Retirement Income Planning

One of the most important financial decisions couples make in retirement is when to start collecting Social Security benefits—and thinking ahead is key. If your household expects Social Security to cover essential expenses, consider how your income may change in the future. When a spouse passes away, the survivor can only collect one benefit—their own or their spouse’s. That means a potential drop in monthly income. The smartest move? Have the highest earner in the household wait until age 70 to start collecting Social Security. By doing so, the survivor is left with the largest possible benefit—more than 75% higher than if benefits started at age 62. Planning ahead now can make all the difference later. #RetirementPlanning #SocialSecurity #WomenAndMoney #FinancialSecurity #LongTermPlanning

"My CPA told me: You don't have to spend your HSA — just let it grow." Last week, I reviewed a client's tax return. They contributed $8,300 to their HSA... and panicked thinking they had to spend it all. They'd been saving receipts all year, planning a December shopping spree for eligible expenses. I stopped them cold: "That's FSA thinking. Your HSA never expires." That money? Still sitting there, tax-free, compounding. Completely untaxed growth — potentially for decades. Their face when they realized their HSA could become a stealth retirement account was priceless. The HSA is the ONLY triple-tax-free account in existence: - Tax-deductible going in (immediate savings) - Grows tax-free (no capital gains taxes ever) - Withdraw tax-free for qualified medical expenses — even decades later And if you don't use it for medical expenses? At age 65, it works like a traditional IRA — withdraw for anything, just pay income tax (no penalties). Here's how to actually win with an HSA: - Max out the contribution every year ($8,300 family limit for 2024, rising to $8,550 in 2025) - Do NOT spend it. Pay medical costs out-of-pocket if you can  - Invest the HSA balance — don't leave it in cash earning nothing - Keep every medical receipt digitally. You can reimburse yourself years later, tax-free - Treat your HSA as part of your retirement portfolio — not a short-term medical fund Remember: The average couple needs $315,000 for healthcare in retirement. Your future self will thank you for this tax-free medical nest egg. If your CPA hasn't explained this strategy to you, you're leaving one of the most powerful tax advantages on the table.

Chart of the week: RMDs tend to increase as you age, potentially exposing you to higher tax brackets   If you’re saving for retirement in a tax-deferred 401(k) and/or IRA, you’re required to start withdrawing money from those accounts (whether you need the money or not) at age 73 (or 75 if you were born in 1960 or later). Those required minimum distributions (RMDs) can push you into a higher tax bracket, especially if you’ve saved significant amounts in those tax-deferred accounts.   The chart illustrates this hypothetical example: Say you're 73 years old, single, and you had $6 million in tax-deferred retirement savings at the end of 2024. Your RMD would be more than $226,000 in 2025—and that amount could rise as the RMD distribution rate rises (as it does each year, based on your age) and if the investments in the account continue to grow after accounting for distributions. Combine that taxable RMD with other income like capital gains, dividends, interest, or Social Security benefits (of which up to 85% could be taxable), and you may land in a higher tax bracket. (Important notes: The chart assumes a 6% average annual portfolio return, and the tax brackets are based on federal tax rates as of 07/01/2025 and increase 2% annually to account for inflation.)   We provide ideas (see link in comments), At least three strategies, and likely more, can help remedy this. 1. Roth 401(k) contributions: If you're still working, you might consider switching from pretax 401(k) contributions to after-tax Roth 401(k) contributions, since Roths aren't subject to RMDs.   2. Roth IRA conversions: If Roth contributions aren't an option—or if you want to shift even more of your savings into a Roth—you could convert some of your tax-deferred 401(k) or IRA funds to a Roth account.   3. Early retirement withdrawals: Once you reach age 59½, you can make penalty-free withdrawals from your tax-deferred accounts. Doing so will result in ordinary income taxes on the withdrawals, but the money could then be invested in a taxable account for future potential growth. See more ideas in the article linked in the comments.   #TaxPlanning #RetirementPlanning #WealthManagement

Powerful strategy for solopreneurs: - Start an LLC - Grow and Become an S Corporation: This can provide significant tax advantages by allowing you to split your income between salary and distributions, potentially reducing your overall tax liability. But make sure to optimize the qualified business income deduction - Pay Yourself a Reasonable Salary: As an S Corp owner, pay yourself a reasonable salary that reflects the market rate for your role. This salary is subject to payroll taxes, but any additional profits can be taken as distributions, which are not subject to self-employment tax. - Add a Solo 401(k) and Max It Out: Establish a Solo 401(k) plan to take advantage of tax-deferred retirement savings. As both the employer and employee, you can contribute up to the maximum allowable limit, significantly boosting your retirement savings while reducing your taxable income. But make sure your salary is not too low, it will impact what can go in here - Employ Your Spouse: If your spouse can perform meaningful work for your business, employ them and pay a fair salary. - Max Out Solo 401(k) for Spouse: By employing your spouse, you can also contribute to their Solo 401(k) plan, further increasing your family's retirement savings and reducing your taxable income - Backdoor Roth IRA for Each: Utilize the backdoor Roth IRA strategy for both you and your spouse. This involves making non-deductible contributions to a traditional IRA and then converting those funds to a Roth IRA, allowing for tax-free growth and withdrawals in retirement - Maximize Qualified Business Income Deduction (QBID): Take full advantage of the Qualified Business Income Deduction (QBID), which allows eligible S Corp owners to deduct up to 20% of their qualified business income (or lesser of that and 50% of w2 wages). This can significantly reduce your taxable income and increase your overall tax savings. - If salary is too low to max solo 401(k), then do mega backdoor Roth 401(K) to the $69,000 limit Implementing these strategies can help solopreneurs optimize their financial planning, reduce tax liabilities, and build substantial retirement savings

It's never too late to get your retirement plan back on track. Here are five quick and easy ways to make impactful changes: 1. Increase Your Contributions Max out your 401(k) or IRA contributions if possible. If you’re over 50, take advantage of catch-up contributions to accelerate your savings. 2. Optimize Your Tax Strategy Don’t let taxes eat into your savings. Consider strategies like Roth conversions or tax-efficient withdrawals. These can lower your tax burden and help preserve your retirement income over time. 3. Reevaluate Your Asset Allocation Review your investment mix to make sure it aligns with your retirement timeline and risk tolerance. As you get closer to retirement, a well-diversified portfolio can help protect your savings from market volatility. 4. Assess Your Retirement Goals Take some time to clarify your retirement goals. How much will you need for the lifestyle you envision? Defining your target can help you plan more effectively and close any savings gaps. 5. Plan for Healthcare Costs Healthcare can be a significant expense in retirement. Make sure you’re accounting for potential medical costs. Explore options like HSAs or long-term care insurance. It’s never too late to make meaningful adjustments and build the retirement you want. Message me today to start putting these tips into action and regain control over your retirement future.

Most retirees spend decades saving, deferring taxes, and building a retirement nest egg. But when it’s time to withdraw, they follow the traditional advice: “Spend taxable accounts first, let tax-deferred accounts grow.” That’s the mistake. By deferring too long, they stack up massive RMDs in their 70s. And this pushes them into higher tax brackets just when they thought they’d be paying less. I’ve seen it happen over and over again. Clients assume their tax bill will shrink in retirement.  Instead, they’re hit with: - Higher Medicare premiums → IRMAA surcharges catch them off guard - More of their Social Security taxed → because of income thresholds. - Less flexibility → because RMDs are mandatory, whether they need the money or not. This isn’t just bad luck—it’s bad planning. We need to help clients control their tax brackets, not just defer taxes blindly. That means: - Strategic Roth conversions early → locking in lower rates while they can. - Blending withdrawals → taxable, tax-deferred, and tax-free for bracket control. - Using tax-efficient investments → because unnecessary capital gains make things worse. The reality is, without a plan, retirees can end up paying more than they ever expected. And by the time they realize it, it’s too late to fix.

I paid an extra $96,000 in taxes in 2023. Yet it will save me hundreds of thousands in future taxes. What I did and the lesson you can learn from it: My goal with taxes is simple ~ pay the lowest amount over my lifetime. This means being strategic about what years my tax bill will be higher (by choice) and what years it will be lower. 2023 was the perfect time for me to execute a key strategy ~ A Roth Conversion. - A Roth Conversion is when you convert (move) money from your IRA to your Roth IRA. When you do this you trigger a tax bill and all of the money converted (moved) gets taxed as if you earned it that year. This year I did that with more than $300,000. - 4 Key Reasons Why 1. My tax rate was lower than nearly any previous year. While my conversion pushed a few dollars into a high marginal tax rate, my effective tax bracket (what I will actually pay) is lower. Paying the taxes now for decades of tax-free growth made sense for me. 2. My tax rate was lower (or equal to) what I expect it to be in retirement. Through continued growth of my income and current assets, I expect my tax bracket in retirement to be at or higher than what it is today. *Remember tax rates are low by every historical measure today. 3. The asset value was down. At the time of my conversion, the stock market was down nearly 20%. This provided me with a 20% discount on the conversion. Since that time those positions have rebounded but done so in a tax-free fashion. 4. Tax control in the future Based on my asset mix, there is a good chance the first time I would use "retirement" assets is not by choice but through Required Minimum Distributions (RMDs). Roth accounts are not subject to RMDs thus providing more control of my tax bill. - The key to taxes is understanding your situation. Plus Projecting out where you think you are going to be in the future. Then Understanding what strategies and timing make the most sense to execute on them. - 📌 If you find this helpful, please share it with your network ♻️ and follow me for more ways to get smarter with your money. 💵

Is your portfolio more complicated than necessary? I met with a prospective client this week whose current advisor has their IRA in a portfolio that includes the 22 funds shown in the image. In addition, they have two taxable accounts with this advisor that include another 24 funds. Overall, there are 46 unique funds being used across the 3 accounts and the advisor is charging a 1.5% AUM fee for the investment management. This might have seemed like a reasonable fee to them on the surface. There is a lot of perceived complexity, and it looks like it must take a lot of effort to research these funds and make sure an appropriate allocation to each fund is maintained. But here is the dirty, little secret… This portfolio can be recreated with just 3 funds that are rebalanced once per year: 48% Total US Stock Market 19% Total International Stock Market 33% Total Bond Market How do I know this? I analyzed the underlying asset exposures of the portfolio. Here is a breakdown of the process so you can do the same: First, go to Portfolio Visualizer and plug the ticker symbols and allocations into the “Backtest Portfolio” tool on the website. Then, scroll down to the “Exposures” tab and look at the “Asset Allocation” to determine the combined exposure to US Stocks, International Stocks, and Bonds. It's as simple as that. This is the process I used and I then plugged the asset allocations into index funds to compare how the 3-fund portfolio would have compared to the 22-fund portfolio. I was not at all surprised to see that the performance was almost identical. You can see the comparison in the backtest linked in the comments along with a picture of the comparison. But it’s hard to justify a 1.5% AUM investment management fee if you are only holding 3 funds. If you are currently paying someone to manage your portfolio, please go through the process mentioned above. You might be paying a hefty fee for perceived complexity and not actual value. Feel free to reach out if you need help with your analysis. #Investing #Engineers

We know that Social Security benefits increase if you delay claiming them, but how much does delaying actually help? We recently reviewed a financial projection with one of our users. They took their Social Security Statement, which estimates the benefit based on the starting age. Using the information from the statement and adjusting the start year, they discovered that delaying Social Security significantly increases their net worth if they live a long life. Assuming a life expectancy of 95 and keeping everything else constant, they got: Start at age 62: Net Worth @ 95 = $3.63M Start at age 65: Net Worth @ 95 = $5.07M Start at age 67: Net Worth @ 95 = $5.53M Start at age 70: Net Worth @ 95 = $6.12M That’s a $2.49M difference between starting at 62 versus 70. Interesting!

I’ve met people who planned for retirement for 20+ years, but when the time came, they weren’t ready. ⤷ They had the spreadsheets.  ⤷ The savings accounts.  ⤷ The property investments. But what they didn’t have was a system that could survive in real life. After 7+ years in accounting, here’s what I now tell every client who wants to retire comfortably, not just hopefully- 1. Break retirement into phases 60–70 (active years), 70–80 (comfort & care), 80+ (health-dominated). Each stage needs a different withdrawal and risk strategy. --- 2. Run 3 scenarios for projections every year Best-case, realistic-case, worst-case. --- 3. Don’t wait to sell your business to start planning Businesses don’t always sell high or on time.  Build parallel incomes like dividends, rentals, or systemized payouts. --- 4. Don’t chase a number, build a replacement income plan Ask: “How much do I need per month to live well, without working?” Then reverse-engineer how much corpus and return you’ll need. — PS: How often do you revisit your retirement projections and strategy?