The Tax Bill You're Leaving Your Kids

One of the most common things I hear in a Roth conversion conversation is, "I don't want to pay the tax until I have to."

That sounds conservative. Why create a tax bill today when you could leave the money invested?

But for families with more retirement money than they're likely to spend, delaying the tax doesn't avoid it. It moves it. Off the parents' return, onto the children's.

Your kids may inherit that account in their forties or fifties, in the highest-earning years of their careers. So the dollars you declined to convert at a 22 percent marginal rate could come out later while they're paying 32 percent or more.

The family pays the tax either way.

The only real question is whether you decide whose return the income lands on, or whether you let that get decided for you.

A Traditional IRA Is More Than an Investment Account

A traditional IRA isn't just an investment account. It's an investment account with a deferred tax liability attached.

The balance on the statement isn't the amount your family gets to spend.

If the account holds mostly deductible contributions and tax-deferred growth, distributions are generally taxable income. During your lifetime, required minimum distributions eventually force some of that income onto your return. If you die with money still in the account, your beneficiaries inherit the assets and the tax obligation that rides along with them.[1]

There are exceptions worth knowing. Part of an IRA may represent after-tax basis. A qualifying charity can generally receive the account without paying the income tax an individual beneficiary would owe. A surviving spouse has options an adult child doesn't.[1]

But when a parent leaves a largely pretax IRA to adult children, the tax liability doesn't disappear.

It changes taxpayers.

The SECURE Act Compressed the Window

Before the SECURE Act, many non-spouse beneficiaries could stretch inherited IRA distributions over their life expectancy. Depending on the beneficiary's age, that could spread the taxable income across decades.

For most adult children today, that's gone.

Most adult children are designated beneficiaries, but not "eligible designated beneficiaries." They generally have to empty the inherited IRA by December 31 of the year containing the tenth anniversary of the owner's death.[1][3]

The main exceptions are a surviving spouse, the owner's minor child, a disabled or chronically ill beneficiary, and someone who isn't more than ten years younger than the account owner.[1]

What happens inside those ten years depends on when the owner died.

If the owner died before the required beginning date for minimum distributions, the beneficiary generally doesn't have to take annual distributions in years one through nine. The account still has to be empty by the end of year ten.[1][3]

If the owner died on or after the required beginning date, the beneficiary generally has to keep taking annual required distributions during the ten-year period, and still empty the account by the end of year ten.[1][3]

Either way, the window is a lot shorter than most families expect.

Your Children May Inherit the IRA at the Worst Possible Time

The problem with the ten-year rule isn't that ten years is short.

It's which ten years they turn out to be.

Your children might inherit this account while they're earning peak salaries, taking bonuses, exercising options, selling company stock, running a business, or writing tuition checks for your grandchildren.

Then, on top of all of that, they have to empty an inherited IRA.

Those distributions can push part of the account into a higher federal bracket. They can also reach state income taxes, deductions, credits, and capital-gain rates.

That's why I don't evaluate a conversion by asking only, "How much tax would you pay this year?"

I ask a different question. Which family member is most likely to report these dollars as income, in which years, and at what incremental rate?

That turns a one-year tax calculation into a multigenerational planning decision.

Consider a 74-Year-Old Widow With a $1.4 Million IRA

Say a 74-year-old widow has $1.4 million in a traditional IRA.

She's already taking required minimum distributions. After her other income and deductions, additional taxable income still falls in the 22 percent federal bracket.

She passes on Roth conversions. Her tax bill already feels high enough, and paying more on purpose doesn't seem necessary.

Now say she dies several years later and leaves the remaining IRA equally to her two adult children.

Both are in their late forties. Both are already earning well. Once the inherited distributions stack on top of their existing income, assume those incremental dollars land in the 32 percent bracket.

For illustration, each child inherits $700,000 and takes $70,000 a year over ten years. Before any growth, the family recognizes $1.4 million of inherited IRA income during that period.

At an assumed 32 percent marginal rate, that's roughly $448,000 of federal income tax.

Apply an assumed 22 percent rate to the same $1.4 million and you get roughly $308,000.

A simplified difference of $140,000.

The family pays the tax either way. It just paid ten points more, and nobody chose it.

One qualification matters here. This doesn't mean the widow could have converted the whole $1.4 million at 22 percent. A conversion that size would cross several brackets. Federal brackets also apply in layers, so not every dollar a beneficiary withdraws is taxed at their top rate. The illustration compares two incremental rates on the same dollars. It isn't a forecast.

The real opportunity would have been a series of partial conversions over several years. Some might happen after retirement but before required distributions begin. Others could happen after RMDs start, as long as the required distribution comes out first, because an RMD itself can't be converted to a Roth IRA.[4]

So the credible question was never whether she could convert everything at 22 percent.

It's how much of the account she could move over time at a lower family tax rate than her children may eventually pay.

What I'd Actually Model

A useful conversion analysis has to do more than compare today's bracket against a child's assumed future bracket.

In our planning process, I want to see at least five scenarios.

The parent's tax bill with no conversions.

We need a baseline first. That means projecting IRA growth, required distributions, Social Security, pensions, deductions, filing status, and other taxable income.

Without it, we don't know whether the IRA is likely to shrink, hold steady, or keep growing even while distributions come out. In a lot of cases it keeps growing, and that surprises people.

A series of partial conversions.

Then we model several amounts instead of an all-or-nothing decision. We might compare converting enough to stay inside a target bracket against pushing into the next rate on purpose.

The goal isn't to minimize this year's tax bill. It's to find out whether paying more now lowers the family's projected lifetime tax cost.

This is also where we settle how the conversion tax gets paid. Outside assets or withholding from the IRA. Paying from the IRA leaves fewer dollars inside the Roth and can shrink the benefit you're converting to capture.

The surviving spouse.

For married couples, the children usually aren't the first tax problem. The first problem shows up when one spouse dies.

The survivor may keep most of the same income and file as a single taxpayer, which means reaching higher brackets on less income.

Conversions can protect the spouse who lives longer, not just the next generation.

The beneficiaries' likely tax range.

Nobody knows what your children will earn twenty years from now. No projection fixes that.

We can still make reasonable estimates. Are they early in high-income careers? Do they own businesses? Might they retire before they inherit? Does one live in a high-tax state while the other lives somewhere with no income tax?

We aren't trying to predict their returns. We're trying to see whether there's a meaningful chance they pay a higher incremental rate than you could pay today.

Where the IRA is actually headed.

Finally, who's getting this account?

If it's going to charity, a conversion is usually less attractive, since a qualifying charity can generally receive traditional IRA assets without the income tax an individual beneficiary would owe. Someone already making qualified charitable distributions may be shrinking the IRA and meeting charitable goals at the same time.

If it's headed to high-earning children, the beneficiary tax cost deserves more weight.

A Roth IRA Changes the Character of the Inheritance

Converting doesn't get your children out of the ten-year rule. They'll still generally need to empty an inherited Roth by the end of the tenth year.[1]

Two things change, though.

Qualified Roth distributions can generally come out free of federal income tax.[5] A child can take a large withdrawal without adding the same amount to taxable income, so it doesn't push wages, bonuses, business income, or capital gains into higher brackets.

And because a Roth owner is never treated as dying after a required beginning date, an inherited Roth generally doesn't carry the annual distribution requirement that an inherited traditional IRA can.[1] That's the mechanism behind the flexibility. Your child can leave the account invested and take it near the end of the ten years, on their own timing.

The five-year rule still matters. Death is itself a qualifying event, so for a beneficiary the holding period is the remaining hurdle. If the applicable five-tax-year period has been satisfied, distributions after the owner's death are generally qualified. If it hasn't, earnings distributed from the inherited Roth can still be taxable until that period is complete.[1][5]

Which is one more reason this planning works better when it starts years before the account is expected to change hands.

When a Conversion Isn't the Answer

A credible analysis has to say when the answer is no.

Conversions get less compelling when your children are likely to be in lower brackets than you are, or when most of the IRA is headed to charity. They get less compelling when the tax would trigger a Medicare premium increase you aren't willing to absorb, when you're planning to move from a high-tax state to a low-tax one, or when paying the bill would cut into liquidity you actually need. If you'd have to use a large slice of the IRA itself to cover the tax, that's a warning sign too. Substantial after-tax basis inside the account changes the math. So does having other deductions or charitable strategies that could reduce future IRA income more efficiently.

Tax rates change. So do account values, spending needs, beneficiaries, and estate plans.

So a conversion projection isn't a one-time answer. It's a document you update as the family changes.

The Decision Is Bigger Than This Year's Bracket

The traditional IRA you decide not to convert doesn't escape taxation.

For most families leaving pretax retirement assets to individual heirs, the decision just determines who pays it later.

That could be you, through required distributions.

It could be a surviving spouse, filing single.

Or it could be your children, emptying the account during the highest-earning years of their lives.

So the question isn't whether you're comfortable paying 22 percent today.

The question is whether 22 percent is the lowest rate your family will ever see.

The IRA gets taxed eventually. What's still up to you is whose return it lands on, what rate applies, and whether anybody chose it on purpose.

Build the projection while you still have the choice.

Then decide on purpose. That's what clarity, confidence, and peace of mind look like on a tax return.

Sources

Internal Revenue Service, Publication 590-B, "Distributions from Individual Retirement Arrangements (IRAs)," including beneficiary categories, the ten-year rule, and inherited Roth IRA distribution rules. https://www.irs.gov/publications/p590b
Internal Revenue Service, "Retirement Topics: Beneficiary." https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary
U.S. Department of the Treasury and Internal Revenue Service, "Required Minimum Distributions," final regulations, July 19, 2024. https://www.govinfo.gov/content/pkg/FR-2024-07-19/pdf/2024-14542.pdf
Internal Revenue Service, Publication 590-A, "Contributions to Individual Retirement Arrangements (IRAs)," including the taxation of conversions and the rule that a required minimum distribution can't be converted. https://www.irs.gov/publications/p590a
Internal Revenue Service, "Roth IRAs," including qualified distributions and the five-year holding period. https://www.irs.gov/retirement-plans/roth-iras

by Peter Donisanu, ChFC®, AIF®

Retirement: 8 Tests Before You Leave Your Paycheck Behind

Retirement shouldn’t begin with a guess.

Still, that’s effectively what happens when someone chooses a retirement date based primarily on the balance of an investment account.

The number may look substantial. The financial projection may show a high probability of success. And after decades of working and saving, it may finally feel like the right time to leave.

However, retirement readiness isn’t determined by one number.

Instead, it depends on whether the major pieces of your financial life can continue working together after your paycheck stops.

In our planning work, we don’t begin the retirement conversation by asking whether someone has reached a particular portfolio balance. We begin by looking at what the paycheck currently supports, what will replace it, and which financial decisions could put the most pressure on the plan after retirement.

That process usually requires more than an investment projection.

It requires a retirement readiness test.

Why Your Retirement Number Isn’t Enough

Most people begin with a straightforward question:

Do I have enough money to retire?

That’s an important question. However, it’s also incomplete.

Two couples could each have $4 million saved and have very different levels of retirement readiness.

One couple may have no debt, predictable spending, substantial taxable savings, two pensions, and both spouses already enrolled in Medicare.

Meanwhile, the other couple may have a large mortgage, most of its wealth in tax-deferred retirement accounts, several years to go before Medicare, and ongoing financial responsibilities for parents or adult children.

The account balances may be identical.

Nevertheless, the retirement decisions aren’t.

That’s because a portfolio can tell you how much you’ve accumulated, but it can’t tell you whether your spending is realistic, whether your tax strategy is coordinated, or whether your family is prepared for an unexpected health or caregiving event.

So, before choosing a retirement date, we believe the plan should pass eight readiness tests.

Test 1: Do You Know What Retirement Will Actually Cost?

First, you need a dependable estimate of what you’ll spend.

That sounds simple. Yet, in practice, it’s often one of the least developed parts of a retirement plan.

Many households know approximately what comes out of their checking account each month. However, that number may not include irregular expenses such as travel, home repairs, vehicle replacements, financial support for family members, or large insurance premiums.

Additionally, retirement spending rarely remains constant.

During the early years, you may spend more on travel, hobbies, dining, or home projects. Later, those expenses may decline while healthcare, home assistance, or caregiving costs increase.

As a result, one static spending assumption may not adequately describe a retirement that could last 25 or 30 years.

When we review retirement spending, we separate expenses into three broad categories:

Core expenses are the costs required to maintain your household, including housing, utilities, food, insurance, and basic healthcare.
Lifestyle expenses include travel, entertainment, gifts, hobbies, and other discretionary spending.
Contingent expenses are costs that may not occur every year but still need to be planned for, such as major home repairs, helping an aging parent, or replacing a vehicle.

This distinction matters because each category has a different level of flexibility.

If markets decline, you may be comfortable postponing a large trip. However, you probably won’t be able to postpone property taxes, health insurance premiums, or a new roof.

Therefore, the first readiness test isn’t whether your portfolio can support one spending number.

It’s whether you understand which expenses are essential, which are flexible, and which could surprise you.

Test 2: Do You Know What Will Replace Your Paycheck?

Once spending is clear, the next step is mapping out your retirement income.

That may include Social Security, pensions, investment income, retirement account withdrawals, rental income, deferred compensation, or part-time work.

However, income planning isn’t simply a matter of adding those sources together.

Timing matters.

For example, you may retire several years before claiming Social Security. A pension may not begin immediately. Deferred compensation may arrive in large installments rather than predictable monthly payments.

Consequently, the first several years of retirement may place more pressure on your portfolio than the later years.

The plan should also consider what happens after the first spouse dies.

A married couple receiving two Social Security payments may eventually become a surviving household receiving one benefit. A surviving spouse may qualify for the higher applicable benefit, but the two payments generally aren’t added together.

Meanwhile, many household expenses may remain largely unchanged.

The surviving spouse may still have the same house, property taxes, insurance premiums, and maintenance costs. However, the household may now have less income and narrower federal tax brackets.

Therefore, a retirement income plan shouldn’t work only while both spouses are alive.

It should also be tested for the survivor.

Test 3: Do You Have Enough Liquidity?

Next, you need to determine how much money should remain readily available.

Retirement changes the role of cash.

While you’re working, a paycheck can replenish your checking account after a large expense. Once you retire, that expense may need to be funded by selling investments or withdrawing money from a retirement account.

That can become a problem during a market decline.

If you’re forced to sell investments after they’ve fallen, you’re not only realizing the loss. You’re also removing assets that would otherwise have the opportunity to participate in a recovery.

That’s why we don’t view a retirement cash reserve as idle money.

Instead, it’s a source of financial flexibility.

The appropriate amount will vary by household. However, it should generally reflect near-term spending needs, known major purchases, the reliability of outside income, and the level of risk in the investment portfolio.

At the same time, holding too much cash can create another problem. Over long periods, inflation can reduce its purchasing power.

So, the goal isn’t to move everything out of the market before retirement.

Rather, the goal is to maintain enough liquidity that you won’t need to make a rushed investment decision simply because a bill is due.

Test 4: Have You Built a Retirement Tax Strategy?

Taxes don’t disappear when your paycheck stops.

In many cases, they become more complicated.

During your working years, income may come primarily from wages. In retirement, however, cash flow may come from several sources with different tax characteristics.

Traditional retirement account withdrawals are generally taxable. Qualified Roth withdrawals may be tax-free. Brokerage account sales may create capital gains. Social Security may become taxable depending on the household’s other income.

Meanwhile, higher income can also increase Medicare Part B and Part D premiums through income-related monthly adjustment amounts.

Therefore, the question isn’t simply which account has money available.

The better question is which account should fund spending this year without creating unnecessary problems in future years.

For instance, the period after retirement but before required minimum distributions begin may create an opportunity to recognize income intentionally through Roth conversions.

However, that doesn’t mean converting as much as possible.

A Roth conversion can affect federal and state taxes, Medicare premiums, capital-gain taxation, healthcare subsidies before Medicare, and the amount of cash available for spending.

Additionally, required minimum distributions generally apply to traditional IRAs and many employer retirement plans under current tax rules.

As a result, the tax strategy should look beyond this year’s tax return.

It should consider the full retirement timeline.

The objective isn’t necessarily to pay the least amount of tax in one particular year. Instead, it’s to manage lifetime taxes while preserving the flexibility to fund the life you want.

Test 5: Have You Planned for Healthcare?

Healthcare is one of the biggest variables in the retirement decision.

If you retire before age 65, you’ll need to determine how you’ll maintain coverage until Medicare begins.

Depending on your circumstances, that may involve coverage through a spouse, COBRA, an Affordable Care Act marketplace plan, or private insurance.

However, the premium is only part of the cost.

You’ll also need to consider deductibles, copays, prescription expenses, dental care, vision care, and out-of-pocket limits.

Then, once Medicare begins, the planning doesn’t stop.

Original Medicare doesn’t cover every healthcare expense. For example, it generally doesn’t cover most routine dental care, hearing aids, or long-term custodial care.

That distinction is important.

Medicare may cover qualifying short-term skilled nursing care under certain conditions. However, it generally doesn’t cover ongoing custodial care when help with activities such as bathing, dressing, or eating is the only care required.

Therefore, a complete healthcare review should address two different risks:

The first is how you’ll pay for medical coverage and routine healthcare expenses.

The second is how you’d fund an extended-care need that Medicare may not cover.

Without both pieces, an otherwise strong retirement plan may still contain a significant blind spot.

Test 6: Do Your Debt and Housing Decisions Support the Plan?

Next, consider the role of debt.

A mortgage payment that felt manageable during your working years may feel different when it’s funded through portfolio withdrawals.

At the same time, paying off the mortgage immediately before retirement isn’t automatically the right answer.

For example, withdrawing a large amount from a traditional IRA could create a sizable tax bill. Using taxable savings to eliminate the mortgage could reduce the liquidity available for healthcare, home repairs, or a market downturn.

Therefore, the question isn’t simply whether you can pay off the house.

It’s whether paying it off improves the overall plan.

Housing also needs to be evaluated beyond the mortgage.

Consider whether the home will remain:

Affordable to maintain
Physically accessible
Close to family and healthcare
Appropriate for the lifestyle you want
Practical if one spouse is living there alone

A retirement projection may assume that you’ll stay in the same home indefinitely. However, that assumption should be tested rather than accepted automatically.

Ultimately, the home should support your retirement.

Your retirement shouldn’t exist primarily to support the home.

Test 7: Are Your Protection and Estate Plans Current?

As retirement approaches, insurance needs often change.

Disability insurance may become less important once earned income stops. Meanwhile, long-term care, property, liability, and umbrella coverage may become more important.

Life insurance also deserves a fresh review.

Some policies may no longer be necessary because the original income-replacement need has declined. However, other policies may still play a role in supporting a surviving spouse, providing liquidity, funding a legacy goal, or covering an estate-planning need.

The objective isn’t to cancel every policy once you retire.

Instead, it’s to determine whether each policy still has a specific job.

The same principle applies to your estate plan.

Wills, trusts, financial powers of attorney, healthcare directives, and beneficiary designations should reflect your current wishes and family circumstances.

However, estate planning isn’t only about transferring assets after death.

It’s also about preparing for incapacity.

Your family should know who can make financial and medical decisions, where important documents are located, and how essential accounts and bills will be managed during an emergency.

Otherwise, a financially sound retirement plan may become difficult to implement precisely when your family needs it most.

Test 8: Are You Personally Ready to Retire?

Finally, retirement readiness isn’t purely financial.

Work provides more than income.

It may also provide structure, identity, relationships, intellectual stimulation, and a sense of purpose.

Once work ends, those things don’t automatically replace themselves.

That’s why we ask clients to think beyond the retirement date.

What will an ordinary Tuesday look like?

How will you spend your time after the initial travel and home projects are complete?

How will you maintain friendships and social connections?

What will give you a sense of progress or contribution?

And if you’re married, have you and your spouse discussed what each of you expects retirement to look like?

A person can be financially prepared to retire and still struggle with the transition.

Conversely, someone may feel emotionally ready to leave but discover that the financial pieces haven’t yet been coordinated.

A durable retirement plan needs both.

What a $4 Million Portfolio Doesn’t Tell You

Consider a hypothetical married couple with $4 million in total savings and investments.

At first glance, they appear ready to retire.

However, the account balance doesn’t reveal the full picture.

Of the $4 million, assume $2.8 million is held in traditional tax-deferred retirement accounts. Another $700,000 is held in a taxable brokerage account, $300,000 is in Roth accounts, and $200,000 is in cash.

The couple estimates that they spend approximately $160,000 per year. However, that estimate doesn’t fully include irregular home repairs, vehicle replacements, or travel.

They also have a mortgage costing approximately $4,000 per month.

Additionally, one spouse is several years away from Medicare eligibility. The couple expects to provide roughly $18,000 per year of support to an aging parent, and their estate documents haven’t been updated in more than 10 years.

Neither spouse has started Social Security.

So, are they ready?

Possibly.

However, the $4 million balance alone can’t answer the question.

Before choosing a retirement date, the couple would need to determine:

Whether $160,000 accurately reflects their full spending
How much additional money is needed for health insurance
Whether the mortgage should be maintained, refinanced, or paid off
How family support affects sustainable withdrawals
Which accounts should fund the first several years
Whether partial Roth conversions improve the long-term tax picture
How the plan changes when Social Security begins
Whether the surviving spouse can maintain the household
How much cash should remain outside the investment portfolio
Whether estate and incapacity documents need to be updated

The couple may discover that they can retire as planned.

Alternatively, they may decide to work one more year, reduce a planned expense, restructure the mortgage, or create a more deliberate withdrawal strategy.

The purpose of the analysis isn’t to push retirement further away.

Instead, it’s to replace uncertainty with informed tradeoffs.

Test the Full Plan Before Choosing the Date

Before submitting your retirement notice, step back and review the entire financial system that will need to replace your paycheck.

Do you understand what retirement will cost?

Do you know where your income will come from?

Do you have enough liquidity to avoid selling investments at the wrong time?

Have you coordinated taxes, healthcare, housing, insurance, and estate planning?

Have you tested what happens if markets fall, inflation remains elevated, a spouse dies, or a family member needs help?

And just as importantly, do you know what you’re retiring to?

The goal isn’t to eliminate every uncertainty.

That’s impossible.

Instead, the goal is to identify the decisions that matter most, understand the tradeoffs, and make sure the major pieces of your financial life can continue working together.

Because retirement readiness isn’t determined by whether you’ve reached one particular number.

It’s determined by whether the full plan is ready to support the life that comes next.

Sources

Internal Revenue Service, required minimum distribution guidance. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
Social Security Administration, retirement and survivor-benefit guidance. https://www.ssa.gov/survivor/amount
Centers for Medicare & Medicaid Services, Medicare premiums and income-related adjustments. https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
Medicare.gov, services not covered by Original Medicare and long-term-care guidance. https://www.medicare.gov/coverage/long-term-care

by Peter Donisanu, ChFC®, AIF®

Why Diversification Feels Broken Right Before It Works

Diversification can feel like a mistake when one part of the market is doing all the work.

That's the part investors don’t always appreciate.

Diversification is easy to believe in when everything's working. It's much harder to believe in when a narrow group of stocks is carrying the market higher and the rest of your portfolio feels like dead weight.

That's when the questions start.

Why own bonds?

Why own value stocks?

Why own international stocks?

Why own anything other than the part of the market that's clearly winning?

Those are fair questions. They're also the exact questions that tend to show up right before diversification matters most.

In our portfolio work, we don’t treat diversification as a prediction tool. It's a risk-management discipline. It's not there because we know exactly which part of the market will lead next. It's there because we don’t.

Disclosures: All performance data represents total returns for the stated period. Past performance is no guarantee of future results. Asset classes are represented by MSCI Emerging Markets, DB Commodity Index, MSCI EAFE, S&P 500 Real Estate Sector, S&P 500, Russell 2000, ICE BofA US Corporate, ICE BofA US High Yield, Bloomberg Barclays 1-3 Month T-Bill, U.S. Bloomberg Bond Aggregate. The "60/35/5" portfolio is for illustrative purposes only and assumes the following weights: 25% Large Caps, 15% Developed Markets, 10% Small Caps, 5% Emerging Markets, 5% REITs, 25% Bonds, 5% High Yield, 5% Commodities, and 5% Cash.

Diversification Isn’t Supposed to Feel Good All the Time

The purpose of diversification isn’t to beat the hottest asset class every year.

It's not designed to make every part of your portfolio look smart at the same time. It's not designed to keep up perfectly with whatever corner of the market is leading today. And it's not designed to eliminate frustration.

In fact, a diversified portfolio almost always owns something that feels disappointing.

That's not a flaw. That's the tradeoff.

If every part of your portfolio is working at the same time, there's a good chance your portfolio isn’t as diversified as you think. You may simply own different versions of the same risk.

True diversification means owning investments that behave differently under different conditions.

Some may lead when growth stocks are in favor.

Some may help when interest rates fall.

Some may provide stability when stocks are under pressure.

Some may become useful when market leadership broadens beyond the same small group of winners.

But because those investments behave differently, they won’t all work at once.

That's what makes diversification frustrating.

It's also what makes it valuable.

Diversification doesn’t guarantee a profit or protect against loss. No portfolio strategy can do that. But it can reduce the risk that one market segment, one economic outcome, or one investment theme determines the entire result of your plan.

That distinction matters.

The Problem Starts With Comparison

The hardest part of diversification isn’t the math.

It's the comparison.

When large-cap growth stocks lead for a long stretch of time, a balanced portfolio can feel too cautious. When a handful of companies are responsible for most of the market’s gains, anything outside of those companies can feel unnecessary. When the index keeps moving higher and your portfolio is moving more slowly, discipline starts to feel like a drag.

That's usually when investors begin to second-guess the plan.

At first, it's just an observation.

Then it becomes a question.

Then it becomes frustration.

And eventually, it can become action.

That's where investors get into trouble.

Because the decision to abandon diversification rarely feels reckless in the moment. It often feels rational. It feels like responding to the evidence. It feels like finally admitting what's been obvious for a while.

Why own the laggards when the winners are right there?

But that line of thinking can quietly turn a long-term investment plan into a performance chase.

And performance chasing has a way of showing up late.

Market Leadership Doesn’t Last Forever

The problem with chasing what's working now is that market leadership changes.

It doesn’t always change quickly. It doesn’t always change when valuations suggest it should. And it doesn’t always change in a way that feels obvious ahead of time.

But it changes.

That's why diversification exists in the first place.

It's not an admission that returns don’t matter. It's an acknowledgment that the future is uncertain.

Think about a period when large-cap growth stocks have led the market for several years. In that environment, a portfolio that also owns value stocks, small caps, international equities, or high-quality bonds may lag the most visible market benchmark.

The investor may look at the portfolio and feel like too many pieces aren’t pulling their weight.

Then conditions shift.

Interest rates move.

Earnings leadership broadens.

Valuations begin to matter again.

The economy slows, reaccelerates, or changes in a way investors didn’t expect.

Suddenly, the parts of the portfolio that looked unnecessary may become the source of stability, income, or return.

That doesn’t mean every diversifying asset will work perfectly. It doesn’t mean a diversified portfolio will avoid losses. And it doesn’t mean diversification will protect against every bad outcome.

But it does mean the portfolio isn’t dependent on one narrow market outcome continuing forever.

That's the point.

A concentrated portfolio feels best when the concentrated bet is working.

A diversified portfolio can feel less exciting during narrow leadership.

But when leadership changes, the difference matters.

Concentration Risk Often Feels Best Right Before It Matters

One of the reasons diversification is so difficult is that concentration risk can feel rewarding for a long time.

That's what makes it dangerous.

When one asset class, sector, or stock keeps leading, concentration doesn’t feel like risk. It feels like confirmation. The investor feels rewarded for having more exposure to the winners and less exposure to everything else.

This can be especially challenging for investors with concentrated company stock, equity compensation, or large positions that have appreciated over many years. The position may have created meaningful wealth. It may still be a high-quality company. It may still have a strong long-term story.

I worked with a client recently who was heading into retirement with a large share of their net worth sitting in company stock. They'd watched that stock grow across their entire career. Selling any of it felt like betting against their own success story.

I told them about a group of people I met years ago when I worked in Saint Louis. Most were former employees of Wachovia, and many were approaching retirement in 2008. Like my client, a large portion of their retirement savings sat in company stock. When the financial crisis hit and Wachovia collapsed, their savings went with it. Years of disciplined saving disappeared in a matter of months, not because they'd done anything wrong, but because their financial future depended entirely on one company continuing to succeed.

That story isn’t meant to scare anyone away from company stock. It's meant to separate two different questions. The first is, “Has this position performed well?” The second is, “What happens to my retirement plan if it stops?” My client’s stock may still have a bright future. But their retirement plan shouldn’t require it to.

For a deeper look at how to evaluate whether you’re sitting on a concentrated position and what to do about it, see Don’t Keep All Your Eggs in One Basket.

But none of that eliminates concentration risk.

A great company can still become an oversized position.

A strong sector can still become overowned.

A successful investment can still become too important to the family’s financial future.

That's why diversification isn’t just an investment concept. It's a planning concept.

The question isn’t simply, “What has performed best?”

The better question is, “How much of my financial life depends on this one thing continuing to work?”

That's a different question.

And for high-net-worth families, retirees, and investors with concentrated wealth, it's often the more important one.

The Risk Isn’t Just Losing Money

The risk isn’t simply that the market pulls back.

The bigger risk is that investors make a permanent decision based on a temporary environment.

That matters because most families aren’t investing for entertainment, ego, or quarterly bragging rights.

They're investing to support a retirement income plan.

To fund education.

To manage concentrated stock exposure.

To preserve liquidity.

To reduce the risk of being forced to sell at the wrong time.

To keep their broader financial life moving in the right direction.

For those investors, the portfolio has a job.

Its job isn’t to win every short-term comparison.

Its job is to support the plan.

That means some parts of the portfolio may look unnecessary for a while. Some may lag. Some may feel boring. Some may be hard to appreciate when the market’s favorite trade is working.

But every allocation should have a purpose.

Growth assets are there for long-term appreciation.

Defensive assets are there for stability and liquidity.

Income-producing assets are there to support cash flow.

Diversifying assets are there because the future doesn’t always look like the recent past.

The question isn’t whether every piece is outperforming today.

The question is whether the total portfolio is built to survive different market environments.

Diversification Has to Be Judged Against the Plan

A diversified portfolio shouldn’t be judged only against the market’s current favorite.

It should be judged against the plan it was built to support.

That includes the investor’s time horizon, spending needs, withdrawal strategy, tax situation, liquidity needs, risk tolerance, and ability to stay invested when markets become uncomfortable.

For an accumulator, diversification may be about avoiding overdependence on one source of return.

For a retiree, it may be about managing sequence-of-return risk and maintaining enough stability to support withdrawals during difficult markets.

For an executive with equity compensation, it may be about reducing the risk that career income, company stock, and long-term wealth are all tied to the same business outcome.

For a family stewarding generational wealth, it may be about preserving flexibility across market cycles rather than maximizing exposure to the latest winner.

The right portfolio isn’t the one that looks best in hindsight.

It's the one the investor can actually live with, fund goals from, and stick with when the environment changes.

That's where diversification earns its place.

Not because it always feels good.

Because it helps keep the plan from depending on one version of the future.

Don’t Confuse Frustration With Failure

There will always be moments when diversification feels broken.

There will always be a stock, sector, asset class, or theme that makes the disciplined portfolio look dull by comparison.

And there will always be investors who are tempted to simplify the portfolio around whatever's worked best recently.

But temporary frustration isn’t the same thing as strategic failure.

Sometimes diversification feels broken because one part of the market has dominated for a long period of time.

Sometimes it feels broken because the benefit hasn’t been needed yet.

Sometimes it feels broken because the thing it's designed to protect against hasn’t happened.

That doesn’t make it useless.

It makes it easy to underappreciate.

The real test of diversification doesn’t come when the market’s current favorite is still leading. It comes when leadership changes, when expectations shift, when volatility returns, or when investors are reminded that no single trade works forever.

By then, it may be too late to rebuild the portfolio without paying a price.

So don’t judge diversification by whether it keeps up with the market’s current favorite.

Judge it by whether your portfolio can survive a change in leadership.

Because by the time diversification feels obvious again, the opportunity to stay disciplined may have already passed.

by Peter Donisanu, ChFC®, AIF®

Weekly Market Update: Hot Inflation Sidelines Rate Cuts

Markets traded lower this week, though there was relative strength beneath the major equity indexes. The S&P 500 and Nasdaq both ended the week lower as the largest technology stocks sold off, while the Russell 2000 small-cap index, along with the value and equal-weight factors, posted modest gains.

Technology, Communication Services, and Consumer Discretionary were the worst-performing sectors as mega-cap names like Apple and Microsoft declined.

The eight remaining sectors finished higher, led by defensive areas of the market. Bonds gained as Treasury yields fell despite a hot inflation report, with investors expecting inflation to ease following the recent drop in oil prices.

Oil fell nearly 5% as shipping traffic through the Strait of Hormuz increased, while the VIX, a measure of expected market volatility, drifted higher as stocks declined.

Key Takeaways

Semiconductors Remain Volatile as a Crowded Trade Unwinds

The group sold off sharply Monday and Tuesday as investors unwound leverage that had built in the industry. Semiconductors have significantly outperformed the broader market this year, but the popularity cuts both ways: when sentiment turns, the moves are large in both directions. The mood shifted again Wednesday evening, when Micron, a leading memory-chip maker, reported record quarterly revenue and its shares jumped more than 15% overnight into Thursday morning.

Why it matters: AI infrastructure spending is the engine behind semiconductor companies' profits and share-price gains, and the industry has benefited from hundreds of billions of dollars in capital spending. The trade has become popular and heavily leveraged, which is why it has become so volatile.

Inflation Ran Hot in May

The Federal Reserve's preferred inflation measure rose 4.1% from a year earlier, its highest level in nearly three years. Higher energy prices tied to the conflict in the Middle East were the main driver, though many economists believe May may mark the peak before inflation eases over the summer. Even so, the Fed has shifted its stance with inflation still above its 2% target. After signaling earlier this year that rate cuts were likely, officials have taken cuts off the table for 2026, and markets now see a possible rate increase later this year.

Why it matters: The Fed's rate-cutting cycle looks likely to stay on pause. With the Fed now placing more weight on inflation than on growth or the job market, interest rates could stay elevated, and may even move higher, before any cuts arrive.

Energy Prices Return to Pre-Conflict Levels

Oil has now given back the entire increase tied to the Middle East conflict. U.S. crude fell to around $70 a barrel this week, its lowest level since the conflict began in late February, as tankers resume moving through the Strait of Hormuz and shipping normalizes.

Why it matters: Lower energy prices ease pressure on household budgets. They are also the main reason inflation is expected to cool in the months ahead, since the same energy spike that drove inflation to a three-year high is now reversing.

First-Quarter GDP Revised Higher

The government's final estimate of growth for the first quarter came in at 2.1%, up from an earlier reading of 1.6%. The figure covers January through March, so it predates most of the energy shock from the conflict and reflects where the economy stood earlier in the year.

Why it matters: The economy entered 2026 on firmer footing than many economists previously thought, an encouraging data point even though it measures activity before the oil supply disruption.

Business Investment Held Up in May

Orders for long-lasting manufactured goods fell 4.5% for the month, but nearly all the decline came from a drop in volatile aircraft orders following an unusually strong April. A broader measure of business investment, which strips out aircraft and defense, rose more than expected.

Why it matters: The headline looks worse than the reality. Underneath the noise, businesses continued to invest, a quietly encouraging sign for the economy and for corporate profits.

by Peter Donisanu, ChFC®, AIF®

The Retirement Costs You Don't See Coming

Most retirement plans begin with one big question.

How much can I safely spend?

It’s the right question. But it’s often answered too simply.

Most retirees build their spending assumptions around the lifestyle they can see clearly. Travel. Dining out. Family support. Hobbies. Charitable giving. Home projects. Everyday living.

Those expenses matter. But the expenses that matter most aren’t always the ones you can see.

Healthcare costs can rise faster than expected. In fact, a 65-year-old couple retiring today is projected to spend roughly $345,000 on healthcare over the course of retirement, and that figure doesn’t even include long-term care.[1] Home maintenance can grow more expensive as the house ages. Insurance premiums can climb. Inflation can quietly raise the cost of the same lifestyle, one year at a time. And long-term care, even if it never arrives, can become one of the largest unknowns in the entire plan.

That’s the retirement spending blind spot.

The risk isn’t simply that you spend too much. The bigger risk is that your plan assumes spending will behave more predictably than real life usually allows.

Retirement spending isn’t one number

It’s a collection of categories, and every category behaves differently over time.

Some expenses go down. Payroll taxes disappear. Retirement contributions stop. Work-related costs decline. A mortgage eventually gets paid off.

But other expenses go up. Healthcare often becomes a larger slice of the budget as you age, and it tends to climb faster than everything else. Over the years, medical costs have tended to rise faster than general inflation, often by a few percentage points a year. Home costs arrive in lumps you can’t schedule. And inflation, while it doesn’t touch every household the same way, still raises the cost of groceries, utilities, insurance, services, travel, and the help you may eventually need.

That creates a planning problem.

A flat spending assumption feels clean. But clean isn’t the same as accurate. A single number can hide the very expenses most likely to create stress later.

That’s why retirement income planning has to go beyond a monthly spending figure.

The better question isn’t, “How much do you want to spend each year?”

The better question is, “Which parts of your spending are predictable, which parts are flexible, and which parts could surprise you?”

That distinction matters, because different expenses call for different tools.

Core living expenses need reliable income. Lifestyle spending needs flexibility. Healthcare and long-term care need contingency planning. Home repairs need reserves. Inflation-sensitive expenses need a portfolio built to protect purchasing power over time.

The goal isn’t to predict every future cost perfectly. The goal is to build a plan that can absorb the costs you can’t predict at all.

What this looks like in real life

I’ve spent a lot of time sitting with couples in the window right before and just after retirement. The plan almost always looks the same on paper. It’s the years that follow that tell the real story.

Here’s a version of a story I’ve watched play out more than once.

A couple retires in their mid-sixties. They’ve done thoughtful work. They know what they spend on travel, dining, gifts to family, utilities, groceries, entertainment, and giving. On paper, the plan works.

But the projection assumes their spending rises at a steady inflation rate and stays smooth from one year to the next.

Then real life shows up.

In a single year, their Medicare premiums increase. Prescription costs come in higher than expected. Property insurance rises. A major appliance fails. The roof needs work. And they want to help an adult child with a family expense.

None of these costs is unusual. But together, they create pressure.

And these are only the costs that arrive while both spouses are healthy. Roughly 70% of people turning 65 will need some form of long-term care at some point, and the price is real. The national median for a private room in a nursing home now runs north of $127,000 a year, and assisted living is close to $71,000.[2] A cost like that doesn’t show up in a smooth annual budget. It lands all at once.

The issue isn’t that the couple was careless. The issue is that the plan treated retirement spending as one predictable number instead of several different kinds of expenses.

A more integrated plan would separate the spending into categories.

A baseline budget for essentials. A lifestyle budget for the flexible things. A healthcare reserve for rising medical costs. A home maintenance reserve for the large and infrequent. An inflation assumption that reflects the truth that some expenses climb faster than others. And a withdrawal strategy designed to flex when spending runs high or markets run weak.

That last piece matters more than most people expect. Recent research pegs a safe starting withdrawal rate near 3.9% for someone who wants steady, inflation-adjusted spending.[3] But retirees willing to stay flexible, dialing spending up in strong years and easing off in weak ones, can support meaningfully higher withdrawals over time. The takeaway isn’t a magic number. It’s that flexibility is itself a planning tool.

The couple may still spend the same amount over time. But now the plan has structure. Now it’s clear which expenses are essential, which are flexible, and which need a cushion all their own.

That’s the difference between a retirement spending estimate and a retirement spending plan.

Plan for what you can’t see

Retirement planning isn’t just about reaching a number. It’s about understanding what that number has to support.

Healthcare, home costs, inflation, insurance, family needs, and the repairs you never schedule can all reshape your spending over time. So can the costs that arrive long after the plan is built. The higher tax bill a surviving spouse can face, for example, is one of the most overlooked expenses in retirement, and it rarely shows up in a simple monthly budget. Because costs like these rarely arrive neatly, they deserve a place in the plan of their own.

The goal isn’t to make retirement feel restrictive. The goal is to create clarity, confidence, and peace of mind.

When you know which expenses are fixed, which are flexible, and which could surprise you, you can make better decisions about withdrawals, investments, cash reserves, insurance, and the planning that protects you years from now.

So before you assume your retirement budget is complete, it’s worth asking one more question.

Have we planned for the expenses that don’t show up every month, but can still rewrite the plan?

That question matters, because retirement income should not only support the life you expect. It should be ready for the costs you don’t see coming.

This is exactly the kind of coordination we walk clients through in the Premier Wealth Blueprint. A retirement plan shouldn’t just tell you how much you can spend.

It should help you understand what your spending needs to withstand.

[1]Fidelity Investments, “2025 Retiree Health Care Cost Estimate,” 2025. newsroom.fidelity.com

[2]Genworth and CareScout, “Cost of Care Survey 2024,” 2025. carescout.com/cost-of-care

[3]Morningstar, “The State of Retirement Income: 2025,” 2025. morningstar.com

by Peter Donisanu, ChFC®, AIF®

Asset Location: The Retirement Tax Mistake Hiding in Plain Sight

Most investors spend a lot of time thinking about what they own.

Stocks. Bonds. Mutual funds. ETFs. Cash. Real estate. Alternative investments.

That matters.

But for retirees and near-retirees, there is another question that can be just as important:

Where should each investment live?

Because the same investment can produce very different outcomes depending on whether it is held in a taxable account, a traditional IRA, a Roth IRA, or a trust.

That is the basic idea behind asset location.

It is not about chasing higher returns. It is about coordinating your investments with your tax situation, your retirement income needs, your estate plan, and your long-term wealth strategy.

In other words, your portfolio may be diversified. But if the right assets are sitting in the wrong accounts, your plan may not be as efficient as it could be.

What You Own vs. Where You Own It

Asset allocation answers the question, "What should I own?"

Asset location answers the question, "Where should I own it?"

That distinction matters because different account types are taxed differently.

A taxable brokerage account gives you flexibility, favorable long-term capital gains treatment, and potentially a step-up in basis at death. But it can also create annual tax drag from interest, dividends, and realized gains.

A traditional IRA or 401(k) offers tax deferral, but withdrawals are generally taxed as ordinary income. That means the account can become a future tax liability, especially once required minimum distributions begin.

A Roth IRA offers tax-free growth and tax-free qualified withdrawals, which can make it one of the most valuable accounts for long-term growth, legacy planning, and late-retirement flexibility.

So the planning question is not simply, "Which account is best?"

The better question is, "Which assets belong in which accounts, based on the role each account plays in the broader plan?"

That is where asset location stops being an investment issue and becomes a wealth management issue.

As a general rule, highly tax-inefficient investments may be better suited for tax-deferred accounts. Long-term growth assets may be attractive in Roth accounts. Tax-efficient equity investments may fit well in taxable accounts, especially when flexibility and estate planning are important.

But there is no universal answer.

The right decision depends on your income needs, your tax bracket, your withdrawal strategy, your charitable intent, your estate plan, your health, your longevity assumptions, and whether the money is intended for you, your spouse, or the next generation.

This is also where coordination between your investment strategy and your tax strategy does the quiet, compounding work that rarely shows up on a single year's statement.

What This Looks Like in Real Life

Consider a retired couple with three major account types.

A taxable brokerage account. A traditional IRA. A Roth IRA.

They own a mix of stock funds, bond funds, cash, and dividend-oriented investments.

At first glance, they look well diversified. They have growth assets, income assets, and liquidity. But when we look closer, the location of those assets may be creating unnecessary friction.

Suppose most of their bonds and income-producing investments are held in the taxable account. Each year, that income may show up on their tax return, whether they need the cash or not.

Meanwhile, their highest-growth investments may be sitting inside the traditional IRA. That growth is tax-deferred, which sounds attractive, but it may also increase future required minimum distributions and push more income into ordinary tax rates later.

At the same time, their Roth IRA may be sitting mostly in cash or conservative investments, even though they may not need that money for many years.

Nothing here is technically wrong.

But the accounts may not be working together as well as they could.

A more integrated approach might place some income-producing assets inside the IRA, where annual income is not taxed currently. The Roth IRA might hold more long-term growth-oriented assets, since qualified withdrawals can be tax-free and Roth accounts are often powerful legacy assets. The taxable account might hold more tax-efficient investments, while preserving flexibility for spending needs and potential estate planning benefits.

The portfolio did not necessarily become more aggressive.

The investments did not necessarily become more complicated.

But the structure became more intentional.

And that is the point.

Asset location is not about making the portfolio look clever. It is about making the portfolio fit the plan.

The Real Goal

Asset location is one of those planning topics that is easy to overlook, because it does not always feel urgent.

But over time, the location of your investments can influence your tax bill, your retirement income flexibility, your estate plan, and the amount of wealth ultimately available to you and your family.

The goal is not to find a perfect formula.

The goal is to make sure your investment strategy, your tax strategy, your withdrawal strategy, and your estate plan are all working in the same direction.

So if you have taxable accounts, traditional retirement accounts, and Roth accounts, it may be worth asking a simple question:

Are the right investments sitting in the right places?

That question may not sound dramatic.

But in retirement planning, small structural decisions can create meaningful long-term differences.

If you are not sure whether your portfolio is positioned as efficiently as it could be, this is exactly the kind of coordination we help clients evaluate through the Premier Wealth Blueprint, where your investment plan and your tax plan are built to work as one.

Because your investments should not just be diversified.

They should be integrated. That’s how you get clarity, confidence and peace of mind.

by Peter Donisanu, ChFC®, AIF®

Before You Roll Over Your 401(k), Check This Hidden Tax Break

Rolling an old 401(k) into an IRA often feels like the obvious move.

It is simple. It is clean. It consolidates your retirement assets in one place and gives you more control over how the money is invested. For many retirees, it becomes the default path. And in many cases, it is the right call.

But if your 401(k) holds highly appreciated company stock, that automatic rollover could accidentally erase a valuable tax planning opportunity. One that, once lost on those shares, generally cannot be recovered.

That opportunity is called Net Unrealized Appreciation, or NUA.

Why the Default Answer Is Not Always the Right One

Most assets inside a traditional 401(k) share the same tax character. When the money comes out, whether through withdrawals, required minimum distributions, or a rollover that is later converted to Roth, it is generally taxed as ordinary income. That is the deal with pre-tax retirement accounts. The government deferred the tax on the way in, and it collects on the way out at whatever ordinary income rates apply at the time.

But employer stock can be different, if it qualifies for NUA treatment and is handled correctly at distribution.

Here is the distinction that matters. Instead of rolling the company stock into an IRA where it will eventually be taxed as ordinary income, some retirees may be able to distribute the employer stock in kind directly into a taxable brokerage account.

When that happens, ordinary income tax is owed only on the original cost basis of the stock, meaning what the plan originally paid for the shares. The appreciation that occurred inside the plan, the NUA itself, is not taxed at ordinary income rates. Instead, when the stock is later sold, that NUA may qualify for long-term capital gains treatment.

Any additional appreciation after the stock is distributed into the taxable brokerage account is treated differently. That gain is taxed under the normal capital gains rules, depending on how long the stock is held after distribution.

That distinction is not cosmetic. Long-term capital gains rates are often significantly lower than ordinary income rates. For some retirees, the spread between those two rates can be 10, 15, or even 20 percentage points. On a large block of appreciated employer stock, that gap translates into real dollars.

So before deciding whether to roll over, convert, or liquidate retirement assets, retirees with company stock inside the plan need to slow down.

The question is not simply, "Should I roll this 401(k) into an IRA?" The better question is, "Is there company stock inside this plan, and does NUA change the tax math?"

Running the Numbers on a Real Scenario

Consider a retiree with a $1.2 million 401(k).

Inside the plan is $400,000 of employer stock. The original cost basis of that stock is $80,000. The remaining $320,000 is appreciation accumulated over years of employment and company growth.

If the entire 401(k) is rolled into an IRA, the NUA opportunity disappears. Every future dollar that comes out of that account, including the $320,000 of appreciation, will be taxed as ordinary income.

But if the company stock qualifies for NUA treatment and is distributed properly, the picture changes. The retiree pays ordinary income tax on the $80,000 cost basis in the year of distribution. That is a real tax bill, and it needs to be planned for. But the $320,000 of appreciation may eventually qualify for long-term capital gains treatment when the stock is sold, rather than being taxed at ordinary income rates later through IRA withdrawals.

That does not automatically make NUA the right answer for every retiree who finds themselves in this position.

Holding a large block of a single employer's stock in a taxable account creates concentration risk. Market conditions change. Companies that looked strong at retirement can look very different five years later. Cash flow timing matters too, because the ordinary income tax on the cost basis is due in the distribution year, which requires liquidity.

Medicare thresholds, Social Security taxation, and estate planning considerations all factor into the analysis. And the IRA rollover route, while less tax-efficient in this scenario, offers simplicity and diversification that have genuine value.

But all of those tradeoffs deserve a careful evaluation. Not a default answer and a signature on a transfer form.

Because once the employer stock is rolled into an IRA, the NUA window on those shares is generally closed. The stock becomes IRA money. The favorable tax character is gone. And there is no going back.

What to Do Before You Sign the Transfer Form

NUA is not for everyone. For retirees whose company stock has minimal appreciation, or whose cost basis is high relative to the current value, the math may not favor a taxable distribution.

The strategy generally requires a qualifying triggering event, a lump-sum distribution of the plan balance within the required timeframe, an in-kind distribution of the employer stock, and careful coordination of any rollover of the remaining assets.

But for retirees with highly appreciated company stock in a 401(k), it can be too important to ignore.

Before rolling over an old employer plan, take the time to review the holdings. Identify whether employer stock is present. Understand the cost basis. Compare the tax impact of leaving the assets in the plan, rolling the account to an IRA, distributing the employer stock under an NUA strategy, and later using Roth conversions where appropriate.

A smart retirement tax plan is not just about choosing between traditional and Roth accounts. It is about understanding every asset, every tax character, and every decision point before making a move that cannot be undone.

Because the goal is not just to move the money somewhere convenient. The goal is to make sure that every dollar you spent decades building works as hard as possible on your behalf, with clarity, confidence, and peace of mind.

by Peter Donisanu, ChFC®, AIF®

How to Reduce RMDs Without a Roth Conversion

Most retirees think the only way to reduce future IRA taxes is through Roth conversions.

Convert now, pay the tax today, and let the money grow tax-free for the rest of your retirement. It is a sound strategy. For many people, it is the right one.

But if you are charitably inclined and over age 70½, there may be another strategy sitting in plain sight. One that does not require writing a check to the IRS today, does not require a market timing decision, and does not add to your taxable income for the year.

It is called a Qualified Charitable Distribution, or QCD.

And for the right retiree, it can reduce taxable IRA income, satisfy charitable goals, and potentially lower the tax pressure created by required minimum distributions, all at the same time.

Why This Matters Beyond Your Tax Bracket

A Roth conversion can be powerful. But it is not always the best first move.

That is especially true for retirees who already give to charity each year. And more retirees fit that description than you might think. Giving to a church, a hospital, a university, a community foundation, or a cause that has been important to a family for decades is not unusual. It is often one of the most consistent line items in a retiree's annual spending.

The problem is how most retirees handle that giving.

The typical pattern looks like this. You take a distribution from your IRA. The distribution hits your checking account and shows up as taxable income. Then you write a check to the charity. The gift is generous. But from a tax standpoint, the sequence can work against you.

This is especially true for retirees who take the standard deduction. In that case, the charitable gift may not produce a separate federal income tax deduction, even though the IRA withdrawal still shows up as income.

When you give directly from a traditional IRA using a QCD, the distribution can go to the charity without showing up as taxable income on your return. The money moves from your IRA to the organization you care about, and for federal income tax purposes, the qualifying portion may be excluded from taxable income.

That matters more than most retirees realize.

Taxable income does not just affect your tax bracket. It influences whether more of your Social Security benefits become taxable. It affects your Medicare Part B and Part D premiums through a mechanism called IRMAA, which can add hundreds or thousands of dollars per year to your healthcare costs.

It affects how much of your long-term capital gains and qualified dividends are taxed. And over time, as IRA balances grow and required minimum distributions increase, all of those pressures can compound together.

So the real question is not simply, "Should I convert more IRA money to Roth?"

The better question is, "If I am already giving to charity, should some of those gifts come directly from my IRA?"

Seeing It in Action

Consider a retired couple in their early seventies with a $1.8 million traditional IRA.

They give $25,000 per year to their church and several charities they have supported for decades. For years, they have made those gifts from their checking account after withdrawing money from their IRA. It has always felt generous, and it has always been. But the tax math has quietly worked against them.

Every dollar they withdraw from the IRA to fund that giving is a dollar of taxable income. That income pushes up their adjusted gross income. That higher adjusted gross income can affect their Medicare premiums and the taxation of their Social Security. And if their IRA continues to grow, their future required minimum distributions may make the problem larger.

Now imagine they redirect that same $25,000 gift directly from the IRA to charity using a QCD.

They still support the causes they care about. The church still receives the same gift. The charities they love still receive the same support. But the money moves directly from the IRA instead of first passing through the couple's checking account.

Same gift. Same charity. Different tax outcome.

One important detail matters here. QCD eligibility begins at age 70½, even though required minimum distributions generally begin later. That creates a planning window where charitable IRA gifts may begin reducing the account balance before required distributions start.

And when that strategy is layered into a multi-year retirement income plan, it can change the overall picture significantly. A retiree who is already giving $25,000 per year through QCDs may need fewer Roth conversions, or may be able to convert more selectively, to keep income in a manageable range.

That means fewer years of deliberately triggering taxable income to move money across the tax wall. It means more flexibility. And it means a retirement income plan that is built around the life you are actually living, not just the account balance on paper.

What to Review Before Your Next Gift

A QCD is not a replacement for Roth conversion planning. The two strategies often work best together, layered intentionally across the years leading up to and following the required minimum distribution age.

But for charitably inclined retirees, the QCD may be one of the most overlooked tools in the retirement tax planning toolbox.

Before converting more IRA money this year, take a step back and look at the full picture. Review your giving history, your IRA balance, your projected RMD timeline, your Medicare thresholds, and your long-term income plan. Because charitable giving and tax planning are not separate conversations. For many retirees, they belong in the same room.

The goal is not simply to convert more. The goal is to keep more control over your income, reduce avoidable taxes, and use your wealth in a way that reflects your values, not just your account statements.

If charitable giving is already part of your life, it may be time to ask whether your IRA should be part of that giving strategy. Because the most powerful retirement tax moves are often the ones that align what you already believe with how your money actually works.

That is where clarity, confidence, and peace of mind begin.

by Peter Donisanu, ChFC®, AIF®

Weekly Market Update: When Rates Rise, Markets Start Asking Harder Questions

The stock market rally slowed this week as investors reacted to a mix of higher interest rates, geopolitical headlines, and a cooling technology rally.

Stocks traded lower early in the week as Treasury yields climbed to levels we have not seen in nearly two decades. Higher rates raised concerns about borrowing costs and put pressure on stock valuations, especially in growth-oriented areas of the market.

Sentiment improved later in the week after reports of potential progress in negotiations with Iran helped push oil prices back below $100 per barrel and steadied interest rates. Even with that improvement, the S&P 500 finished with a modest loss, ending its multi-week winning streak. The Nasdaq also moved lower as the technology rally cooled.

Energy and defensive sectors held up better than the broader market, while more economically sensitive areas like materials and industrials lagged. Bonds declined as rates continued to rise, and the VIX remains near levels last seen in late January despite the week’s equity market volatility.

Key Takeaways

Treasury Yields Continue to Rise, Touching Levels from the Mid-2000s

Interest rates rose again this week, extending a trend that began in late February.

The 30-year Treasury yield touched 5.19% on Tuesday, its highest level in nearly 19 years. Rates moved higher across the curve, with the 2-year and 5-year Treasury yields each rising for a second straight week.

This builds on last week’s move, which followed hotter inflation readings and renewed concerns that price pressures may remain more persistent than investors had hoped.

Why it matters: Several forces are pushing rates higher, including rising oil prices, Fed commentary, and recent inflation data. Interest rates are now sitting near multi-decade highs, and markets are watching closely to see whether this becomes another sustained move higher.

Federal Reserve Commentary Suggests Rate Hikes Are Possible

Minutes from the Fed’s April meeting reinforced the message that interest rates may stay higher for longer.

The meeting included several dissents, and multiple officials appeared less comfortable maintaining a bias toward cutting rates. The message was clear: rate hikes are no longer off the table.

Investors had already started lowering their expectations for rate cuts. While markets still expect the Fed to hold rates steady over its next three meetings, expectations have shifted toward the possibility of a rate increase later this year, potentially at the October or December meeting.

Why it matters: The Fed’s next meeting takes place in mid-June. The setup has changed. Earlier this year, investors were focused on when the Fed would cut rates. Now, the conversation has shifted to whether the Fed may need to raise rates again.

Geopolitical Headlines Continue to Impact Stocks

Stocks rebounded midweek as reports of easing tensions with Iran pushed oil prices lower and improved investor sentiment.

Crude oil, which had spiked on geopolitical concerns, fell from near $110 to below $100 per barrel. That decline helped ease concerns that higher energy prices could add to inflation and keep interest rates elevated.

Stocks responded positively as rates eased, with the S&P 500 and Nasdaq trading back toward record highs and the Dow briefly rising above 50,000.

Why it matters: The quick midweek reversal shows how closely markets are tracking both energy prices and interest rates right now. If oil prices move higher, inflation concerns may rise with them. If oil prices ease, it can take pressure off rates and support investor sentiment.

Major Stock Indexes Continue to Set Highs, but the Rally Remains Narrow

The largest companies continued to lead the market, helping the S&P 500 stay near record highs despite rising interest rates.

Technology stocks have driven much of the gain since late March, especially companies tied to artificial intelligence. While much of the market has participated in the rally, leadership has narrowed in recent weeks.

Interest-rate-sensitive areas, including smaller companies, have traded lower as rising rates weigh on valuations and investor appetite for risk.

Why it matters: Major stock indexes remain near all-time highs, but the rally is slowing and becoming more selective. That does not mean the rally is over, but it does mean investors should be mindful of what is actually driving index-level performance.

Nvidia’s Earnings Results Signal Strong Demand for AI Infrastructure

Nvidia’s earnings release was the major company-specific event of the week.

Investors continue to watch the company’s results closely because Nvidia has become one of the clearest gauges of demand for AI-related technology. The company reported roughly $81.6 billion in revenue, up about 85% from a year earlier, along with strong earnings and an $80 billion stock buyback.

Why it matters: The report suggests that spending on AI infrastructure remains strong and continues to grow. At the same time, expectations for Nvidia and the broader AI theme are already high. That means future results will need to keep impressing investors to justify current expectations.

by Peter Donisanu, ChFC®, AIF®

When Gas Prices Move, Your Plan Shouldn’t Panic

Gas prices are back in the headlines.

The national average price of a gallon of gasoline has moved above $4.50, up nearly 50% since the start of the U.S.-Iran conflict in late February. The main issue is oil supply. Roughly 20% of the world’s oil moves through the Strait of Hormuz, a major shipping route in the Middle East, and traffic through that route remains well below pre-conflict levels.

When less oil is moving through the system, crude prices rise. When crude prices rise, gas prices usually follow.

And this does not stop at the pump.

Higher diesel prices eventually show up in the cost of moving goods by truck. That means the pressure can work its way into grocery prices, household goods, and other everyday expenses. In other words, what begins as an energy story can quickly become a household budget story.

Moments like this tend to produce a lot of predictions.

Where will oil go next? How high will gas prices get? How long will this last?

Those are interesting questions, but they are not always the most useful ones.

The better question is: what, if anything, should this change in your financial life right now?

For most households, the answer is not “rewrite the plan.” The answer is usually much simpler. It is to look at where the pressure is showing up and make sure the adjustment is intentional.

Three questions are worth asking.

Question #1: Where is the gas price increase being absorbed?

For a household with two cars, higher fuel prices may add roughly $1,200 to $1,800 per year in additional spending.

That money has to come from somewhere.

For some families, it quietly reduces the amount being saved each month. For retirees, it may increase the amount being withdrawn from the portfolio. For others, it may simply crowd out other discretionary spending.

None of those outcomes is automatically wrong.

The issue is whether the change is happening by choice or by default.

That is the practical planning question. Are you comfortable absorbing the increase where it is currently landing? Or would it make more sense to temporarily adjust something else, such as delaying a purchase, trimming a discretionary category, or reducing short-term savings for a season?

In most cases, this kind of price increase does not require a major financial planning change.

But it does deserve a quick look.

Small pressures are easier to manage when they are noticed early.

Question #2: Is this year’s spending still tracking the retirement income plan?

For retirees, the question becomes more specific.

Is this year’s spending still in line with the plan, or is it beginning to run ahead of it?

A temporary stretch of higher fuel and grocery costs is usually something a well-built retirement plan can absorb. That is one reason we build plans with flexibility, not precision down to the penny.

But it is still worth checking.

The simple exercise is to compare actual spending over the past several months with what the plan assumed for the year. Then look at the trend.

Is the gap closing as prices stabilize? Or is it widening as higher costs spread into more parts of the budget?

That distinction matters.

The goal is not to overreact. The goal is to identify whether a small adjustment today can prevent a larger adjustment later.

That is one of the quiet benefits of ongoing planning. It gives you room to respond before something becomes urgent.

Question #3: Does higher inflation change the long-term plan?

Usually, no.

A financial plan is not built around one year of inflation. It is built around long-term assumptions that play out over decades.

That means a stretch of 4% inflation, even if it lasts several quarters, does not automatically change the long-term plan. The plan was designed with the understanding that some years will be higher, some years will be lower, and the actual path will never move in a straight line.

For those approaching retirement, the better question is whether the retirement income target still reflects the life you are planning to live.

For those still saving, it is a reminder that the cost of the future is not fixed. The number you are working toward needs to be reviewed over time because life, markets, taxes, and inflation all change.

That is not a flaw in the plan.

That is the reason planning is an ongoing process.

The Bottom Line

Higher gas prices are frustrating because they are visible, frequent, and hard to ignore.

You see the price every time you fill up. You feel it when the grocery bill runs higher. You notice it when the monthly budget feels a little tighter than it did a few months ago.

But from a planning perspective, this is not a reason to panic.

It is a reason to pay attention.

The price at the pump is a reminder that the cost of living is not a fixed number. But it is still only one input in a plan designed around a much longer time horizon.

Good planning does not require reacting to every headline.

It requires knowing which headlines matter, asking the right questions, and making small adjustments before they become large ones.

by Peter Donisanu, ChFC®, AIF®

Life & Wealth Planning

Why Your Retirement Number Isn’t Enough

Test 1: Do You Know What Retirement Will Actually Cost?

Test 2: Do You Know What Will Replace Your Paycheck?

Test 3: Do You Have Enough Liquidity?

Test 4: Have You Built a Retirement Tax Strategy?

Test 5: Have You Planned for Healthcare?

Test 6: Do Your Debt and Housing Decisions Support the Plan?

Test 7: Are Your Protection and Estate Plans Current?

Test 8: Are You Personally Ready to Retire?

What a $4 Million Portfolio Doesn’t Tell You

Test the Full Plan Before Choosing the Date

Sources

Diversification Isn’t Supposed to Feel Good All the Time

The Problem Starts With Comparison

Market Leadership Doesn’t Last Forever

Concentration Risk Often Feels Best Right Before It Matters

The Risk Isn’t Just Losing Money

Diversification Has to Be Judged Against the Plan

Don’t Confuse Frustration With Failure

Key Takeaways

Semiconductors Remain Volatile as a Crowded Trade Unwinds

Inflation Ran Hot in May

Energy Prices Return to Pre-Conflict Levels

First-Quarter GDP Revised Higher

Business Investment Held Up in May

Retirement spending isn’t one number

What this looks like in real life

Plan for what you can’t see

What You Own vs. Where You Own It

What This Looks Like in Real Life

The Real Goal

Why the Default Answer Is Not Always the Right One

Running the Numbers on a Real Scenario

What to Do Before You Sign the Transfer Form

Key Takeaways

Treasury Yields Continue to Rise, Touching Levels from the Mid-2000s

Federal Reserve Commentary Suggests Rate Hikes Are Possible

Geopolitical Headlines Continue to Impact Stocks

Major Stock Indexes Continue to Set Highs, but the Rally Remains Narrow

Nvidia’s Earnings Results Signal Strong Demand for AI Infrastructure

Question #1: Where is the gas price increase being absorbed?

Question #2: Is this year’s spending still tracking the retirement income plan?

Question #3: Does higher inflation change the long-term plan?

The Bottom Line