The Election Changed Washington. It Didn't Change Your Plan.

Maybe you stayed up Tuesday night refreshing the results. Maybe you woke up Wednesday morning relieved. Or maybe you woke up worried about what the next two years will bring.

Either way, if you're an investor, there's a good chance another question followed close behind:

Should I be doing something with my money?

Will the results lead to higher stock prices? Could a shift in congressional control change the direction of tax policy, government spending, or economic growth? And should your investments look different now that the votes have been counted?

These are fair questions.

After all, elections have consequences. The people we send to Washington make decisions that influence the economy, businesses, and ultimately the financial well-being of American households.

But here's what tends to get lost in the post-election noise:

The political landscape changed this week. Your financial plan didn't, at least not yet.

And understanding the difference could save you from making an expensive mistake.

Elections Matter. Just Not the Way Most Investors Think.

Now, to be clear, I'm not suggesting that elections don't matter to financial markets.

Quite the opposite.

During my years developing macroeconomic research and investment strategy at Wells Fargo Investment Institute, evaluating government policy and geopolitical developments was an important part of understanding the economic outlook.

That's because decisions made in Washington can have real consequences for corporate earnings, inflation, interest rates, and ultimately asset prices.

Consider fiscal policy, for example.

Changes to government spending and taxation can influence consumer demand and business investment. Tax reductions may encourage additional spending and investment, but depending on how they're financed, they can also contribute to larger federal deficits.

And those deficits matter because increased government borrowing can influence Treasury yields, which in turn affect mortgage rates, corporate borrowing costs, and the valuation of financial assets.

Trade policy is another example.

Tariffs might provide an advantage to certain domestic producers, but they can also raise input costs for companies relying on imported goods. Depending on how businesses respond, those higher costs can squeeze profits or contribute to higher consumer prices.

So, from this perspective, the composition of Congress matters because it can influence which policies advance, which face resistance, and which remain unresolved.

But here's where things get interesting.

The economic consequences of political decisions aren't always the same as their intended outcomes.

A policy designed to stimulate growth could contribute to inflation. A policy intended to protect domestic industries could create new costs elsewhere in the economy.

And even when investors correctly anticipate a policy change, financial markets may have already reflected those expectations in asset prices.

That's why understanding the election results is only the beginning of the investment analysis.

The more important question is how actual changes in policy interact with the economic environment that already exists.

Midterm Years Look Weak for Stocks. The Elections Weren't the Reason.

Now, if we turn to history, there's good reason to be cautious about drawing investment conclusions from election outcomes alone.

According to research from J.P. Morgan Asset Management, the S&P 500 has generated an average annual total return of 9.2% during midterm election years since 1937, compared with 13.3% during non-midterm years.

At first glance, that might suggest that midterm elections are bad for stocks.

But the numbers don't tell the whole story.

Consider 2018 and 2022.

Both were midterm election years, and both experienced significant stock market declines.

But the primary pressures on markets weren't the elections themselves.

In 2018, investors were dealing with tighter monetary policy, rising interest rates, and concerns about slowing global growth.

In 2022, inflation was running at its highest levels in decades, and the Federal Reserve was aggressively raising interest rates to contain it.

The elections happened against those economic backdrops. They weren't necessarily the reason markets struggled.

And that's an important distinction because correlation doesn't establish causation.

Indeed, research from J.P. Morgan also shows that the S&P 500 has historically generated positive returns in the twelve months following every midterm election since 1950, with an average gain of approximately 15%.

That's an interesting observation, but it isn't a forecast for the coming year.

Those historical returns occurred under very different economic conditions, interest-rate environments, and market valuations.

The takeaway isn't that stocks are destined to rally after an election.

It's that trying to use election outcomes alone to predict future market performance is a much less reliable exercise than many investors might believe.

The Bigger Risk Isn't Washington. It's How We React to It.

There's another factor that makes investing around elections particularly challenging.

And it has less to do with Washington than with how we process political information.

You see, whether we realize it or not, our political beliefs can influence our expectations about the economy.

When the political party we support wins, we might become more optimistic about the future.

When the other party wins, we might become more pessimistic.

But that change in sentiment doesn't necessarily reflect a change in the underlying economy.

Consider research published in The Journal of Finance examining how millions of American households adjusted their investments around the 2016 presidential election.

The researchers found that investors identified as likely Republicans increased their stock exposure following Donald Trump's victory, while investors identified as likely Democrats shifted toward safer assets.

Importantly, these changes were largely driven by a relatively small group of investors making substantial portfolio adjustments.

Think about that for a moment.

Two investors could look at the same election result, face the same economic conditions, and make completely different investment decisions simply because of how they interpret the political news.

Yet neither investor's retirement spending needs, long-term goals, or financial obligations necessarily changed overnight.

That's why I've long maintained that political opinions and investment decisions should be kept separate.

It's certainly reasonable to have concerns about government spending, deficits, taxes, or the direction of economic policy.

And it's equally reasonable to feel optimistic about policies that you believe could support economic growth.

But neither optimism nor pessimism is a substitute for evaluating corporate profits, interest rates, valuations, and the risks embedded in your investment portfolio.

Being right about an election doesn't automatically mean you'll be right about the stock market.

We Plan Around Policy Changes, Not Election Results

So, what does all of this mean for someone preparing for retirement or already living off their investments?

Well, this is where the distinction between monitoring economic developments and reacting to political headlines becomes particularly important.

At Franklin Madison Private Wealth, we approach economic and political uncertainty within the context of each client's broader financial plan.

And that means looking beyond what might happen in Washington to understand how different economic outcomes could affect a client's ability to meet their financial obligations.

Consider a couple approaching retirement that we recently worked with.

One of the central questions in their planning process was how to transition from earning a paycheck to generating income from their investments.

To answer that question, we first examined their actual household spending, separating recurring expenses from discretionary purchases and larger one-time financial commitments.

We then evaluated how their financial situation would change as employment income ended, healthcare costs shifted, and Social Security benefits eventually began.

An important part of that process involved modeling a multiyear Roth conversion strategy to evaluate whether paying taxes on retirement savings earlier could reduce their overall tax burden later in life.

Now, consider how this year's election fits into that picture.

Congressional decisions could eventually affect income tax provisions, healthcare policy, or other factors incorporated into their retirement projections.

But we wouldn't automatically change the couple's investment portfolio based solely on a change in congressional control.

Instead, we'd want to understand whether an actual policy change materially alters the assumptions supporting their plan.

For example, if tax legislation changes the economics of their Roth conversion strategy, we can revisit the timing and amount of future conversions.

If changes to healthcare policy affect their anticipated insurance costs, we can incorporate those costs into their retirement cash-flow projections.

And if changing economic conditions lead to higher inflation or weaker investment returns, we can evaluate how those developments affect the sustainability of their withdrawal strategy.

The key is that we're responding to changes in the client's financial circumstances and planning assumptions, not simply to changes in the political landscape.

You Don't Have to Predict the Next Crisis to Be Ready for It

The same approach applies to how we manage investment risk.

In another retirement planning engagement, our focus was on helping a client establish a more disciplined system for funding ongoing living expenses.

A key consideration was ensuring that the client had an appropriate amount of cash available to meet near-term spending needs without becoming overly dependent on selling investments at unfavorable times.

To accomplish this, we established a cash management framework that coordinated required minimum distributions, portfolio income, and planned withdrawals.

We also developed guidelines for maintaining and replenishing cash reserves, including circumstances in which it might be appropriate to delay selling equities during periods of significant market volatility.

Why does that matter?

Because for a retiree drawing income from a portfolio, the timing of investment losses can have lasting consequences.

A prolonged market decline combined with ongoing withdrawals can reduce the amount of capital available to participate in a subsequent recovery.

This is commonly referred to as sequence-of-returns risk.

Now, having cash available doesn't eliminate investment risk, and there's a cost associated with holding assets that may earn less than stocks over time.

But appropriately sized reserves can provide flexibility in meeting spending needs during market downturns.

And that flexibility is useful whether the next period of volatility comes from political uncertainty, inflation, a recession, or an unexpected geopolitical event.

In other words, we don't need to know which event will cause the next market decline to prepare for the possibility that one will occur.

That's the difference between trying to predict uncertainty and building a financial plan designed to accommodate it.

Ask What Changed for You, Not What Changed in Washington

Now that the election is behind us, the financial news cycle will inevitably shift toward what the new congressional landscape could mean for economic policy.

And there will be no shortage of opinions about which industries might benefit, whether inflation will move higher or lower, and what all of this could mean for stock prices.

Some of those arguments may prove correct.

But before making changes to your investments, I'd encourage you to ask yourself a more practical question:

What has actually changed about my financial situation that warrants a change in my investment strategy?

For instance, has your ability to withstand a market decline changed? Have your cash-flow needs increased? Are you approaching retirement with a portfolio that's more concentrated or aggressive than you originally intended?

And what about your tax situation?

If you're approaching retirement with substantial savings in a traditional IRA or 401(k), have you considered how future required minimum distributions, Social Security benefits, and potentially higher tax rates could affect your retirement income?

These are the types of decisions worth revisiting regularly.

Not because one political party won or lost an election, but because the economic assumptions underlying your financial plan can change over time.

And sometimes, an adjustment will be warranted.

That could mean rebalancing a portfolio that has drifted away from its intended allocation, reevaluating the amount of cash you hold, or updating a multiyear tax strategy following a meaningful change in tax law.

Other times, after reviewing the available information, the appropriate course of action might be to make no changes at all.

That's not ignoring uncertainty. It's managing it deliberately.

The Election Is Over. Your Financial Plan Still Has Work to Do.

As we move beyond the 2026 midterms, there's little doubt that Washington will remain an important source of economic headlines.

Questions surrounding fiscal policy, government debt, taxation, and regulation aren't going away simply because the election has concluded.

And as new policies are debated and implemented, we'll continue evaluating their potential consequences for financial markets and the economy.

But for individual investors, the bigger takeaway is that your investment strategy shouldn't depend on getting the political forecast right.

It should depend on having a clear understanding of what you're trying to accomplish, the risks you're willing and able to take, and the financial resources you'll need along the way.

After all, the next congressional election is only two years away.

Your retirement could last another twenty or thirty.

That's a much longer time horizon, and it's the one your financial plan needs to be built around.

At Franklin Madison Private Wealth, we help individuals and families coordinate their investment, tax, and retirement income strategies so that financial decisions remain grounded in long-term priorities rather than short-term uncertainty.

If you're concerned about how changing economic conditions could affect your retirement, we invite you to schedule a conversation to explore how your financial plan is positioned for the years ahead.

https://franklinmadisonadvisors.com/schedule-now/

Research and Supporting Sources

J.P. Morgan Asset Management, "2026 Midterm Election Hub."
https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-themes/us-elections/

J.P. Morgan Asset Management, "How Do Markets Perform Post-Midterms?"
https://am.jpmorgan.com/us/en/asset-management/institutional/insights/market-insights/market-updates/on-the-minds-of-investors/how-do-markets-perform-post-midterms/

Meeuwis, Parker, Schoar, and Simester (2022), "Belief Disagreement and Portfolio Choice," The Journal of Finance.
https://doi.org/10.1111/jofi.13179

by Peter Donisanu, ChFC®, AIF®

The Roth Conversion Deadline Isn’t April 15

Imagine sitting down with your tax preparer in March 2027 and discovering that you might have been able to convert another $50,000 from your traditional IRA at a favorable tax rate in 2026.

Your income came in lower than expected. Maybe your business slowed down, or a consulting contract ended earlier than anticipated.

Whatever the reason, the opportunity was there.

But there's a problem. The year is already closed.

Unlike IRA contributions, which generally can be made until the following April's tax-filing deadline, a direct Roth conversion must be completed by December 31 to count for that tax year.

And there's another difference worth understanding. Under IRS rules, Roth conversions made since 2018 cannot be recharacterized back into traditional IRAs. Once the conversion is completed, you cannot undo it.

But here's what I think is the bigger mistake.

It's building a multi-year Roth conversion plan and never checking it against the year's actual circumstances before the year closes.

Because a good conversion year only looks good when you compare it with the years ahead.

Why a Roth Conversion Plan Still Needs a Year-End Review

When we develop a Roth conversion strategy for a client, we're making decisions about when it makes sense to recognize taxable income over multiple years.

That requires projecting income, retirement withdrawals, future taxes, and the amount of money likely to remain in tax-deferred accounts later in retirement.

I've discussed how we identify those opportunities in The Retirement Tax Window Most People Miss.

Once we've identified a strategy, we establish a conversion schedule based on what we know at the time.

But that schedule is a starting point, not a standing instruction.

Consider a retiree who's winding down a consulting business. We build a plan in January expecting $100,000 of consulting income, only to learn in October that their actual income will likely be closer to $50,000.

The original conversion schedule might still work.

But the assumptions supporting it have changed.

And if we're not reviewing those changes before December 31, we could miss an opportunity to recognize income at a lower cost than originally anticipated.

The reverse can happen, too. A large capital gain, unexpected bonus, or substantial retirement withdrawal might make the planned conversion more expensive than expected.

That's why we distinguish between establishing the strategy and managing its implementation.

The plan sets the path. The fall review sets the pace.

Four Questions That Drive Our Year-End Roth Conversion Decisions

By the fall, we generally have a much clearer picture of how a client's year is shaping up.

We can compare actual income against our original projections, estimate what remains for the year, and evaluate whether the planned conversion still makes sense.

Four questions drive that review.

1. What Changed Since We Established the Plan?

The first thing I want to understand is whether the assumptions behind our original conversion schedule still hold.

Think back to our retiree winding down the consulting business. By October, their income is running $50,000 below what we projected in January.

Now we need to determine what that difference means for the conversion schedule.

In our planning process, this involves updating the current-year tax projection and comparing it with the assumptions built into the longer-term retirement plan.

A decline in income isn't the only reason to make an adjustment.

An unusually large deduction might reduce taxable income. A market decline could allow us to convert more shares at a lower current value. Conversely, an unexpected capital gain or retirement withdrawal might make converting less attractive.

None of those developments automatically justifies changing the strategy.

But they give us a reason to rerun the numbers.

If the current year has become materially more attractive, I'll want to know whether we should move some conversions originally scheduled for future years into the current one.

The important thing is that we're responding to new information rather than following an outdated schedule.

2. Is This Year More Attractive Than the Years We'd Be Taking Conversions From?

Finding additional room in a tax bracket doesn't necessarily mean we should use it.

For our retiree, we could potentially increase the planned conversion by $50,000. But whether that makes sense depends on what we'd otherwise do with those dollars in future years.

What if next year is expected to be even more favorable?

What if the additional conversion triggers a cost elsewhere in the plan?

And what if the projected benefits don't justify paying taxes earlier than necessary?

Research by Edward McQuarrie and James DiLellio, published in the Journal of Financial Planning, examines how Roth conversion outcomes depend on factors such as future tax rates, investment horizons, and how the conversion taxes are funded.

Their analysis, The Arithmetic of Roth Conversions, illustrates why conversion decisions can't be reduced to filling the available space in a tax bracket.

In our work, that means comparing the revised conversion schedule against the original plan and measuring how the decision changes projected long-term outcomes.

We're not simply asking whether we can convert more this year.

We're asking whether moving a conversion from one year to another actually makes the plan better.

3. What Is Already Scheduled to Change in the Next Two Years?

Before accelerating a conversion, we also need to consider what's immediately ahead.

For our consulting retiree, suppose a deferred compensation payment is scheduled for 2027.

That payment could make 2027 a more expensive year to recognize additional IRA income, strengthening the case for converting more in 2026.

But other circumstances might point in the opposite direction.

For example, a conversion today could affect Medicare premiums two years from now. Or the client might anticipate a large deduction next year that makes waiting more attractive.

I covered the interaction of these retirement milestones in Your Tax Window Doesn't Close All at Once.

For the year-end review, the question is more specific.

Do the changes we know are coming justify moving part of our planned conversions into this year?

And if we do, are we accurately accounting for the costs associated with that decision?

4. Can We Pay the Taxes Without Disrupting the Plan?

This is where an otherwise attractive conversion can become a poor financial decision.

Generally, it's advantageous to pay conversion taxes using money outside the traditional IRA, particularly when that money can be used without triggering substantial additional taxes.

But that money may also be earmarked for living expenses, property improvements, healthcare, or other anticipated costs.

That's why we coordinate the conversion decision with the household's cash management plan.

We look at the additional taxes, determine where the payment would come from, and consider whether using those funds would compromise other priorities.

We also coordinate any required estimated tax payments or withholding adjustments.

A conversion shouldn't create a cash problem simply because the tax projection suggests an opportunity.

How a Good Roth Conversion Plan Can Miss a Valuable Year

Let's put these questions together.

Consider our hypothetical retiree with a substantial traditional IRA and several years remaining before required minimum distributions begin.

Their retirement plan calls for converting $50,000 annually over the next several years.

That schedule was established using projected consulting income, investment earnings, future retirement withdrawals, and expected tax rates.

Then something changes.

During 2026, the retiree begins winding down the consulting business.

By October, it becomes clear that income will be approximately $50,000 lower than originally projected.

Meanwhile, a deferred compensation payment scheduled for 2027 is expected to increase taxable income next year.

Now we have a decision to make.

Do we stick with the original $50,000 conversion for 2026?

Or could it make sense to convert $100,000 in 2026 and reduce the amount originally planned for 2027?

Under the original plan, the client converts $50,000 in 2026 and another $50,000 in 2027.

Under the revised approach, the client converts $100,000 in 2026 and nothing in 2027.

Either way, the total comes to $100,000 over those two years.

What changed is the timing.

If the client's lower consulting income makes 2026 less expensive than 2027, the revised schedule could reduce the total tax cost.

But we wouldn't stop at the tax bracket comparison.

We'd calculate the additional current-year tax, evaluate other income-related consequences, confirm that cash is available to pay the bill, and consider how the revised timing affects the broader retirement projections.

We also need to remember that a lower tax rate today doesn't guarantee a successful conversion.

In his September 2024 paper, Net Present Value Analysis of Roth Conversions, Edward McQuarrie identifies taxpayers who have accumulated substantial tax-deferred savings during high-earning years but temporarily find themselves in a lower tax bracket as among the least risky candidates for conversion.

That's particularly relevant to our retiree.

The temporary income decline could create an attractive opportunity, especially if future retirement distributions are expected to be taxed at higher rates.

But the paper also cautions that the ultimate value of a conversion depends on uncertain future tax rates and the timing of the potential savings.

That's why we'd measure the expected benefit rather than assume the additional $50,000 conversion is automatically worthwhile.

If the updated calculations support accelerating the conversion, we'd coordinate the transaction before year-end.

Now imagine that review never happens.

The client goes through the holidays and doesn't revisit the figures until meeting with the tax preparer in March 2027.

At that point, the income shortfall is obvious.

The 2026 tax return shows that income was substantially lower than originally anticipated.

But it's too late to initiate a direct Roth conversion for 2026.

The client can still convert in 2027, but the income and tax circumstances will be different.

And the opportunity to shift that additional $50,000 into 2026 is gone.

The original retirement plan wasn't necessarily flawed.

The problem was that nobody compared what actually happened with what the plan expected while there was still time to act.

A Roth Conversion Isn't Complete Just Because You've Decided to Make One

There's one final part of our year-end process worth emphasizing.

Once we've decided how much to convert, the transaction still needs to be completed.

That means coordinating with the retirement account custodian, confirming the appropriate assets and dollar amount, and making sure the transaction is processed within the applicable deadline.

For clients whose retirement accounts are held at Charles Schwab, we verify the relevant year-end processing cutoff before initiating the transaction.

As Schwab Advisor Services explains, Roth conversions are among the transactions subject to year-end processing schedules and cutoff times.

We also need to consider whether the conversion involves cash or securities, whether any account transfers are necessary, and whether tax payment arrangements are in place.

And because the IRS prohibits recharacterizing Roth conversions made since 2018, I want the tax projection and funding decision settled before the transaction takes place.

The conversion amount is only part of the decision.

Getting the transaction completed correctly is what turns the strategy into action.

The Plan Sets the Path. The Fall Review Sets the Pace.

A Roth conversion strategy shouldn't be rebuilt from scratch every December.

But it shouldn't run on autopilot, either.

In our work with clients, the multi-year plan gives us a framework for deciding when it may make sense to recognize income.

The annual review gives us a chance to respond to what actually happened during the year.

Sometimes that means accelerating conversions.

Sometimes it means postponing them.

And sometimes, after reviewing the numbers, the original schedule is still the right one.

The value comes from making that decision deliberately, with current information, while we still have the ability to act.

That's why I believe a fall tax review belongs on the calendar of anyone pursuing a multi-year Roth conversion strategy.

Don't wait until your tax return is being prepared to discover whether the previous year offered an opportunity.

By then, the decision may already have been made for you.

At Franklin Madison Private Wealth, we help pre-retirees and retirees coordinate Roth conversion decisions with their longer-term retirement income and tax strategies.

If you've accumulated substantial savings in traditional IRAs or 401(k)s and want to understand whether your current strategy is making the most of the years available to you, schedule an introductory conversation.

Because once you've identified the years when converting makes sense, there's another question that deserves just as much attention:

How much should you actually convert in each of those years?

Sources

Internal Revenue Service, “Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).”
https://www.irs.gov/publications/p590a

Fidelity Investments, “Why Convert to a Roth IRA Now?”
https://www.fidelity.com/learning-center/personal-finance/retirement/answers-to-roth-conversion-questions

Edward F. McQuarrie and James A. DiLellio, “The Arithmetic of Roth Conversions,” Journal of Financial Planning, May 2023.
https://www.financialplanningassociation.org/learning/publications/journal/MAY23-arithmetic-roth-conversions-OPEN

Edward F. McQuarrie, “Net Present Value Analysis of Roth Conversions,” Journal of Financial Planning, September 2024.
https://www.financialplanningassociation.org/learning/publications/journal/SEP24-net-present-value-analysis-roth-conversions-OPEN

Charles Schwab Advisor Services, “Digital Tools to Simplify End-of-Year Tasks.”
https://advisorservices.schwab.com/insights-hub/end-of-year-digital-tool-tips

Internal Revenue Service, “Retirement Plans FAQs Regarding IRAs.”
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras

by Peter Donisanu, ChFC®, AIF®

Phased Retirement Has a Tax Price Tag

For many executives and professionals approaching retirement, the idea of doing a little consulting sounds like the perfect transition.

You get to stay engaged, put your experience to work, and earn some additional income without the demands of a full-time career.

And financially, it seems like a pretty good deal. Every dollar you earn is another dollar you don't have to take from your retirement savings.

But there's a cost to that arrangement that often gets overlooked.

The income you earn during phased retirement can take up the very tax brackets you were planning to use for Roth conversions.

To be sure, those first few years after leaving full-time employment can be particularly valuable for retirement tax planning. So then, by continuing to earn income, you may be trading away some of that opportunity without realizing it.

That doesn't mean consulting is a bad decision. In fact, it could strengthen your retirement plan.

However, the question is whether the additional income today is worth what you're giving up in future tax savings.

How Consulting Income Changes Your Roth Conversion Strategy

For many successful professionals, the years immediately following retirement represent a significant shift in their tax situation.

Your salary and bonuses disappear.

Social Security and required minimum distributions (RMDs) haven't started yet.

And for the first time in decades, you have greater control over how much taxable income shows up on your return.

I discussed this opportunity in The Retirement Tax Window Most People Miss. It's the period between your working-income years and the years when retirement income sources begin filling your tax return.

For someone with substantial savings in a traditional 401(k) or IRA, that window creates an opportunity to move money into Roth accounts at deliberately chosen tax rates before RMDs begin. The IRS outlines the applicable distribution requirements, which depend on birth year and account type.

Now consider what happens when you accept a consulting engagement.

Suppose you've determined that converting $100,000 from a traditional IRA would make sense given your projected income and tax situation.

Then you accept a consulting arrangement that produces another $100,000 in taxable income.

Suddenly, much of the tax-bracket capacity you intended to use for conversions is gone. You can still convert, but doing so at the same amount could push more income into a higher marginal tax bracket.

To be sure, the relationship isn't necessarily dollar-for-dollar. Business expenses, deductions, retirement contributions, and other household income all affect the calculation.

But the tradeoff remains. The more taxable income you earn during your conversion years, the less room you have to recognize additional income at your preferred tax rate.

And the consequences can extend well beyond those first few years.

Research by Edward McQuarrie, published in the September 2024 Journal of Financial Planning, examines the economics of Roth conversions intended to reduce future RMDs. His analysis emphasizes that conversion decisions involve an upfront tax cost in exchange for uncertain future tax savings that can take decades to materialize.

That's an important distinction.

That’s because the objective isn't simply to convert more money.

It's to determine whether using today's tax brackets improves your long-term after-tax financial position.

Why Working Longer Can Still Strengthen Your Retirement Plan

Of course, focusing exclusively on lost conversion opportunities would miss the other side of the decision.

Continuing to earn income has real financial advantages, particularly when it reduces the need to withdraw money from your investments early in retirement.

That's because the first few years of retirement are especially sensitive to the order in which investment returns occur.

As I discussed in Why the First Five Years of Retirement Decide the Next Twenty-Five, withdrawing money during an early market decline can leave a portfolio with less capital to participate in the subsequent recovery.

Consulting income gives you another source of money to cover expenses without relying as heavily on portfolio withdrawals.

And that additional income can also make it easier to delay Social Security. For individuals born in 1943 or later, delayed retirement credits increase benefits by 8% annually beyond full retirement age, up to age 70.

And if you're genuinely self-employed, you have another planning opportunity through a solo 401(k).

Traditional contributions can reduce current taxable income, although they also add to retirement savings subject to future RMDs. Roth solo 401(k) employee contributions, if permitted by the plan, don't provide that immediate deduction, but aren't subject to lifetime RMDs.

On the other hand, independent consulting income ordinarily carries self-employment tax in addition to income tax.

So, while consulting provides additional cash flow and retirement savings opportunities, it can also reduce your flexibility to manage taxes later.

The question then becomes whether those benefits outweigh the opportunity cost of delaying Roth conversions.

A Retirement Planning Example: Three More Years of Consulting

To see how those pieces interact in practice, consider a hypothetical 62-year-old executive in Philadelphia we’ll call Craig.

Craig is preparing to retire after a successful corporate career.

Most of his retirement savings are held in traditional retirement accounts. And Craig also also has taxable investments and sufficient cash reserves to support the transition away from full-time employment.

By many measures, Craig is financially prepared to retire.

But as he starts thinking about what he'll do next, a former colleague offers him a three-year consulting arrangement.

The work is interesting.

The hours are manageable.

And the income would cover a substantial portion of his living expenses.

At first glance, accepting the arrangement seems like an easy decision. But before making that commitment, I would want to compare two different retirement paths.

Path A: Retire Fully at 62

Under the first scenario, Craig stops working entirely.

He funds his living expenses from available cash and taxable investments while preserving flexibility over when to withdraw from his traditional retirement accounts.

With employment income eliminated, he has an opportunity to execute Roth conversions within deliberately selected tax brackets during the years before Social Security and RMDs begin.

The drawback is that Craig will need to rely on his investments sooner, exposing more of his portfolio to early-retirement withdrawal risk. He'll also need sufficient assets outside his retirement accounts to cover both living expenses and conversion taxes.

And because he's retiring before Medicare eligibility, I would evaluate how conversion income affects his health insurance costs.

For someone purchasing coverage through the Marketplace, Roth conversion income counts toward the income used to determine premium tax credits, so a larger conversion can mean a larger premium bill.

Path B: Consult for Three Years

Under the second scenario, Craig accepts the consulting arrangement.

The additional income covers his household expenses, allowing him to preserve more of his investment portfolio. Depending on how the arrangement is structured, he could also make additional retirement contributions.

From a cash-flow perspective, that's attractive.

But now Craig has considerably less room for Roth conversions during those same three years.

And if he's buying Marketplace coverage until 65, the consulting income counts toward his premium tax credit calculation too.

To illustrate, suppose his tax projections show $120,000 of available room for conversions within a chosen marginal tax bracket.

If the consulting arrangement adds $80,000 to his taxable income after applicable deductions and adjustments, that room falls to approximately $40,000. That's $80,000 less that he can convert within his targeted bracket that year, and over three years, the cumulative difference becomes substantial.

Those conversions aren't necessarily lost forever.

Craig can revisit them after consulting ends.

But the delay leaves more money in tax-deferred accounts, increasing their exposure to future RMDs and potentially requiring conversions at less favorable tax rates.

So, neither path automatically produces the better outcome. The more important question is what happens when we compare their projected results over the next twenty or thirty years, rather than focusing exclusively on the three years he's consulting.

This example is hypothetical and illustrates the planning tradeoffs rather than an actual client's financial results. The conversion figures are simplified and do not represent a tax recommendation.

How I Evaluate Phased Retirement Decisions With Clients

Which brings us to how I actually work through a decision like his. One thing I've found in retirement planning conversations is that the prospect of consulting tends to get evaluated first as a cash-flow benefit.

The thinking is straightforward.

If you earn another $80,000 a year, that's $80,000 you don't have to withdraw from your savings.

And that's a reasonable starting point.

But it isn't where I want the analysis to end, because the same income changes the tax-planning opportunities available during those years.

This is why I separate the final working years from the years that follow when building retirement income plans.

In a recent client planning engagement, for example, I modeled a couple's remaining two years of employment separately from their full retirement years.

That required distinguishing their actual and projected household spending during the working period, identifying when employment income would end, and adjusting the cash-flow assumptions once retirement began.

The distinction matters because income and withdrawal strategies that make sense during the final working years aren't necessarily appropriate after the paychecks stop.

I apply that same discipline when evaluating consulting arrangements.

First, I establish a retirement baseline without consulting income, including the sources of portfolio withdrawals, Social Security timing, and projected Roth conversions.

Then I introduce the consulting income. Think back to our executive, Craig.

On paper, his $80,000 looks like pure upside. But once I recalculate the tax picture, I can see how it changes the conversion schedule, the taxes paid during the consulting years, and the balances remaining in tax-deferred accounts as RMDs approach.

But I also want to know what happens to the investment portfolio.

Why?

Because the same income that crowds out conversions also means less money coming out of his investments during the first three years.

So, I look at whether preserving those investments improves the plan's ability to withstand an unfavorable sequence of market returns, and whether that benefit is worth the additional tax exposure later.

Finally, I look at Medicare, because the income-related monthly adjustment amount, or IRMAA, generally uses income from two years earlier to determine whether higher-income beneficiaries pay additional Part B and Part D premiums.

That means consulting income earned at age 63 can affect Medicare premiums at age 65. While work reduction or stoppage can qualify for an IRMAA redetermination, I don't assume that relief will offset the projected premium impact.

Once those moving pieces are incorporated, the decision becomes more interesting.

Maybe the better arrangement is to consult for two years instead of three.

Maybe it's to work fewer hours and preserve some conversion room.

Or perhaps the income is worth accepting, with larger Roth conversions scheduled after the engagement ends.

There may also be a case for accepting the higher tax cost if consulting meaningfully reduces portfolio withdrawals during an unfavorable market environment.

That's a legitimate outcome, too.

The point here isn't to convince someone to stop working.

It's to understand what continuing to work actually means for the retirement they've spent decades preparing for.

Before You Accept the Consulting Offer, Run Both Scenarios

Still, none of that analysis captures why most people say yes to consulting in the first place. For many, phased retirement is as much an identity decision as a financial one.

After spending thirty or forty years building a career, it's understandable to want to remain professionally engaged. Consulting can provide structure, purpose, and a gradual transition into retirement.

I've written about that challenge in The First Monday With Nowhere to Be, where I explored how the loss of a working routine can influence retirement spending and financial decisions.

But a decision that makes sense personally still deserves to be evaluated financially.

Here’s the bottom line: Phased retirement has a price tag.

Read it before you sign.

Before committing to another two or three years of work, compare what your retirement looks like with and without that income.

Look beyond the immediate paycheck.

Evaluate the taxes you'll pay today, the withdrawals you'll avoid, the Roth conversions you'll defer, and the impact on your financial position over the coming decades.

That way, your retirement identity and your retirement tax plan get decided together.

At Franklin Madison Private Wealth, I help individuals approaching retirement work through how decisions involving income, taxes, investments, and retirement timing fit together.

If you're considering a consulting arrangement or a gradual transition into retirement, I invite you to schedule an introductory conversation.

Schedule here ==> https://franklinmadisonadvisors.com/schedule-now/

Sources

Edward F. McQuarrie, “Net Present Value Analysis of Roth Conversions,” Journal of Financial Planning, September 2024.
https://www.financialplanningassociation.org/learning/publications/journal/SEP24-net-present-value-analysis-roth-conversions-OPEN

Internal Revenue Service, “Retirement Plan and IRA Required Minimum Distributions FAQs.”
https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

Internal Revenue Service, “Topic No. 554, Self-Employment Tax.”
https://www.irs.gov/taxtopics/tc554

Internal Revenue Service, “One-Participant 401(k) Plans.”
https://www.irs.gov/retirement-plans/one-participant-401k-plans

Internal Revenue Service, “Retirement Plans FAQs on Designated Roth Accounts.”
https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts

Social Security Administration, “Delayed Retirement Credits.”
https://www.ssa.gov/benefits/retirement/planner/delayret.html

Social Security Administration, “Medicare Premiums: Rules for Higher-Income Beneficiaries.”
https://www.ssa.gov/benefits/medicare/medicare-premiums.html

Social Security Administration, “Request to Lower an Income-Related Monthly Adjustment Amount (IRMAA).”
https://www.ssa.gov/medicare/lower-irmaa

HealthCare.gov, “What's Included as Income.”
https://www.healthcare.gov/income-and-household-information/income/

by Peter Donisanu, ChFC®, AIF®

Your Cash Reserve Is Supposed to Run Low

Every retiree is told to hold cash. Almost no one explains how to use it.

That's a problem, because a retirement cash reserve only works when you know when to draw from it, when to leave your investments alone, and when to put money back.

Without those decisions made ahead of time, a reserve tends to fail in one of two ways:

Either it sits untouched while you keep selling investments through a downturn, or it gets spent down with no clear plan for rebuilding it.

And holding too much cash creates a third problem, because money set aside for short-term stability is money that's no longer participating in your portfolio's long-term growth.

So, the question isn't just how much cash you should keep in retirement. It becomes how that cash fits into the way you intend to fund the next 20 or 30 years of your life.

Why Cash Reserves Matter More Once You Retire

While you're working, a falling stock market is usually easier to manage. Your paycheck keeps covering the bills, and regular retirement contributions may even let you buy investments at lower prices.

Retirement changes that relationship.

Once the paychecks stop, your portfolio becomes responsible for some or all of your household income.

What this means is that a market decline can create two problems at once: your investments are losing value at the same time you're withdrawing money to support your lifestyle.

For instance, suppose your stock portfolio falls 25%. If you have to sell shares to cover expenses, you're shrinking the number of shares left to participate in the recovery.

That's why sequence-of-returns risk matters so much in the early years of retirement. As I discussed in Why the First Five Years of Retirement Decide the Next Twenty-Five, the order in which returns arrive can have a significant effect on how long your savings last.

But a cash reserve, on the other hand, gives you some breathing room. Indeed, instead of relying entirely on investment sales during an unfavorable market, what you have is another source of money to pay the bills.

To be sure, a reserve doesn't eliminate market risk, and it doesn't guarantee a better outcome. A diversified portfolio with disciplined rebalancing can also manage withdrawal risk effectively. But what the reserve does give you is flexibility. It separates the timing of your household's spending from the timing of investment sales, and that flexibility is most valuable precisely when markets aren't cooperating.

How Much Cash Should You Hold in Retirement?

So how big should the reserve be?

Well, my starting point is straightforward: size it to the income gap your portfolio needs to fill, not your entire household budget.

Consider, for example, a retired couple who expects to spend $150,000 a year, including the cash they need for taxes and other household obligations. They receive $50,000 in annual Social Security income, which leaves $100,000 to be funded from their investment portfolio. That works out to about $8,333 a month.

For many retirees, I begin by evaluating a reserve equal to roughly 18 months of that spending gap. In this example, that's $150,000.

On the other hand, if the couple held 18 months of their entire $150,000 budget, they'd set aside $225,000. That's an additional $75,000 that could otherwise stay invested in assets with greater long-term growth potential.

Now, there's nothing inherently wrong with keeping more cash.

Some households need extra liquidity because of large upcoming expenses, uncertain income, or a lower tolerance for volatility. Others need considerably less because pensions or other dependable income cover most of their recurring expenses.

The important part is understanding what the reserve needs to accomplish.

Start With Actual Spending, Not an Estimate

Of course, sizing a reserve to the gap only works if the gap is accurate. And this is where I find retirement income planning often takes more work than people expect.

In a recent planning engagement, we compared a couple's anticipated retirement expenses against transactions from their bank accounts. Several spending categories came in meaningfully higher than the household had estimated.

Rather than assume either figure told the whole story, we separated the couple's expected long-term retirement lifestyle from their more immediate spending patterns and reflected both in the planning projections.

That distinction matters when deciding how much cash to keep available.

A reserve built on an understated spending assumption may provide far less protection than intended. At the same time, counting expenses that disappear after retirement, or one-time purchases that won't recur, can lead to an unnecessarily large cash allocation.

So before settling on a reserve amount, I want to know what the household actually spends, which expenses are recurring, which are discretionary, and which income sources will reliably cover them.

I also want the calculation to account for taxes. If the portfolio has to produce $100,000 in spendable cash, the gross amount withdrawn from a traditional IRA may need to be higher.

Only once those questions are answered does an 18-month reserve become a meaningful number.

Where Should You Keep Your Retirement Cash Reserve?

Once you know how much to hold, the next question is where to hold it. And because the reserve has a different purpose from the rest of your portfolio, it belongs somewhere different.

Its primary job isn't to maximize returns. It's to make money available when you need it, without exposing your near-term spending to substantial market volatility.

For most retirees, that points toward fairly unremarkable investments: money market funds, Treasury bills, and other highly liquid, short-duration instruments.

I generally think about the reserve in two parts. The first is the money needed for near-term withdrawals, which might stay in a money market fund connected to the account that distributes household income.

The second is money that won't be needed for several months. Here, short-term Treasury bills with staggered maturity dates may be appropriate, so proceeds become available as upcoming expenses arise.

There are important distinctions, though. Money market mutual funds aren't FDIC-insured bank deposits, and their value isn't absolutely guaranteed. Treasury bills pay their stated face value at maturity, but selling before maturity can expose you to market-price fluctuations.

That's why I prefer aligning available cash and maturity dates with actual spending needs. And it's also why I wouldn't treat a long-term bond fund, a stock fund, or any other investment with meaningful price volatility as interchangeable with a dedicated cash reserve.

How a Retirement Cash Reserve Works During a Market Downturn

With the size and location settled, let's look at how the reserve actually behaves when markets turn. Think back to our couple.

They need $100,000 a year from their investments, or roughly $8,333 a month, and they've set aside an 18-month reserve of $150,000.

In a relatively normal market, their monthly spending comes out of the reserve, while distributions, investment income, and periodic rebalancing provide opportunities to replenish it.

In other words, the reserve works much like a checking account for retirement, with a larger cushion behind it.

Then the market begins to decline.

Instead of automatically selling stocks each month to restore the reserve, we evaluate whether it makes sense to lean more heavily on the cash already set aside.

For this illustration, assume a prolonged selloff makes discretionary stock sales unattractive, so the household uses its reserve to fund the entire $8,333 monthly gap for one year.

After 12 months, the reserve falls from $150,000 to about $50,000, excluding interest. That leaves roughly six months of spending on hand.

Now here's the thing: That decline in the cash balance isn't a sign that something went wrong.

It's the reserve doing exactly the job it was designed to do. The couple kept paying their bills without having to liquidate stocks just to fund living expenses during the decline.

That said, the reserve doesn't remove the need to manage the rest of the portfolio. We still need to evaluate asset allocation, rebalancing, cash-flow sustainability, and whether spending assumptions remain reasonable. And if a downturn drags on, we need to reassess well before the reserve runs out.

Illustrative 18-Month Cash Reserve

Illustrative only. Assumes $8,333 in monthly spending, no reserve interest, no replenishment during the 12-month selloff (months 3 through 14), and portfolio transfers of roughly twice the monthly draw during months 15 through 18. Actual results depend on portfolio performance, spending, taxes, and withdrawal decisions.

When Should You Refill Your Retirement Cash Reserve?

Which brings us to the harder question: when, and how fast, do you put money back?

I don't believe retirees should blindly refill their cash on a fixed schedule, regardless of market conditions. But neither should they wait indefinitely for stock prices to return to a particular level. Instead, the decision needs to be coordinated with the entire portfolio.

Morningstar's Christine Benz makes a similar case for being opportunistic each year about where a retiree's cash comes from.

When markets have performed well, we may have opportunities to trim appreciated investments or bring allocations back toward their targets. During weaker markets, we might rely more on interest, dividends, maturing fixed-income investments, or existing cash.

Either way, the objective is to raise the cash a household needs while avoiding unnecessary portfolio risk and weighing the tax consequences of each transaction.

So, let's go back to our couple, whose reserve has fallen to $50,000.

Suppose conditions improve and the portfolio offers opportunities to rebuild. Over the following four months, they keep withdrawing $8,333 a month for household expenses.

At the same time, portfolio transfers of roughly twice that amount steadily rebuild the reserve, and by month 18, it's back to about $89,000.

It isn't fully restored, but it's moving in the right direction. And here's the important part: the pace of replenishment reflects opportunities within the portfolio, not an arbitrary requirement to get back to $150,000 immediately.

Don't Ignore the Minimum Reserve Level

There's one more consideration here. A strategy that simply waits for markets to recover can become a problem if the downturn lasts longer than expected.

That's why a reserve needs review thresholds, not just a target balance.

For example, if a household's available cash falls below nine months of expected withdrawals, that could trigger a more detailed review of portfolio liquidity and replenishment options. At six months, the conversation becomes more urgent.

At that point, we might need to evaluate additional fixed-income maturities, portfolio sales, changes to discretionary spending, or other sources of household liquidity.

These aren't universal thresholds. Rather, they're examples of the decisions I want established up front as part of a household's retirement income strategy. The goal is to keep a short-term market problem from turning into an unplanned cash-flow emergency.

How We Coordinate Cash Reserves With the Retirement Income Plan

All of this points to a bigger idea. In my work with clients, the cash reserve is only one component of the broader retirement income strategy.

So, I want to understand how the money will actually move through the household: which accounts generate income, where distributions arrive, how taxes are withheld or paid, and how much transfers to checking each month.

For one retired client, our implementation work included setting up a cash management arrangement that receives retirement-account distributions after tax withholding and supports regular monthly transfers to the client's bank account.

We also put an investment monitoring and rebalancing process in place, so distributions and portfolio management are coordinated rather than handled as separate activities.

And why does that operational detail matter?

Because it's one thing to show a projection in which a household withdraws a set amount every year. It's another to make sure the right money arrives in the right account, at the right time.

And where that money comes from matters just as much. Because rebuilding a reserve from a traditional IRA, a taxable account, or a bond maturity can produce very different tax results.

That's why I view retirement cash reserves as part of the household's retirement income map, not as an isolated investment allocation.

The Hidden Cost of Holding Too Much Cash

Still, there's one final tradeoff worth understanding. Cash reserves may make retirement spending easier to manage, but they aren't a free form of protection.

Long-term returns are uncertain. Historically, though, cash has offered lower growth potential than a diversified portfolio with meaningful equity exposure. As a result, holding an unnecessarily large reserve can reduce the assets available to support future spending, particularly as inflation raises the cost of maintaining the same lifestyle.

Indeed, this tradeoff shows up in retirement income research. In a Morningstar comparison of retirement income approaches, a cash-flow-reserve strategy holding one year of spending in cash supported lower viable retirement spending than a systematic withdrawal strategy. Morningstar pointed to the opportunity cost of keeping that money in cash, and an 18-month reserve would carry more of that cost, not less.

However, the same research found that once investors overreacted to a bad market by abandoning stocks, the cash reserve strategy came out ahead.

That distinction is crucial.

The value of a cash reserve isn't that it produces a higher return or guarantees better long-term results.

Its value comes from providing liquidity, supporting a disciplined withdrawal process, and helping retirees make better decisions when markets are unfavorable.

For some households, that's a meaningful benefit. But it still has to be weighed against the growth you give up by holding the cash.

Decide How Your Reserve Works Before You Need It

When it comes down to it, a retirement cash reserve needs more than a dollar amount attached to it. It needs a purpose and a set of operating rules.

Start by sizing the reserve to the spending gap your portfolio actually has to cover.

Keep the money in liquid, relatively stable investments. Then establish how monthly distributions will work, when investment sales may be reduced during a downturn, and what circumstances justify rebuilding the reserve. And revisit those decisions as spending, market conditions, taxes, and household circumstances change.

Most importantly, make those decisions before the market forces you to.

That way, when the next downturn arrives, you won't have to wonder which investments you're going to sell to cover next month's bills. You'll already know where the money is coming from.

At Franklin Madison Private Wealth, we help retirees and pre-retirees connect their retirement income, investment management, and tax strategies into one coordinated plan.

If you're approaching retirement, or you're already retired but aren't sure how your cash reserves should work, let's talk about what it would take to build a retirement income strategy around your own circumstances.

After all, the objective isn't simply to hold enough cash. It's to know how and when to use it, so you can approach retirement with clarity, confidence, and peace of mind.

Sources

Morningstar, Systematic Withdrawal Strategy: Benefits and Risks for Retirement Income
https://www.morningstar.com/business/insights/blog/systematic-withdrawal-approaches

Michael Kitces, Managing Sequence of Return Risk With Bucket Strategies vs. a Total Return Rebalancing Approach
https://www.kitces.com/blog/managing-sequence-of-return-risk-with-bucket-strategies-vs-a-total-return-rebalancing-approach/

Christine Benz, Morningstar, How Do You Maintain a Bucket System for Your Retirement Portfolio?
https://www.morningstar.com/retirement/how-do-you-maintain-bucket-system-your-retirement-portfolio

U.S. Department of the Treasury, Treasury Bills
https://treasurydirect.gov/marketable-securities/treasury-bills/

by Peter Donisanu, ChFC®, AIF®

Your Tax Window Doesn't Close All at Once

Most retirees think of their low-tax years as one window.

The paycheck stops. Required distributions are still years away. And in between, there's a stretch where you control how much taxable income shows up on your return.

That's true, certainly.

But it isn't the whole picture.

Because that window doesn't close all at once. It closes in stages, one door at a time.

And if you don't know the order, you can lose your best planning years before you realize they're gone.

The Window Isn't One Opening

I've written before about the retirement tax window most people miss. It's the gap between your working-income years and your forced-income years.

For many retirees, those years offer rare control over their tax bill.

Now here's the thing. That control has limits, and the limits change as you move through retirement.

A Roth conversion that looks attractive on this year's return could raise your Medicare premiums two years from now.

Selling appreciated stock could land in a higher capital-gains bracket than you planned.

And once Social Security starts, it shares whatever bracket space is left.

So the question isn't just: Do I have a tax window?

It becomes: Which move belongs in which year, before its door closes?

Medicare Starts Counting Before You Enroll

The first door most people miss is Medicare.

That's because Medicare doesn't look at this year's income when it sets your premiums. According to the Social Security Administration, it generally looks at your tax return from two years earlier.

Higher income triggers surcharges on Part B and Part D premiums, known as IRMAA.

So income at 63 can affect your premiums at 65.

To be sure, retirement may support a request to use your more recent, lower income. But that only accounts for the lost paycheck. It doesn't erase conversion income you chose to create.

In my planning work, this is the constraint that comes up most often.

And it means every conversion after 63 has to pass a second test. Is the long-term benefit worth the surcharge it could trigger?

Then Come the Deductions, Benefits, and Distributions

Medicare isn't the only door.

If you're 65 or older, the new senior deduction can be worth up to $6,000 per person from 2025 through 2028. But the IRS phases it out once modified adjusted gross income exceeds $150,000 for married couples. A large conversion can shrink it or erase it. I covered the details in The New Senior Deduction Most People Don't Know About.

Social Security changes the income mix again.

Depending on your combined income, up to 85% of your benefits can be included in taxable income. That's the portion subject to tax, not an 85% tax rate. And until you reach that maximum, extra withdrawals or conversions can pull more of your benefits onto your return.

Then come required minimum distributions.

Under current IRS rules, people born in 1960 or later generally begin RMDs at 75. Those withdrawals arrive whether you need the money or not. And the RMD itself can't be converted to a Roth.

If you're retiring before 65 and relying on Marketplace health coverage, there's one more door. Conversions and realized gains count toward the income that sets your premium assistance. With the enhanced credits expired after 2025, crossing 400% of the federal poverty level can eliminate that assistance entirely.

None of these milestones ends the opportunity.

They change its price.

And sometimes a door opens wider. Once you're fully on Medicare, for example, the Marketplace constraint disappears.

Consider a Couple Retiring at 64

Consider, for example, a hypothetical couple, both 64.

They have a seven-figure IRA, a taxable account that produces steady dividends, and a healthy cash reserve. One spouse also has nonqualified deferred compensation that pays out over five years after retirement. Both were born after 1959, and they plan to delay Social Security.

At first glance, they have about a decade before RMDs begin.

In practice, they have several distinct phases.

The first is the retirement year itself.

Salary, a final bonus, vacation payouts, and any year-end equity vesting may leave less room than they expect. Leaving work in September doesn't turn the whole calendar year into a low-income year.

The second is the deferred comp years.

This is the piece many households overlook. Each payout is ordinary income in the year it arrives. So it fills part of the bracket space they were counting on for conversions.

The question isn't how much room the bracket offers.

It's how much room is left after the payout.

The third is the Medicare transition.

Because of the two-year lookback, a conversion at 64 can affect their premiums at 66. Income at 65 can affect premiums at 67.

Conversions and Capital Gains Compete for the Same Room

Once both are on Medicare, but before Social Security begins, our couple may have their most flexible years.

They're also the years when Roth conversions and capital-gains planning start to compete.

How so?

Well, long-term gains stack on top of ordinary income in the federal tax calculation.

For a household like this, dividends and interest often fill much of the 0% capital-gains bracket on their own. So the real decision is usually whether gains land at 15% or 20%, and whether they cross into the 3.8% net investment income tax above $250,000 of modified adjusted gross income.

Every dollar of conversion income pushes their gains closer to those lines.

One year might favor shrinking the pretax balance.

Another might favor selling appreciated holdings to diversify or rebuild the cash reserve.

But you can't maximize both in the same year and assume the results will fit together.

Then Social Security starts, and we rebuild the projection. Benefits cover more of their spending, which can reduce withdrawals. But the taxable portion takes up room that conversions used to have.

And by 75, RMDs become part of the baseline.

You can't carry this year's unused bracket space into next year.

Each phase offers a different amount of room, at a different price.

This Is How I Turn the Timeline Into a Decision

In our planning process, we don't start with "How much should you convert?"

We start with a retirement income map. What does the household need to spend? What income will arrive each year? And which accounts will cover the difference?

The spending number deserves particular attention.

In one recent engagement, reconciling a couple's bank activity showed several categories running above the figures they'd given us.

Here's why that matters for taxes. If withdrawals must cover more spending than expected, there's less room for conversions. And there's less cash to pay the tax on them.

From there, we pair long-term cash-flow modeling in eMoney with annual tax projections in Holistiplan. The long view estimates future income needs and tax-deferred balances. The annual projection tests what a move costs now.

Then we compare alternatives.

A smaller conversion.

A larger one.

Realizing gains instead.

Or holding the room for a later year.

Sometimes accepting a Medicare surcharge makes sense because the long-term benefit is larger. Sometimes protecting the cash reserve comes first.

Either way, the tradeoff should be deliberate.

Because a Roth conversion isn't the goal. It's a tool for lowering your lifetime tax bill.

That's also why we revisit the projection before implementation, once the year's actual income and gains are clearer.

The Bottom Line

Your low-tax window is real.

But it's a sequence of decisions, not one.

What this means is that before you choose a strategy, you need the dates. Your final working year. Each spouse's Medicare enrollment. Any deferred comp payout schedule. Your Social Security claims. And your RMD starting ages.

Then layer in the income already expected each year and the withdrawals your lifestyle requires.

Only then can you see where each strategy fits.

So map the milestones.

Match each strategy to the years when it works best.

And act before each door closes.

Sources

Social Security Administration, "Premiums: Rules for Higher-Income Beneficiaries."

https://www.ssa.gov/benefits/medicare/medicare-premiums.html

Internal Revenue Service, "One, Big, Beautiful Bill Act: Tax Deductions for Working Americans and Seniors."

https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

Social Security Administration, "Must I Pay Taxes on Social Security Benefits?"

https://www.ssa.gov/faqs/en/questions/KA-02471.html

Internal Revenue Service, "Retirement Plan and IRA Required Minimum Distributions FAQs."

https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

HealthCare.gov, "What's Included as Income."

https://www.healthcare.gov/income-and-household-information/income/

Internal Revenue Service, "Topic No. 409, Capital Gains and Losses."

https://www.irs.gov/taxtopics/tc409

Internal Revenue Service, "Net Investment Income Tax."

https://www.irs.gov/individuals/net-investment-income-tax

by Peter Donisanu, ChFC®, AIF®

Don't Make Your Family Figure It Out

For many people approaching retirement, the fear that keeps them up at night isn't simply running out of money.

It's becoming dependent on someone else.

That's because you've spent most of your adult life being the person others rely on.

You earned the income.

You solved problems.

You helped your children.

You took care of your parents.

And when something goes wrong, you're the one who makes the decisions.

So, the idea that those roles might eventually reverse can certainly be difficult to face.

So then, what happens if your spouse has to manage your care?

What if your children have to step in financially?

What if someone has to make medical decisions for you?

Or even, what if your family has to reorganize their lives around yours?

Those are hard questions, certainly. And because they're so hard to answer, that fear often goes unspoken.

When it does, however, long-term care planning tends to get reduced to one narrow question: Do I have enough money to pay for care?

That's an important question. But it's only part of the problem because the time to decide what care should look like is before you need it.

Four Questions to Answer Before You Need Care

That's because once a health event happens, the conversation can shift quickly from preference to necessity.

Planning earlier, on the other hand, gives you the chance to decide where you'd want to live, who you'd want involved, and what resources should be used before your family is forced to make those decisions under pressure.

That’s why in my planning work, I tend to break the long-term care question into four parts: where you'd want to receive care, how that care gets funded, who has the authority to make decisions, and what your family will be responsible for.

Those four questions are much more useful than simply asking whether you should buy a long-term care insurance policy.

Why?

Because they force you to think through what would actually happen if your health changed.

#1 Where Would You Want to Receive Long-Term Care?

Let's start with the first point, where.

When it comes to long-term care planning, some people want to remain in their home for as long as possible.

Others are more comfortable with the idea of eventually moving into a Life Plan Community, also called a Continuing Care Retirement Community (CCRC), where independent living, assisted living, and higher levels of care are available within the same system.

To be sure, neither option is automatically better.

But the financial and family implications can be very different.

Consider, for example, a couple I worked with we’ll call Dave and Mary. Their concern wasn't whether they had enough resources to pay for care.

They had the money.

Instead, their concern was predictability, independence, and avoiding a future where either spouse felt vulnerable or overly dependent on family.

So, we modeled two different paths: transitioning into a CCRC or remaining at home with progressively greater in-home support.

For the community-based path, we modeled a substantial entrance fee and ongoing monthly costs, with home equity serving as one of the primary funding sources. The idea wasn't merely to cover expenses, though.

It was to create a path where they could make the move intentionally rather than under pressure after a health event.

Now, the aging-in-place scenario worked differently.

There, we modeled professional in-home care beginning later in retirement and allowed those expenses to rise significantly over time. That preserved more flexibility around where they lived. At the same time, it introduced more uncertainty, because the timing, intensity, and duration of care could vary considerably.

In the end, both approaches were financially workable.

So the real decision wasn't, "Which one can we afford?"

The question ultimately became, "What kind of dependence are we comfortable with?"

#2 How Should You Fund Long-Term Care?

Alright, once the care setting is clearer, the next question is deciding where the money comes from.

Depending on the household, that might include long-term care insurance, investment assets, home equity, pension income, Social Security, life insurance, or some combination of those resources.

But more crucially, having one perfect funding source isn’t the sole focus.

Rather, it's understanding the order in which those resources are expected to be used.

And why does the order matter?

Because care decisions don't happen in isolation.

For instance, if you use portfolio assets for several years of care, what happens to the surviving spouse?

Or, if you sell the home, where does the healthy spouse live?

And if preserving a legacy matters, how much of the portfolio are you willing to spend on care before that goal changes?

That's why those tradeoffs belong in the financial plan long before a care need arises.

#3 Who Makes Financial and Healthcare Decisions If You Can't?

Now, on paper, a retirement projection can show that you have enough money.

But that doesn't mean anyone can actually use it if you become incapacitated.

This is where long-term care planning intersects with estate planning.

Indeed, it isn't enough to have assets available. Someone needs authority to act, access to the right documents, and a clear understanding of what you'd want done.

Otherwise, even a well-funded plan can become difficult to execute when incapacity occurs.

In practice, that means confirming the basics like:

Who has financial power of attorney, and who's the backup?
Who can make healthcare decisions?
Where are important documents stored, and who knows how to access them?
Who knows which accounts exist, how the bills get paid, and which professionals to call?

Now think back to Dave and Mary I mentioned earlier.

Part of their implementation plan wasn't simply to model future care costs. It was also to reconfirm decision-makers, identify estate agents and backups, and create an emergency "in-a-crisis" packet with document storage and access information for fiduciaries.

That's where the planning becomes practical.

Because more often than not, the burden on a family is made worse by an information problem.

No one knows what exists.

No one knows where the documents are.

No one knows who has authority.

And everyone is trying to make decisions while already dealing with a crisis.

#4 What Do You Actually Want Your Children to Be Responsible For?

So then that brings us to what may be the most important question of all.

When clients tell me, "I don't want to become a burden to my children," they usually don't mean, "I never want my children involved in my life."

What they usually mean is, "I don't want them to have to figure everything out."

And those are two very different things.

There's a difference between asking your daughter to help oversee your care and asking her to leave her job to provide it, right?

There's a difference between asking your son to serve as financial power of attorney and leaving him to discover accounts, insurance policies, bills, and legal documents after something has already gone wrong.

And there's a difference between asking family members to make a decision and asking them to invent the decision.

That distinction sits at the heart of long-term care planning.

Now, the goal isn't to eliminate every responsibility your family may ever have because that may not be realistic.

Rather, the goal is to make those responsibilities intentional instead of accidental.

After all, the burden isn't only emotional. For example, a 2025 study of family caregivers found that those who helped with more everyday tasks, like managing a loved one's finances, were significantly more likely to report financial strain and measurable financial impact of their own.

In other words, the paperwork you leave undone doesn't disappear, it becomes someone else's cost.

That's why the planning question shouldn't stop at "Can we afford care?" It should also ask, "What are we implicitly asking our family to absorb?"

A Better Long-Term Care Plan Starts With "If This, Then That"

So how do you plan for something you can't predict?

One thing I've found useful with clients is to stop pretending we can predict exactly what will happen.

Instead, we build scenarios.

If we remain healthy, here's the plan.

If one spouse needs help at home, here's how we fund it.

If care needs become more intensive, here's the next step.

If remaining at home is no longer practical, here are the alternatives.

If one spouse dies first, here's how the surviving spouse is supported.

And if neither spouse can manage the household, here's who steps in.

That same "if this, then that" approach was built directly into the plan for Dave and Mary. Their broader retirement plan was designed around ranges, tradeoffs, and trigger points rather than one rigid forecast.

That's a much more realistic way to approach long-term care.

Of course, you may never follow the plan exactly.

But that isn't the point.

The point is that your family has a framework to work from.

How to Reduce the Fear of Becoming a Burden

When it comes down to it, if this is one of the fears you carry into retirement, don't start by asking whether you have enough money for long-term care.

Start by asking what you want to happen if you need help.

Where would you want to live?

Who would make decisions?

What would you want your spouse and children to handle, and what would you rather pay professionals to handle?

Which assets are intended to fund your care, and at what point would the plan change?

Because you may never need the exact plan you create today.

But the people you love should never have to invent one for you in the middle of a crisis.

And that's one of the most valuable things good financial planning can do.

Not eliminate uncertainty.

Give your family a way to navigate it.

Sources

National Institute on Aging, "What Is Long-Term Care?"
https://www.nia.nih.gov/health/long-term-care/what-long-term-care

National Institute on Aging, "Getting Your Affairs in Order Checklist: Documents to Prepare for the Future"
https://www.nia.nih.gov/health/advance-care-planning/getting-your-affairs-order-checklist-documents-prepare-future

National Institute on Aging, "Advance Care Planning and Health Care Decisions: Tips for Caregivers and Families"
https://www.nia.nih.gov/health/advance-care-planning/advance-care-planning-and-health-care-decisions-tips-caregivers-and

Zhu, Y., Falzarano, F., Mage, S., Benton, D., Wilber, K., and Enguidanos, S. (2025). "Subjective Financial Strain and Objective Financial Impacts Among Informal Caregivers in the United States." Journal of Applied Gerontology.
https://doi.org/10.1177/07334648251398117

by Peter Donisanu, ChFC®, AIF®

The Pennsylvania Roth Conversion Advantage

Most retirees treat state income tax as a footnote in the Roth conversion decision.

What federal bracket am I in today? How large will my required distributions get? How much can I convert without creating unnecessary Medicare costs?

Those are important questions, certainly.

But if you live in Pennsylvania and expect to move someday, there's another question that can change the math: Where will you live when these retirement dollars finally come out?

Because your answer could decide when you convert.

Pennsylvania Leaves Your IRA Alone

To be sure, Pennsylvania treats retirement money differently than the IRS does.

That’s because when you convert a traditional IRA to a Roth, the IRS taxes every pre-tax dollar that year. The Pennsylvania Department of Revenue, on the other hand generally doesn't.

And once you're 59½, Pennsylvania doesn't tax your traditional IRA withdrawals either.

Put those two rules together, and Pennsylvania takes nothing whether you convert or not.

So if you're staying in Pennsylvania, state tax isn't a factor in your Roth decision. The decision rests entirely on federal math like, your federal rate future required distributions, when Social Security begins and the like.

Pennsylvania only becomes a factor when you plan to leave.

The Opportunity Appears When You're Planning to Move

How so?

Well, suppose you expect to leave Pennsylvania in a few years to be closer to family, and your new state taxes IRA withdrawals.

Now you have a situation where there's a state tax to avoid.

On the other hand, if you convert while you're a Pennsylvania resident, then state takes nothing.

Wait until after the move, and your new state taxes your withdrawals.

And here’s the best part: Your IRA doesn't remember where you earned it.

Federal law says only the state you live in when the money comes out can tax it.

So then, once you leave Pennsylvania, your new state is the one with the claim. Note: the opposite also applies.

That's the real Pennsylvania Roth conversion advantage.

It isn't simply that Pennsylvania is tax-friendly.

Now here’s the thing, Pennsylvania doesn’t give you a few years to convert without a state tax bill.

That window closes the day you move.

While you're a resident of another state, you lose the benefit of Pennsylvania's tax treatment and become subject to that state's rules.

Consider a Pittsburgh Couple Planning to Move

Consider, for example, a hypothetical couple, both 63.

They recently retired in Pittsburgh with most of their savings in traditional IRAs. They plan to stay about four more years before moving closer to their grandchildren.

Their future state taxes IRA withdrawals. For simplicity, let's say those dollars would face a state tax rate of about 5%.

The first thing I wouldn't do is tell them to start converting $100,000 a year.

We start with the retirement-income timeline.

When does their paycheck stop completely?

When will Social Security begin?

How much income will their taxable portfolio produce?

How much will they need from their investments to support their lifestyle?

When will required minimum distributions begin?

What does their federal tax picture look like year by year?

And now there's another date on that timeline: When do they stop being Pennsylvania residents?

Only after we build that baseline do we start testing conversion amounts.

So then, let's say our analysis shows that converting $100,000 a year for four years fits their target federal bracket without creating side costs big enough to undo the benefit. They pay the tax from cash, so the full amount goes to work in the Roth.

Over four years, they convert $400,000.

The IRS still gets its share. Pennsylvania takes nothing.

Now consider the alternative.

They leave the same $400,000 in their traditional IRAs and withdraw it after they've moved.

At an illustrative 5% state rate:

$400,000 × 5% = $20,000.

That's about $20,000 in state tax on the same $400,000 of retirement money.

This example isolates the state-tax question on purpose. It assumes their federal rate would be about the same either way.

Real planning is messier.

Investment growth, federal brackets, deductions, Medicare premiums, Social Security taxation, future tax law, their new state's rules and the timing of withdrawals can all change the result.

The $20,000 isn't the conclusion.

It's the signal that there's something worth modeling.

This Changes How I Build the Conversion Timeline

Indeed, this is where knowing a tax rule and doing tax planning part ways.

Because knowing Pennsylvania doesn't tax the conversion is information.

The planning work is figuring out whether that fact matters for your household.

To be sure, in our planning process, we don't start with "How much should you convert?"

We start with the income timeline.

I want to see what your tax return could look like over the next 10 or 15 years before we deliberately add income to it.

We map when your paycheck stops, when Social Security and pensions start, and when Medicare enters the picture. We map when required distributions begin, how much your portfolio needs to provide, and how big your traditional IRA could get if we do nothing.

Then we model different conversion schedules.

One might involve no conversions.

Another might fill the remaining room in a target bracket.

Another might cross into the next bracket on purpose because the long-term result still looks better.

For a Pennsylvania client planning to relocate, I'd add one more point: What changes if we finish more of the conversions before the move?

This isn't just theory. Research by Edward McQuarrie and James DiLellio in the Journal of Financial Planning shows that conversion results hinge on your tax rate today versus later, how long the money has to grow, and where the cash to pay the tax comes from.

A move adds another tax rate to that math.

So then, instead of treating the move as a lifestyle decision over here and the conversion as a tax decision over there, we put them on the same timeline.

That's the coordination.

I'd Work Backward From the Move Date

Once a client has a real relocation plan, the analysis gets sharper.

For our couple, the move is about four years out.

Now we know the conversion window isn't unlimited.

We can work backward and start asking question like:

What does taxable income look like this year?
How much room is there before the next federal bracket?
Will the added income trigger a Medicare surcharge down the road?
Will Social Security start before the move?
Is there cash on hand to pay the conversion tax instead of withholding it from the IRA?
Could investment gains or losses change how much we want to convert?
Should we convert the same amount each year, or does one year have a lot more room than another?
And how sure are we about the move?

That last question matters.

Because tax planning shouldn't be built around a move you've only daydreamed about.

But if you've picked the destination, bought property or set a date, the move belongs in the plan.

Your move date can matter as much as your federal bracket.

The State-Tax Advantage Still Doesn't Make Every Conversion a Good Conversion

Now, none of this means you should convert as much as possible before you leave if you’re planning to move out of a tax-advantaged state like Pennsylvania.

Indeed, saving 5% in future state tax doesn't justify paying a much higher federal rate today, if there isn’t a long-term net gain.

Maybe another $100,000 would push a big chunk of income into a higher bracket with no net benefit.

Maybe it triggers a Medicare surcharge.

Maybe paying the tax would drain cash you need for the first few years of retirement.

Maybe your new state has its own break for retirement income.

Or maybe you're moving to a state with no income tax at all, where there's no state bill to get ahead of.

Any of those can shrink the advantage or erase it.

That's why I wouldn't compare Pennsylvania's zero to another state's headline rate and call the difference "savings."

Your new state's actual rules matter.

Your federal return matters.

The timing matters.

And the amount you convert matters.

A Roth conversion is still a multi-year tax decision, not a state-tax arbitrage trade.

Your Move Date Can Become Part of Your Retirement Tax Window

Now, i've written before about what I call the income tax valley. It's the stretch after your paycheck stops but before Social Security and required distributions start filling up your tax return.

For many retirees, those years offer rare control over how much taxable income they report.

A planned move out of Pennsylvania adds a second boundary to that window.

You have the federal window that retirement creates.

And inside it, you may have a Pennsylvania window. Inside that window, your conversion only answers to the IRS.

That changes how I think about the planning horizon.

Think back to our couple. They retired at 63, plan to move around 67, and won't face required distributions for years after that.

The question isn't just: How much can we convert before RMDs?

It becomes: How much, if any, should we convert before leaving Pennsylvania?

Those are different questions.

And the second one has an earlier deadline.

The Goal Isn't to Avoid State Tax at Any Cost

When it comes down to it, good retirement tax planning isn't about finding one tax to dodge and rebuilding your plan around it.

It's about coordinating the decisions you already expect to make.

Because if you're staying in Pennsylvania, the state's treatment of conversions won't tip your decision, given that your IRA withdrawals get the same break.

But if you already expect to move, leaving residency out of the analysis leaves out a variable that matters.

That's why the conversion decision should include more than your current bracket.

It should include your retirement-income timeline.

Your future required distributions.

Your Social Security and Medicare decisions.

Your cash-flow needs.

And, when it's relevant, where you'll live.

Because Pennsylvania gives you the rule.

But proper planning tells you whether the rule is worth using.

The Bottom Line

Pennsylvania doesn't tax your Roth conversion. Once you're 59½, it doesn't tax your IRA withdrawals either.

So staying put doesn't create a special state-tax reason to convert.

Planning to leave might.

What this means is that if you're moving to a state that taxes retirement income, don't build your conversion timeline around your federal bracket alone.

Put your move date on the same timeline.

Then find out how much of your tax window closes when you cross the state line.

Sources

Pennsylvania Department of Revenue, "Taxability of Roth IRAs According to PA Income Tax Rules."
https://revenue-pa.custhelp.com/app/answers/detail/a_id/274/~/taxability-of-roth-iras-according-to-pa-income-tax-rules

Pennsylvania Department of Revenue, PA Personal Income Tax Guide: Gross Compensation.
https://www.pa.gov/agencies/revenue/forms-and-publications/pa-personal-income-tax-guide/gross-compensation

Internal Revenue Service, Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).
https://www.irs.gov/publications/p590a

Edward F. McQuarrie and James A. DiLellio, "The Arithmetic of Roth Conversions," Journal of Financial Planning, May 2023.
https://www.financialplanningassociation.org/learning/publications/journal/MAY23-arithmetic-roth-conversions-OPEN

Michael Kitces, "Why Moving To A Lower-Tax State Doesn't Always Result In Lower Taxes On Deferred Income."
https://www.kitces.com/blog/moving-lower-tax-state-income-employee-stock-options-iso-nonqualified-deferred-compensation/

Michael Kitces, "Harvesting Capital Gains Vs. Roth Conversions At 0% Tax Rates." https://www.kitces.com/blog/navigating-income-harvesting-strategies-harvesting-0-capital-gains-vs-partial-roth-conversions/

by Peter Donisanu, ChFC®, AIF®

The First Monday With Nowhere to Be

You spent years thinking about that last Friday.

The last commute.

The last meeting.

The last time you closed the laptop because someone else expected you to be somewhere Monday morning.

Maybe there was a retirement party.

Maybe a long-awaited trip came next.

Maybe you finally tackled a few things around the house.

And then, eventually, an ordinary Monday arrives.

You wake up at six because your body still thinks it has somewhere to be.

By ten, the morning feels unusually long. Tuesday looks suspiciously like Monday.

For the first time in decades, nobody else has decided what your week is supposed to look like.

That empty calendar may seem like a lifestyle issue.

It is also a financial-planning issue.

Because the retirement income plan you spent years preparing will ultimately be lived through those empty Mondays. The restaurants, trips, home projects, gifts to family, hobbies, vehicles and everyday purchases that follow are what turn an annual withdrawal assumption on a spreadsheet into an actual retirement.

And that is why I believe one of the most overlooked questions in retirement planning is not simply, “How much can I afford to spend?”

It’s: “What exactly am I retiring to?”

Retirement changes two systems at once

For most of your working life, your schedule and your finances reinforced each other. Work determined where you needed to be and when you needed to be there. Meanwhile, your financial life largely ran in the opposite direction: earn money, pay the bills, save what you can and leave the investment accounts alone. There was structure around both your time and your money.

Retirement removes much of that structure at once.

Researchers who study the retirement transition have found that work provides more than income. It can provide daily structure, identity, social interaction and meaning.

When work disappears, retirees have to decide not only what they want the next stage of life to mean, but also what they are going to do on an ordinary Wednesday morning. Research examining retirees' use of time has similarly found that routines can help restore a sense of order and purpose after leaving work.

That matters financially, because money suddenly changes jobs too. For decades, the objective was accumulation. Now the portfolio is supposed to fund your life. And I have found in planning conversations that this transition can break in two very different directions.

Some people struggle to spend at all.

They have spent 30 or 40 years treating withdrawals from an investment account as something to avoid. A financial plan can show that a trip, a larger annual gifting budget or additional lifestyle spending is well within reach, yet every withdrawal still feels like moving backward.

Other people move in the opposite direction. They finally have the time to travel. The house project that sat on the list for years can finally get done. The vehicle is due for replacement.

The children and grandchildren are more accessible. There are more lunches out, more long weekends, and more opportunities to say, “Why not? This is what we worked for.”

None of those decisions is inherently a problem. The problem is when the retirement plan assumed one lifestyle and retirement produces another.

The first few years deserve special attention

This disconnect becomes particularly important early in retirement.

Retirement-income research has long recognized sequence-of-returns risk: when withdrawals occur during an unfavorable period of market returns, particularly earlier in a retirement distribution period, the combination of portfolio losses and withdrawals can make recovery more difficult.

Research published in the Journal of Financial Planning has therefore emphasized evaluating withdrawal rates alongside changing portfolio conditions rather than assuming a distribution plan should run indefinitely on autopilot.

This does not mean retirees should be afraid to spend during their first few years. It means the first years should be intentional.

When I build retirement income plans with clients, I do not want to know only what their portfolio can theoretically distribute over 30 years. I want to understand what those distributions are actually expected to fund:

Which expenses are part of the recurring lifestyle, and which are discretionary?

Which large expenses are likely to occur only once?

And how much cash should be available so a client is not forced to sell investments simply because the market happens to be down when a major expense arrives?

Those distinctions matter because a $250,000 lifestyle composed almost entirely of recurring commitments is very different from a $250,000 lifestyle that includes $70,000 of travel, home projects and other expenses that could be adjusted temporarily.

The annual spending number may look identical. The retirement plan is not.

Consider what happens when it doesn't

How so? Well, imagine a recently retired executive who spent years counting down to retirement.

Financially, he prepared well.

He accumulated enough assets.

His advisor modeled his retirement income, coordinated Social Security with portfolio withdrawals, and established cash reserves. And the probability of the plan succeeding looked strong.

He was ready to retire financially.

But he had spent far less time designing retirement itself.

So, Monday morning arrives.

He still wakes up at six.

But by ten, he’s restless.

There are no meetings.

Nobody needs an answer from him.

The phone barely rings.

Now, at first, the freedom feels good.

Then he starts creating things to do. There is a truck he has been thinking about replacing, and now seems like the time. The kitchen could use an update. His spouse mentions a trip they have talked about for years, so they book it. Then another one, because the calendar still looks surprisingly empty.

Individually, none of those decisions breaks the plan.

Together, however, they produce a very different first two years of retirement from the ones the financial plan modeled. This is a composite example, but it reflects something that comes up repeatedly in real planning work: the assumptions inside a retirement model are only useful if they bear some resemblance to how the client intends to live.

That is why the more useful conversation is not, “Can I afford to spend $250,000 a year?”

It’s: Here is the lifestyle we want to maintain.

Here are the experiences we want retirement to include.

Here are the major expenses we expect during the next five years.

And here is how the portfolio will fund them without allowing a few unusually expensive years to dictate the rest of the plan.

The opposite problem matters just as much

There is another version of the empty Monday, and it gets far less attention.

For example, picture a couple who prepared every bit as carefully.

The same solid plan, the same reserves, the same strong probability of success. But when the calendar empties, they respond with caution instead of consumption.

The trip they have discussed for years can wait until they are sure.

The home project can wait.

They would like to help a grandchild, but perhaps next year, just to be safe.

And they watch the account balance rise and fall, and quietly decide not to touch it.

The portfolio keeps growing while their willingness to use it gradually shrinks. And the years when they had the health, the time and the interest to enjoy what they built slip past while they wait for a certainty that never quite arrives.

This is not necessarily better financial behavior.

David Blanchett, head of retirement research at Prudential, has documented that inflation-adjusted spending tends to decline as retirees age. He named the pattern the retirement "spending smile," and, for the typical retiree, a steadier "smirk."

Notably, he finds that decline is largely a matter of choice rather than hardship.

One implication is that a plan built on flat, inflation-adjusted spending can understate how much a retiree could comfortably spend early on. The early years, in other words, are the high-capacity years, and they do not come back.

So sometimes the planning work is not convincing someone to save another dollar. It is helping them understand that the plan already allows them to use the money they spent decades accumulating. That requires a different kind of guardrail: not a maximum they should not exceed, but permission to fund something the plan was built to support.

Overspending and underspending look opposite, but the underlying problem is surprisingly similar.

The money lacks a job because the time lacks a plan.

Build the week before you build the withdrawal

This is why retirement preparation should begin before the retirement date, and not simply by determining an asset allocation or deciding when to claim Social Security.

Start by designing an ordinary week.

Ask: Where will you be on Monday morning?

Which relationships will receive more of your time?

Will you travel frequently or prefer longer periods at home?

Is there volunteer work, a part-time role or consulting you want to keep?

Will exercise, hobbies, learning, faith or community have recurring places on the calendar?

And, perhaps most importantly: What does that life cost?

Now the financial plan has something tangible to fund. Travel and family support can carry their own budgets. Major home projects can be modeled separately from recurring lifestyle spending. Cash reserves can be established around the actual distribution needs. And the portfolio can be managed according to a withdrawal process rather than whatever happens to feel right when the market, or the retiree's emotions, changes.

That is the difference between a retirement projection and a retirement income plan. A projection tells you whether the numbers might work. A retirement income plan connects those numbers to the life you intend to live.

Give freedom some form

For years, retirement planning has centered on a number: “How much do I need?”

Sure, that matters.

But eventually the more useful question becomes what all of this money is supposed to make possible.

Retirement gives you something your career rarely did: control over an enormous amount of your own time.

But freedom without form can get heavy. For some people, that emptiness gets expensive. For others, it turns into hesitation, and the money they accumulated becomes something they are afraid to use. Neither outcome is what decades of saving were supposed to accomplish.

So, build the rhythm for your week before you need it. Identify the people, activities and experiences that deserve space on the calendar. Separate the lifestyle you intend to maintain from the purchases and experiences that will come and go. Then build the withdrawal strategy around that life, because a retirement income plan is only as good as the life it is funding.

Give your days a shape, and your money finally has somewhere to go.

Sources

Journal of Financial Planning, "Probability-of-Failure-Based Decision Rules to Manage Sequence Risk in Retirement": https://www.financialplanningassociation.org/article/journal/NOV11-probability-failure-based-decision-rules-manage-sequence-risk-retirement

Journal of Financial Planning, "The Impact of Guaranteed Income and Dynamic Withdrawals on Safe Initial Withdrawal Rates": https://www.financialplanningassociation.org/article/journal/APR17-impact-guaranteed-income-and-dynamic-withdrawals-safe-initial-withdrawal-rates

The Gerontologist, "The Role of Meaning in the Retirement Transition: Scoping Review":
https://pubmed.ncbi.nlm.nih.gov/39969022/

Ageing & Society, "The Task of Time in Retirement":
https://www.cambridge.org/core/journals/ageing-and-society/article/task-of-time-in-retirement/8193FE7C3D8DA60C2086E2B4EE1D98DA

Financial Planning Review, David Blanchett, "How Spending Evolves in Retirement: A Smile, a Smirk, or Something Else?": https://onlinelibrary.wiley.com/doi/10.1002/cfp2.70032

Journal of Organizational Behavior, "Retiring: Role Identity Processes in Retirement Transition":
https://onlinelibrary.wiley.com/doi/10.1002/job.2438

by Peter Donisanu, ChFC®, AIF®

The Withdrawal Order You Were Taught Can Quietly Cost You

There's a standard rule for which accounts you should spend first in retirement.

Spend the taxable brokerage account first. Then move to the traditional IRA or 401(k). Save the Roth for last.

There's logic behind that advice. Spending taxable assets first can allow your tax-deferred and tax-free accounts to continue compounding. It can also keep your taxable income relatively low in the first few years of retirement.

The problem is that retirement taxes aren't calculated one year at a time.

Follow that withdrawal order on autopilot, and you may spend years congratulating yourself for keeping your tax bill low while quietly building a much larger one for later.

That's because every dollar left growing inside a traditional IRA isn't simply money you've deferred paying tax on. It's also future taxable income that, eventually, you may no longer control the timing of.

And that changes the question you should be asking.

The question isn't:

Which account should I spend first?

It's:

Which account should fund the next dollar of spending this year, given what that decision may do to my taxes over the rest of my retirement?

That's a very different problem.

The Default Rule Solves for This Year's Tax Bill

The traditional withdrawal hierarchy exists for a good reason.

Suppose you retire with money spread among a taxable brokerage account, a traditional IRA and a Roth IRA. If you can meet your spending needs from the brokerage account without realizing much taxable income, your tax return may look remarkably clean.

Your traditional IRA continues growing tax-deferred.

Your Roth continues growing tax-free.

And your current tax bill stays relatively low.

Viewed one year at a time, that can look like smart tax planning.

Viewed over 20 or 30 years, it may not be.

Traditional IRA money eventually becomes subject to required minimum distributions. Under current law, the applicable RMD age is generally 73 for those born between 1951 and 1959, and 75 for those born in 1960 or later. Once RMDs begin, an IRS formula sets a minimum amount that has to come out each year.

That means a retiree who spends aggressively from taxable assets while leaving a large traditional IRA untouched can unintentionally concentrate more and more of your future wealth inside the one account that eventually forces taxable income onto your return.

The mistake isn't tax deferral itself.

The mistake is assuming that more deferral is always better.

Sometimes Paying Tax Earlier Is the Tax-Saving Move

This is where retirement income planning gets counterintuitive.

For many higher-net-worth retirees, some of the most valuable tax-planning years arrive right after they stop working. The paycheck stops, bonuses and business income fade, Social Security may not have started yet, and required distributions haven't begun. Someone who spent decades in relatively high brackets can suddenly have several years in which surprisingly little ordinary income lands on the return.

I think of these as tax-planning windows, and I don't want to waste one simply because a retiree has enough sitting in a brokerage account to leave the IRA untouched. I wrote about this window in more depth in The Retirement Tax Window Most People Miss.

So this is one of the first places I look when building a retirement income strategy. We map the income already expected each year, pensions, Social Security, interest, dividends, capital gains and the rest, and then look at how much room remains inside the brackets we're willing to use.

That may lead us to intentionally recognize additional IRA income. Sometimes that means taking a traditional IRA distribution and actually spending the money. Other times it means converting part of the traditional IRA to Roth and funding lifestyle spending elsewhere. A Roth conversion generally causes previously untaxed traditional IRA dollars to be included in taxable income in the year of the conversion.

Either way, the objective is the same:

Pay tax on some of the IRA when you choose the timing, instead of waiting until the tax code chooses it for you.

Academic research on retirement withdrawals supports this approach. James DiLellio and Daniel Ostrov examined individualized withdrawal strategies across taxable, tax-deferred and Roth accounts and found that sequencing can materially affect portfolio outcomes, arguing specifically against relying on simple chronological withdrawal rules when tax brackets, RMDs and other variables change over time.

More recent work from Stanford goes one step further: these decisions should be recalculated as circumstances change rather than solved once at retirement, with the strategy updated each year based on current balances, taxes, investment outcomes and inflation. That's much closer to how I believe retirement income planning should actually work.

The Withdrawal Order Should Change From Year to Year

This is why I rarely think of retirement withdrawals as a fixed hierarchy.

I think of them as an annual coordination problem.

In a relatively low-income year, we may intentionally create taxable income from an IRA.

In another year, a large capital gain, pension payment, business transaction or other income event may already have filled the brackets we want to use. In that case, taxable assets or Roth dollars might make more sense for additional spending.

Once Social Security begins, we have another variable to coordinate.

Once Medicare begins, there's another.

Once RMDs begin, there's another.

The answer can change again after the death of a spouse, when the surviving spouse may eventually be filing under narrower single-filer tax brackets.

There's no account that's universally "first."

There's only the account that makes the most sense given the rest of that year's financial plan.

Consider Two Retirees With the Same $2 Million

Imagine two recently retired households.

Each starts retirement with $2 million.

Each has the same amount in taxable investments, traditional retirement accounts and Roth accounts.

Each spends the same amount.

Their investments earn the same returns.

The difference is how they decide where the spending money comes from.

Retiree One: Follow the textbook order

The first household follows the conventional rule.

The brokerage account comes first.

They sell investments as needed to fund retirement and leave the traditional IRA alone for as long as possible.

Their tax returns initially look terrific.

With no paycheck and relatively little ordinary income, they may spend several years in unusually low brackets.

But they aren't actually using those brackets for much of anything.

Meanwhile, the traditional IRA keeps compounding.

Eventually Social Security begins. Later, required minimum distributions begin.

Now the retiree has Social Security income, portfolio income and IRA distributions arriving on the same tax return.

And the IRA distribution is no longer entirely optional.

Retiree Two: Use the low-income years deliberately

The second household also uses the brokerage account for spending.

But each year, they look beyond the current tax bill.

While their taxable income is temporarily low, they intentionally take some money from the traditional IRA or convert part of it to Roth.

They may pay more tax in their 60s than the first retiree.

That's intentional.

Because they aren't trying to minimize taxes this year.

They're trying to manage taxes across retirement.

By the time required distributions begin, the second household has a smaller traditional IRA balance and more money sitting in accounts that provide greater flexibility.

Same starting wealth.

Same lifestyle.

Same investment environment.

Different tax path.

And potentially a materially different amount of wealth available over their lifetime.

The point isn't that Roth conversions automatically save taxes. They don't. Converting too much, converting at the wrong tax rate or ignoring other parts of the tax return can make a conversion counterproductive.

The point is that withdrawal sequencing changes the timing and rate at which your retirement wealth gets taxed, and that timing can matter substantially.

Medicare Adds Another Threshold to Watch

Tax brackets aren't the only line I watch. Medicare premiums move with income too.

Higher-income Medicare beneficiaries pay income-related surcharges, known as IRMAA, on Medicare Part B and Part D. Those surcharges generally use modified adjusted gross income from the tax return two years earlier. So a Roth conversion might lower future RMDs and raise a Medicare premium two years later.

That doesn't mean you should avoid the conversion. It means the IRMAA cost needs to be part of the calculation.

I raise this because retirement tax decisions often get reduced to a single rule: "Don't cross the next tax bracket," or "Don't trigger IRMAA." Neither is a complete strategy. I'd willingly cross a threshold today if the long-term math favored it, and I wouldn't convert an extra dollar simply because there's technically room left in a bracket. The goal isn't to fill brackets for the sake of filling brackets. It's to understand what today's marginal dollar of taxable income may save, or cost, you later.

Long-Term Map, Annual Decision

When I work through this decision with clients, I don't want to look only at this year's tax return. And I don't want to rely solely on a 30-year retirement projection either. You need both.

First, we build the longer-term retirement income map: when employment income stops, when Social Security might begin, what pension income exists, how large the tax-deferred accounts could become and when required distributions are likely to enter the picture. That helps identify where the potential tax-planning windows exist. I walk through building that map in The Tax Cost of Retiring Without a Retirement Income Map.

Then we bring the decision back to the current year. How much ordinary income is already on the return? How much capital gain are we recognizing? What deductions are available? Are we approaching a Medicare threshold? Is there charitable giving to coordinate? What's changed since the long-term projection was built?

That annual review matters because a 20-year tax projection isn't a promise. Tax laws change. Markets change. Income, spending and the portfolio all change. So should the withdrawal strategy.

That's why I don't think the right question is, "What's my retirement withdrawal order?" The better question is:

What should my withdrawal order be this year?

The Coordination Is the Plan

The textbook withdrawal order, taxable, then tax-deferred, then Roth, is useful as a starting point. It isn't a retirement income strategy.

The retirees who have the greatest flexibility are often the ones who recognize that every account represents a different future tax choice. A taxable account gives you one set of choices. A traditional IRA gives you another. A Roth gives you another. Which assets you hold inside each is a related decision, one I cover in Asset Location: The Retirement Tax Mistake Hiding in Plain Sight.

The goal isn't to empty those accounts in some predetermined sequence. It's to coordinate them so that you can fund the life you want while controlling when and how much taxable income shows up along the way.

That may mean deliberately paying more tax in certain years. It may mean leaving a tax bracket partially unused in another. It may mean converting IRA dollars before Social Security begins, or using Roth assets during an unusually high-income year. And it means revisiting the decision every year rather than setting the withdrawal order on the day you retire and never looking at it again.

The standard withdrawal order is a default, not a decision.

Decide the order while you still have the ability to choose.

Because once required distributions begin, part of that choice has already been made for you.

Sources

Internal Revenue Service, Retirement Plan and IRA Required Minimum Distribution FAQs:
https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

Internal Revenue Service, Retirement Plans FAQs Regarding IRAs (including Roth conversions):
https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras

Social Security Administration, Medicare Premiums and income-related adjustments:
https://www.ssa.gov/benefits/medicare/medicare-premiums.html

Centers for Medicare & Medicaid Services, 2026 Medicare Parts A & B Premiums and Deductibles fact sheet:
https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles

DiLellio, James, and Daniel Ostrov, "Toward Constructing Tax Efficient Withdrawal Strategies for Retirees with Traditional 401(k)/IRAs, Roth 401(k)/IRAs, and Taxable Accounts" Financial Services Review
https://openjournals.libs.uga.edu/fsr/article/view/3419

Johansson, Kasper, and Stephen Boyd, "A Tax-Efficient Model Predictive Control Policy for Retirement Funding," Journal of Retirement
https://web.stanford.edu/~boyd/papers/retirement.html

by Peter Donisanu, ChFC®, AIF®

The Return You're Chasing Already Happened

There's a particular kind of investment decision that rarely feels reckless in the moment.

A part of the market has had an exceptional run. The companies are strong. The narrative makes sense. Every time you open your account, those positions seem to be doing exactly what you hoped they would.

So you add more.

That doesn't necessarily feel like chasing returns. It can feel prudent. Why put new money into investments that have lagged when the winners seem to be proving themselves month after month?

The problem is that your brain may be answering a different question than the one your portfolio needs you to answer.

Instead of asking, What mix of investments gives me the appropriate amount of risk for where I'm trying to go? you begin asking, What's been working lately?

That's where recency bias can quietly take control of a portfolio.

And for successful investors, particularly technology executives whose careers, compensation, and accumulated wealth may already be connected to the same companies or sector, the bigger risk isn't simply choosing the wrong investment next.

It's allowing yesterday's returns to determine how much risk you take tomorrow.

What Just Happened Feels Like What Happens Next

One of the central problems in investing is that our expectations aren't formed in a vacuum.

What we've recently experienced matters.

Robin Greenwood and Andrei Shleifer examined six different measures of investor expectations covering nearly five decades. They found that expectations for future stock returns were strongly tied to past market returns and to how high the market had already climbed.

In plain English, after stocks performed well, investors tended to expect more of the same.

But there was another important finding: those expectations were strongly negatively related to the returns the models actually projected going forward. The periods that left investors feeling more and more optimistic weren't necessarily the periods when future returns looked attractive.

A strong return is evidence of what's happened.

It's not evidence of what must happen next.

Research by Ulrike Malmendier and Stefan Nagel adds another piece of the puzzle. Studying household investing with Survey of Consumer Finances data from 1960 through 2007, they found that people's own experiences with stock and bond returns shaped how much risk they were willing to take and how they allocated their portfolios. More recent experiences carried greater weight.

Our memories, in other words, can become inputs into our portfolios.

And the freshest memories can become some of the most influential.

The Return That Convinced You Is the Return You Already Missed

This tendency shows up in what investors actually do with their money.

Erik Sirri and Peter Tufano studied money flowing into and out of equity mutual funds and found that investors based their buying decisions heavily on past performance. The relationship was particularly strong among the best-performing funds: exceptional prior performance pulled in a disproportionate share of new money.

That makes intuitive sense.

The investment with the best story is often the investment whose performance has already supplied the evidence for that story.

None of this means that last year's winner must become next year's loser.

A technology company can have an extraordinary year and keep performing well. An expensive asset can become more expensive. Market leadership can last much longer than investors expect.

That's why the lesson isn't to bet against whatever has recently performed well.

The lesson is simpler:

The return that convinced you to buy is a return that's already occurred.

Your decision today needs to be justified by what the investment contributes to your portfolio from this point forward.

How Concentration Actually Shows Up

This issue is usually more subtle in practice than an investor deliberately deciding to make a giant bet on last year's winner.

In one recent planning engagement, we worked with an executive whose compensation included salary, bonus, and recurring restricted stock units.

Those RSUs were an important part of the family's wealth-building engine. At the same time, the taxable portfolio was being built to serve an entirely different purpose: helping create enough financial flexibility for the executive to eventually step away from a high-paying career and move toward work optionality.

That distinction mattered.

Each time another block of RSUs vested, there were effectively two choices.

The first was passive: simply allow the employer shares to accumulate.

The second was deliberate: treat the vest as a new capital-allocation decision and ask where those dollars belonged given the family's overall portfolio, future spending needs, and risk capacity.

We chose the second approach.

The planning process called for vested equity to help fund a diversified taxable portfolio rather than allowing employer stock exposure to compound indefinitely by default. That taxable portfolio was spread across multiple asset classes and placed on a quarterly rebalancing schedule.

The important part wasn't predicting whether the employer's stock would outperform.

We didn't need to.

The issue was that the client's salary, future compensation, and a growing portion of financial wealth could otherwise become increasingly dependent on the same company.

And a position can become concentrated without the investor ever consciously deciding, I want more concentration.

Imagine that a $500,000 employer-stock position rises to $750,000.

Nothing was purchased.

No investment decision was made.

But the risk exposure changed materially.

Then another RSU grant vests.

Keeping those shares may feel innocuous because the stock has performed well, and because familiarity with the company can make the investment feel easier to understand than something outside the investor's immediate experience.

Another vest arrives six months later.

Then another.

Over time, what began as compensation can quietly become an investment thesis.

That's the practical danger of recency bias for investors with equity compensation. The bias doesn't always tell you to go out and buy the hottest stock.

Sometimes it simply tells you there's no reason to disturb what's already been working.

Success Can Change the Portfolio Without Your Permission

Now extend that problem across the rest of a high-income household's balance sheet.

The executive owns employer shares.

The 401(k) contains a large-cap U.S. index.

The taxable account owns another broad-market strategy.

Perhaps there are additional technology holdings accumulated over the years.

Viewed separately, none of those investments may appear particularly alarming.

Viewed together, however, they may represent substantially more exposure to the same companies, sector, and economic forces than the investor realizes.

This is particularly important for technology professionals.

Your human capital may already depend on the technology industry.

Your bonus may depend on company performance.

Your future RSU value depends on the employer's stock.

Your existing shares may represent a substantial portion of your financial capital.

And broad-market indexes can add further exposure to some of the same companies that have already driven your wealth higher.

The question, then, isn't simply, Is this a good company?

It may be an exceptional company.

The better portfolio question is:

How much of my financial future should depend on it?

Lisa Meulbroek's research into company stock held by employees illustrates the economic problem created by combining employment exposure with concentrated ownership of employer shares. Even when an employee believes strongly in the company, concentrated employer stock exposes the household to risks that could otherwise be diversified.

That distinction matters because diversification isn't a judgment about whether your company will succeed.

It's a judgment about how much of your family's future should depend on being right about any single outcome.

Why Portfolio Discipline Sometimes Feels Wrong

This is where a disciplined investment process earns its keep.

You establish what role each asset is supposed to play.

You decide how much concentration you're willing to accept.

You determine an appropriate allocation based on the return you need, the risk you can afford to take, your liquidity requirements, taxes, time horizon, and the goals the portfolio ultimately needs to fund.

Then you periodically compare the portfolio you actually own with the portfolio you intended to own.

That last step matters because successful investments don't remain politely inside their original allocations.

They grow.

For an investor receiving equity compensation, there's another layer: new shares may keep arriving even after an existing position has already become large.

That means maintaining the portfolio may require an active process for deciding what happens when shares vest.

Hold?

Sell?

Diversify?

Fund another goal?

The answer will vary by investor. Taxes, trading restrictions, holding periods, liquidity needs, charitable objectives, and the rest of the financial plan all matter.

What shouldn't determine the answer by itself is the fact that the stock has recently gone up.

Sometimes the most important portfolio decision isn't identifying the next winner.

It's recognizing how much your previous winners have already changed your risk exposure.

Don't Ask Your Memory to Vote

The solution to recency bias isn't becoming better at predicting which sector will lead next.

It isn't selling everything that's performed well.

And it certainly isn't reflexively buying whatever performed poorly.

Those approaches simply replace one forecast with another.

The better defense is an investment process that doesn't require you to reconstruct your portfolio strategy every time the market hands you a new reason to feel optimistic or pessimistic.

Build the portfolio around your objectives and risk profile.

Understand your exposure across all of your accounts.

Include employer stock and future equity compensation when evaluating concentration.

Establish parameters for how much risk you're willing to allow any one company, sector, or economic driver to contribute.

And when equity compensation vests, treat those shares as a fresh allocation decision rather than automatically assuming yesterday's allocation should become tomorrow's.

Then periodically compare the portfolio you actually own with the one you deliberately set out to build.

That leads to one useful question to ask this quarter:

Have my recent winners quietly made me more concentrated than I ever consciously chose to be?

If the answer is yes, that doesn't automatically mean those investments should be sold.

Taxes matter. Equity-compensation restrictions matter. Liquidity needs matter. Your broader financial plan matters.

But it does mean the portfolio deserves another look.

Because the job of an investment strategy isn't to own whatever just worked.

It's to maintain the amount and type of risk necessary to get you where you're trying to go, even when the rearview mirror is telling you to do something else.

Sources

Greenwood, Robin, and Andrei Shleifer. "Expectations of Returns and Expected Returns." The Review of Financial Studies, 2014.
https://academic.oup.com/rfs/article-abstract/27/3/714/1580705

Malmendier, Ulrike, and Stefan Nagel. "Depression Babies: Do Macroeconomic Experiences Affect Risk Taking?" The Quarterly Journal of Economics, 2011.
https://academic.oup.com/qje/article-abstract/126/1/373/1901343

Sirri, Erik R., and Peter Tufano. "Costly Search and Mutual Fund Flows." The Journal of Finance, 1998.
https://onlinelibrary.wiley.com/doi/10.1111/0022-1082.00066

Meulbroek, Lisa. "Company Stock in Pension Plans: How Costly Is It?" The Journal of Law and Economics, 2005.
https://www.journals.uchicago.edu/doi/abs/10.1086/430807

by Peter Donisanu, ChFC®, AIF®

Life & Wealth Planning

Elections Matter. Just Not the Way Most Investors Think.

Midterm Years Look Weak for Stocks. The Elections Weren't the Reason.

The Bigger Risk Isn't Washington. It's How We React to It.

We Plan Around Policy Changes, Not Election Results

You Don't Have to Predict the Next Crisis to Be Ready for It

Ask What Changed for You, Not What Changed in Washington

The Election Is Over. Your Financial Plan Still Has Work to Do.

Related Reading

Research and Supporting Sources

Why a Roth Conversion Plan Still Needs a Year-End Review

Four Questions That Drive Our Year-End Roth Conversion Decisions

1. What Changed Since We Established the Plan?

2. Is This Year More Attractive Than the Years We'd Be Taking Conversions From?

3. What Is Already Scheduled to Change in the Next Two Years?

4. Can We Pay the Taxes Without Disrupting the Plan?

How a Good Roth Conversion Plan Can Miss a Valuable Year

A Roth Conversion Isn't Complete Just Because You've Decided to Make One

The Plan Sets the Path. The Fall Review Sets the Pace.

Related Reading

Sources

How Consulting Income Changes Your Roth Conversion Strategy

Why Working Longer Can Still Strengthen Your Retirement Plan

A Retirement Planning Example: Three More Years of Consulting

Path A: Retire Fully at 62

Path B: Consult for Three Years

How I Evaluate Phased Retirement Decisions With Clients

Before You Accept the Consulting Offer, Run Both Scenarios

Sources

Why Cash Reserves Matter More Once You Retire

How Much Cash Should You Hold in Retirement?

Start With Actual Spending, Not an Estimate

Where Should You Keep Your Retirement Cash Reserve?

How a Retirement Cash Reserve Works During a Market Downturn

Illustrative 18-Month Cash Reserve

When Should You Refill Your Retirement Cash Reserve?

Don't Ignore the Minimum Reserve Level

How We Coordinate Cash Reserves With the Retirement Income Plan

The Hidden Cost of Holding Too Much Cash

Decide How Your Reserve Works Before You Need It

Sources

The Window Isn't One Opening

Medicare Starts Counting Before You Enroll

Then Come the Deductions, Benefits, and Distributions

Consider a Couple Retiring at 64

Conversions and Capital Gains Compete for the Same Room

This Is How I Turn the Timeline Into a Decision

The Bottom Line

Related Reading

Sources

Four Questions to Answer Before You Need Care

#1 Where Would You Want to Receive Long-Term Care?

#2 How Should You Fund Long-Term Care?

#3 Who Makes Financial and Healthcare Decisions If You Can't?

#4 What Do You Actually Want Your Children to Be Responsible For?

A Better Long-Term Care Plan Starts With "If This, Then That"

How to Reduce the Fear of Becoming a Burden

Sources

Pennsylvania Leaves Your IRA Alone

The Opportunity Appears When You're Planning to Move

Consider a Pittsburgh Couple Planning to Move

This Changes How I Build the Conversion Timeline

I'd Work Backward From the Move Date

The State-Tax Advantage Still Doesn't Make Every Conversion a Good Conversion

Your Move Date Can Become Part of Your Retirement Tax Window

The Goal Isn't to Avoid State Tax at Any Cost

The Bottom Line

Related Reading

Sources

Retirement changes two systems at once

The first few years deserve special attention

Consider what happens when it doesn't

Build the week before you build the withdrawal

Give freedom some form

Sources

The Default Rule Solves for This Year's Tax Bill

Sometimes Paying Tax Earlier Is the Tax-Saving Move

The Withdrawal Order Should Change From Year to Year

Consider Two Retirees With the Same $2 Million

Retiree One: Follow the textbook order