Do You Have at Least $1 Million in Tax-Deferred Investments?
If the answer is yes, then this article is for you. Find out how you can keep more of that $1 million for yourself and away from Uncle Sam.


I once had a guy reach out to me who said, “Joe, I’ve been reading your book, watching your videos and reading your articles. I’m ready to trust your team with the $1 million in my 401(k) that I’ve saved over the last 30 years.”
This was a big moment for him, and he had done a great job up to this point. He was certainly ready to retire; he just needed a better plan to ensure he could enjoy retirement.
But I had to tell him, “You don’t have $1 million.”

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
He started to raise his voice as he said, “Yes, I do. Look at my statement. You’ll see a balance of $1 million.”
He was getting defensive, and rightly so; after all, he had spent the last three decades working to accumulate that amount.
The problem? He was missing something: The guy had $1 million saved, but not all of that $1 million was his, because Uncle Sam expected a cut of that money. My new client needed a tax-smart plan to kick Uncle Sam to the curb before he was forced to take that money out of his 401(k) in the form of required minimum distributions (RMDs).
Why is tax planning so important for those with $1 million or more in their 401(k)s or IRAs? Because you likely won’t be in a lower tax bracket in the future. (You can read more about this in my article Will You Pay Higher Taxes in Retirement?)
You’re probably thinking, “I’ll be in a lower bracket in retirement because I will no longer be working. That’s what I’ve been told all my life.” I’m sorry to break the news, but if you have significant money saved in your retirement accounts, your taxable income will include Social Security benefits and also withdrawals from your investments. (Even if you don’t want to take money from your retirement accounts, the IRS will force you to take them as RMDs once you hit the required age.)
What can wreak havoc on your retirement
The combination of Social Security benefits plus withdrawals from tax-deferred accounts can wreak havoc on your retirement. Your Social Security income will most likely be fully taxable if you have $1 million or more in tax-deferred accounts like a 401(k) or IRA and must take RMDs. You’ll be pushed into what I call the “Social Security tax torpedo,” where you could pay a 40% to 50% tax rate by taking extra withdrawals from your tax-deferred investments.
Is there anything you can do to avoid the “tax torpedo”? Fortunately, you don’t have to sit and hope for a better retirement. And you certainly don’t have to put your trust in Uncle Sam. Here are some tax-smart planning strategies for those with $1 million or more saved in an employer-sponsored retirement plan or traditional IRA.
Strategy #1: Consider a Roth conversion.
A Roth conversion is the top strategy I think you should be looking at right now. Roth conversions can result in lower RMDs and allow you to pay taxes at your current tax rates, which could be lower than what they will be in the future.
Why do we think tax rates will rise in coming years? To start, tax rates are set to go up in 2026, following the expiration of the Tax Cuts and Jobs Act. Unless Congress acts before then, taxes will revert to 2017 levels, which were higher than they are today. (Read more about this in my article What You Can Do Now to Avoid Paying Higher Taxes in 2026.)
Also, our country has a spending problem and a massive amount of debt — both reasons why tax rates could increase even more in the coming years. How will the government come up with the revenue to cover our debt crisis? Higher taxes seem to be the obvious answer.
Strategy #2: Avoid paying higher Medicare premiums.
Another strategy we look at for our clients with $1 million or more in tax-deferred accounts is to prepare for increased Medicare premiums. Known as the Medicare income-related monthly adjustment amount (IRMAA), this is an extra amount you pay for Medicare if your income exceeds a certain level.
The IRMAA look-back period is two years, so you’ll want to start thinking about how it could impact your Social Security benefits as soon as you become eligible to receive them. We’ve talked with people who are getting little to no Social Security income because they are paying surcharges on their Medicare premiums.
To reduce your taxable income and potentially avoid Medicare surcharges, you may want to get strategic with which accounts you take withdrawals from and in what order. You don’t want to do a great job of saving just to pay more for health care in retirement.
Strategy #3: Avoid the 'Social Security tax torpedo.'
Taxes were not charged on Social Security benefits before the 1980s. It used to be that if you were owed $2,000 in monthly income from Social Security, you would receive a check for the full amount.
Today, you likely won’t see that full $2,000 deposited into your bank account because of taxes unless you plan appropriately. Uncle Sam will get his share first, and you will get the rest. But it doesn’t have to be this way! Social Security benefits do not have to be taxable. Many of our clients pay no taxes on their Social Security income because we have implemented a plan to successfully lower their income in retirement by positioning their investments correctly.
Taking advantage of these strategies takes smart planning, and it must start today. My biggest advice is to get help from someone who specializes in working with people who have $1 million or more saved in retirement accounts. Your plan is more complex and will need more diligence than those who haven’t saved as much in their 401(k)s or IRAs as you have.
Related Content
- Don’t Let the 'Widow's Penalty' Blindside You: How to Prepare
- Are You Taking Too Much Risk in Retirement?
- High-Income Millennials, This Advice Is for You
- Nervously Nearing Retirement? Four Do’s, Four Don’ts and One Never
- To Create a Happy Retirement, Start With the Three Ps
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As Founder and CEO of Peak Retirement Planning, Inc., Joe Schmitz Jr. has built a comprehensive retirement planning company focused on helping clients grow and preserve their wealth. Under Joe’s leadership, a team of experienced financial advisers use tax-efficient strategies, investment management, income planning and proactive health care planning to help clients feel confident in their financial future — and the legacy they leave behind. Joe has also written two books, I Hate Taxes (request a free copy) and Midwestern Millionaire (request a free copy). You can find Joe on YouTube by clicking here, where he creates educational videos for those in or near retirement with $1M or more saved.
-
Stock Market Today: Solid Signals Lift Stocks Despite Tariff Noise
Markets are whistling over the White House in an ongoing display of corporate America's enduring ability to survive and advance.
-
Amtrak Joins Prime Day With Deals on Fares — But You’ll Have to Act Fast
Prime members can score 20% off midweek fares — what travelers should know before booking.
-
Key to Financial Peace of Mind: Think 'What's Next?' Rather Than 'What If?'
Even if you've hit your magic number for retirement, it's hard to stop worrying about money. Giving it a clear purpose is one way to reduce financial anxiety.
-
Three Estate Planning Documents a Business Owner Can't Afford to Skip
A business owner's estate plan should protect the company and its employees as well as the entrepreneur's heirs. These three documents are critical.
-
Financial Fact vs Fiction: Why Your 'Magic Number' Isn't Actually Magical
Do you think you're diversified if you're invested in the S&P 500 and Nasdaq? Do you think your tax rate will fall in retirement? Think again — and read on for other myths that could be leading you astray.
-
Opportunity Zones: An Expert Guide to the Changes in the One Big Beautiful Bill
The law makes opportunity zones permanent, creates enhanced tax benefits for rural investments and opens up new strategies for investors to combine community development with significant tax advantages.
-
Five Ways Retirees Can Keep Perspective Through Market Jitters
Market volatility is a recurring event with historical precedents (the dot-com bubble, global financial crisis and pandemic), each followed by recovery. Here's how people who are near or in retirement can navigate economic uncertainty.
-
I'm a Financial Strategist: This Is the Investment Trap That Keeps Smart Investors on the Sidelines
Forget FOMO. FOGI — Fear of Getting In — is the feeling you need to learn how to manage so you don't miss out on future investment gains.
-
Can You Be a Good Parent to an Only Child When You're Also a Business Owner?
Author and social psychologist Susan Newman offers advice to business-owner parents on how to raise a well-adjusted single child by avoiding overcompensation and encouraging chores.
-
How Advisers Can Steer Their Clients Through Market Volatility (and Strengthen Their Relationships)
Financial advisers need to be strategic when they communicate with clients during market volatility. The goal is to not only reassure them but to also help them avoid rash decisions, deepen your relationship with them and build lasting trust.