historical Patterns in the Markets for Investors to Know
• I'm an Investment Adviser: This Is the Tax Diversification Strategy You Need for Your Retirement Income
• 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.

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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• 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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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

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• 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

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• 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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• Are You Getting Vague Advice About Roth Conversions?
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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 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.

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• 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.

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• 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

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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.

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."

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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.

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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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
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• 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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• Your 401(k) Is Sitting Pretty Right Now: It Could Be Time to Rethink Your Strategy
• 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.

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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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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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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.