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

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

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

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

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

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

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

Why the regret?

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

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

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

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

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

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

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

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

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

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

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

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

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

3. Where you work and where you retire both matter

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

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

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

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

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

5. Roth conversions mean writing a check you feel

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

6. Roth 401(k): No RMDs

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

7. Heirs inherit money and the tax

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

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

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

To Roth or not to Roth?

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

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

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

Related Content

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

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

Dear Wealth Wise: I'm 29 and trying to build retirement wealth. I have most of my assets in my Roth IRA, 401(k), and HSA: over $270k in total, with about $220k in the Roth IRA. I mostly hold individual stocks, and I'm not sure whether it makes more sense to switch to index funds and accept market-adjacent returns or stay concentrated. I don't want to lose what I've built, but I don't want to give up valuable growth this early in my retirement savings. I am ready for a "set it and forget it" portfolio, but I also have experience researching stocks, so I'm wary of going all in on index funds. — Passive Curious

Dear Passive Curious: Before we dive into your question, we first want to note how far ahead of most young investors you are. If you left your total savings of $270,000 invested and didn't save another penny, you would have $2.05 million at age 60, assuming a conservative 7% return. So, well done!

While your youth gives you more runway to experiment than older investors might have, your question is spot-on for anyone weighing the upside of stock picking against the simplicity of index funds.

Many investors prefer index funds over taking their chances with a portfolio of individual stocks. The S&P 500 index has rewarded investors with an average annual return of about 10% (or about 7% after inflation) since its inception in 1957.

In fact, Warren Buffett, one of the most successful investors of our time, agrees that everyday investors are well served by loading up on index funds over the long term.

In his 2013 Berkshire Hathaway shareholder letter, Buffett said, "The goal of the non-professional should not be to pick winners — neither he nor his 'helpers' can do that — but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal."

At 29, you might easily have a 30-year window to build wealth. Will a shift to index funds mean selling your goals short? Here’s what the experts have to say.

It’s a matter of how much risk you want to take on

The good thing about being 29 is that you’re young enough to take on risk in your portfolio. But the question you want to ask, says Danielle Arlotta, CFP and founder at Sole Financial, is "Can you continue to pick stocks for the rest of your life?"

"I’m sure that you’ve heard most active managers underperform their benchmark," Arlotta says. "It’s good that you’ve done your research and know what you’re buying. It sounds like you have been able to outperform the market as well. But one bad pick and you can also suffer significant losses."

As Arlotta explains, indexing works because it gives you instant diversification, which helps reduce portfolio volatility. As you get older and your risk tolerance starts to wane, it's important to recognize that benefit.

Keep in mind that broad indices like the S&P 500 are market-cap weighted, meaning that just a few mega-cap tech giants (like the Magnificent 7) make up a big slice of the fund. If you want true broad-market diversification, consider pairing an S&P fund with an international index, for example.

Holding individual stocks isn’t gambling

You’ll often hear that index investing is safer than holding stock individually. Vincent Garaventa, CFP and vice president at Bauman Wealth Advisors, says that has some validity. But not every individual stock holding is speculative.

A well-researched, diversified portfolio may not be risky off the bat. The key, according to Garaventa, is to monitor your investments and rebalance as needed over time. You don’t want to remain too concentrated in a single company or market sector, so you’ll need to actively manage your portfolio.

"If done in the right amounts with the right portion of the portfolio," Garaventa explains, "there can be value for some diligent, disciplined investors in mixing in individual stocks or more targeted, themed investment funds."

Consider a hybrid approach: The core-satellite strategy

You may have the time and energy to follow individual stocks now, including the due diligence of reading 10-K reports and listening to earnings calls. But if you start a family or your work intensifies, index funds may look far more attractive. Arlotta says there’s nothing wrong with shifting to a "set it and forget it" strategy, but it doesn’t have to be all or nothing.

"Since you already have a majority of individual stocks, you can allocate all future contributions to index funds and rebalance when necessary," she says.

Arlotta's solution is easy to manage and avoids selling your stock positions. But there's another approach if you want to be more hands-on.

Garaventa suggests a core-satellite strategy, where the "core" of your portfolio consists of stable index funds and the "satellite" holdings can aim to beat the market.

"You siphon off a smaller portion of your portfolio and allocate it to your higher-risk investments, like individual security selection, and then run the core of your portfolio in a variety of index funds in a set it and forget it type of plan," he says. "This is a great way to balance the profit potential of individual stock selection with the high probability of index investing."

Advisers typically suggest that investors following the core-satellite strategy devote 80% or 90% to the core index fund portfolio and the remaining 20% or 10% to stocks. Many advisers recommend that no individual stock make up more than 5% of the portfolio.

Garaventa says it’s also important to consider the rate of return your plan needs to meet your goals.

"Sometimes that rate of return may be lower than one might anticipate, and investors may decide to use a higher-probability, index-only strategy where they’re not seeking significant outperformance beyond the benchmark because they’ve run the numbers and understand that their plan doesn’t require them to outperform the index," he says.

Of course, Garaventa acknowledges that most investors are wired to want higher returns, even if those returns aren’t needed to cover their future spending needs. It’s less about greed than ambition.

Plus, a 29-year-old investor doesn’t know what the future holds in terms of career growth, inflation, and AI-related disruption. Having more money than less only puts you in a stronger position to manage whatever the future holds.

At the same time, Garaventa says, "It’s important to consider the drawbacks and the higher risk. In my view, if you don’t want to leave individual stock selection behind, there’s value in doing both, as long as you do it in portions that are reasonable for your plan."

Keep in mind that there are tax ramifications for the location (or type of account) where you've stashed your funds. On the plus side, you can reallocate the $220,000 in your Roth IRA without a tax hit. That would not be the case if those funds were held in a taxable brokerage account. But if one of your stocks suffers a permanent loss in your Roth account, you can't harvest tax losses.

You’ve already won the hardest part of the early wealth-building game. Moving into index funds isn’t conceding defeat — it’s building in your lead so you can spend less time managing your money and more time living your life.

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

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When I ask pre-retirees with large 401(k)s how they plan to handle the taxes on those accounts, I usually hear some version of the same answer: "We'll wait until we retire. Our income will drop, and we'll be in a lower bracket."

However, "What will my tax rate be the year after I stop working?" is the wrong focus for a household with $2 million or more in pre-tax savings.

It's far more useful to consider what you and your spouse, and eventually your children, may pay in taxes across all the years that money will be withdrawn.

Your deduction today is a decision about decades

Deferring taxes while you work can make sense, and today's deduction is a real benefit.

But a traditional 401(k) or IRA isn't entirely yours to spend. Every dollar that comes out is generally taxed as ordinary income, and the balance that will eventually be taxed keeps growing along with your investments.

At a hypothetical 6% annual return, $2 million doubles to roughly $4 million in about 12 years. That growth is good news, but it also means the pool of income you'll eventually pay tax on may be much larger than the one you're looking at today.

You also won't have full control over when that income shows up. Required minimum distributions (RMDs) generally begin at 73, or 75 if you were born in 1960 or later, and they're calculated from your pre-tax balance whether you need the money or not.

Where 'lower later' tends to break down

Retirement can open a window of lower-income years. But for large pre-tax savers, that window is often shorter than expected.

Income stacks. RMDs add taxable income. Higher income can make up to 85% of your Social Security benefits taxable. It can also trigger Medicare IRMAA surcharges on Part B and Part D premiums, which are based on your tax return from two years earlier.

Market declines leave fewer choices. A downturn strains any retirement portfolio. But if all of your savings are pre-tax, every withdrawal you take to cover spending also adds taxable income. Roth savings don't protect you from market losses, but they give you another account to draw from without raising your tax bill.

A surviving spouse files alone. After one spouse dies, the survivor generally files as a single taxpayer. Household income often doesn't fall by much, especially if the survivor inherits the IRAs, but the tax brackets are roughly half as wide.

Your children inherit the tax bill, too. Most non-spouse beneficiaries must empty an inherited IRA within 10 years, according to IRS Publication 590-B. Those withdrawals are generally taxable, and for many adult children they land during their own peak earning years. Inherited Roth IRAs have distribution rules too, but qualified withdrawals can be tax-free.

None of these factors makes a Roth conversion the right move on its own. But together, they're the reason "we'll be in a lower bracket" isn't the same as "we'll pay less."

What paying tax now can buy, and what it costs

A Roth conversion doesn't avoid tax. You recognize income today and move that amount into a Roth account, where future growth may be withdrawn tax-free if you meet the IRS qualified-distribution rules.

In return, you get more control. A smaller pre-tax balance can mean smaller RMDs later. Qualified Roth withdrawals aren't counted in gross income, so they generally don't increase the taxable portion of Social Security or the income Medicare uses to set IRMAA. And as the original owner of a Roth IRA, you aren't required to take distributions from it during your lifetime.

The costs are just as real. A conversion raises this year's tax bill and can push you into a higher bracket or trigger higher Medicare premiums two years later. Paying the tax from savings outside your IRA uses money you could otherwise keep invested. A conversion can't be undone. And if your future tax rate really is lower, waiting may cost less.

So the real decision is when to recognize income, and whether paying some tax now may lower what your household pays over both spouses' lifetimes.

How to test the assumption

If you're within 10 years of retirement or recently retired, these steps can show whether waiting is really your cheapest path.

1. Sort your savings by tax treatment. List pre-tax 401(k)s and IRAs separately from Roth and taxable accounts. Many couples I work with are surprised by how much of their net worth carries a future tax bill.

2. Project income, not just a rate. Estimate what RMDs may look like alongside Social Security, pensions and planned withdrawals. The question is how much income will land on your return each year, and in which years.

3. Plan for both spouses, and your heirs. Run the numbers for the years after one spouse is gone and for what your children would receive. Those are the years a pre-tax-heavy plan is most likely to cost more.

4. Convert in pieces. A conversion plan doesn't mean moving an entire account in one year. Many households convert enough to use available room in a chosen bracket, then pause in years with a bonus, a business sale or a large capital gain.

5. Line up the tax payment first. Decide how you'll pay the tax, and adjust withholding or estimated payments before you convert. Your tax professional can help you check the effect on Medicare premiums and state taxes.

Make waiting a choice

Waiting until retirement to convert may still be the right answer for you. But it should be a conclusion you reach after comparing your options over both spouses' lifetimes, not a default you accept because it's what most people do.

Every pre-tax dollar will be taxed at some point. You have the most say over when that happens in the years before RMDs and other retirement income begin to stack up.

Projections depend on assumptions about returns, tax law and your circumstances, and they cannot guarantee a lower tax bill. The 6% return above is hypothetical and does not represent any specific investment.

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• 5 Times You Should Absolutely Not Do a Roth Conversion
• Just Retired? This Could Be Your Once-in-a-Lifetime Opportunity to Lower Your Lifetime Taxes
• The Retirement Move That's Quietly Taxing Your Social Security to the Max (and How Early Roth Conversions Can Help)
• Will Your Death Double Your Spouse's Tax Bill? 4 Ways Couples Should Prepare for the Widow's Penalty

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 Sir Terry Pratchett's 1993 Discworld novel "Men at Arms," Captain Samuel Vimes laid out his grand economic theory: a rich man spends $50 on a pair of good leather boots that last ten years. A poor man, who can only afford $10 cardboard-soled boots, has to replace them every year.

After ten years, the rich man still has his expensive boots and dry feet. But the poor man has spent $100 and still has wet feet. As Vimes noted with characteristic cynicism, "The reason that the rich were so rich…was because they managed to spend less money."

Retirees on a fixed income face similar traps with their income taxes.

For instance, maxing out traditional 401(k)s and IRAs to save on taxes during your working years feels like a sensible, frugal choice. But deferring taxes without a plan is the financial equivalent of buying cardboard-soled boots — it gives temporary relief today, only to push you into higher federal tax brackets tomorrow.

The good news? You don't need a fortune in cash to keep your feet dry. You just need to know how to patch your boots in retirement.

How the "Boots Rule" of retirement tax planning works

The "boots rule" of retirement tax planning acknowledges a simple reality: most retirees don't have wads of cash hanging around.

As Sam Vimes alluded to in Discworld, everyone would buy durable, high-quality boots if they could afford the upfront cost — or, put another way, retirees would make the "perfect" financial move if circumstances allowed.

Nowhere is this clearer than in traditional retirement accounts. During your working years, deferring taxes offers an immediate, affordable benefit: get your employer's match, deduct your contributions today, then pay the taxes later.

However, deferring taxes means deferring them on decades of compound growth, creating a mounting tax liability down the road.

Then, when standard financial advice tells you to "just convert your 401(k) to a Roth IRA today," it ignores the immediate, out-of-pocket tax bill that conversion triggers. Just like the worker was forced to keep buying cheap boots, many retirees stay in tax-deferred accounts because they lack the upfront cash needed to buy their way into tax-free growth.

To overcome this, you can become a financial cobbler. Rather than paying a big upfront tax bill all at once, you can patch your financial boots on a modest budget using three core levers:

• Smart timing. Withdrawing money from specific account types during "low-income gap years" (the window between career retirement and when Social Security or required distributions begin) to minimize tax exposure.
• Bracket management. Intentionally filling lower federal income tax brackets (like 10% or 12%) without accidentally spilling into higher marginal tiers.
• Account sequencing. Choosing the order in which you spend down your taxable, tax-deferred, and tax-free accounts to prevent artificial income spikes later in life.

Coordinating these three levers creates a personalized "repair strategy" that systematically plugs your tax leaks year by year using dollars you already have. This can help protect your retirement portfolio against unoptimized RMD payments, higher taxes on Social Security benefits, expensive Medicare surcharges, and wasted charitable deductions.

Four "leaks" to plug in your retirement dollars

Without proactive planning, four major tax traps act as the "cardboard soles" of retirement — quietly draining your portfolio year after year. Here is how to fix each leak using low-cost levers:

1. Required minimum distributions (RMDs). Starting between ages 73 and 75, mandatory pre-tax withdrawals from traditional IRAs and 401(k)s force taxable income into your bank account, pushing you into higher brackets whether you need the cash or not.

The "shoe repair": Use smart timing to execute targeted "micro-conversions" during your gap years. Moving smaller IRA amounts — maybe $1,000 annually — from a traditional IRA to a Roth systematically chips away at future forced RMDs (since Roths aren't subject to them). Roth distributions are also not taxable when withdrawn.

See also: 6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)

Plus, by only converting small amounts, you're less likely to push yourself into a higher marginal federal tax bracket. This type of bracket management may keep the federal tax on those annual Roth conversions as low as $100 to $220 per year (assuming a 10% to 22% marginal tax bracket rate).

2. The Social Security "tax torpedo." Unmanaged IRA withdrawals stack directly on top of your Social Security benefits. This triggers a compounding formula that can tax up to 85% of your Social Security income.

The "shoe repair": Blend tax-free Roth withdrawals or health savings account (HSA) funds to cover discretionary spending spikes (like home repairs or travel). Keeping ordinary income below the threshold limits helps protect your Social Security from taxation.

You can also draw down taxable brokerage accounts up to the 0% long-term capital gains tax threshold to fulfill your cash needs without raising your taxable baseline (or, as Kiplinger reported, utilize tax-loss harvesting to lower your tax bill).

3. Medicare IRMAA surcharges. One extra dollar of retirement income can cost you thousands. For instance, crossing an income-related monthly adjustment amount (IRMAA) threshold triggers automatic, high-cost monthly premium hikes on Medicare Parts B and D two years later.

The "shoe repair": Instead of draining pre-tax accounts first, sequence your annual withdrawals across three buckets: taxable, tax-deferred, and tax-free. Blending these sources keeps your modified adjusted gross income (MAGI) low, potentially helping your retirement income steer clear of IRMAA cliff edges. For more information on the three-bucket model, check out Kiplinger's report, The 40-Year Retirement Rule.

4. The RMD legacy and charitable waste. Donating cash directly from your checking account overlooks significant tax savings once you reach RMD age (and even a little before that).

The "shoe repair": If you are age 70½ or older, use a qualified charitable distribution (QCD) to transfer funds directly from an IRA to a qualifying charity (up to $111,000 per individual). This satisfies required distributions without adding a single dollar to your taxable income.

But if you want to donate outside an IRA, you can still get a tax advantage. Starting in 2026, the new charitable deduction for standard filers allows up to $1,000 in tax savings per individual on direct cash contributions.

Comparing your options side-by-side

To help evaluate your options, the breakdown below contrasts sticking with default standard tax-deferred accounts against a low-cost "boot repair" strategy.

The bottom line: Keeping your feet dry

Navigating taxes in retirement isn't about finding a magic bullet (or a magic shoe). As Sam Vimes realized, the real challenge is that short-term financial constraints often force choices that drain long-term wealth.

You don't need $5,000,000 sitting in a bank account to protect your portfolio from future tax hikes, Medicare surcharges, or mandatory distribution cliffs.

By making small, deliberate adjustments — filling low tax brackets, utilizing gap years, and sequencing your withdrawals — you can patch your financial boots year by year using the money you already have. But financial strategy is highly personalized, and no one size fits all.

So take a look at your current account mix today. Identify whether your savings sit primarily in pre-tax accounts, and map out your income gap between retirement and forced RMD age based on your specific financial circumstances.

A few simple patches could help to keep your tax bill more predictable, your income intact, and your financial feet dry for decades to come.

This article does not cover state income tax and is for educational purposes only. The content does not constitute financial, legal, or tax advice.

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"I'm self-funded." I hear those two words from almost every successful retiree I meet, and I understand the instinct.

Nobody wants to spend their retirement thinking about nursing homes or memory loss.

But after 40 years of planning for retirees, I can tell you the real question was never whether you can pay for long-term care. It's what happens to your spouse and your children while you do.

What self-funding actually costs

Here's the math most people never run. Say a care need costs $10,000 a month, a realistic figure for assisted living or a home health aide today. That money typically comes out of a traditional IRA that hasn't been taxed yet.

To walk away with $10,000 after taxes, you might need to withdraw $16,000 to $18,000. Your income jumps, your tax bracket can shift, and your Medicare premiums rise with it.

Then there's timing. Care doesn't wait for a good market. If a health event hits during a downturn, you're selling investments at the worst possible moment, not because it's smart, but because the bills don't stop.

When adult children are managing the finances during a crisis, they don't always make calm decisions. I've sat across the table from families quietly watching an inheritance disappear, arguing about whether Mom "really needs" a higher level of care. That's not a position any parent wants to put their kids in.

What changed one couple's mind

Let's consider a scenario with a couple I'll call Richard and Diane, a composite of a pattern I see constantly.

He's 67 and retiring, she's 66, and for three years, a couple like them tell me the same thing every retiree tells me: "We're self-funded." Large IRA, strong financial plan, long-term care nowhere on the radar.

What changes minds like theirs isn't a spreadsheet. It's Diane watching her own father need care. He had the money to pay for professional help and refused to spend it, so the calls went to his children instead.

Diane stepped up, and she saw firsthand what that looks like: The physical demands, the disruption to her own family, the exhaustion.

Her conclusion, one I hear versions of constantly: "There is no way I'm putting my kids through that."

That's the moment long-term care planning stops being a financial exercise and becomes something personal.

What Medicare will and won't cover

One of the biggest misconceptions I run into is that "Medicare will handle this." It won't, at least not the way people expect. Medicare might pay for a stay in a skilled nursing facility following a hospitalization, but that coverage runs out fast.

Around day 20 or 21, once care shifts from skilled to custodial, Medicare typically steps back, and the bill lands on you.

For a progressive condition such as dementia that requires years of care, Medicare offers very little.

The plan this structure solves for

Say Richard and Diane have a large IRA sitting untaxed, and Richard is approaching the age at which required minimum distributions (RMDs) would start. A common structure here is a custodian-to-custodian transfer, for example $280,000, from that IRA into a new IRA held at an insurance company.

That money funds a long-term care life insurance hybrid policy over 10 years, with the carrier adding roughly $65,000 in interest, bringing the total to about $345,000, distributed in equal annual pieces.

The policy would give them a current monthly benefit of slightly more than $6,000 for home healthcare, assisted living or nursing home care, available immediately if needed. That benefit typically increases 3% a year for two decades, so by the time they're in their late 80s, it has roughly doubled.

The benefit is unlimited in duration and paid out completely tax-free. Each spouse's benefit is entirely separate, so one spouse's claim never reduces what's available to the other. If neither of them ever needs care, there's a death benefit for their heirs.

There's a second benefit most people miss: The annual transfer from the IRA counts toward Richard's required minimum distribution once he turns 73, so a decision he had to make anyway now does double duty.

In this short video, I break down how such a structure plays out over a decade, RMDs included, if you'd like to see the numbers visually.

None of this was available to them by accident. Long-term care insurance requires underwriting, and Richard and Diane could still qualify because they had this conversation while they were healthy. Wait until a diagnosis arrives, and you might not qualify at all.

Wait five years because you're not ready to think about it, and the policy will likely cost more, with no guarantee you'll still be insurable. Most people I meet after a health event no longer have that option.

I want to be straightforward: A policy such as this doesn't cover every dollar of every care scenario, and costs will keep rising. But having $10,000 or $12,000 a month arriving tax-free changes the equation. Your children aren't scrambling for cash, and your surviving spouse isn't draining their own resources.

There's no investment strategy that replicates that kind of advantage. You can't self-fund an unlimited benefit. The math doesn't work.

Three steps to take now

1. Run the real numbers on what self-funding a $10,000-a-month care need would cost you in taxes and IRMAA surcharges, not just the sticker price.

2. If you're in your 60s and in reasonably good health, get a hybrid long-term care quote now. Underwriting only gets harder from here.

3. Talk to your spouse and adult children about who would provide care if no plan existed and whether that's a role you want them in.

You don't put a long-term care plan in place for yourself. You put it in place for the people who love you enough to show up when things get hard, so that showing up never becomes their full-time job.

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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.

Is 2027 your year to retire, or should you prepare a little more and work another year? That may be the question running through your mind as we round out 2026. After all, it's been pretty tumultuous. Inflation is up 3.7%, gas is over $4 a gallon and the stock market has been volatile. At the same time, 401(k) balances are at record highs and there are more 401(k) millionaires than ever before.

If you have been doing your job and saving, you may be thinking you're ready. You've got the cash and the means, so why not go for it? It turns out there's a lot more to it than the balance in your retirement accounts.

"It's a conversation we're having a lot right now with consumer sentiment so low and what's happening out in the world," said Kelli Smith, a financial planner at Edelman Financial Engines. "Can you really afford to retire next year, and how do you feel about it?"

To help you decide, we've created a choose-your-own-path type guide. Read on to see which path may be best for you.

Retire in 2027? Work One More Year?

Retire in 2027 if you know exactly what your retirement expenses will be each month: If retirement is only months away, a general idea of your monthly spending isn't enough; you should know exactly how much you'll spend and have a strategy. "Is your plan thorough?" says Smith. "Can it support your lifestyle, healthcare and income taxes in retirement?"

Work one more year if you don't have a retirement budget: If you're going off a rough estimate or plan to wing it, work one more year and create a detailed budget. To be extra ready: Smith says to follow that budget the year you're still working. You'll see if that's the right amount. Plus, it gives you a chance to save more.

Retire in 2027 if you're comfortable with the amount you saved: Most Americans think they need over $1 million to live comfortably in retirement, but that varies based on your unique situation. Some need more and some less. Whatever your number, once you reach it, a major retirement hurdle is gone.

Work one more year if you are unsure about your number: If you are feeling a little bit unsure about your retirement balance, working one more year can help build up your confidence. It's an additional twelve months to max out your retirement accounts, pay down any high-interest debt and save more. "A penny saved is a penny earned," says Smith. "Use the year to feel more comfortable."

Retire in 2027 if you have a withdrawal strategy: Do you know how much you plan to withdraw regularly, and does it account for inflation and any market downturns, particularly early in retirement? If you can answer yes, then it's another aspect of retirement readiness you can check off. A tax-smart plan for when and how much you withdraw in retirement will ensure your money lasts and give you permission to spend.

Work one more year if you plan to figure it out as you go: If you don't have a plan for using your money in retirement, another year may benefit you. Withdrawing as you go can lead to running out of money prematurely. That's particularly true during market downturns. To help build a strategy, check out our rules series, including the 4% rule, the bucket approach, guardrails and the pay yourself first strategy.

Retire in 2027 if you know what you'll do with your free time: Retirement isn't only about your finances; it's about your emotional health. Happy retirees typically have a passion that gives them a purpose and a sense of community. It can be volunteer work, a part-time job or spending time with friends and family. Whatever it is, if you know what your retirement passion will be, or at least have a list to try, it's a good sign you're ready to retire.

"It comes down to defining a lifestyle, not a number," says Michele Havens, head of U.S. wealth management at BMO. "We ask clients to think about their value and purpose more than their savings."

Work one more year if you don't know what you'll do in retirement: You may know you don't want to work anymore, but if you haven't really thought about what you'll do once you retire, take the time to ponder it. Spend one more year working and map out what retirement will look like for you. Not only the big trips and hobbies, but the day-to-day activities. What does a regular Tuesday look like?

Take your time with the choice

Deciding between 2027 and working one more year doesn't have to be an all-or-nothing choice you make today. Use the coming months to hone your plan, build your confidence and map out what life actually looks like after work. When the financial and emotional pieces align, you'll know it's time.

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For 30 or 40 years, the job is simple: Save more, invest it, let it grow, repeat. Then you retire, and almost everything about how your money behaves changes at once. The habits that built the nest egg are not the habits that manage it well in retirement.

As a financial planner with nearly two decades of experience, I've sat with plenty of accomplished people who mastered the accumulation game but were caught off guard by the drawdown phase. The shift is real, and knowing what's coming makes it far easier to handle.

Here are six things that happen to your investments the moment you stop working.

1. Sequence of returns risk takes center stage

While you were saving, a market drop early in your career was almost a gift. You kept buying shares at lower prices, and time smoothed everything out. In retirement, the order of your returns suddenly matters enormously.

A steep decline in the first few years of retirement, while you're also withdrawing to live on, can do damage that a later decline of the same size would not. You're selling shares to fund expenses at exactly the wrong moment, and those shares aren't around to recover when the market eventually rebounds.

Two retirees with identical average returns over a 30-year retirement can end up in very different places depending purely on when the bad years arrived. The one who hit turbulence late may sail through comfortably. The one who hit it in years one and two may run short, even though the long-run average was identical.

This is the single biggest behavioral and structural shift. But most people have never heard of sequence of returns risk until it is upon them.

2. You move from 'growth at all costs' to income and stability

The whole point of accumulation is growth. The point of retirement is using the money. That usually means dialing back the most aggressive parts of the portfolio in favor of holdings that can produce income and ride out volatility with less drama.

This isn't about abandoning stocks altogether, since a multi-decade retirement still needs growth to keep pace with inflation. It's about changing the mix so that a bad year doesn't force you to sell your strongest holdings at a loss to pay the electric bill. The balance you held at 45 is rarely the balance that serves you at 65.

3. Cash suddenly has a job

During your working years, large cash balances felt like a drag — money sitting idle while it could have been invested. In retirement, a cash reserve becomes a tool rather than a missed opportunity.

Holding a year or two of expenses in cash and equivalents gives you somewhere to draw from when markets are down, so you aren't forced to sell investments at depressed prices. That buffer is what lets the rest of the portfolio stay invested through a rough patch.

The mindset flip is hard for lifelong savers, who spent decades being told that idle cash is wasted cash. In retirement, that idle cash is doing important work.

4. Required minimum distributions start making decisions for you

Eventually the IRS stops letting your tax-deferred accounts grow untouched. For 2026, required minimum distributions (RMDs) generally begin at age 73. From that point, you must withdraw a calculated amount each year whether you need the money or not, and it's taxed as ordinary income.

For someone with a large traditional IRA, those forced withdrawals can be substantial enough to push you into a higher tax bracket or trigger Medicare surcharges. The penalty for missing one is steep: 25% of the amount you failed to take, reduced to 10% if you correct it promptly.

RMDs turn your portfolio into something that generates taxable events on a schedule you don't control. This is also why the years before 73 carry so much planning value. Drawing down or converting some of those tax-deferred dollars earlier, while you have room in lower brackets, can soften the size of the RMDs waiting for you later. Wait passively and the distributions, and their tax bill, only grow.

5. Dollar-cost averaging runs in reverse

For decades, you put money in on a regular schedule, buying more shares when prices were low. That steady-drip discipline worked in your favor.

In retirement, the flow reverses. You're taking money out on a regular basis, which means you sell more shares when prices are low — the mirror image of the dollar-cost averaging strategy that served you so well.

This is why withdrawal sequencing and that cash buffer matter so much. Pulling a fixed dollar amount from a falling market chips away at the share count faster than most people expect. The same mechanical force that built your wealth can erode it if you don't plan around it.

6. You become a spender — and that's harder than it sounds

This last one is psychological, but it is no less real. People who spent their whole lives saving often find it genuinely difficult to flip the switch and spend. They under-spend out of anxiety, denying themselves things they planned and saved for, because watching the balance drop feels wrong after decades of watching it climb.

I've seen retirees with more than enough ration their own travel and comfort as if the money were not really theirs to use. Others swing the other way and spend too freely early on, before they have a clear read on how long the money needs to last.

Neither extreme serves you. Becoming a deliberate, comfortable spender, drawing down the money you worked to build without fear or recklessness, is one of the underrated challenges of retirement, and almost nobody warns you about it in advance.

Putting it together

Look at these six issues together and a theme emerges. Retirement isn't just "accumulation, continued." It's a different game with different rules, different risks and a different relationship to your own money. The instincts that built the nest egg — save aggressively, stay heavily invested, ignore short-term noise — don't all translate cleanly to spending it down over decades.

None of this means retirement is something to dread. It means the transition deserves its own plan, not just an extension of the one that got you here. The years right around your retirement date are when these shifts hit hardest, which is exactly why thinking them through in advance, ideally before you stop working, tends to make the whole transition smoother.

The accumulation phase rewarded discipline and patience. The drawdown phase rewards planning and flexibility. Knowing the difference — and adjusting before the shift catches you off guard — is most of the battle.

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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.

Things that go bump in the night aren't the only frights retirees should fear this Halloween season; their retirement accounts might just scare the bejesus out of them.

That's especially true in the current environment, where inflation is rising, gas prices are elevated, and a U.S. mid-term election is around the corner. Short-term portfolio dips might be scary, but the true nightmares lie in these five hidden traps.

5 Spooky Retirement Investment Moves to Avoid

1. The monster you invited in

You may have heard this AI stock is the next Nvidia, or this option play using an upside-down multi-way spread trade (whatever that is) will make you rich; if you don't understand it and still invest in it, Brant Wong, head of retirement solutions at Principal Asset Management, says that is one of the scariest things an investor can do.

"With any retirement account, for any investor, there are always different investments, different returns, and risks," says Wong. "It's important to understand how these things work." If you don't, you might make mistakes, leading to buying high and selling low, which is what true portfolio horror stories are made of.

2. Zombie investments

If you've switched jobs over the years, or aren't completely on top of your finances, you may have one or more of these: zombie investment accounts. These are old 401(k) accounts, stocks you forget about, or the same investment in multiple ETFs or mutual funds. All of those zombie investments cost you money in fees, redundancy and lost growth. They can be downright frightening, says Patrick Marcinko, a financial adviser at Bogart Wealth.

"Here's an easy fix. At least once a year, look at everything you own and why you own it. If you can't explain why, it's worth looking at it," he said. "It's very important to have an inventory."

To get started, you could search for lost 401(k) accounts.

3. Panic and run

In horror movies, you want everyone to run for the exit or get away from the axe murderer. But doing that when markets are going south, especially when you have a plan, can lead to a bloodletting, warns Wong. Just look at what happened after the Great Recession in 2008 and 2009. Everyone who didn't sell recouped their losses and then some. History has proven that over and over.

"You may want to escape and get away, but with investments it's not that simple," said Wong. "There's risk mitigation, which is why it's important to understand the investment and to make moves to optimally derisk the portfolio." If you have a plan in place and the markets are dropping, don't react, warns Wong. Stick to the plan and ride out the fright show to live another day.

4. Putting all your screams in one basket

Maybe you had stock options at your job, owned a stock that did well over the years, or, for whatever reason, one investment has taken on a life of its own and now represents a big chunk of your investment portfolio. If that rings true, you are committing what Jaime Quiros, CFP and Portfolio Manager at FBB Capital Partners, says is a grave mistake.

"Too much concentration can hurt you in a downturn or if something happens," he says. "Think about Enron, think about Lehman Brothers." Quiros was referring to two companies that collapsed, taking their share value along with them. "You don't want too much of one stock, especially in retirement," said Quiros.

5. Flying blind

One of the most haunting things any retiree can do that will doggedly follow them in retirement is to lack a financial plan. Without one, you may react when things go bad, which could create shortfalls later in life. "The scariest thing in retirement isn't a market drop," said Marcinko. "It's one you didn't plan for."

Avoiding the financial horror movie

Investing in retirement doesn't have to be scary and spooky this Halloween season. By making sure you have a plan, your investments aren't overconcentrated in one area and that you stay the course once you are on track, you can put all those ghouls, goblins and demons to bed once and for all.

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When it comes to estate planning, avoiding probate is one of the main motivators.

Whether it's designating beneficiaries or putting assets in a living trust, there are several ways assets can be directly transferred to heirs without going through probate.

But simply shielding assets from probate doesn't automatically mean assets will be distributed the way you intended. Sometimes, the same strategies used to avoid probate can unintentionally override other parts of an estate plan, potentially leaving loved ones without the protection you put in place.

Consider a father who has two adult children with different financial needs. One receives government benefits that have income and asset eligibility requirements. The other struggles with substance abuse and isn't able to responsibly manage a large inheritance.

To accommodate both children, the father creates a revocable living trust with separate trusts made for each. This allows the father to leave an inheritance to both while also keeping protections they need in place.

Later, the father opens a bank account and purchases an annuity, naming both children as beneficiaries.

Once he dies, the bank account and annuity proceeds go directly to the children instead of the trusts that were created. While naming the children as beneficiaries of that account allowed the father to keep his assets out of probate, it also bypassed the protections he deliberately built into his estate plan.

While avoiding probate is an important part of the plan, it shouldn't be the only consideration in this process. A beneficiary's situation can matter just as much as how the assets get transferred.

For example, a beneficiary might receive government benefits that have income or asset restrictions, struggle with substance abuse or managing money, or could be dealing with a personal matter such as a divorce.

Leaving an inheritance to someone in one of these situations could jeopardize future benefits, leave money vulnerable or bring new financial responsibilities they might not be prepared for or capable of handling.

Instead of having assets transferred to them outright, you might choose to open a trust so you can manage the inheritance and determine when and how distributions are made.

However, those protections only work if the assets are directed to the trust. Naming the individual as the beneficiary rather than the trust itself could make the trust irrelevant altogether.

While trusts can be helpful in protecting and managing assets, they're only one tool in the estate planning process. Reviewing how assets are titled and who's designated to receive them after you die is important.

Look at bank and investment accounts, retirement accounts, real estate, life insurance policies and annuities. A beneficiary designation or other transfer arrangement on a particular asset could determine where it goes once you die, even if that overrides protections you've established elsewhere in your plan.

Avoiding probate is just one of many considerations when it comes to building an estate plan. What's most important is making sure your assets are transferred to the people you intended in a way that accounts for their needs and circumstances.

For some, naming beneficiaries directly is enough. Others might find additional protections are necessary. Regularly reviewing your estate plan, making adjustments as needed, will ensure the strategies you use to avoid probate don't work against your estate 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.

The new documentary You Can See Everything about Theranos founder Elizabeth Holmes hit screens with a bang this month. Directors Nathan Fielder and Lance Oppenheim kept the movie a secret until its premiere, and buzz has been building about what it reveals.

It was certainly unexpected for Fielder to make a documentary about Holmes. He's worked in his own particular sort of reality TV for years, first with the show Nathan For You and next with The Rehearsal. While these shows tap into the human psyche in their own ways, as he says in You Can See Everything, he's far from an expert on chemistry or the Theranos case, and over the course of the filming, he seems increasingly confused about what he's doing there, which is also a central point of the documentary.

So much of this movie has been kept hush-hush, and it's an enjoyable experience to watch it unfold in a theater. So: If you haven't seen the movie yet and don't want to read any "spoilers," stop reading now before we get into the nitty-gritty.

While the documentary is ostensibly about Holmes, it's also about her partner, Billy Evans, and their relationship. After Holmes goes to a federal prison camp to serve her sentence for defrauding investors, Evans reveals on camera that he has power of attorney (POA).

He says that the power of attorney gives him the right to do many things on Holmes' behalf. The documentary shows him tweeting online from Holmes' X account, not indicating that it's not her posting (and not asking for her approval for what he writes), and creating an AI avatar of her likeness. He is also working on a new business with her, although he says he is largely making decisions on their behalf while she's imprisoned.

"The documentary shows how far people assume a POA reaches," Debra Taylor, managing partner and wealth adviser at Carson Wealth, tells Kiplinger.

So, what exactly does power of attorney give a person the right to do, and how does it work?

1. What "powers" does a power of attorney grant?

A power of attorney (POA) is a legal document that grants someone, called an agent, authority to make decisions on a person's behalf in the event of their incapacitation. Typically, one document grants medical power of attorney, and one grants financial power of attorney. As the names suggest, one gives the right to make healthcare decisions, while the other covers finances.

"A broadly drafted financial POA can give an agent authority over the principal's business interests," Taylor explains. "Certain powers, such as making gifts, changing beneficiaries or creating trusts, generally must be granted expressly. Many states require specific language in the document to authorize sensitive transactions such as gifting or certain banking transactions."

Does that mean, then, that a person could, say, speak on another's behalf outside of specific decisions?

"A POA lets an agent sign and transact on the principal's behalf. It does not make the agent's opinions the principal's words. In most states, an agent has no right to access the content of the principal's email and private messages unless the document specifically grants it," Taylor says.

2. Can power of attorney be triggered by incarceration?

In the movie, Evans said Holmes signed the POA document, giving him power to make business decisions for her. But does an incarceration always trigger a POA to go into effect?

"Powers of attorney are governed by state law, so the rules on when a POA can take effect, and what it can authorize, vary from state to state," Taylor says.

There are different types of POAs. A durable POA goes into effect once signed and remains in effect unless the principal cancels it or dies. A limited POA gives authority for specific matters and can have time parameters for when it's valid. A springing POA, meanwhile, takes effect when a specific, predetermined event happens, such as mental incompetence.

"Most of these 'springing' POAs are tied to incapacity, but many states let you name another trigger, such as incarceration, and designate a specific person to confirm in writing that it happened," Taylor says. "In many cases, a durable POA that is effective immediately makes the most sense. This is because a springing document forces your agent to prove the trigger occurred, and banks can be slow to accept that proof exactly when someone needs to act."

3. Do you have any recourse if you believe your POA agent is acting against your best interests?

"An agent is a fiduciary. The law requires them to act loyally in your best interest, avoid conflicts of interest and keep records of every transaction," Taylor says.

If you are in this situation and are not incapacitated, you can revoke the POA. Taylor recommends doing so with a signed written revocation and notifying every institution that has a copy of the POA.

Assuming you are not incapacitated, you also have the ability to sue for breach of fiduciary duty. "Serious misuse can be prosecuted as theft or financial exploitation," Taylor says.

4. What can you do if you think someone else's agent is misusing their powers?

The documentary makes it clear that Fielder doesn't trust what Evans is doing, although Holmes herself doesn't express any misgivings.

If you're a third-party observer and believe someone with POA is acting against the principal's best interests, there are some things you can do, although it somewhat depends on your relationship to the principal.

If you're a family member, heir, caregiver or government agency, you can petition a court to review the agent's conduct, Taylor explains. If a case involves an older or vulnerable adult, you can report concerns to Adult Protective Services.

Additionally, financial institutions can play a role. "Banks can refuse to honor a POA when they suspect abuse and report it, and brokerage firms can place temporary holds on suspicious withdrawals and trades for older or impaired clients," Taylor says.

"If the person still has capacity, though, a court will generally defer to their choices," she adds.

5. Should you assign your spouse or partner POA?

"A spouse is usually the right first choice since no one knows your finances and wishes better," Taylor said. "The weak spot is timing."

That's for a few reasons. First, you will be aging together, so it's possible you'll need help at the same time and therefore can't serve for each other. For this and many other reasons, it's recommended that you also name a backup POA.

Additionally, of course, there's the possibility you divorce. "Many states end a spouse's authority automatically once a divorce is filed or finalized, but not all of them, so update your documents the day you separate," Taylor says.

Taylor also points out that Holmes and Evans are not legally married, which means that if they were to break up, it would not automatically end the POA in the way a divorce would in many states. If Holmes wanted to revoke it, she would have to actively do so.

"In blended families, adding an adult child as co-agent, or requiring your spouse to report to one, heads off a lot of conflict later," Taylor says.

If you have a POA, you should review it "every few years and whenever you move," Taylor advises, so that it doesn't become out of date or invalidated by a state law.

Ultimately, Taylor says, "The best protection is built in before you sign: Name a successor agent and require the agent to report periodically to a second person."

It's important to remember that You Can See Everything is a movie constructed around the idea of suspicion. Don't let the movie scare you off the idea of POAs: They help ensure that your finances and/or healthcare can be appropriately managed in the way in which you want them to be.

And when it comes to Holmes and Evans in particular, we have to go back to that old adage: You never really know what's going on in someone's relationship ... even if you're a documentary crew filming their every waking moment.

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Too much information about stock market seasonality can lead to overload and bad decisions for investors. Just enough can be fun, even valuable if properly deployed.

Indeed, traders and speculators who specialize in technical analysis take advantage of inefficiencies created by retail investors going too deep on those kinds of things.

And even among the experts, you'll find an amusing variance in how they define things such as the "Santa Claus Rally."

At the same time, as some of the greatest asset allocators who ever lived will tell you, the stock market is a reflection of us, our emotions and our psychology.

Warren Buffett said it's a "popularity contest" in the short term, a "weighing machine" in the long term. He also described it as "a church with a casino attached."

Those are colorful words from one of the best who ever did it. Basically, though, it is a barometer of human behavior, including our emotions and psychology, as well as what we choose to consume and when.

Think about it for a second: It's October, so you're probably pulling out your sweaters and corduroy, maybe prepping to do some leaf work in the yard, perhaps watching football, possibly hitting a pumpkin patch.

As much as we want to understand ourselves and how we behave as investors, we can also profit from seeing how our decisions plus those made by others like us aggregate over time.

So seasonality offers another reference point along that journey, a map based on history and data to use as you approach prevailing terrain.

But it's just a guide.

And this quiz is for edutainment purposes only.

More on investing from the Kiplinger team:

• Now Is the Best Time to Make These 6 Financial Moves (You'll Thank Yourself in December)
• What the Midterms Mean for Your Stock Portfolio
• Stop Waiting for the Perfect Moment to Invest: There Isn't One
• How to Pick the Right ETF for Your Financial Goals
• The Best All-in-One ETFs to Keep Your Investment Portfolio Simple
• The 5 Best Long-Term Investment Stocks to Buy for Steady Returns
• Best Stocks to Buy for Rising Interest Rates This Fall
• 5 Stocks to Avoid as Interest Rates Rise This Fall
• 5 Best Momentum Stocks to Buy for More Upside in 2027

When the calendar flips to 2027, a series of Social Security updates will impact your wallet. These changes cover everything from taxes and monthly benefits to how the agency handles fraud.

These changes don't only impact retirees — they also affect current workers and their families. Workers need to keep an eye on accumulating enough Social Security credits to qualify for survivors benefits, correct errors in their earnings record and understand how much of their wages will be subject to the 6.2% Social Security tax.

Let's look at what's different in 2027.

1. Social Security cost of living adjustment (COLA) for 2027 is 3.6%

The 2027 COLA is 3.6%, up from last year's 2.8%. This matches the estimate provided by David Payne, staff economist for the Kiplinger Letter.

Older people are caught in a "COLA catch-22." A higher COLA means more money for retirees, but it results directly from higher inflation. Conversely, a lower COLA means less inflationary pressure, but it provides less money to help retirees with rising costs such as medical expenses and housing.

"There’s a lot on the line financially right now for older Americans: one in five have no retirement savings, and more people feel financially insecure this year than last. That makes Social Security’s cost-of-living adjustment (COLA) critically important. It helps millions of Americans keep up with rising costs for groceries, routine bills, health care and other everyday expenses," said Dr. Myechia Minter-Jordan, CEO of AARP.

According to the SSA 2027 fact sheet, the 3.6% increase will translate to an additional $75 per month for the average retiree. In January 2027, the average payment will be $2,170, up from the pre-COLA amount of $2,095. Married couples will see an average increase of $117, raising the average monthly benefit for couples to $3,355 from $3,238.

Remember, the SSA automatically deducts the Part B premium from the Social Security benefits of most Medicare recipients. So any monthly increase will be reduced by higher Part B premiums.

2. November digital notification deadline to learn 2027 increase

In an October blog post, the SSA noted that beneficiaries wishing to view their official 2027 COLA notice online through their personal my Social Security account must establish their online account by November 18, 2026. Otherwise, the SSA will mail the notice in December.

Account holders can also choose to receive text or email alerts when a new message, including their COLA notice, is available in their personal my Social Security account Message Center.

3. Maximum Social Security benefits

For workers retiring at age 70 in 2027, the maximum possible monthly benefit increases to $5,358, up from $5,181 in 2026. To qualify, you'd need to have earned at or above the earnings cap ($192,300 for 2027) for 35 years — an achievement that requires consistently high income throughout your career.

Claiming without any delayed retirement credits reduces this amount; those retiring at full retirement age (FRA) in 2027 will see a maximum monthly payout of $4,188, an increase of $36 over last year's maximum of $4,152.

 4. Social Security tax limit

Social Security caps the amount of income you pay taxes on — and get credited for — when benefits are calculated. The Social Security tax limit in 2027 is $192,300, up $7,800 from $184,500 in 2026. The tax limit is indexed to inflation and is likely to rise in 2028.

The increase in the wage base will translate into paying a maximum total tax of $11,922.60 for 2027. Social Security will stop withholding taxes once you reach the maximum income amount for the year. However, there is no cap on Medicare taxes, meaning your total wages are subject to the 1.45% tax.

There's also an additional 0.9% Medicare tax for individuals earning more than $200,000 per year, $250,000 for married couples filing jointly, or $125,000 for married people filing separately. These numbers don't increase annually; they're statutory and not subject to indexing for inflation. Employers are responsible for withholding this amount from your paycheck, although they're not required to match it.

5. Earnings test: You can earn more from work in 2027 while collecting benefits

Continuing to work while collecting Social Security may reduce your monthly benefit check due to a rule called the Social Security earnings test. Fortunately, those limits typically rise every year, leaving more of your monthly Social Security intact.

The SSA temporarily withholds $1 of a worker's benefits for every $2 earned above $25,560 (or $2,130 a month) in 2027, up from $24,480 (or $2,040 a month) in 2026.

The year when you reach FRA, the test is more generous — you only forfeit $1 in benefits for every $3 in 2027 earnings above $67,920, an increase of $2,760 over the 2026 limit of $65,160. Once you reach your FRA, there is no limit on earnings for the remainder of the year, and any withheld benefits are restored.

For beneficiaries younger than full retirement age (FRA) throughout 2027: The annual earnings limit is $25,560; $1 in benefits will be withheld for every $2 earned above this limit.

For beneficiaries reaching FRA in 2027: The annual earnings limit is $67,920; $1 in benefits will be withheld for every $3 earned above this limit until the month the beneficiary reaches FRA.

 6. Earning Social Security credits in 2027

Workers need to earn slightly more in 2027 to secure quarterly work credits (quarters of coverage) toward the 40-credit minimum required to qualify for retirement benefits.

In 2027, earning 1 credit requires $1,970 in covered wages, up $80 from $1,890 in 2026. To earn the maximum 4 credits for the year, a worker must earn $7,880 in 2027, a $320 increase from $7,560 in 2026.

Why it's important. You must earn a minimum number of Social Security credits to qualify for retirement benefits. The SSA can't pay you benefits if you don’t have enough credits.

The SSA also uses the number of credits you’ve earned to determine your eligibility for retirement or disability benefits, Medicare and your family’s eligibility for survivor benefits.

Once you earn the 40 credits, earning more credits won’t increase your benefit payment. Instead, your retirement benefit is based on your highest 35 years of inflation-adjusted earnings.

7. A single point of contact for identity theft victims

Victims of Social Security number theft and misuse have new relief under the Improving Social Security's Service to Victims of Identity Theft Act (H.R. 5345). Signed into law on October 7, 2026, the law requires the SSA to provide affected individuals with a dedicated, single point of contact to manage and coordinate their case through resolution.

While it does not issue automatic benefit checks or new Social Security numbers, it eliminates the need to deal with a different representative during follow-ups. The single-point-of-contact requirement takes full effect for cases beginning April 5, 2027.

8. Supplemental Security income (SSI) payment limits

The 3.6% COLA applies to Supplemental Security Income (SSI) federal benefit rates, which officially take effect for the 2027 tax year. Because January 1 is a federal holiday, eligible individuals and couples will see these updated payment amounts starting on December 31, 2026.

For an eligible individual, the maximum monthly benefit rises to $1,029 in 2027, up from $994 in 2026. For an eligible couple, the maximum monthly rate increases to $1,544 in 2027, compared to $1,491 in 2026. Additionally, the allowance for an essential person rises from $497 to $516 per month.

9. Disability income thresholds

The SSA has updated the monthly earnings thresholds for Social Security Disability Insurance (SSDI) recipients. These benchmark increases allow beneficiaries to earn higher wages before impacting their monthly disability benefits or triggering evaluation periods.

For non-blind disabled workers, the substantial gainful activity (SGA) threshold is $1,770 per month in 2027, up from $1,690 per month in 2026. For statutorily blind workers, the limit increases to $2,950 per month in 2027, up from $2,830 per month in 2026. Meanwhile, the earnings threshold required to count toward a trial work period (TWP) month increases to $1,270 per month in 2027, rising from $1,210 per month in 2026.

Other important changes effective in 2027

For more information about other 2027 changes, read:

8 Changes Coming to Medicare in 2027

Medicare 2027 Projections: Here's How Much Your Monthly Premiums Are Estimated to Rise

Projected 2027 IRMAA Brackets and Surcharges for Medicare Parts B and D

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The above picture was taken from my seat in Seattle at (sadly) the U.S. soccer team's last 2026 U.S. World Cup game.

I had tossed around the idea of going since the U.S. qualified for the round of 32, but I came up with too many excuses to take it seriously. It wasn't until the day before the game when my wife said, "Memories over money — just do it." More on that later.

The best emails I get from clients at Exit 59 Advisory, where I am president, feature phrases such as:

"I just got back from…"

"I just booked…"

"I just committed to…"

The best, best emails are the ones that include the part above and then the same quote from my wife: "Memories over money."

Now I know this seems counterintuitive coming from a financial planner, but let me explain.

Think of money as the base of Maslow's hierarchy of needs. I am not diminishing its importance. I am not diminishing the need for financial security to be happy in retirement.

Basically, every academic study agrees that we need financial security, along with health and social connection, to experience true happiness in retirement.

What is diminishing, to use that word once more, is the return you get beyond the security point. Beyond security, money can:

• Buy you freedom
• Buy you time
• Buy you memories

To be clear, all of our clients have financial plans. All of those plans have a line item for expenses like those. If you want to build your own, you can access our planning software.

When my wife and I were first married and had no kids, we caught the travel bug. When we had kids, we thought we would press pause, at least on the bigger trips. We didn't.

Many people told me that the kids wouldn't remember the trips. And we felt OK about that. We were still enjoying the trips. Our kids are now 8, 4 and 1:

• Our oldest, Vivian, recently brought up the name of a bunny on a farm we visited in Austria
• Our middle child, Lucy, talks about seeing the Statue of Liberty in "Yew Nork"

If my young children remember these trips fondly, even when everything didn't go exactly as planned, I would bet they'd be even more impactful for your adult children and grandchildren.

Carl Richards, a fellow financial planner who is part of my speaking agency and is a former New York Times personal finance columnist, has a Venn diagram sketch with "experiences" in one circle and "people you love" in the other, with an arrow pointing to the overlap and the label "spend money here."

So this is not just about travel. It is about spending money to create memories or creating memories that don't require spending.

My extended family has been gathering for Sunday dinners almost every weekend since 2011. Experiences, whether they involve a trip, a meal or a walk, provide more bang for your buck than material purchases.

You get the benefit of anticipation, the actual experience and the memory — bang for your buck from experiences in three phases.

So the Sunday night before the U.S. squared off against Belgium in Seattle, I booked a flight, one night at a hotel and a ticket to the game. As you probably know, the game did not go our way, but I have no regrets about going.

There are two more important lessons here.

First, even bad experiences or experiences with bad parts can become good memories. Three years later, we are able to laugh about my daughter getting sick on a transatlantic red-eye.

The last lesson is the concept of "contrast." One reason I got so much joy out of such a ridiculous itinerary is because of how much it contrasts with my day-to-day life. If this were something that was normal or not special, I would have been one of the five people in the front row scrolling their phones during the game.

As you know, I spend my days looking for every avenue to help you accumulate a healthy balance sheet, to save you money on taxes and otherwise optimize your financial situation.

I've also been doing this long enough to say that those who convert their financial balance sheet to a memory balance sheet tend to be happier.

Memories over money!

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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 need a steady paycheck in retirement, or are you ok with withdrawing money as you go? Not sure? Then you aren't alone.

We spend decades focused on accumulating money for retirement, but give little thought to how we'll spend it when we retire. Will we create a guaranteed stream of income deposited in the bank each month, or will we pay as we go, taking solace in the fact that the money is there when we need it?

The paths are vastly different. If you choose the guaranteed route, it means taking a portion of your savings and turning it into a steady paycheck, typically through an annuity. If you choose the pay-as-you-go route, it means making periodic withdrawals from your retirement account when you need the funds.

Which approach is right for you depends on several personal factors: your cash flow (steady monthly income), longevity (how long your retirement will last), and temperament (your ability to manage withdrawals on your own)

The decision is not as clear-cut as saving money in a 401(k), is it? Before you decide if you need some guaranteed income in retirement, ask yourself these three questions.

1. Does your guaranteed income cover your living expenses and if not, are you ok with that?

For most retirees, fixed income comes from either Social Security, a pension, other income like real estate, or a combination of some of the above. That money replaces the paycheck from working and typically covers monthly expenses. Sometimes the money is not enough, and retirees have to tap their savings to make up the difference. If that sounds familiar and you're ok with that scenario, then you probably don't need guaranteed income.

But if you're not comfortable with that scenario, guaranteeing the portion of your expenses not covered by Social Security and other fixed income would probably provide peace of mind.

"I would argue that if you cover most of the essential spending with guaranteed income, that takes out a lot of stress in retirement," said Nick Nefouse, global head of retirement solutions and head of LifePath, Multi-Asset Strategies & Solutions at BlackRock.

The key is to guarantee some, not all, of your retirement income, warns Barb Pietrangelo, a financial planner at Prudential Wealth Advisors. After all, retirement can easily last 30 years, so you still need some of the money to grow and compound.

Pietrangelo says to tally your monthly expenses against your recurring income, then ensure guaranteed income fills any gap. "The general rule of thumb is 70% of spending, but that is not always true," said Pietrangelo. "Look at your checkbook or charge card for the last three to six months to see what you are spending on a regular basis."

The easiest way to turn retirement savings into a monthly paycheck is via an income annuity. With this, you get guaranteed income for life, but it comes at a cost. Accessing your money early means high surrender fees, and you'll have no built-in inflation protections unless you pay extra.

2. Will you be ok if the stock market drops and takes your retirement portfolio along with it?

One major benefit of guaranteed retirement income is freedom from market anxiety. Stock drops, high unemployment, or economic slumps won't stop your checks — unlike living strictly off an investment portfolio.

An investment portfolio fluctuates with the market, carrying inherent risk and potential losses. If you can handle market volatility and potential shortfalls, self-managing your withdrawals may work best. But if market swings will keep you up at night, an annuity offers a more reassuring alternative

"Would you be ok if the market dropped? Would you still have enough income to pay yourself forever? Most people wouldn't," said Pietrangelo. "With guaranteed, you don't have to worry about that. But always pair it with another savings vehicle."

3. Is certainty important to you?

Is longevity on your side? Are you worried about running out of money in retirement? If you answer yes to either question, then guaranteeing a portion of your retirement income may be for you. After all, by doing so, you ensure the money will last as long as you do. If you live to 100, you will get a monthly payout until then.

Plus, you'll know exactly how much you get each month. For some people, that certainty is all the permission to spend they need.

"People don't like talking about life expectancy; they like being certain about the ability to spend," said Nefouse. "With guaranteed income, you're more certain; you're more willing to take more risks, take that extra trip."

Take your time before deciding

Whether to guarantee income or withdraw as you go is as unique a decision as your retirement plan. But one thing is for sure: it's not something you should choose blindly. Both approaches have pros and cons.

Guaranteed income gives you peace of mind, but you give up growth and flexibility. Withdrawing as you go provides the potential for appreciation and continued portfolio growth, but there's also more risk. Ultimately, finding the right balance is about matching your money to the lifestyle and comfort level you want.

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Recovering from identity theft can feel like a full-time job, but a newly enacted federal law aims to eliminate at least one major headache. Signed into law on October 7, 2026, the Improving Social Security’s Service to Victims of Identity Theft Act (H.R. 5345) promises to end the exhausting "call center scavenger hunt" for victims of Social Security number (SSN) fraud.

"Americans recovering from identity theft should not have to fight through layers of red tape to receive help. With President Trump’s signature, victims will have a trained Social Security Administration employee responsible for coordinating their case and seeing it through to resolution," said the legislation's sponsor, Representative David Kustoff (TN-08).

The provision takes effect 180 days after enactment. The Social Security Administration (SSA) has a six-month implementation window, making the official effective date April 5, 2027.

During this 180-day transition period, the SSA must establish internal protocols, train designated staff and set up the casework routing systems needed to assign single points of contact for victims.

What the law does for victims

Under the bipartisan legislation, the SSA is now required to assign identity theft victims — as well as individuals whose Social Security cards are lost or intercepted in the mail — a single, dedicated point of contact. Rather than explaining your situation to a different representative every time you call, you will work with one trained SSA employee who is tasked with maintaining your case records and coordinating across agency departments until your issue is fully resolved.

Rep. Kustoff introduced the legislation after constituents reported getting bogged down in a long, confusing process to resolve Social Security identity theft. A release from the Ways and Means Committee noted that "an individual may be faced with multiple, different processes requiring them to speak to multiple, different SSA employees before the issue is resolved" and "victims report they are often provided conflicting information and advice."

And data breaches continue to rise. In 2024, there were 3,158 data compromises and more than 1,800 included SSNs; these numbers were up in 2025, with 3,322 data compromises reported and SSN-related data exposed in 2,243 of the breaches, according to the Identity Theft Resource Center's 2024 and 2025 data breach reports.

What you should do if your SSN is compromised

While this administrative fix streamlines agency support, taking swift personal action remains crucial to protecting your finances. Here are four steps to take when your Social Security number is stolen.

• Contact the SSA: Report fraudulent activity directly to the SSA Office of the Inspector General at oig.ssa.gov or call 1-800-269-0271. Check your earnings records and benefit status by logging into your my Social Security account at ssa.gov/myaccount.
• Lock your Social Security number: Locking your SSN is a strategic move that shuts down the two most common avenues for fraud: illegal employment and unauthorized access to your government records.
• File an FTC report: Visit identitytheft.gov to report the theft and receive a personalized recovery plan.
• Freeze your credit: Contact all three major credit bureaus — Equifax, Experian and TransUnion — to place a free freeze on your credit reports, preventing identity thieves from opening new accounts in your name.

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I'm sitting on the sofa in my office, which is in Virginia. Looking out the window, I can see both Virginia and Maryland. There's an often-incorrect assumption that when you cross the bridge from Virginia into Washington, D.C., your taxes jump. The reality is much more complicated.

Income taxes, which is how we often gauge whether taxes are "high" or "low," do go up if you move into D.C. But property taxes come down. So, if you're retired, you may actually be better off in D.C.

However, D.C. has an estate tax, and Maryland has an estate and an inheritance tax, so depending on your balance sheet, you may be better off staying in Virginia. You can see how things can get complicated quickly.

My goal in this article, as a CFP® and president of Exit 59 Advisory, is to help you avoid making a big decision on where you move in retirement for tax purposes — which I think is often a mistake in and of itself — without understanding the full tax picture.

Five taxes to consider

1. Income tax

You've heard of people moving from California to Texas. We have several clients in the process of changing residency from New York to Florida. This isn't because Texas has delicious BBQ or because Florida has Publix. It's typically because folks want to ditch the income tax. While this is almost always the most consequential tax when you're working, that isn't always the case for retirees.

Nine states don't tax earned income. However, like the federal government, most states do have a progressive income tax, where the rate rises with your income. Be sure you understand that progression and what effective or average rate you're likely to pay.

When we have a relocation in retirement in a client's financial plan, it becomes pretty clear what will happen to their income, capital gains and estate taxes, all else being equal. We recently had a client moving from California to Texas and were able to tell them how much money they would save, and therefore, could spend elsewhere. We used specialist software to do that, and you can use our subscription to access it for free.

2. Capital gains tax

Capital gains rates are more favorable than income tax rates at the federal level as a way to incentivize investment. The same cannot be said about state treatment of capital gains.

In most states that levy an income tax rate, the same rate is applied to capital gains. When my parents sold their (not so) forever home in Maryland, it basically looked as though the capital gain was income. It was taxed at the same rate.

There are some notable exceptions. Washington state, for example, doesn't have an income tax but does have a capital gains tax. If your savings are all in retirement accounts, you don't have too much to worry about. But let's say you sold a business and almost all your assets are in non-retirement accounts. For you, Washington state may not be a good tax destination.

3. Sales tax

I'm a (perhaps too) proud graduate of the University of Delaware. Delaware is often referred to as the "tax-free state." Incorrect. Delaware doesn't have a sales tax. It does have income and property taxes, though those property taxes are extremely low by the beaches. Take notes, Florida.

Sales taxes are more straightforward, except that there are adjustments on certain types of purchases. Like to eat out? Then Washington, D.C., is no good. To be clear, the food is good. Like to drink? Avoid Washington state.

4. Property taxes

You might be unpleasantly surprised when you arrive in Texas for the BBQ or Florida for the Publix, and you're presented with a massive property tax bill. As the saying goes, "There's no such thing as a free lunch."

States need income, and that income gets raised somewhere. The key is landing in a state where that somewhere or someone is not you. If you're looking at a second home, you could consider renting instead of buying, so long as you can still satisfy the residency requirements.

Another thing to evaluate when it comes to property taxes is the property's assessed value, which can sit close to the market value or far below. A high tax rate on an assessed value much below market value may not sting as much as you think.

5. Estate and inheritance taxes

While estate and inheritance taxes are often used interchangeably in the context of death taxes, they are not the same. Estate taxes are levied on the decedent's estate. Inheritance taxes are paid by the beneficiary.

Fewer and fewer states have either of these taxes. As of this writing, 17 jurisdictions. However, if you have enough money and haven't done enough planning, estate taxes can be punitive. Before you move because of it, see if you can plan around it.

Why the full picture is even more nuanced

There's an exception to every rule in our tax code, and nothing is black and white. While an income tax rate may be high on the surface, many states exempt retirement income sources such as Social Security, pensions and retirement account distributions. Many have income phaseouts or caps on those exemptions.

Property taxes can be discounted in multiple jurisdictions if you meet certain requirements.

And let's not forget the cost of living. You may be someone who had spreadsheets for all of the above but still wound up with astronomical grocery bills, mortgage payments and restaurant bills because you weren't the only one who moved to Florida during Covid.

If you do want to move for tax purposes retirement, my hope is that you go in with your eyes wide open.

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

When a windfall arrives, the mental accounting trap is immediate: Cash feels like "found money" rather than hard-earned principal.

This cognitive shift can give rise to 'sudden wealth syndrome' — a distortion of financial judgment in which a sudden windfall or inheritance creates the illusion of infinite purchasing power.

From a balance sheet perspective, sudden wealth can be destructive not because of emotion, but because it can convert the windfall into permanent fixed liabilities. Many inheritors fall prey to lifestyle creep, high-risk investments and guilt-driven financial requests from friends and relatives.

To ensure long-term wealth preservation, beneficiaries must shift from an emotional mindset to a professional one.

Here are seven ways to safeguard a windfall and build multigenerational financial security.

1. Enforce a mandatory 'decision freeze'

Before deploying a single dollar, place the capital in high-yield savings accounts, short-term Treasury bills or money market funds. Spread funds across institutions to remain under FDIC insurance thresholds of $250,000 per depositor per bank.

How this protects your money. Temporarily parking your funds creates a crucial "decision-free zone." This cooling-off period halts impulse choices and gives you the time to assemble a team of qualified professionals — such as tax strategists, estate attorneys and financial advisers. Stepping back allows you to build a thoughtful strategy, ensuring your windfall transitions safely into enduring wealth.

2. Divide your windfall into strategic buckets

Rather than treating an inheritance as one lump sum, divide the windfall into distinct financial buckets using a disciplined allocation framework. Consult a financial professional to help you decide how much to allocate to each bucket and to refine your investment choices.

• Long-term investment growth. index funds, ETFs and investment-grade bonds
• Financial foundation & debt reduction. create a six-to-12-month emergency fund, maintain a high-yield savings account and eliminate high-interest debt
• Near-term goals & real estate. fund a primary home down payment and/or capital improvements to a new or existing home
• Controlled fun / guilt-free bucket. use for travel, major purchases and family gifts

How this protects your money. Allocating a strict 5% to 10% "fun bucket" creates a psychological circuit breaker. It satisfies immediate lifestyle desires without eroding the 90% core engine required for long-term compounding.

3. Wipe out high-interest liabilities first

Pay off variable credit card debt, personal loans or high-rate auto financing immediately before committing to long-term market investments. Paying off any lingering student loan debt will also save you money on interest.

How this protects your money. Retiring an 18% or 22% interest liability delivers an immediate, risk-free return equivalent to that APR. It permanently reduces monthly baseline overhead and creates greater budget flexibility.

4. Build an objective advisory team

Assemble a fee-only certified financial planner (CFP), a certified public accountant (CPA), and an estate attorney. Avoid commission-based brokers or product sellers pitching complex, illiquid instruments.

How this protects your money:. A CPA ensures compliance with tax rules (such as SECURE Act 10-year distribution rules for inherited IRAs), while a fee-only adviser acts as an objective barrier between the inheritor and impulse decisions.

5. Pass the no to your financial team

Requests for loans, business seed funding or gifts from friends and extended family are a leading driver of rapid wealth depletion. You might feel bad saying no even though it's the best thing to do.

How this protects your money. By shifting distribution authority to a formal policy or advisory team, the inheritor uses a scripted defense: "My estate plan and financial adviser manage all portfolio distributions under a fixed annual schedule, so I cannot write personal checks." This removes personal conflict while preserving relationships.

6. Avoid converting cash into recurring liabilities

A common pitfall is purchasing high-maintenance assets — such as luxury vehicles, second homes or boats — using lump-sum cash.

How this protects your money. A lump-sum inheritance can drain quickly when tied to permanent, recurring liabilities such as property taxes, HOA fees, maintenance and insurance premiums. Covering ongoing fixed costs strictly with earned income safeguards the underlying inheritance.

7. Adopt the 4% rule for perpetual cash flow

To treat the windfall as a true income-generating asset rather than a declining balance, establish a sustainable withdrawal rate, such as the 4.0% rule.

How this protects your money. On a $1 million invested portfolio, the 4% rule would generate $40,000 in annual supplemental income while allowing the underlying principle to compound alongside inflation, ensuring the capital survives indefinitely.

Spending that has financial return

Here are concrete, financially sound ways to allocate an inheritance that transform a one-time cash windfall into long-term financial resilience:

Pace yourself

An inheritance is far more than a financial buffer; it's the physical representation of someone else’s life's work, passed forward to create opportunity. Treating a windfall with intention doesn't mean locking every dollar away in a vault and forgoing life's pleasures — it means establishing clear guardrails so your capital works for you, rather than disappearing beneath lifestyle inflation.

By pausing before acting, funding productive assets and protecting your principal with a disciplined financial plan, you can transform a one-time inheritance from short-lived "mad money" into enduring financial freedom and multigenerational security.

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California can be a wonderful place to retire. The great weather, access to outdoor activities, good food and diverse culture are some reasons retirees choose the Golden State.

That said, retiring there comes with its unique financial considerations. The cost of living is high, state taxes can take a big bite out of retirement income, and housing, transportation and healthcare costs can add up quickly. The overall cost of living in California is roughly 40% to 45% higher than the national average.

Retiring comfortably in California requires careful planning and consideration. If you're taking a do-it-yourself approach to retirement in California, here are a few areas to consider.

Get a good handle on your expenses

One of the first steps in planning for retirement is understanding what it costs to maintain your lifestyle. This might sound obvious, but many of my clients come to work with me at Halbert Hargrove because I am a CFP® professional and wealth adviser.

I review my clients' bank and investment account information and help them analyze and understand how much they spend on a monthly or annual basis. While many of my clients know how much money they have in their bank accounts, they often don't have a clear understanding of how much they spend on a regular basis.

I recommend starting with your regular fixed expenses. Think housing, utilities, insurance, transportation and healthcare premiums. Then consider the expenses that don't occur every month: Vacations, home repairs, property taxes or helping family are examples of some.

Knowing your nondiscretionary expenses (what you need to spend), vs your discretionary expenses (what you want to spend), is helpful. If the stock market has a challenging year, knowing where you have the flexibility to cut back can help you adjust your withdrawals while you wait for the market to recover.

Plan for healthcare beyond Medicare

California is home to some of the greatest medical institutions and hospitals in the nation including Cedars-Sinai Medical Center, Stanford Health Care, UC San Diego Health and UCLA Ronald Reagan Medical Center. But medical planning goes beyond finding the best doctors for the care you need.

California retirees need to budget for Medicare premiums, Medigap or Medicare Advantage, Part D (prescriptions), dental, vision, long-term care and any out-of-pocket expenses. Knowing the average cost of healthcare as a starting point can help, but age, location and tobacco use can impact costs.

There's another issue: Higher taxable income can increase Medicare premiums through IRMAA (income-related monthly adjustment amount). This is a surcharge added to your monthly Medicare Part B and Part D premium if your income is above certain limits.

What this means for retirees is a large IRA or 401(k) withdrawal might create a tax bill today and potentially higher Medicare premiums later.

Pay attention to California taxes

In addition to a higher cost of living, California has one of the highest state income taxes in the U.S. State income taxes start at 1% and go up to 12.3%, plus an additional 1% for taxable income over $1M. This matters quite a bit when retirees are drawing from large IRAs, 401(k)s or pension plans, as the net distribution from a pretax account can be considerably lower after you account for taxes.

Long-term capital gains tax, which is triggered by the profit you make from the sale of an asset held for more than a year, is also taxed in California using the same ordinary income rate that's applied to withdrawals from pretax retirement accounts.

At the federal level, long-term capital gains are taxed at a more preferential rate, so California is unfortunately unique in this regard. For retirees with substantial investment income, this can really increase their tax liability.

One silver lining — California does not tax Social Security benefits, disability or survivor benefits, so retirees who live primarily on these types of income have less tax exposure.

Don't forget housing, property taxes and home insurance

For many retirees, homes can make up a large portion of their net worth. This is especially true for California, where the prices of homes have skyrocketed throughout the years.

I frequently hear my clients recount how they bought their first homes for tens of thousands of dollars, and have watched the property grow into a multimillion-dollar assets.

A retiree in that situation might have substantial equity in their home, but a low-cost basis and property tax assessment. That can make a decision such as downsizing or moving to a retirement community much more complicated than simply looking at the price of the new home.

Before moving, consider the complete cost of the new property, including property taxes, homeowners' insurance, homeowners' association (HOA) dues and maintenance.

A smaller or less expensive home might not lower monthly expenses by much, all things considered.

When it comes to property taxes, keep in mind that Proposition 13 imposes a 1% cap on the tax rate and a 2% maximum for annual increases, offering some protection from long-term owners.

If you're a homeowner age 55 and older who wants to move from one California home to another, Proposition 19 allows you to transfer the lower assessed value of the primary residence to a newly constructed or replacement principal home. Eligible adults can use this tax transfer benefit up to three times.

Keeping your California retirement on track

Retirement in California can be expensive, but for many people, the lifestyle is a significant factor in their decision to live here. Understanding the costs, staying flexible and recognizing how each financial decision affects others can help you make informed choices while enjoying this chapter of life.

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

As many people in the U.S. are dealing with high prices for everyday expenses, the growing gap between wealthy households and everyone else is a topic of debate. Now, United Airlines CEO Scott Kirby is weighing in, calling for a national wealth tax and inheritance taxes that could approach 100% for some.

In an interview with The New York Times published October 18, Kirby was asked about declining public trust in corporate executives. He responded:

"Wealth inequality has become a danger to our society, and we need to address that. We should have a national wealth tax — it won't work by state because people will just move. And I think we should have inheritance taxes that get close to 100 percent at some level. I would pay them."

Kirby, who is reportedly worth over $125 million, didn't offer a detailed plan for how new taxes would work. But his comments raise interesting questions about tax fairness in the United States.

The Center for American Progress reports that the wealth gap is the widest it's been in 30 years, with the top 1% holding nearly 32% of the nation's total wealth (roughly $55 trillion in assets). Meanwhile, the bottom 50% holds only about 2.5% of U.S. wealth.

To better understand what a national wealth tax could mean, it helps to look at what the U.S. tax system currently does and doesn't tax.

Types of income the IRS taxes

In the U.S., many types of income are taxable, including wages and certain investment gains. But the IRS generally doesn't tax accumulated wealth.

• For example, if someone's stock portfolio increases in value, they generally don't owe capital gains tax on those gains until they sell the investments, though other tax rules may apply.
• A national wealth tax, if ever approved, would require people to pay tax on the value of their assets even if they hadn't sold anything or received additional income.

However, the U.S. government can tax some wealth transferred after death. When applicable, the estate, not the heir, generally pays the federal estate tax, which tops out at 40%. But because the exclusion is so high, many estates owe no federal estate tax.

For people who die in 2026, the federal lifetime estate tax exemption is $15 million per person ($30 million for couples).

Also worth noting: Some states have their own estate taxes, with different rules and exemptions. For instance, five states — Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania — tax certain inheritances.

The takeaway? Under current federal law, inheriting money doesn't automatically mean owing federal income tax or inheritance tax. The outcome depends on the asset type, the estate's circumstances, and the state involved.

What would a wealth tax change?

A wealth tax would generally target a person's net worth — generally, the value of their assets minus their debts at a given time — rather than the income they earn in a year.

Imagine someone owns $50 million in investments and other assets and has $5 million in debt. Their net worth would be $45 million. Under a hypothetical wealth tax on net worth above $20 million, some of that wealth could be subject to tax even if the person earned relatively little income that year.

Of course, the details would matter. Lawmakers would need to decide which assets count, how to value them, what threshold triggers the tax, and how often to collect it. Valuing private businesses, art, and other assets that don't trade on public markets could be especially complicated.

Interestingly, and as Kiplinger has reported, California voters will weigh in on similar questions this November.

• Proposition 40, on the November 3 midterm elections ballot, would impose a one-time tax of up to 5% on certain covered assets held by billionaires who were California residents on January 1, 2026.
• Covered assets would include businesses, securities, art, and intellectual property.
• Real estate, pensions, and some retirement accounts would generally be excluded.

Advocates say the measure is intended to raise money primarily for healthcare, with additional funding for education and food assistance. Estimates suggest it could generate tens of billions of dollars in temporary revenue over several years.

Opponents argue that the billionaire's tax could drive wealthy residents away and weaken state finances over time. A state analysis estimates that tax flight could reduce annual income tax revenue from billionaires by less than $1 billion.

The California proposal is a one-time state tax aimed at billionaires, not a recurring "wealth tax." But it highlights some of the same issues lawmakers would face in designing a broader national levy, including which assets to include, how to value them, and how to limit opportunities to avoid the tax.

Meanwhile, other states are debating tax changes aimed at high earners, though these proposals concern income rather than total wealth.

• Colorado voters will consider Amendment 87, which would replace the state's flat 4.4% income tax with graduated rates, including higher rates for people earning more than $500,000.
• Washington state voters, meanwhile, will decide whether to repeal a new 9.9% tax on annual income above $1 million.

The difference between wealth taxes and inheritance tax

It's also important to note that a wealth tax and an inheritance tax target different things. A wealth tax would generally apply to assets a person owns, while an inheritance tax applies to money or property someone receives from a person who has passed away.

An inheritance tax is also different from an estate tax. An estate tax is generally assessed on the estate before assets are distributed to beneficiaries. An inheritance tax (when applicable) is imposed on the recipient.

In any case, a tax rate approaching 100%, as suggested by Kirby, on very large inheritances would represent a major change from current federal law.

Supporters of higher inheritance taxes often argue that taxing large transfers of wealth could help reduce wealth concentration and raise money for public services. Critics counter that high rates could make it harder to pass family businesses or other assets to the next generation, potentially forcing heirs to sell assets to cover a tax bill.

The effects would depend heavily on how any new tax would be designed, including the size of the exemption, the rate schedule, and how assets such as closely held businesses would be treated.

And of course, there's politics: passing a national wealth tax would be difficult in a deeply divided Congress.

What new taxes mean for your financial plan

For now, Kirby's comments don't change the tax rules for your investments or inheritance. Most families also don't need to worry about the federal estate tax.

But if you're concerned about tax liability, don't overlook state taxes. Some states have estate tax exemptions well below the federal limit, and as previously mentioned, certain states tax some inheritances and estates.

As a result, depending on where you live and where the person leaving you assets lived, state taxes could affect how much you or your heirs ultimately keep.

Consult a trusted tax advisor or certified financial planner who knows your financial circumstances.

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When it comes to passing down a lifetime of hard-earned wealth, no two legacies look the same. Some high-profile stars, such as Sting, plan to spend down their fortunes to teach their heirs self-reliance. Others, like Shaquille O'Neal, demand advanced degrees and business proposals before opening the vault. A few, like Elton John, aim to hit just the right note — providing security without spoiling the next generation.

Which iconic approach mirrors your own financial philosophy? Answer these seven quick questions to uncover your celebrity estate planning archetype — and discover whether your style aligns with Sting "The Self-Made Spender," Shaq "The Milestone Mentor," or Elton John "The Middle-Ground Mentor."

More on Retirement

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• Kiplinger: The Trillion Dollar Talk Research Report
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• Estate Planning for Millionaires
• Six Reasons to Disinherit Someone and How to Do It
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Retirement should simplify your life, but managing post-career income streams often adds unexpected tax complexity.

Once you retire, you lose the safety net of routine employer withholdings, making it easier to slip up under a new set of tax rules. For instance, a single misplaced IRA distribution or part-time coaching gig might inadvertently trigger steep Medicare surcharges — or cause the IRS to tax your Social Security benefits.

Here are five hidden tax traps that catch new retirees off guard, and how to adjust your withdrawal strategy to stay ahead of them.

Note: This article covers federal income taxes and municipal property taxes. State income tax provisions may differ. Consult a qualified tax professional when necessary.

1. The Social Security earnings test isn't permanent

After retiring, you can claim Social Security benefits as early as age 62, or wait until full retirement age (or "FRA," typically ages 66 to 67, depending on when you were born).

Most retirees know that claiming early permanently reduces their monthly benefit by 25% to 30% compared to what they would receive at their FRA. However, that rule changes if you're still working part-time while receiving early benefits.

The "gotcha": For 2026, if you are under FRA for the entire year and earn more than $24,480, Social Security withholds $1 for every $2 earned above that limit. Many retirees mistakenly believe this money is lost forever or that part-time work permanently destroys their benefits.

The reality: It's a temporary withholding, not a penalty. Once you reach your FRA, Social Security recalculates your monthly benefit upward to account for the amounts withheld earlier, returning those funds over time in higher monthly checks. (How much you recover ultimately relies on longevity, though.)

2. Medicare surcharges are for two years later

Many retirees don't realize their Medicare Part B and Part D premiums are calculated well before they even enroll.

That's because the government uses a two-year lookback period on your tax returns to determine if you owe an income-related monthly adjustment amount (IRMAA).

The "gotcha": If your income was high during your final working years — due to a peak salary, a home sale, or a large IRA withdrawal, for instance — Medicare applies a monthly surcharge to your premiums based on that amount two years later.

The reality: You don't have to pay a surcharge based on a salary you no longer make. If your income drops significantly due to a qualifying life event, like retirement ("work stoppage," as the Social Security Administration calls it), you can file Form SSA-44 with the SSA. This document requests an immediate premium recalculation based on your current, lower income.

3. Tax withholding percentages aren't customized

When folks retire, most roll over their 401(k) or other employer-provided retirement plan into an IRA; this often defers taxes until distributions are made.

But when you withdraw traditional IRA funds, most (if not all) of the withdrawal is treated as ordinary income and taxed at federal and state rates.

And unlike during your working years (when an employer might've withheld income taxes for you), you'll need to handle tax withholding on your retirement distributions yourself.

The "gotcha": IRA plan custodians generally default to a flat 10% federal withholding rate on distributions — and often withhold nothing for state taxes — unless you explicitly request otherwise. Withdrawing money without adjusting these defaults can lead to an unexpected bill and underpayment penalties in tax season.

The reality: Whenever you set up a one-time or recurring IRA distribution, you can specify your exact withholding percentages. For example, if your effective federal tax rate is 22% and your state rate is 6%, you can direct your custodian to withhold those exact percentages, or choose to make quarterly estimated tax payments instead.

4. More counts toward MAGI and combined income than you think

Modified adjusted gross income (MAGI) governs several key retirement tax thresholds, including Medicare IRMAA surcharges, traditional IRA deductibility, and net investment income tax (NIIT).

Meanwhile, the IRS uses a separate metric — "combined income" — to decide how much of your Social Security benefit gets taxed.

The "gotcha": Even non-taxable income can lead to higher federal income tax bills. For instance, tax-exempt municipal bond interest and tax-free Social Security benefits are added back to combined income. Once that figure crosses just $25,000 for single filers or $32,000 for joint filers, up to 50% to 85% of your Social Security benefits become federally taxable. MAGI also includes tax-exempt municipal bond interest, foreign earned income, and dividends.

The reality: Retirees can use a multi-tiered withdrawal strategy to keep both MAGI and combined income under key thresholds. For example, qualified distributions from a Roth IRA or Roth 401(k) are tax-free and don't count toward either metric, so you can access spending money without pushing yourself into higher tax tiers.

Related: 6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)

5. Property taxes and utilities often don't match COLA

Eliminating a mortgage is a milestone worth celebrating. But even though your principal and interest payments are gone, property tax, home insurance, and utility bills unfortunately continue indefinitely.

Some retirees might think that annual cost-of-living adjustments (COLAs) for Social Security will help cover some of these costs. However, that's not always the case.

The "gotcha": Social Security COLAs are tied to the Consumer Price Index for urban wage earners and clerical workers (CPI-W). This index reflects working-age household spending rather than older adult budgets, which lean more toward housing and healthcare. As a result, property tax hikes and utility rate increases frequently outpace annual COLA bumps.

The reality: Many states and municipalities offer older adult-specific tax relief programs, like homestead exemptions, property tax freezes, or tax rebates. If your area lacks these programs, you can also try building a liquid cash cushion in a high-yield savings account or Roth IRA. This safety net lets you absorb sudden tax or utility spikes without drawing additional traditional IRA funds that might bump you into a higher tax bracket.

See also: Social Security Tax Limit Rises for 2027: Who Will Pay More?

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

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

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

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

Federal and state estate taxes

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

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

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

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

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

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

Leaving heirs an inheritance, not a tax bill

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

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

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

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

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

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

What if most of your wealth is illiquid?

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

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

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

Gifting and giving while living

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

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

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

People and paperwork

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

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

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

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

Read More

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If you misplace your Social Security card, getting a replacement may seem like a simple, routine task. But before you apply, you need to know about the "3-and-10" rule.

Under federal law, the Social Security Administration (SSA) limits the number of replacement cards you can receive to three per calendar year and ten over your lifetime. While most people will never come close to those thresholds, reaching the cap without understanding how the system works can leave you stranded when you need a physical card for a new job or government benefits.

Congress established these limits to combat identity theft, prevent the illegal resale of Social Security cards, and deter fraud — not to punish people who simply misplace a card.

The statutory limits on replacement cards

The limit on replacement cards began a little over 20 years ago. As part of post-9/11 legislation, the Intelligence Reform and Terrorism Prevention Act (IRTPA) of 2004 introduced limits on issuing replacement Social Security cards.

• Yearly limit: 3 replacement cards in a single calendar year.
• Lifetime limit: 10 replacement cards over a lifetime.

The count applies to replacement cards issued on or after December 17, 2005. Original Social Security card issuances, such as at birth or naturalization, do not count toward these limits. There are a few more exceptions that are discussed below.

How the system works and other exclusions from caps

The SSA tracks replacements automatically through its internal enumeration system, the "Online Social Security Number Application Process" (SSNAP). When you submit an application, the system checks the card history before authorizing a replacement card.

Automatic exclusions that do not count toward limits. Certain types of card issuances are exempt from the 3/10 limits:

• Legal name changes: Updating a first name or surname.
• Work authorization legend changes: Adding, removing or modifying restrictive legends (e.g., changing from "Valid for Work Only with DHS Authorization" to an unrestricted card).
• Non-receipt / SSA errors: Cards lost in the mail or replacements required due to an SSA clerical error.

Hardship exceptions

If an individual reaches the 3-per-year or 10-per-lifetime threshold, they can apply for a hardship exception by providing documentation that a lack of a physical card creates a significant risk or barrier.

Common valid grounds include:

• Employment: An employer requires the physical card for Form I-9 verification, and alternative identity/work documents are unavailable.
• Government benefits / housing: A state or federal agency requires the physical card to process an application for financial assistance, food benefits or housing.
• Severe personal hardship: Exceptional circumstances where a failure to produce the physical card directly impacts health, safety or basic livelihood.

How many people apply for replacements?

Official SSA operational data indicates that fewer than 0.1% of all replacement card applicants hit the 3-card yearly or 10-card lifetime limit in a given year.

The Social Security Administration (SSA) issues approximately 10 million replacement Social Security cards annually. By comparison, the SSA issues about 5.5 million to 6.9 million original (new) Social Security numbers annually (primarily newborn enrollments and new immigrants).

Replacement applications represent the majority of physical card transactions. This is typically the result of lost or damaged cards or the need to change the name appearing on the card, rather than card fatigue, according to the SSA.

The cards are made with specially designed pre-printed banknote paper that has been standard since 1983. They have an estimated use life that depends on how often you physically handle the card. The banknote paper Social Security cards are expected to last at least 50 years with little use or handling. While cards with moderate use or handling are expected to last 35 to 50 years.

Personally, I've gone through three cards due to misplacement or loss. Fortunately, only one counts against my lifetime limit.

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Dear Wealth Wise: My husband and I are 65 and 66, respectively, and retired. Our financial adviser suggested a $250K life insurance policy for each of us that could also cover nursing home care. The total cost would be about $15K a year, or around $7.5K for each. Is this a good rate or even a smart idea at our age? They would take the money directly out of our retirement fund and we would be paying tax on the amount withdrawn. We also have two adult children, and we are trying to figure out the best route to minimize their taxes once we pass. — Policy Perplexed

Dear Policy Perplexed: Long-term care costs are hitting retirees hard. CareScout puts the average annual cost of assisted living in 2026 at $82,482, while a shared nursing home room costs $118,424. Even well-off retirees can struggle to cover these expenses, especially when care is needed for multiple years. That’s why some financial experts recommend long-term care insurance.

While a pair of $259K hybrid insurance policies sounds comprehensive, the $15,000 annual premium is a heavy lift. Is it worth paying? Here’s what our experts have to say.

Is the $7,500 cost per person a deal-breaker?

Unfortunately, the later in life you apply for long-term care insurance, the more expensive your premiums are likely to be.

Sonja Breeding, CFP, CCFC, and Senior Vice President, Wealth Management at Rebalance, says, "At their ages, $7,500 a year per person is within a reasonable range, but I'd want to know whether that premium is paid for life or only for a set number of years, such as 10.”

As Breeding explains, it’s one thing to pay $7,500 a year per person for 10 years. It’s another thing to pay $7,500 a year for 20 or more.

Nicholle Overkamp, MBA, ChFC, CDFA, Founder and CEO of Wilcox Financial Group, isn’t necessarily put off by the rate either. But, she says, "My first question wouldn't be whether $7,500 per person is a good insurance rate. It would be, 'What problem are we actually trying to solve?'”

Given our couple’s age, Overkamp says she’d be cautious about committing $15,000 annually to new insurance policies without understanding the couple's complete financial picture, including their existing assets and financial goals.

Does our couple need long-term care insurance?

Since we don’t know how wealthy our couple is, it’s hard to know whether they need long-term care insurance or whether they’re in a position to self-fund it.

"If this couple has accumulated enough wealth to comfortably self-fund potential long-term care expenses, purchasing expensive insurance may not be the most efficient use of their assets," Overkamp says.

"Insurance is about transferring risk,” she continues. “If they can absorb that risk without jeopardizing their financial security, maintaining control of those assets could be a better strategy."

We also don't know how healthy the couple is. At ages 65 and 66, securing a hybrid life and long-term-care policy requires passing rigorous medical underwriting. If either one has pre-existing conditions, they could be denied coverage or face steep premium surcharges.

What’s the actual benefit?

Another missing piece of the puzzle is what the proposed insurance policy would actually cover.

Before committing, our couple needs to look past the $250,000 death benefit per person and evaluate the care payout details, Breeding says.

"The most important missing piece is the long-term care benefit itself,” Breeding says. “Let's assume this is a standard hybrid life and long-term care policy. A $250,000 death benefit often pays around 2% per month for care, or about $5,000 a month for roughly four years. Many policies also include an extension rider that continues payments for another two to four years after the death benefit is used up, which can bring the total care benefit to $500,000 or more per person.”

But Breeding’s assumptions are just that. Our couple needs to see exactly what coverage they’ll have for long-term care, especially if the policy's main purpose is to pay for that rather than provide a death benefit for heirs.

Understand the hidden costs of funding insurance premiums

Our experts both caution that withdrawing funds from pre-tax retirement accounts to pay for insurance premiums creates hidden tax drags and missed growth opportunities.

"The proposed premiums would be funded through retirement account withdrawals, potentially creating additional taxable income, increasing Medicare premiums, and reducing invested retirement assets," Overkamp says.

"Over 20 years, that's $300,000 in premiums alone, assuming payments continue that long. That doesn't include the income taxes or potential investment growth they're giving up. Before making this commitment, I would want to see an analysis of the actual after-tax cost and what those dollars could accomplish elsewhere."

Breeding agrees.

"Paying premiums from a pre-tax retirement account makes the policy more expensive than it looks,” she says. "To net $15,000 for premiums in a 22% bracket, they'd need to withdraw more than $19,000. If they have cash or a taxable account, that's usually a better source."

Tax-efficient wealth transfer strategies

Our couple wants to ensure their needs are met while minimizing taxes for their heirs. Breeding says that, given that goal, a long-term care policy with a death benefit could make sense, provided the terms of the policy work for our couple.

"There's actually a silver lining here." Breeding explains that without the life insurance policy, "their kids would inherit an IRA and have to pay income tax on it within 10 years, likely during their peak earning years. Using IRA dollars to buy a tax-free death benefit converts taxable money into tax-free money for the next generation."

That said, Breeding points out that Roth conversions "accomplish something similar and are worth comparing" before buying the insurance policy.

They should keep in mind that federal estate taxes only hit ultra-high-net-worth households (currently over $15 million for an individual or $30 million for a married couple). That said, if they live in one of the 17 states (plus Washington, DC) that levies an estate or inheritance tax, that should affect their planning too.

Key questions to ask before buying the insurance

Whether a hybrid life and long-term care policy makes sense for our couple depends on a lot of specifics. To help them decide, Breeding suggests that they ask their adviser these four questions:

1. What’s the monthly care benefit, and is there inflation protection?

2. Are the premiums guaranteed, and for how many years are they paid?

3. Is there a joint policy option with shared benefits that might cost less?

4. Is there any return of premium if we change our minds?

The couple could also seek a quote for a traditional, standalone long-term care policy, which strips out the life insurance component and is often cheaper.

Finally, Breeding explains, these types of insurance policies typically pay a commission, so our couple should ask point blank how their adviser is compensated for selling them one. And if they’re inclined to buy the policy, Breeding says, “A second opinion from a fee-only fiduciary is worth getting.”

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

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

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

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

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

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

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

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

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

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

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

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

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

I still had a roommate.

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

There is an important difference today.

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

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

Social media shows the finish line

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

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

What you don't see is the race.

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

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

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

It's the mindset.

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

The real divide is ownership

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

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

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

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

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

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

That's what time does.

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

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

Their capital had time to work.

Young Americans are right to want more

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

That's not a serious response.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1. Skip your first RMD

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

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

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

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

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

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

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

2. Buy a qualified longevity annuity contract, or QLAC

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

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

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

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

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

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

3. Keep working

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

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

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

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

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

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

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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.

My mom died unexpectedly one month after creating her will. She was sure to include a clause that funds from her estate could be used to cover costs, like her memorial service, and had spoken to me about how she'd named me executor and how she made sure money was available for those immediate expenses.

Though she'd planned to make the process as logistically and financially simple for me as possible through her estate planning, that quickly changed after her death. My mom's death was unattended, and the state of Massachusetts performed an autopsy. Months later, we still don't have the results. I have a death certificate listing her cause of death as pending, and her bank won't accept it, so I can't do something as simple as deposit her vacation payout from her employer. I won't have access to her estate funds anytime soon, and despite having a will, her estate has to go through probate.

My family's situation isn't unusual, and it's added financial stress to an emotionally turbulent time. I spoke with three attorneys to learn about why this happens and what you can do to avoid this. Here are five situations that might happen after a death despite your estate planning efforts. These situations may delay your heirs from being able to access the money you set aside for immediate expenses like funeral or memorial service costs, mortgage payments and more.

1. A death certificate may create challenges for your beneficiaries

A death certificate is a legal document that includes details about a death, including its date, time, location and cause. It's needed to begin the probate process, access or close bank accounts, claim a life insurance policy and more. If you've left money in a bank account to be used for expenses after your death, your beneficiaries will need a death certificate to access that account.

Things get more complex if an autopsy is performed. In some situations, a cause of death is clearly evident, but in others, it can be more complicated, necessitating an autopsy. Autopsies are particularly important and common when someone passes away at a young age, and they can provide a family with important peace of mind.

If an autopsy is performed, beneficiaries may receive a death certificate listing the cause of death as pending. When the autopsy results are available, that certificate can be updated to reflect the official cause of death.

Several financial transactions may require an official cause of death. "With a lot of financial assets, especially life insurance, the cause of death ultimately determines if the funds get paid out and how much they get paid out," says Kelsey Simasko, Attorney at Simasko Law. Since many life insurance policies have exclusions for suicide, illegal drug use or deaths that occur in a felony, life insurance won't pay out a policy until the insurer knows how an individual died.

"A lot of life insurance policies have riders for accidental death, so you need the official cause to determine if it's accidental and if the family should be paid out triple the policy," says Simasko.

Banks and credit unions may or may not accept a death certificate listing a cause of death as pending. According to Simasko, such financial institutions operate according to their own internal policies regarding whether to accept a death certificate with a pending cause of death. Most institutions would rather be safe than sorry, so beneficiaries may not be able to access an account at all until they have a death certificate with an official cause of death.

2. Autopsy results could delay a final death certificate

If an autopsy is performed, a beneficiary may need to wait on the final autopsy report before being able to proceed with tasks like accessing a bank account or claiming a life insurance policy. Unfortunately, the amount of time that a family may wait for a final report and death certificate may very significantly.

Benjamin Trujillo, Partner J.D., LL.M. at MONETA, explains that while the autopsy may be completed quickly after a death, toxicology and other laboratory work can extend that timeline. "Some tests can take more than a year with a backed-up lab," he says.

Simasko adds that location also affects autopsy processing timelines. Highly populous counties, such as those encompassing major cities, typically have a much larger backlog of autopsies to perform and process. In contrast, the process will likely be much faster in a small county.

3. Your bank account might be automatically frozen

Financial institutions often automatically freeze a bank account after the account holder dies. According to Elizabeth Acevedo, Shareholder/Director at Weinstock Manion, this can occur if someone calls and notifies the bank, or if a staff member sees an obituary in the news.

When older adults pass away, account freezes may be caused by benefits. "One of the most common things that triggers [an account freeze] is if the person was receiving any benefits," Acevedo says, such as Social Security benefits. "The Social Security Administration is one of the first ones to learn of the death, and they're the first to recover any additional payments that have been made. This often alerts banks."

According to Simasko, once an account is frozen, a beneficiary listed on the account will have to fill out paperwork to be able to access the account. If there's no beneficiary, a bank can't release any money until they receive an order from the probate court.

Trujillo explains that people are often surprised that being named as executor in a will doesn't necessarily give them immediate authority over the deceased person's assets. "You are nominated in the will, but you typically receive your legal authority through the probate process and after receiving what is called 'letters testamentary,'" he explains. Letters testamentary are legal documents issued by a probate court that give an executor the authority to manage an estate.

4. Your estate may have to go through probate

It's a common misconception that a will allows your beneficiaries to easily access your estate, but many people don't realize that a will must pass through probate.

According to Kiplinger's Trillion Dollar Talk survey, conducted by Morning Consult, 41% of parents have a will. But having one doesn't necessarily mean their loved ones can avoid probate.

"Having a will does not avoid probate — it almost guarantees some probate," says Trujillo. He explains that the will identifies who should receive the property left in the estate and who should administer the estate, but probate, the legal process of putting those instructions into effect, is overseen by the court.

Small estates may qualify to avoid the probate process, but the threshold for small estates varies significantly by state. In Massachusetts, that threshold is $25,000, excluding the value of a car. In California, the threshold is $107,900 for deaths occurring on or after April 1, 2025.

Many people are also surprised by the cost of the probate process. In addition to possibly retaining a lawyer, the court charges fees, including fees to open and administer probate, plus an inventory fee. In some counties, an inventory fee is a percentage of the total value of the estate's assets, while other counties charge a flat fee based on the asset value.

The probate timeline may vary, potentially taking months to years. Acevedo explains that the probate duration can depend on many factors, including how busy the court is and when hearings are set. "When I file a petition to close an estate, it's likely the hearing will be set three months from now," she explains. "There's just this drawn-out period that is truly a function of the fact that you are in court."

The decedent's organization can also impact the duration of probate. The process of unearthing assets can be time-consuming and challenging, especially if a beneficiary can't get into the decedent's email account. In such a situation, the process might involve reaching out to a CPA, going through mail, reviewing prior tax returns to identify income sources and running title searches.

5. Your beneficiaries might pay significant expenses out of pocket

Even if you have a will, your beneficiaries may not be able to access the money you'd set aside for immediate expenses after your death. They may have to cover those costs out of pocket.

Funeral costs may be substantial, and many people underestimate the costs. According to the Choice Mutual 2025 Funeral Cost Perception Report, more than half of adults ages 45 and older estimate funeral costs to be less than $10,000. However, experts report that when you account for expenses like the services, casket, printed materials and body transportation and preparation, costs can quickly approach $15,000 to $20,000.

Cremation is a lower-cost alternative. The National Funeral Directors Association reports that the median cost of a cremation, including a memorial service and body viewing, is $6,280. However, costs can still vary significantly by state.

Simasko says that families may have some flexibility in these situations. She notes that funeral homes understand that it often takes families some time to get their finances lined up, and they're typically willing to send a family a bill.

She adds that mortgages can often be left unpaid for about three months before a mortgage lender starts to talk about foreclosure. If a family can't cover the first mortgage payment, they may be able to miss that one payment and then pay it back once they have access to the funds. She encourages families to proactively contact the mortgage company and let them know about what's going on.

If a beneficiary pays for expenses out of pocket, it's essential to keep detailed receipts, including copies of checks or direct payments made from a bank account. Beneficiaries can submit those receipts to get paid back later on.

7 ways to make accessing funds simple for beneficiaries after your death

• Prepay for a funeral or cremation: Prepaying for a funeral or cremation allows you to cover the costs in advance, leaving your family with one less expense. There are a couple of drawbacks to be aware of. If the funeral home should close, it might be difficult to transfer the contract. If you and your family move and no longer want to use that funeral home, you generally can't use the contract elsewhere.  
• Consider final expense insurance: Final expense insurance is a permanent life insurance policy that helps cover expenses like funeral costs, legal fees for end-of-life documents and some other related costs. This type of policy usually has a lower premium and a smaller payout than a traditional life insurance policy, and it's an alternative to prepaying for services.
• Open a joint account: Consider opening a joint account specifically for funds to be used for end-of-life costs and other immediate expenses. You can add a beneficiary to the account as a joint user, which may help them access the funds sooner. Trujillo cautions that joint ownership of accounts may have unintended gift tax consequences, particularly if the money is used to benefit the survivor, and not the estate, so consider speaking with a tax professional when you create the account.
• Create and maintain your will: A will is important, and it identifies which assets you want to go to each beneficiary. Make sure that you create a will and keep it updated if your wishes change.
• Consider a living trust: Acevedo recommends creating a living trust in addition to a will. "The living trust operates like a will, and I have my clients move their assets into the name of their living trust during their lifetime," she explains. Instead of having to go through court, the beneficiaries take a change of trustee document and a tax ID number to the bank and are able to access accounts much faster than through the probate process.
• Add a beneficiary to your accounts: Beneficiary designations on your retirement accounts and life insurance are also essential. Trujillo cautions that retirement accounts and life insurance benefits usually pass according to the beneficiary designation, not according to the will, so be sure to keep those designations updated if your plans change.
• Leave documentation: Make sure your will executor knows how to access your financial information and estate planning documents. Keep copies of essential details, like a list of bank accounts, retirement accounts, income sources and email addresses and passwords, and share their location with the executor in advance. Having this information organized and accessible can save your beneficiaries time and stress.

Looking forward

Estate planning may be expensive, and Simasko estimates that most people will pay several thousand dollars upfront, but that investment may help save your beneficiaries both money and time. "Estate planning is so much less expensive than fees beneficiaries are facing when going through probate," she says.

Laws vary by location, so consider speaking with a lawyer specializing in estate planning in your state. Discuss your goals, including your wishes for funds to be easily accessible to cover immediate costs, and ask whether your current estate plans are sufficient or need to be improved to meet that goal.

Taking a second look at your plans may help avoid unexpected situations, making the overall process easier for your beneficiaries.

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Katie retired at 67 after 30 years as a marketing executive. She had planned for it. In the final months of her career, she made a list of everything she had wanted to do but never had time for: Painting, reading, travel and long lunches with friends.

She retired in June and by September had done them all. By January, she was restless in a way she could not explain.

She was not exactly bored. Her days were full. She painted three mornings a week, attended a book club twice a month and had taken two trips she described as wonderful. She had the life most people picture for retirement. She also had a persistent, low-grade sense that something was not adding up.

She was doing everything right. She simply did not realize that doing everything right is not the same as doing the right things.

The leisure trap

Most retirement planning conversations miss a distinction entirely: Pleasant activity and purposeful engagement are not the same. One passes time agreeably. The other builds something.

Many retirees arrive at retirement with a version of Katie's list. They have delayed hobbies and postponed pleasures, and retirement finally gives them the time to pursue them. This is not a problem. The problem is mistaking the beginning of a fulfilling retirement for the whole of it.

Meaningful activity has three qualities:

• It draws on something you are good at
• It continues to challenge you
• It generates an outcome beyond personal enjoyment

Pleasant activities can satisfy one of those conditions, while purposeful engagement satisfies all three.

Katie's painting met one. She enjoyed it. It did not yet require her best thinking. It produced no outcome that mattered to anyone outside the room. And it was not growing.

What work was actually providing

For 30 years, Katie's career provided three things she did not consciously notice until they were gone: A skill that was always developing, an audience whose response to her work mattered and outcomes with real stakes.

The marketing campaigns she built either succeeded or failed. The metrics were visible, and the feedback was immediate. The challenge was never fully mastered.

That combination of novelty, accountability and consequence is what psychologist Mihaly Csikszentmihalyi identified as the conditions for flow: A state of full absorption in a demanding, skill-matched activity.

Flow is not relaxation. It is the opposite of relaxation. Csikszentmihalyi's decades of research identify flow as one of the most reliable contributors to well-being and meaning in adult life.

Pleasant hobbies rarely generate flow. They generate comfort. Comfort is not nothing. It is simply insufficient to fill the psychological space a career once occupied.

The distinction that changes everything

Purposeful engagement is not about what you do. It is about how you do it and for whom.

Golf is an instructive example. As a vehicle for walking, outdoor exposure and social connection, it is among the most valuable physical activities for a retiree. The distinction is not in the game itself. It is in what the game is being asked to carry.

As the sole answer to the question of how to spend the years after a career, it becomes a placeholder masquerading as a life. Same activity. Entirely different design.

Three conditions turn a hobby into purposeful engagement:

• A skill that still has room to grow. An activity not yet mastered that continues to demand more than you can deliver
• An audience beyond yourself. Someone whose response to your work, presence or contribution matters to the outcome
• Stakes. Something that would be diminished if you stopped showing up

A hobby that meets none of these conditions is considered leisure. Leisure is valuable. A retirement built entirely on leisure is like a financial portfolio held entirely in cash: It preserves what is there, but it yields nothing new.

The prescription

Katie's restlessness was resolved not by changing what she did but by altering the conditions under which she did it.

She joined a community art collective that required her to show work quarterly and to receive critiques.

She began teaching watercolor once a week at a center for older adults, which required her to clearly articulate what she knew.

She entered a regional exhibition but did not place. The following year, she entered again and had different results.

The hobby took on a higher purpose.

The painting did not change. The design did. She now has an audience, a standard and a reason to improve that extends beyond her own preference.

Her days have the quality of her career days, oriented toward something that is not yet finished.

That orientation is what the hobbies pillar, properly understood, is meant to provide. Not entertainment. Not the pleasant passage of time. An answer to the question retirement poses to every retiree who takes it seriously.

Who am I becoming in the years after my career, and is anyone watching?

The financial plan tells you how long the money will last. Purposeful engagement determines whether the person spending it keeps growing.

Both deserve a plan. For too long, only one has had it.

To learn more about designing a fulfilling retirement, pick up my new book, Your Encore Years: The Psychology of Retirement.

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

Americans have no shortage of retirement benchmarks competing for their attention. Some experts say you need $1 million, others suggest saving 10 times your salary, and then there's the 4% rule.

On top of that, there are annual surveys and statistics that aim to calculate or identify the ever-popular retirement "magic number" for how much the average American needs to retire comfortably.

While these figures and rules can offer a starting point, they can also create unnecessary anxiety and lead people to focus on the wrong end goal.

Retirement planning is not about reaching someone else's number. It's about creating enough sustainable, reliable income to support the life you want to live.

Start with the retirement you envision

Many people begin retirement planning by asking, "How much do I need to save?" However, a more useful question may be, "What do I want retirement to look like?"

For some, retirement means extensive travel and new experiences. For others, it may involve staying close to family and supporting children or grandchildren. Others might even consider relocating, volunteering, pursuing a passion project or continuing to work in some capacity.

Those decisions matter because they determine the amount of income you will actually need. A retirement built around international travel will look very different financially from one centered on spending time at home with family.

Starting with your goals rather than a savings target helps turn retirement planning from a math exercise into a strategy built around your life.

Focus on income, not just assets

During your working years, retirement planning is largely about accumulation. You save, invest and allow time and compounding to work on your behalf.

As retirement approaches, the challenge changes. The question is no longer how much you can accumulate. It becomes how effectively you can convert those assets into reliable income.

This is where popular rules of thumb can fall short. Let's take the 4% rule, for example. This strategy suggests withdrawing 4% of your savings in the first year and then adjusting that amount for inflation every year after.

While this can feel simple and may work for some, there is a lot it can't account for, including when you retire, your tax situation, spending patterns, desire to leave assets to heirs or charitable causes, among other factors.

Two retirees with identical portfolio balances could require very different withdrawal strategies based on their goals, other income sources and life circumstances.

Consider the personal risks, too

A retirement income strategy should also account for risks that a simple savings target can't capture.

Longevity is one example. Funding a retirement that lasts 20 years is very different from funding one that lasts 35 years.

Market conditions matter as well. Retiring into a market downturn can create challenges that don't exist when markets are rising, particularly if withdrawals begin immediately.

Inflation can reduce purchasing power over time, while taxes can significantly affect how much spendable income remains from different accounts.

Family considerations also play a major role. While some retirees expect to help support aging parents, others may want to assist adult children, fund education for grandchildren, or prepare for a future transfer of wealth.

These priorities are meaningful, but they're difficult to capture in a single benchmark or national average.

Build a plan that evolves

No matter what you envision for your retirement, planning for it shouldn't be a one-time exercise completed just before leaving the workforce. A strong retirement income strategy should be flexible enough to adapt as life and goals evolve.

That's where an adviser can add value. Working with an adviser can help you build and refine that strategy over time, aligning your resources with your goals, revaluating trade-offs and adjusting as circumstances change.

A retirement plan should reflect your life, not a "magic number" or arbitrary benchmark. In the end, what matters most is having a personalized income strategy that supports the retirement you want today and can evolve with you tomorrow.

This material is provided for informational purposes only and is not intended as investment, legal, or tax advice. Any opinions expressed are those of the author as of the date of publication and are subject to change. Individuals should consult their own legal, tax and financial professionals regarding their specific circumstances.

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• Five Keys to Retirement Happiness That Have Nothing to Do With Money

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

Many parents and grandparents set up college funds for their children or grandkids. Given the cost of higher education today, starting a college fund early could help ensure they can earn a degree without the burden of overwhelming student loan debt.

But given today’s sluggish entry-level job market, funding a college education might no longer be enough to help your kids or grandkids be financially stable in young adulthood. In addition to education, you might want to create a "launch fund" — money your heirs can use to supplement their post-college paychecks or reserve for a down payment on a home.

Here’s how a couple of experts suggest approaching your launch fund, and how to balance it with your own financial needs.

Your financial security must come first

It’s noble to want to set your kids or grandchildren up for financial success. But Tyler End, CFP, CEO and co-founder of Retirable, says it’s important to prioritize your own financial needs and only give what you can truly afford.

"There can be a strong emotional pull to be looked at as the provider, but it is important to pay yourself first," he says. "There are no loans for retirement income like there are with college. It doesn’t help to stretch yourself and ultimately become a worry for your heirs."

Beth Stenz, CFP and financial adviser at Edward Jones, agrees.

"I would start with one important rule — secure your own retirement before funding the next generation," she says. "A young adult has decades of earning potential ahead of them."

Before earmarking significant assets for younger heirs, Stenz says, make sure your retirement savings are sufficient or on track. Also make sure you have a solid emergency fund and a plan for what she calls "potentially significant health care or long-term care costs."

Decide how much flexibility you want

Accounts like 529 plans offer tax benefits, but they’re meant for education expenses. If you end up with excess funds, you have options, but avoiding tax penalties requires strategic planning.

If you’re going to set up a launch fund, Stenz says, you might want to use different "buckets" or accounts that address different goals.

"A launch fund is ultimately about flexibility," she says. "The money may be used to supplement income during a difficult job market, fund additional education or training, help with a relocation opportunity, support the early stages of a business venture, or assist with other important milestones in young adulthood."

To that end, Stenz recommends thinking about how much money you want to earmark for education vs other young-adult expenses. You’ll also need to decide how much control of the money you want to retain and for how long.

Account options to look at

Once you’ve narrowed down your specific goals, Stenz says, you can look at different account options.

Taxable brokerage accounts

"A grandparent-owned taxable brokerage account can be particularly attractive for a launch fund because of its flexibility," Stenz says. "The grandparent retains ownership and control, there are no education-only spending requirements, and the money can ultimately be used where it is most valuable."

If you’re going to use a taxable account, your investment allocation should reflect when you might need the money, Stenz says.

"A fund for a 2-year-old can generally accept substantially more market volatility than money intended for an 18-year-old," she explains.

529 plans

Stenz says a 529 plan is still an excellent option when creating a launch fund.

"Earnings receive favorable federal tax treatment when distributions are used for qualified expenses, and a grandparent can establish the account with the grandchild as beneficiary. I particularly like that the account owner retains control rather than simply handing the assets to the child," she says.

End says that funding college and young adulthood can be a tricky balancing act.

"The cost of education can vary greatly or be non-existent depending on the path taken," he says. "The best course of action is to decide what is most aligned with your values and give the gift that will make the biggest impact. For example, if education is important, prioritize making that accessible."

Thanks to recent rule changes, 529 plans allow the beneficiary to roll over up to $35,000 into a Roth IRA over their lifetime. That gives you the option to help a child or grandchild’s college education, save for graduate school and start a retirement nest egg if they don’t need all the money while earning degrees.

A number of parents and grandparents have "superfunded" 529 plans to support their heirs and get a nice tax break. As a result, some young adults have substantial 529 accounts that, even after a $35,000 rollover, would still leave them with more than they could spend on education. A Senate proposal would allow unlimited Roth IRA rollovers from unused 529 funds, but its fate is uncertain.

Custodial accounts

Custodial accounts are similar to brokerage accounts, but with a brokerage account, you retain control perpetually. With a custodial account, ownership eventually transfers to a child or grandchild at a certain age.

"Typically, you structure them under Uniform Transfers to Minors Act or Uniform Gifts to Minors Act accounts where the ownership transfers at a set age, giving the beneficiary full control of the funds," End explains.

If you go this route, keep in mind that because a custodial account is owned by your child or grandchild, it could affect their ability to qualify for college financial aid. If you’re planning to fund their education entirely, this might not be an issue.

Trump Accounts

Trump Accounts, says Stenz, add another potential tool to the mix. You can contribute up to $5,000 per year, per child, to one of these accounts, and the money grows tax-deferred. Funds are locked until the beneficiary turns 18, when the account converts to a traditional IRA.

A Trump Account won’t help your child or grandchild cover the rent as a young adult or buy a new car. But it could give them a vital jumpstart in building retirement savings.

Share your plans so no one’s in the dark

Whether you’re saving to help a child or grandchild tackle young adulthood, End says it’s important to share your thoughts and get input from the loved ones you’re trying to help.

"Don’t hesitate to open communication with your family," he says. "You might have an idea of how to make the biggest impact, but opening the dialogue might help you learn what will make the biggest difference."

You might, for example, be inclined to prioritize 529 plan contributions. But if your teenage grandchild already knows they don’t want to go to college, your money might be better off in another account. Having open conversations could help you achieve your ultimate goal of making life easier for a child or grandchild you care deeply about.

Read More

• Use the 529 'Grandparent Loophole' to Maximize College Savings
• How to Help Your Adult Kids Without Hurting Your Retirement
• 'Subsidized Adulting': Can You Afford to Help Your Children Financially?
• We Retired at 70 With $4.3 Million. My Wife Won't Spend 'Our Grandkids' Inheritance,' but I Want to Travel.
• I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds Out Through the Years?

I live in Arizona, and during monsoon season, we know what a black cloud looks like.

You can see it building in the distance. The sky gets darker. The temperature changes. The wind starts to pick up. Even though nothing has happened yet, you worry about it.

Is it going to rain? How bad will it be? Will there be hail? High winds? A dust storm? Is it even going to hit us — or will it pass by?

The other day, the clouds were dark enough that I called my 17-year-old daughter and told her to be careful driving. There wasn't a storm at our house yet, but I knew there was enough risk that it was worth thinking ahead.

Those clouds are a good metaphor for how I look at long-term care: It's the black cloud of retirement planning.

You know the cloud is out there

Most people approaching retirement understand they might need some form of long-term care. What they don't know is what it will look like. They're likely asking themselves:

• Will I need long-term care at all?
• When will I need it?
• Will my spouse be able to take care of me?
• Will I need a little help at home or full-time care?
• Will I need help for six months or six years?
• How much might that care cost?
• What happens financially to my spouse if I'm the one who needs care?

That's a lot of uncertainty hanging over a retirement plan, which makes long-term care so uncomfortable to discuss.

• We can estimate how much income someone will need in retirement
• We can model Social Security
• We can build an investment portfolio
• We can discuss taxes and estate planning

But long-term care is different.

We don't know if or when the storm is coming, how long it will last or how severe it will be.

That's why we should plan for it.

The storm isn't just about money

When people hear "long-term care planning," they often think about the financial hit. But that's not always the biggest risk.

Long-term care can become a family issue before it becomes a financial problem.

Someone must coordinate doctors, medications, transportation and care facilities. A spouse might become the primary caregiver. Adult children might begin rearranging work schedules and family responsibilities. Families are often forced to make difficult decisions when they're already feeling stressed.

There's also the potentially substantial cost.

Imagine a married couple who have spent 30 or 40 years saving for retirement. They've built a nest egg that's meant to provide income for two people. They have travel plans. They want to help their grandchildren. Maybe they want to leave something to their children.

Then one spouse needs significant care.

Suddenly, the same pool of assets has two jobs. It must provide for the healthy spouse's retirement while simultaneously paying for the other spouse's care expenses.

That's why I believe the long-term care planning conversation should start with people, not products.

What would you want to happen?

Before discussing insurance and other options, I like the idea of asking some basic questions:

• If you needed care, where would you want to receive it?
• Would you prefer to remain at home as long as possible?
• Who would you expect to help you?
• What assets would you be comfortable spending?
• How important is preserving assets for your spouse?
• How important is leaving an inheritance?

These questions change the conversation. The plan comes first. The product comes second.

There are several ways to prepare for the storm

There isn't one long-term care strategy that will work for everyone. Generally, families have at least a few options, including:

1. Self-funding

Some people have accumulated enough wealth to comfortably pay for care from their own assets, and that's a perfectly legitimate strategy.

But self-funding should be a strategy, not an assumption. It should include modeling what happens if one spouse requires significant care for several years.

• From where would the money come?
• Which assets would be tapped?
• What happens to the surviving spouse's income?
• Does the rest of the retirement plan still work?

2. Traditional long-term care insurance

Traditional long-term care insurance allows someone to transfer a portion of the risk to an insurance company. In the right situation, it can provide significant leverage and help protect other retirement assets.

But the tradeoffs include ongoing (usually high) premiums and the possibility of premium increases, not to mention the discomfort some people have with paying for something they might never use.

3. Hybrid or asset-based strategies

Another option is a hybrid or asset-based strategy — usually a life insurance policy or annuity that includes long-term care benefits.

The money that goes into this strategy can serve multiple purposes. If long-term care is needed, those benefits are available. If it isn't needed, the death benefit or other value remains.

This can make the decision more acceptable for someone who dislikes the idea of "use it or lose it" insurance.

4. Combining strategies

Planning doesn't have to be all or nothing.

A family might choose to insure against part of the risk while retaining enough assets to cover the rest.

That's often how we handle other risks in life. We decide how much risk we're comfortable shouldering and how much we want to transfer to auto, home, health or other insurance policies.

Doing nothing is still a decision

You could decide to do nothing and figure it out as you go. That's the long-term care strategy many families have by default.

Maybe a spouse provides the care. Maybe the children step in. Maybe assets are spent down. Eventually, Medicaid might become part of the conversation for some families.

But there's an important distinction between intentionally choosing to retain a risk and ignoring it: The default plan might give you fewer choices when you need choices the most.

Plan while the sky is still clear

Having a strategy in place can help you feel more prepared and might reduce the urge to constantly watch the sky.

That's one of the primary goals of a good retirement plan: It can help provide confidence in the face of uncertainty.

Planning earlier might give you time to evaluate your financial resources, your family situation and the various ways you could handle the risk.

You don't necessarily have to purchase something. But you should have the conversation.

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 Pay for Long-Term Care
• Long-Term Care Insurance: 10 Things You Should Know
• What You Need to Know About Long-Term Care Before You Need It
• A Financial Professional's Take on Long-Term Care Insurance: Buy or Not?
• If Not Long-Term Care Insurance, Then What?

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.

How does an ordinary investor find a true professional financial planner when it can be like searching for a needle in a haystack?

The financial services industry includes hundreds of thousands of individuals who use titles such as financial advisor, wealth manager, financial consultant, retirement specialist or financial planner. Yet these professionals operate under very different business models, compensation structures and standards of care.

Over the years, I've developed three criteria that I believe help consumers identify a true financial planning professional:

1. Professional training and competency, often demonstrated through credentials such as the CERTIFIED FINANCIAL PLANNER™ certification.

2. A fiduciary relationship, where the advisor is legally obligated to place the client's interests ahead of their own.

3. Fee-only compensation, meaning the advisor is compensated only by the client and doesn't receive commissions or other sales-related compensation from financial product providers.

Financial advisers who are members of the Garrett Planning Network (GPN) are required to meet all three criteria. But they must also agree to one more, unique requirement.

Unlike many firms that require ongoing wealth management relationships, Garrett members must make financial advice available regardless of income, net worth or asset level. They must also offer time-based services, such as hourly planning or project-based engagements.

That may be the organization's superpower.

I spoke to Jean Keener, CFP®, founder of Keener Financial Planning in Keller, Texas and a long-time Garrett Planning Network member, to find out more.

The accessibility problem

One of the biggest challenges facing consumers today is simply gaining access to objective financial advice.

Many advisory firms establish minimum account sizes of $500,000, $1 million, $2 million or more. While those firms may provide excellent service, their business models can leave many Americans without access to professional financial planning advice.

According to Keener, when consumers attempt to seek help, they often encounter something very different from what they expected: "People maybe try to get some advice, but they end up getting a sales pitch instead.

"When people are looking for objective advice and the only solution that's available to them is a sales relationship, that's not what they're even looking for."

This distinction is important.

Consumers are often searching for advice. What they find instead is a product recommendation.

The Garrett difference

The Garrett Planning Network was built differently, Keener says: "I felt like it solved that problem of, 'how do we create a model that people can get the objective advice they're looking for without a sales pitch?'"

It allows consumers to seek professional advice without worrying whether they will meet a firm's minimum account requirements.

The practical impact of this policy cannot be overstated.

• A young physician beginning a residency
• A newly married couple saving for their first home
• A recently divorced individual
• A mid-career professional evaluating their stock options
• A retiree trying to make Social Security and Medicare decisions

All these individuals can benefit from professional financial planning advice, even if they don't have substantial investment assets.

Advice when you need it

One of the most interesting parts of my conversation with Keener involved the concept of comprehensive financial planning.

She described comprehensive planning as taking a holistic view of an individual's financial life, including investments, taxes, insurance, estate planning, retirement planning, cash flow, debt management and other financial decisions.

But she also emphasized that consumers don't always need a traditional comprehensive financial plan. Sometimes they simply need objective guidance on a specific issue.

That flexibility is particularly valuable for younger investors with modest assets. Keener said: "[A] 25-year-old doesn't need comprehensive financial planning the way our industry has defined it, but [they do] need holistic financial advice."

In other words, consumers should be able to access the advice they need today without waiting until they accumulate significant wealth.

Finding the needle in the haystack

The more financial planners I interview, the more convinced I become that true financial planning professionals represent a relatively small segment of the broader financial advice marketplace.

Many people who call themselves financial planners are primarily engaged in selling investment products, insurance products or investment management services.

By contrast, professional financial planners focus on providing advice.

That's why I continue to believe that three characteristics matter most:

• Professional training and competency
• Fiduciary responsibility
• Fee-only compensation

The Garrett Planning Network combines all three of those characteristics while also adding a fourth requirement that may be uniquely valuable to consumers: Accessibility.

Its members agree to make financial advice available regardless of a person's income, assets or net worth.

That commitment helps consumers find what can otherwise be a needle in a haystack: A professionally trained, fee-only financial planner who is willing to help them before they become wealthy.

How to find a Garrett planner

Consumers who are interested in working with a Garrett Planning Network member can begin by visiting the Garrett Planning Network's online advisor directory. The directory allows investors to search for fee-only financial planners who have agreed to the organization's membership standards, including providing advice without minimum income, asset or net-worth requirements and offering time-based planning services.

Before engaging an advisor, investors should review their credentials, regulatory filings, areas of specialization, compensation model and service offerings to determine whether they're a good fit for their personal financial situation.

The bottom line

When I asked Keener what continues to attract her to the Garrett Planning Network after nearly two decades of membership, her answer reflected the organization's mission.

She said Garrett members are committed to making objective financial advice available to a broader segment of the American public and helping consumers obtain the advice they need when they need it.

For investors searching for objective financial guidance, that commitment may be the organization's greatest strength.

In a marketplace crowded with salespeople, the Garrett Planning Network helps consumers find something increasingly rare: A professionally trained financial planner who combines fee-only compensation, fiduciary responsibility and a commitment to making financial advice accessible to everyone — not just the wealthy.

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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 talk to a lot of 65-year-olds, and one of the biggest fears they have is making a mistake with Medicare. It's hard not to be afraid when you keep hearing well-intentioned, but conflicting advice such as:

• "You have to sign up for Medicare at 65."
• "You don't have to sign up for Medicare at 65."
• "You can change your Medicare insurance every year."

During my 20-plus years as a retirement-focused financial adviser, I've just about heard it all — some true, some false and just about all of it leaving near-65-year-olds wondering how they can figure it out in time.

Below are the five most common mistakes retirees make with Medicare and what you can do to try to avoid them.

What makes Medicare so different

Your health insurance choices used to be easy. Your work gave you two or three options and you chose the one that fit your family best.

Then you turn 64 and you get bombarded with advertisements in the mail touting how great a particular Medicare insurance plan is.

When I checked Medicare.gov's Plan Comparison Tool in September 2026, there were 81 different options near me in Wisconsin: 39 Medicare Advantage plans, 10 prescription drug plans and 32 supplement insurance (Medigap) options.

The number and types of plans available to you will depend on where you live.

With so much information and so many different plans, it's no wonder Americans keep making these five common mistakes.

Mistake No. 1: Assuming Medicare is automatic

Medicare feels automatic since many people enroll or get signed up for it at 65, but that feeling of "automatic" often turns into "I don't have to think about it" — and that's a big mistake.

Medicare enrollment generally is automatic if you've already been receiving Social Security retirement benefits for at least the four months before age 65. A few months before your 65th birthday, you'll get your Medicare card in the mail showing that you're enrolled for Part A and B.

If you have current employer-provided health insurance from a company with 20-plus employees, you may be able to delay starting Part B. Before you do, check with your employer to find out how your health coverage coordinates with Medicare.

If you're signed up for Part A and B automatically, that doesn't mean you automatically get signed up for other private Medicare insurance to pay for the gap between what Medicare covers and what Medicare pays.

You should still evaluate whether you're better off with Medicare Advantage or original Medicare with Medigap (supplemental) insurance — and you'll have to proactively sign up to get those coverages.

Mistake No. 2: Misunderstanding what counts as 'employer coverage'

Many people turning 65 think, "I don't need to sign up for Medicare. I already have insurance through my employer." It turns out they actually have retiree coverage, COBRA or even TRICARE from prior military service.

Retiree health insurance and COBRA plans are not coverage from your current employer. And TRICARE states that you need Part A and B to get TRICARE For Life.

If you have employer-provided health insurance based on your or your spouse's current employment with a company of 20-plus employees, you may be able to delay signing up for Medicare. That's true, and yet there's so much confusion around that.

Your "employer coverage" must be from active, current employment.

Retiree healthcare doesn't count as current employer coverage that could allow you to delay Part B. COBRA generally doesn't count either.

TRICARE states, "If you're eligible for both TRICARE and Medicare Part A, then in most cases, you must have Medicare Part B to keep TRICARE." (Emphasis added.)

Mistake No. 3: Confusing the different Medicare parts and choices

Medicare lists four different parts of Medicare, along with optional Medigap insurance, and points out the differences between Medicare and Medicaid. With similar names and so many parts, no wonder it's confusing.

Medicare Part A (hospital insurance) covers inpatient care in hospitals, skilled nursing facility care, hospice care and home healthcare.

Most people get Part A with no premium cost because they, or their spouse, qualified by working and paying Medicare payroll taxes for "40 quarters" — basically 10 years. Premium-free doesn't mean cost-free though. You can still have deductibles, copays and other out-of-pocket costs.

Medicare Part B (medical insurance) helps pay for doctor visits, outpatient care and preventive care, such as screenings, shots or vaccines, and yearly "wellness" visits.

Part B costs $202.90 a month, which is often a surprise to many retirees who think it's free. It can cost even more if you have a high enough income and must pay Income-Related Monthly Adjustment Amount (IRMAA) surcharges.

Medicare Part D helps cover the cost of prescription drugs.

Drug coverage is often part of a Medicare Advantage plan. But if you choose a Medicare Supplemental Insurance (Medigap) plan, you'll generally buy part D drug coverage separately, unless you have other creditable drug coverage.

Medicare Supplement Insurance (Medigap) helps you pay your share of the costs of original Medicare.

People often ask me, "What does Medicare Supplement cover?"

My answer is, "Medicare Supplement generally covers what Medicare covers, but it generally pays for many of the costs that Medicare makes you responsible for."

Medicare Part A has deductibles, coinsurance and copays that you are responsible for.

Medicare Part B has a deductible, after which you generally pay for 20% of the cost of the Medicare-approved amount for services Medicare covers.

That's where Medicare Supplement (Medigap) comes in, to help pay the costs of your healthcare that Medicare covers but doesn't fully pay. You could also choose a different route, called Medicare Advantage.

Medicare Advantage (also known as Part C) is an alternative to original Medicare. You get a "bundled" plan through a private insurance company that is Medicare approved and essentially brings your Part A, Part B and usually Part D coverages all together.

Many Medicare Advantage plans have low or even $0 monthly plan premiums, while Medigap policies generally charge a separate monthly premium.

However, those on Medicare Advantage generally must continue paying their Part B premium, along with deductibles, copayments and specific provider networks.

Mistake No. 4: Ignoring the potential extra costs of Medicare through IRMAA

Many people are surprised that Medicare Part B has a monthly premium. They expect the taxes they paid throughout their career to cover their Medicare in retirement.

What's even more surprising is when your income from two years ago causes you to pay extra for Medicare through the IRMAA.

I met a client recently who was upset that his Medicare premiums were higher this year than last year.

I discovered he had retired two years ago. His income from that year was high enough to go over the IRMAA threshold so that both his and his wife's Medicare premium was roughly double the normal amount.

Fortunately, you can appeal your extra Medicare costs through IRMAA, and "work stoppage" is one of the "life-changing" events Social Security will take into account.

My client had retired, and his income is now lower. So after the couple requested a new IRMAA determination based on his retirement and their reduced income, their combined Medicare premiums were reduced by roughly $5,000 for that year.

This client's IRMAA surcharge highlights how interconnected all the pieces of retirement are. Your added income in one year, from working or perhaps Roth conversions or stock sales, can affect your healthcare costs two years later.

Retirement isn't just about your Medicare decision and your investment decision, and your Social Security decision separately. It's about how each of these areas affect each other.

That's why I created a five-step retirement master plan to help all the pieces of retirement fit together, which you can find in my book Retire Today.

Mistake No. 5: Not re-evaluating your Medicare Advantage or drug plan each year

Each year during open enrollment from October 15 through December 7, I send a message to my clients encouraging them to review their Medicare Advantage or prescription drug plan for the following year.

By far, the most common response is, "Nothing changed for me this year, so I don't need to do this."

But here's the thing: Something may have easily changed. Your existing plan could have changed quite a bit.

Every year, your Medicare Advantage or Part D drug plan can change its cost, its network, its preferred pharmacy, its benefits, its provider list.

And even if your plan doesn't change one thing, all the other plans could change and you might be missing out on a better plan for you.

You may find another plan that better fits your healthcare needs, or your prescription drugs, providers and budget.

Whether you're on Medicare already, or getting ready for Medicare, follow these five steps to avoid big Medicare mistakes:

• File for Medicare at the right time
• Confirm how your current health insurance coordinates with Medicare
• Learn the different parts of Medicare and what they cover
• Understand how past income affects current Medicare costs — and whether you qualify for a reduction in those costs
• Re-evaluate your Medicare Advantage and drug plan options each year

Take these five steps before, and even after, you file for Medicare, and you'll feel much more confident in the Medicare decisions you make.

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• Why Is My First Medicare Bill So High?
• Your 2027 Medicare Open Enrollment Guide: Essential Dates and Notices
• Claiming Social Security Soon? 5 Smart Moves to Make Before You File
• Retiring in the Next 12 Months? Answer These 3 Questions Before Your Paycheck Stops

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

You probably know that money is taken out of your paycheck to help fund the Social Security program. But did you know there's a limit on how much of your income is subject to the tax?

That threshold is rising in 2027, which means higher-paid workers could see more money withheld from their paychecks next year.

The Social Security Administration (SSA) just announced a new wage base for 2027 (roughly 4.2% higher than the 2026 tax limit), along with the annual cost-of-living adjustment (COLA) for more than 70 million Social Security recipients.

The new 3.6% COLA will boost monthly checks for beneficiaries, while the wage base determines how much of a worker's income is subject to Social Security payroll taxes.

Also worth noting: These updated numbers come as some lawmakers weigh proposals to shore up Social Security — including whether to eliminate the Social Security tax cap. Here's more to know.

New 2027 Social Security payroll tax limit

Every year, the SSA sets a limit on how much of your earnings can be taxed for Social Security. Any money you earn above this limit — also called the tax cap or wage base — isn't taxed and doesn't count toward your future retirement benefits. This limit usually goes up each year based on average wage changes across the country.

For 2027, the tax limit is $192,300, up about 4.23% from $184,500 for 2026.

High earners. If you're at or above the taxable limit, you will pay the 6.2% tax on more of your income.

• The maximum tax an employee will pay in 2027 is $11,922.60, up from $11,439 for 2026.
• The taxable wage base is increasing by $7,800.
• An employee earning at least $192,300 will pay an additional $483.60 in Social Security taxes in 2027 (for example, 6.2% of $7,800).

Other workers. If your income is below the taxable limit, all of it is already subject to Social Security tax.

Note: The wage base also matters for future benefits. Social Security uses a worker's earnings history to calculate retirement benefits, generally based on the highest 35 years of indexed earnings. Earnings above the annual cap don't count toward that calculation.

How much Social Security is taken from a paycheck

Employees pay 6.2% of covered wages toward Social Security, and employers pay another 6.2%. The combined rate is 12.4%. Self-employed workers generally pay both portions, for a combined rate of 12.4% on net earnings up to the annual wage base.

Self-employed individuals can generally deduct the employer-equivalent portion of their self-employment tax when calculating adjusted gross income (AGI).

It's also important to distinguish Social Security taxes from Medicare taxes.

• Medicare payroll taxes don't have the same wage cap.
• Employees generally pay 1.45% in Medicare taxes on all covered wages, and employers pay another 1.45%.
• Higher-income workers might also owe an additional 0.9% Medicare tax on wages above $200,000 for single filers and $250,000 for married couples filing jointly.
• Those thresholds are separate from the Social Security wage base.

Will the Social Security tax cap be eliminated soon?

As Kiplinger has reported, Sens. Elizabeth Warren, D-Mass., and Bernie Moreno, R-Ohio, are calling for the elimination of the Social Security payroll tax cap. The proposal would require people with higher wages to pay Social Security taxes on more of what they earn.