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Author: Kevin Lao

5 Essential Retirement Tax Planning Strategies for High Net Worth Individuals: The “Poor on Paper” Advantage

If you have a net worth of $2 million or more but find yourself in the 12% tax bracket during retirement, congratulations—you’re officially “poor on paper.” This might sound like a contradiction. Actually, it’s one of the most powerful positions you can be in for tax planning. When you’re high net worth but have low taxable income, you unlock planning opportunities that can save you tens of thousands of dollars in taxes and healthcare costs.

The concept of being “poor on paper” came from one of my clients, who recently retired with a net worth of multiple seven figures. He went from a higher income bracket during his working years to the 12% bracket in retirement. His net worth continues to grow, but his tax bracket has dropped dramatically. “Wow, I’m poor on paper now,” he told me, and that phrase perfectly captures this unique planning window.

This situation typically occurs when you’re in early retirement. The time after your W-2 income stops but before you’re required to take Social Security or required minimum distributions from your retirement accounts.

Understanding the “Poor on Paper” Concept

Financial planning for high-net-worth individuals requires a completely different approach than traditional retirement advice. When you have substantial assets but low current income, you have unique levers to pull that most retirees don’t.

The key is having assets in what I call the “non-qualified bucket.”

  • Taxable brokerage accounts
  • Money market accounts
  • CDs
  • Savings accounts that you’ve built up outside of your 401(k) or IRA.

If all your money is locked in tax-deferred accounts, you’re somewhat stuck because every withdrawal creates ordinary income.

When you have diversified assets across different account types, you can strategically control your modified adjusted gross income (MAGI) and ultimately your taxable income. This control becomes the foundation for all the strategies we’ll discuss.

Strategy 1: Maximizing ACA Premium Tax Credits for Healthcare Savings

One of the biggest concerns I hear from early retirees is healthcare costs. If you’re retiring before 65 and not yet eligible for Medicare, you’ll need to figure out health insurance on your own. The Affordable Care Act (ACA) marketplace often becomes the solution, and here’s where being poor on paper creates massive opportunities.

ACA premium tax credits are based on your modified adjusted gross income, not your assets. Even with a $3 million portfolio, if you keep your MAGI between 100% and 400% of the federal poverty line, you can receive substantial tax credits. Sometimes $3,000 per month or more, depending on your state.

I recently worked with a client with $3 million in net worth who is receiving free healthcare through ACA premium tax credits. The key is managing your income sources strategically. Instead of taking large distributions from tax-deferred accounts, you might use cash savings for year one of retirement. Taking money from your savings account isn’t a taxable event—it’s just a return of your basis.

For your brokerage accounts, you can target assets with low to no capital gains, or even assets that are temporarily down in value. Selling at a loss allows you to offset other gains. This keeps your taxable income low while still generating the cash flow you need.

The strategy works best when you have multiple income sources to choose from. Maybe you take $50,000 from cash savings and only need to withdraw $55,000 from your IRA to net $50,000 after taxes. A $55,000 adjusted gross income can still allow you to qualify for significant premium tax credits, potentially saving thousands monthly on healthcare premiums.

Strategy 2: The Roth Conversion Window and 401 (k) Withdrawals and Taxes

Understanding 401 (k) withdrawals and taxes becomes crucial during what I call the “Roth Conversion Window.” This is the period after retirement but before required minimum distributions kick in at age 73 or 75, depending on your birth year.

During your working years, Roth accounts might not make sense because you’re already in high tax brackets. You may prefer deferring taxes (Traditional 401(k)s and IRAs).  But in retirement, when you’re poor on paper, you have an opportunity to move money from tax-deferred accounts to Roth accounts at historically low tax rates.  This is known as a “Roth Conversion.” 

Here’s the Challenge

Every Roth conversion adds to your modified adjusted gross income, which can impact your ACA premium tax credits. You need to weigh the long-term benefits of the conversion against the immediate cost of reduced healthcare subsidies.  However, if you completely ignore this Roth Conversion Window, those Required Minimum Distributions (RMDs) can really hurt later in retirement. 

I have clients right now who are in what I call the “RMD tax trap” because they didn’t do conversions earlier. When required minimum distributions begin, you can’t reverse the process. Some of my clients are taking six-figure RMDs. They tell me they wish they had converted some of those assets to a Roth before reaching RMD age.

The key is coordination. You might decide to do modest conversions that fill up the 10% or 12% tax brackets, even if it reduces some ACA tax credits. The long-term tax savings from avoiding massive RMDs later often outweigh the short-term cost of higher healthcare premiums.

One client I’ve been working with for four years started this process at age 61. She’s been chipping away at her tax-deferred accounts through strategic conversions while supplementing her income with IRA withdrawals. When she turns 70 and starts Social Security, most of her tax-deferred money will have been converted to Roth. This will dramatically reduce her future RMD burden.

Strategy 3: Optimizing Social Security Taxation Through Income Management

Social Security taxation is one of the most misunderstood aspects of retirement planning. You paid into the system during your working years. However, up to 85% of your benefits can still be taxable under a concept called “provisional income.”

When you’re poor on paper, you have the opportunity to keep your provisional income low enough that much of your Social Security remains tax-free. There are three tiers: 0% taxable, 50% taxable, and 85% taxable.

The strategy involves coordinating the timing of your Social Security benefits with your other income sources. If you’re doing Roth conversions during your early retirement years and plan to delay Social Security until age 70, you might be able to structure things so that when Social Security begins, your other income sources are low enough to keep most of your benefits tax-efficient.

I’m working with a client whose husband is already taking Social Security. She hasn’t started hers yet because her benefit is higher. We’ve been doing conversions during her Roth conversion window. When she starts Social Security at 70, the combination of her and his Social Security and her small pension won’t require large IRA withdrawals. This could allow most, if not all, of your Social Security benefits to remain tax advantaged. 

The timing coordination is crucial. Taking Social Security early might make sense in some situations, but it can also add to your provisional income calculation, potentially making more of your benefits taxable and reducing the effectiveness of other strategies.

Strategy 4: Capital Gains Harvesting to Minimize Taxes in Retirement

Capital gains harvesting helps minimize taxes in retirement while providing another tool for managing your taxable income. Depending on your filing status, you’ll pay either 0%, 15%, or 20% on long-term capital gains. Most retirees won’t hit the 20% bracket, but the difference between 0% and 15% is significant.

When you’re poor on paper and in the 0% capital gains threshold, you can sell appreciated investments and pay 0% federal tax on the gains. This strategy essentially resets your cost basis to current market values, reducing future tax obligations when you eventually need to sell for income.

The key is coordination with your other strategies. Every time you harvest gains, you’re adding to your adjusted gross income, which affects:

  • Social Security taxation
  • ACA premium tax credits
  • Your Roth conversion capacity.

If you’re planning to leave investments to your heirs, you might not want to harvest gains. Why? Because they’ll receive a stepped-up basis at your death. But if you’re concerned about concentration risk—like one of my clients who has over 13% of her net worth in Microsoft stock from her late husband’s employment—strategic harvesting combined with charitable giving can address both the tax and risk management issues.

For charitable giving, you can donate appreciated stock directly to a charity. The charity can sell it at their 0% tax rate. You get the deduction, and you reduce the concentration risk in your portfolio.

Strategy 5: How to Reduce Taxes in Retirement Through Coordinated Planning

The fifth strategy is really about coordination—understanding that all these approaches work together and not in silos. You can reduce taxes in retirement most effectively when you coordinate the timing of:

  • Social Security
  • The pace of Roth conversions
  • Your healthcare subsidy optimization
  • Your capital gains management

The early retirement phase, before required minimum distributions and potentially before Social Security, is when all these strategies overlap. This is your window to play the tax game on your terms rather than having the government dictate your tax burden through RMDs and taxation on your Social Security Income.

The biggest mistake I see is people coasting through these early retirement years without taking advantage of these planning opportunities. They’re either not working with an advisor who understands retirement taxes or not consuming educational content about these strategies. By the time RMD Tax Trap kicks in, it’s too late to reverse course.

The goal isn’t to avoid taxes forever—it’s about timing those taxes strategically. You want to pay taxes when you’re in low brackets and have control over the timing, rather than being forced into high brackets later when you have no choice.

Coordination Is Everything: Why These Retirement Tax Planning Strategies Must Work Together

These retirement tax planning strategies are most effective when implemented as a coordinated system. Each decision affects the others, which is why piecemeal planning often fails to deliver optimal results.

For example, if you focus solely on maximizing ACA premium tax credits, you might miss valuable years in your Roth conversion window. Conversely, if you’re aggressive with Roth conversions without considering the impact on healthcare subsidies, you might pay more in premiums than you save in future taxes.

The coordination becomes even more complex when you consider factors such as the senior bonus deduction available to those aged 65 or older. This additional $6,000 deduction per person phases out at relatively low income levels—$75,000 for singles and $150,000 for married filing jointly. Roth conversions can easily push you above these thresholds, eliminating the deduction.

I’ve had to convince many people not to do Roth conversions over the past few years, which is the opposite of what I was doing a decade ago. The popularity of Roth conversions has made them seem like a universal solution. But, they’re not right for everyone in every situation.

The key is working with someone who can:

  1. Review your entire financial picture
  2. Understand your goals
  3. Coordinate these strategies appropriately.

Whether that’s working with my firm or finding another advisor who specializes in retirement tax planning, the important thing is getting professional guidance that considers all these moving pieces together.

Taking Action on Your Retirement Tax Planning Strategies

If you’re approaching retirement or have recently retired with 7 figures or more in assets but low current income, you’re in a unique position to implement these strategies. The window won’t last forever—once RMDs begin or if your income increases significantly, many of these opportunities disappear.

The most important step is understanding what you’re planning for and who you’re planning for. Are you focused on maximizing your own retirement security, leaving a legacy to children, or supporting charitable causes? Your goals should drive which strategies make the most sense and how aggressively to implement them.

Don’t assume that all of these strategies are right for your situation. Content like this is educational, but it can also be dangerous if you implement strategies without understanding how they fit into your overall plan. Every conversion triggers taxes. Gain harvests can affect your income. And each decision creates ripple effects across the rest of your financial plan.

If you’re interested in working with an advisor who specializes in these retirement tax planning strategies, make sure they’re a fiduciary who won’t try to sell you unnecessary products. Look for someone who can actually review your tax returns and coordinate with your tax preparer. Retirement tax planning isn’t just about investments—it’s about understanding the tax code and how to work within it strategically.

The early retirement years, when you’re poor on paper, represent one of the best opportunities for tax optimization you’ll ever have. Don’t let them pass by without taking advantage of the strategies that could save you thousands of dollars in taxes and healthcare costs over the course of your retirement.

How We Can Help

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

TIAA Traditional Withdrawal Options: Your Complete Guide to Four Payout Choices

If you have money in TIAA Traditional, you’ve probably wondered what your options are when it’s time to take your money out for retirement. Understanding your TIAA Traditional withdrawal options is one of the most important decisions you’ll make in your retirement planning journey. Yet, it’s also one of the most confusing aspects of TIAA retirement accounts.

What is TIAA Traditional?

It’s a fixed annuity that’s part of your 403(b) retirement account, specifically designed for employees of:

  • Non-profit organizations
  • Hospitals
  • Universities
  • Schools

Unlike variable investments that fluctuate with market performance, your TIAA traditional annuity provides stability through guaranteed minimum interest rates and participation in TIAA’s carefully managed general account.

Retirement planning decisions involving TIAA Traditional are particularly complex because it’s a unique product with specific rules and options. While this guide covers the four main payout choices available, it’s important to consider how these options align with your overall financial picture, including:

  • Other income sources
  • Other investments
  • Retirement timing
  • Risk tolerance
  • Legacy goals.

Understanding Your TIAA Traditional Options

TIAA Traditional is different from the variable annuity options in your 403(b) account, such as CREF stock, CREF growth, or CREF bond. While those investments tie your returns to market performance, TIAA Traditional provides returns based on TIAA’s general account performance. This massive, conservatively managed portfolio includes traditional bonds, commercial real estate, agriculture, timber, and other stable investments that TIAA has been managing for over 150 years.

There are several types of TIAA traditional contracts, and each has different rules and interest rates. You might have older contracts from contributions made decades ago, or newer contracts from recent contributions. Some contracts are fully liquid (marked with an “S” for supplemental), while others have liquidity restrictions. Furthermore, there are even certain “Plan Rules” within your organization that might create additional complexity around the availability and liquidity of funds.  Understanding which type of contract you have and your plan’s rules is crucial for determining your available options.

Option 1: Required Minimum Distribution (RMD) or Minimum Distribution Option (MDO)

The first way to access your TIAA traditional funds is through the required minimum distribution option, also called the minimum distribution option by TIAA. This option becomes available when you reach the age when the IRS requires you to start taking distributions from your tax-deferred retirement accounts.  If you miss an RMD, you could be subject to a 25% penalty! 

The RMD age has changed over the years due to legislation. Previously set at 70.5, it was raised to 72 by the SECURE Act. RMD now stands at 73 or 75, depending on your birth year. If you were born in 1960 or later, your required minimum distribution age is 75.

How the Math Works

The IRS provides a life expectancy table that determines your distribution factor based on your age. For example, if you turn 75 in 2025, your life expectancy factor is 24.6. You divide your account balance by this factor to determine your required distribution amount.

Example

Let’s say you have $1 million in a TIAA traditional account. At age 75, you would divide $1 million by 24.6, resulting in a required distribution of approximately $40,650, or about 4% of your account balance. As you age, your life expectancy decreases, which means your required distributions increase. By age 90, with a life expectancy factor of 12.2, that same $1 million would require a distribution of nearly $82,000.

This creates what I like to call the “Tax Trap of 401ks and IRAs.” If you have substantial Social Security payments and perhaps a pension, and you don’t need these tax-deferred assets for current income, those increasing RMDs can push you into higher tax brackets and trigger additional costs like Medicare surcharges or IRMAA.

The advantage of this option is continued tax deferral while pulling out the minimum required by the IRS. Before reaching RMD age, you can let your account continue growing tax-deferred without being forced into any payout structure. You can also change to other options later if your needs evolve.

Option 2: Interest-Only Withdrawals

The second option allows you to withdraw only the interest your TIAA traditional account earns while leaving your principal intact. Each of your TIAA traditional accounts has an associated interest rate that depends on when you made the contributions and what type of contract you have.

Contributions made in the 1970s, 1980s, and 1990s typically carry much higher interest rates than contributions made after 2009, when interest rates dropped to near zero following the Great Recession. However, even recent TIAA traditional contributions often provide interest rates of 4% to 4.5% or higher, which compare favorably to traditional bond investments that have averaged less than 2% annually over the past 10-15 years.

The interest rates also vary by contract type. Contracts without an “S” designation (such as RA and GRA contracts) typically offer higher interest rates but come with liquidity restrictions. These are usually funded by employer contributions. Contracts with an “S” designation (SRA and GSRA contracts) are supplemental contracts funded primarily by your own contributions. They offer slightly lower interest rates but provide full liquidity.

Example

Using our $1 million example with a combined interest rate of 4.5%, your account would generate approximately $45,000 in annual interest. With the interest-only option, you could receive this $45,000 as income while preserving your $1 million principal balance. You can typically choose to receive these payments monthly, quarterly, semi-annually, or annually, depending on your cash flow needs.

This option works well if you need supplemental income but want to preserve your principal for future needs or to leave as a legacy. The interest payments from pre-tax 403b accounts are treated as taxable income in the year you receive them, just like any other distribution from a tax-deferred account. However, there are usually restrictions on how frequently you can start and stop these payments. You’ll want to confirm the specific rules for your contracts.

Option 3: Annuitization – Creating a Lifetime Income Stream

The third option, and what many experts consider the most underutilized, is annuitization. This means exchanging your account balance for a guaranteed income payment that will continue for as long as you live, or for as long as you and your spouse live if you choose a joint option.

When you annuitize your TIAA traditional account, you’re essentially trading your account balance for an income stream you can never outlive. The amount of income depends on several factors:

  • Your age
  • Your account balance
  • The interest rates of your various contracts
  • The payout option you select

Real Example

A 67-year-old client with various TIAA traditional contracts dating back decades received an illustration showing a single life payout rate of 8.81% with a 10-year guarantee period. This means that for every $100,000 annuitized, this client would receive $8,810 annually for life.

The 10-year guarantee provides protection if you die early in retirement. If you pass away within 10 years of starting the annuity, payments continue to your beneficiary for the remainder of the guarantee period. So, if you die after five years, your beneficiary receives payments for five more years.  But if you outlive the 10-year guarantee period, there is no death benefit.

You can also choose joint life options that continue payments as long as either you or your spouse is alive. These typically offer lower payout rates because they’re expected to pay out longer, but they provide valuable protection for surviving spouses.

Payout rates vary significantly depending on when you made your contributions. Older contracts often have much higher payout rates. I’ve seen TIAA Traditional payout rates as high as 10% per year on older contracts from the 80s and 90s. 

TIAA’s long history and conservative management approach allows them to offer competitive rates to existing participants.

It’s important to understand that annuitization is an irrevocable decision. Once you exchange your account balance for the income stream, you cannot change your mind or access the principal. Additionally, these annuities are generally designed to be fixed with no guarantee of increased payments over time. 

This brings inflation risk into play more so than other investments.  However, the high baseline guaranteed income can stack on top of Social Security and allow for your more aggressive investments to compound longer.  Many are surprised that this can result in a higher legacy amount despite the lack of a death benefit.

Option 4: Transfer, Rollover, or Liquidation

The fourth option is to move your money out of TIAA Traditional entirely. Your ability to do this depends on what type of contracts you have.

If your TIAA traditional is in supplemental contracts (SRA, GSRA, and RCP), you have full liquidity. You can

  • Take the money out as a lump sum
  • Roll it into your own IRA
  • Transfer it to other investments within your 403(b) plan without restrictions.

However, if your money is in non-supplemental contracts (RA, GRA, or RC), you face liquidity restrictions because these contracts were funded primarily by employer contributions. For these illiquid contracts, you can use what’s called a Transfer Payout Annuity (TPA). A TPA provides your money in equal installments for a term determined by the type of contract.

  • RA Contracts: 10 payments over nine years
  • RC Contracts: 7 payments over 6 years
  • GRA Contracts: 5 payments over 4 years

If you elect to receive these payments as cash, each payment is taxable income. If you roll the TPA payments to an IRA or other qualified account, there are no immediate tax consequences.  You’ll need to check with TIAA to understand the specific rules for your contracts.

Many people choose this option because they’re frustrated with TIAA Traditional’s complexity or because they want to consolidate and simplify their retirement accounts. However, this decision deserves careful consideration because you’re giving up some unique benefits that are difficult to replicate elsewhere.

The Most Overlooked Option: Why Annuitization Deserves Serious Consideration

After working with hundreds of TIAA participants over the years, one pattern became clear.

Most people immediately gravitate toward option four (getting their money out) without seriously considering annuitization. This happens for several understandable reasons.

First, annuities have developed a negative reputation in the financial industry. Much of this stems from how annuities are often sold in the marketplace. Some salespeople are taking advantage of seniors and retirees, focusing on their own commissions rather than clients’ needs. This has created widespread distrust of anything labeled as an “annuity.”

Second, TIAA Traditional is genuinely complex, and many people simply want to move their money to something they understand better. The various contract types, liquidity restrictions, and payout options can feel overwhelming.

However, this rush to liquidate often overlooks the significant value that TIAA Traditional can provide in a well-designed retirement plan. Consider these advantages:

Bond Alternative

Over the past 10-15 years, traditional bonds have provided returns of less than 2% annually while experiencing significant volatility. TIAA traditional accounts typically earn 4% to 4.5% or more annually and never decrease in value. They can serve as an excellent bond alternative, allowing you to be more aggressive with your other investments.

Guaranteed Income Foundation

The annuitization option provides a guaranteed income foundation that reduces pressure on your other investments. With a baseline income from Social Security and a TIAA traditional annuity, you can afford to take more risk with your remaining investments to capture potential upside.

Superior Payout Rates

The payout rates available through TIAA traditional annuitization often exceed what you can obtain by purchasing commercial annuities in today’s market. The 8.81% payout rate in our example would be very difficult to replicate elsewhere.

Longevity Insurance

If you expect longevity for you or your spouse, the annuity continues paying regardless of how long you live. TIAA reportedly has clients in their hundreds who are still receiving payments.

The key is not to annuitize everything, but to consider using TIAA Traditional as one component of a diversified retirement income strategy. You might annuitize a portion of your TIAA Traditional to create a guaranteed income floor, while keeping other assets liquid for emergencies and growth potential.

Making the Right Choice for Your Situation

Choosing among these four options requires careful consideration of your complete financial picture. Here are some key factors to evaluate:

Income Needs

How much income will you need from your retirement accounts? If you have substantial Social Security and pension income, you might prefer to let the TIAA traditional continue growing tax-deferred. If you need current income, the interest-only or annuitization options might be more appropriate.

Other Assets

What other liquid assets do you have available for emergencies? If most of your wealth is in retirement accounts, maintaining some liquidity is important. But if you have substantial taxable investments or other liquid assets, you might be more comfortable annuitizing a portion of your TIAA Traditional.

Risk Tolerance

How comfortable are you with market volatility in your other investments? If TIAA Traditional serves as your bond allocation, you might be able to invest more aggressively elsewhere.

Legacy Goals

Do you want to leave assets to heirs? Annuitization reduces the assets available for inheritance, whereas the other options preserve more of the principal.  With that said, if you do live a long time, the benefits of annuitization could allow for your growth assets to compound without selling at the wrong time.

Tax Considerations

How will each option affect your overall tax situation? Large RMDs might push you into higher tax brackets, while annuity payments provide predictable taxable income.

Health and Longevity

Your health status and family history of longevity should influence your decision. If you expect a long retirement, annuitization becomes more attractive.

Conclusion

Your TIAA traditional account represents a valuable and unique retirement asset that deserves careful consideration. While the complexity can be frustrating, understanding your four main options – RMD/MDO, interest-only, annuitization, and rollover/liquidation – helps you make an informed decision that aligns with your retirement goals.

The most important takeaway is not to rush into liquidating your TIAA traditional simply because it’s complex. The guaranteed annuity rate and lifetime income options available through TIAA Traditional are increasingly rare in today’s financial marketplace. These benefits, combined with TIAA’s 150+ years of experience and conservative management approach, make TIAA Traditional a potentially valuable component of your retirement income strategy.

Before making any decisions, consider how each option fits within your overall financial plan. Think about your income needs, risk tolerance, legacy goals, and tax situation. If you’re unsure, consider working with a fee-only financial planner who can provide objective guidance without trying to sell you additional products.

Remember, you don’t have to choose just one option or make all decisions at once. You might use different options for different portions of your TIAA Traditional balance, or adjust your approach as your needs evolve in retirement. The key is understanding your choices so you can make decisions that support your long-term financial security and retirement goals.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

5 Retirement Strategies for Navigating Market Volatility in 2026

The current geopolitical tensions involving Iran have sent ripples through global markets. If you’re approaching retirement or have recently retired, you’re probably feeling some anxiety about your financial future. As someone who works with retirees daily, I’m seeing a familiar pattern emerge—the same concerns that surfaced during the 2020 COVID crisis and the 2008 financial meltdown.

Right now, we’re witnessing significant market volatility due to the Iran conflict. This conflict has effectively shut down the Strait of Hormuz—a critical waterway that accounts for about 20% of global oil consumption. This disruption is driving up energy costs, squeezing business margins, and creating uncertainty about future economic conditions.

For those planning to retire within the next year or two, or those who’ve recently entered retirement, this volatility raises serious questions about timing and financial security.  In this blog post, we’ll touch on five retirement strategies to help you navigate this current market volatility. 

The One-More-Year Syndrome: Why Market Volatility Affects Retirement Decisions

During my recent client reviews, I noticed something troubling. Many clients who were planning to retire this year are now considering pushing back their retirement. This phenomenon, which I call the “One-more-year syndrome,” isn’t new. I witnessed the same pattern during the 2020 pandemic when global markets crashed and again during the 2008 financial crisis.

The concern is understandable. Sequence of returns risk—the danger of experiencing poor market performance early in retirement—can significantly impact your long-term financial security. Historical data shows that retiring during major market downturns, such as the early 2000s tech crash or the 2008 financial crisis, can be particularly challenging for retirees who don’t have proper strategies in place.

However, here’s what many people don’t realize:

Even those who retired during the difficult 2022 triple bear market—stocks down 20%, bonds down 13–15%, and cash losing value—have seen a strong recovery from 2023 to 2025. The key is having the right retirement strategies to weather these storms.

Understanding the Current Market Impact

The Iran conflict is creating specific challenges that retirees need to understand. Oil prices have jumped over 40%, and this impacts everything from shipping costs to business profitability.

What makes this situation particularly concerning for retirement planning is the potential impact on inflation. Coming into 2026, markets expected the Federal Reserve to cut interest rates two to three times. However, if oil prices remain elevated and inflation becomes stickier, those rate cuts may not materialize. This uncertainty affects both stock and bond markets, creating the kind of volatility that can disrupt traditional investment strategies for retirement.

The situation is further complicated by the broader implications for artificial intelligence infrastructure, which requires enormous amounts of energy. The current administration’s focus on energy independence and the potential impact on China’s energy supply adds another layer of complexity to global markets.

Essential Retirement Strategies for Market Volatility

The Guardrails Framework

One of the most effective retirement strategies for managing market volatility is implementing a guardrails system. The Guyton-Klinger framework provides a structured approach to adjusting your spending during market downturns.

Here’s how it works:

If your withdrawal rate increases by 20% due to portfolio losses (not increased spending), you implement a 10% reduction in your expenses.

For many retirees, this strategy is quite manageable because they often have significant discretionary spending. Instead of taking three major trips per year, you might reduce it to two. While this requires some lifestyle adjustment, it’s far better than running out of money entirely.

The beauty of this approach is that it’s not arbitrary. It’s based on historical analysis of what works during extended market downturns. This systematic approach to managing market volatility helps remove emotion from financial decisions during stressful periods.

Building Your Cash and Fixed Income Buffer

Another crucial element of sound investment strategies for retirement is maintaining adequate liquidity. Building up a substantial cash and fixed income buffer allows you to avoid selling stocks during market downturns. This strategy proved invaluable during the 2008-2009 crisis, which took about 5 years for the market to fully recover.

The question isn’t whether to build this buffer, but how large it should be. Some retirees feel comfortable with two years of expenses in cash and fixed income. Others prefer four or five years for maximum peace of mind. This decision depends on your risk tolerance and how much market volatility you can psychologically handle.

Your buffer can include money market accounts, high-yield savings, CDs, short-term treasuries, or a combination of these vehicles. The key is having enough liquid assets to cover your expenses without forcing you to sell stocks at the worst possible time. This approach allows your equity investments time to recover while you live off your safer assets.

Reconsidering Annuities in Your Portfolio

Many people have negative associations with annuities, often for good reasons, given how they’ve been oversold in the past. However, when used appropriately, annuities can serve as an effective tool for managing market volatility in retirement portfolios.

The advantage of fixed annuities over traditional bonds is the elimination of interest rate risk. While bond prices can decline when interest rates rise, a fixed annuity locks in your value each year. More importantly, annuities can be converted into guaranteed lifetime income streams, which reduces the pressure to sell stocks during market downturns.

This is particularly relevant for managing market volatility. Why? Because it provides a foundation of guaranteed income that doesn’t fluctuate with market conditions. Whether you’re considering a private annuity from companies like Lincoln or Principal, or you have access to institutional options like TIAA, these tools can provide valuable stability during uncertain times.

Alternative Income Strategies

Sometimes the best retirement strategies involve thinking outside traditional investment approaches. Part-time work, for instance, can significantly reduce pressure on your investment portfolio during volatile periods. This doesn’t mean returning to a stressful full-time career, but rather finding enjoyable, flexible work that provides additional income.

Many retirees find fulfillment in consulting work, retail positions, or service jobs that keep them active and social while providing financial benefits. The additional income reduces the amount you need to withdraw from your portfolio, giving your investments more time to recover from market downturns.

Strategic Social Security Timing

Your Social Security claiming strategy can also serve as a tool for managing market volatility. If you had planned to delay benefits until age 70 but find yourself in a prolonged market downturn, claiming earlier can reduce pressure on your investment portfolio.

There’s even a little-known provision that allows you to start Social Security benefits before full retirement age, but then stop them at full retirement age.  This allows you to capture delayed retirement credits up until age 70. This flexibility can be valuable if market conditions improve and you want to return to your original strategy of maximizing lifetime benefits.

The DURP Framework: Staying Disciplined During Uncertainty

The foundation of all effective retirement strategies is what I call the DURP framework: Disciplined, Unemotional, Repeatable Process. This approach is based on having a clear investment policy statement that guides your decisions regardless of market conditions.

Think of how major university endowments operate. They have clear goals, defined risk tolerance based on those goals, and specific asset allocation targets. When they need to generate cash flow, they sell from whatever asset class has performed best recently and is overweight in their portfolio.

During strong market years like 2025, when stocks returned about 16%, and bonds returned 7%, you would trim your equity allocation to generate additional cash flow. Conversely, during down markets like 2008, when stocks fell 37%, but bonds gained 6%, you could sell bonds to meet your cash flow needs while allowing stocks time to recover.

This systematic approach to managing market volatility removes emotion from the equation. It ensures that you’re buying low and selling high rather than the other way around.

What is Retirement Planning in Today’s Environment?

What is retirement planning in an era of increased market volatility and geopolitical uncertainty? It’s about creating flexible, robust strategies that can adapt to changing conditions while protecting your financial security.

Modern retirement planning must account for longer lifespans, lower expected returns, higher healthcare costs, and increased market volatility. It’s no longer sufficient to simply accumulate assets and hope for the best. Today’s retirees need sophisticated strategies that address sequence-of-returns risk, inflation protection, and income sustainability.

The key is to work with professionals who understand these complexities and can help you implement appropriate strategies before you need them. This can include:

  • Setting up guardrails
  • Building proper cash buffers
  • Optimizing your Social Security strategy

The time to plan is before the crisis hits.

Moving Forward with Confidence

While the current market volatility related to the Iran conflict is concerning, it’s important to remember that markets have weathered similar storms before. The key is having proper retirement strategies in place and the discipline to stick with them during challenging periods.

If you’re approaching retirement with over a million dollars in savings and feeling uncertain about how to navigate these turbulent times, you’re not alone. The strategies outlined here—from guardrails frameworks to cash buffers to strategic Social Security timing—have helped countless retirees successfully navigate market volatility.

The most important thing is to avoid making emotional decisions based on short-term market movements. Instead, focus on building a robust plan that can adapt to changing conditions while protecting your long-term financial security. Remember, you can’t time the markets perfectly. However, you can prepare for volatility and position yourself to weather whatever storms may come.

Managing market volatility in retirement isn’t about predicting the future. It’s about being prepared for multiple scenarios and having the flexibility to adapt as conditions change. With proper planning and professional guidance, you can maintain confidence in your financial future regardless of what global events may unfold.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel. This is for general education purposes only and should not be considered as tax, legal, or investment advice.

One More Year Syndrome: The Hidden Trap Keeping You from Retirement

If you’ve been researching retirement lately, you’ve probably encountered content about something called “one more year syndrome.” This concept has been gaining traction across YouTube channels, podcasts, and financial forums, but what exactly is it, and why should you care?

One more year syndrome describes the tendency for pre-retirees to continuously postpone their retirement by convincing themselves they need to work “just one more year.” Sound familiar? You’re not alone. This pattern affects countless people who are financially ready to retire but keep finding reasons to delay.

What Is One More Year Syndrome?

One more year syndrome occurs when you give yourself excuses to work another year, even though you have the financial capacity to retire. These excuses might sound like:

  • “I need to add more money to my portfolio.”
  • “The market valuations look scary right now.”
  • “Inflation is making me nervous.”
  • “There are tariffs looming on the horizon.”
  • “Healthcare costs before Medicare eligibility worry me.”
  • “I don’t know what I’ll do with my time in retirement.”

The truth is, there’s always something uncertain on the horizon. Think about any time you’ve challenged yourself to try something new – that feeling of unease before stepping into uncharted territory is completely natural. Just like a child reciting a poem in front of their peers feels terrified for weeks beforehand, but once they’re doing it, they realize it wasn’t so scary after all.

For many pre-retirees, you’ve spent your career being the go-to person. You’re the problem solver, the one putting out fires, the person others turn to for advice and help. You have meaning, purpose, and respect in your field and community. The idea of leaving that behind for an uncertain next chapter can feel genuinely frightening.

Understanding the Content Creator’s Angle in Retirement Planning

Here’s something important you need to understand: many people creating content about one more year syndrome are retirement planners and financial advisors. They want people to retire, or at least seriously consider retiring soon, because that creates business opportunities for them.  This is coming from a fellow content creator and retirement planner!  (At least I’m upfront about it).

This doesn’t mean their advice is wrong, but you need to understand the incentive structure. When you see content saying, “don’t work another year, you’re wasting your time, stop slaving away for the man,” ask yourself who is packaging that message and what their angle might be.

Every content creator has an angle. The key is being aware of where the content is coming from so you can evaluate it appropriately. This awareness doesn’t invalidate the message – it might still be exactly what you need to hear – but it helps you consume it more thoughtfully.

Why Mortality Makes Us Rethink When to Retire

Sometimes life provides wake-up calls that force us to reconsider our retirement timing. Recently, a podcast listener reached out to see if he could retire earlier than he had planned.  The reason?  He lost 3 of his close friends over the last year. That kind of mortality reminder hits differently than abstract retirement planning discussions.

I remember back in my TIAA days, I worked with a sweet math professor looking for help with retirement planning.  She planned to work until 65 to become eligible for Medicare, and she was incredibly excited about traveling the world. For three years, her excitement built with each planning meeting. Then, unexpectedly, she passed away at 64 – just months before her planned retirement.

These stories aren’t meant to create fear, but they highlight an important reality: time isn’t guaranteed. When you see people around you pass away, get sick, or become frail, it naturally makes you reevaluate what you’re doing today. This response is completely normal and healthy.

Three Questions to Evaluate Your Retirement Readiness

To address one more year syndrome effectively, ask yourself these three critical questions:

Question 1: The Financial Standstill Test

Assuming nothing changed financially over the next year – even if the markets didn’t cooperate and your portfolio balance stayed exactly the same 12 months from now – would you still work that one more year?

What if you had a crystal ball showing your net worth wouldn’t change despite working another year, would you still choose to work? If the only reason you’re working is to add more money to your portfolio, even though you already have the capacity to retire today, you might be suffering from one more year syndrome.

Question 2: The Money-No-Object Test

If money weren’t an issue and you didn’t need to add more to your portfolio, would you still be doing what you’re doing today?

Remember, retirement doesn’t have to mean sitting in a rocking chair sipping drinks all day. Maybe you’d work occasionally as a consultant, volunteer, travel, or start a nonprofit. But the question is: if you didn’t need your job financially, would you still choose to spend most of your day and week doing that job?

If the answer is yes, and you can still pursue other important activities and relationships, then keep working. But remember – nothing is guaranteed.

Question 3: The Five-Year Horizon Test

If you were told today that you had five more good, healthy “go-go” years left, would you still work that one more year?

How would this knowledge change your decision about working another year?

Finding Purpose Beyond Traditional Retirement

The concern about losing purpose in retirement is valid and important. In 1 Peter 4:10, it says, “Each one should use whatever gift he has received to serve others, faithfully administering God’s grace in its various forms.”

This doesn’t suggest that retirement is bad; rather, it asks whether you’re using your gifts to serve others. If work is preventing you from doing that, maybe you should consider retiring sooner than planned. However, if you have no purpose planned for retirement, you’re likely to feel lost.

Retirees who feel lost don’t feel good, and people who don’t feel good aren’t enjoyable to be around. You need purpose, meaning, fulfillment, and energy in retirement. But there are many ways to make an impact and put your time, talents, and treasures to work beyond traditional employment.

Making Your Decision About One More Year Syndrome

Here’s what to take away from this discussion:

First, when you encounter content about one more year syndrome, understand where it’s coming from. Consider who is delivering the message, how they’re packaging it, and what their angle might be. Everyone has motivations, and being aware of them helps you evaluate advice more effectively.

Second, recognize that despite potential biases, this message might still be exactly what you need to hear today. Time isn’t guaranteed, and you can’t predict how many good years you have remaining. This reality has played out countless times throughout retirement planning careers.

Third, use those three questions to guide your thinking. They might lead you to conclude that you should continue working – maybe for five more years instead of one. Or you might realize you hate what you’re doing and need to figure out a plan to transition now, even if it’s not full retirement.

If money isn’t the issue and you dislike your job, it’s probably time to reevaluate what you’re doing. There are plenty of ways to make an impact and use your skills meaningfully.

Moving Forward with Your Retirement Decision

One more year syndrome is real, and it affects many people who are actually ready to retire but keep finding reasons to delay. The key is honest self-reflection about your true motivations.

Are you working another year because you genuinely need the money, or because you’re afraid of the unknown? Do you love what you do and find meaning in it, or are you staying because it feels safe and familiar?

Your retirement planning should go beyond financial calculations to include questions of purpose, meaning, and how you want to spend your remaining healthy years. Whether you decide to retire now, work one more year, or continue for several more years, make sure that decision is based on thoughtful consideration rather than fear or habit.

The goal isn’t to minimize your retirement years but to maximize the meaningful use of whatever time you have left. Sometimes that means working longer, and sometimes it means taking the leap into retirement sooner than you initially planned.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel. This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Ep. 121: 5 Tax Planning Strategies When You’re High Net Worth, but Poor on Paper

After you retire, you might find your net worth continuing to grow, but your ‘taxable income’ drops significantly. That can create major tax planning opportunities. Hence, ‘High net worth, poor on paper.’

I’ll explain how that period of time can open the door to smarter planning around ACA subsidies, Roth conversions, Social Security taxation, and 0% capital gains harvesting.

Remember, these strategies should not be looked at in a silo. A move that helps in one area can easily impact another if it isn’t coordinated with your full retirement plan.

What you’ll learn in this episode:

  • What “high net worth, poor on paper” actually means
  • Why low-income years in retirement can be powerful planning years
  • How ACA premium tax credits work for early retirees
  • The tradeoff between ACA subsidies and Roth conversions
  • How the Roth conversion window can reduce future RMD problems
  • How Social Security taxation can potentially be reduced with proper timing
  • When 0% capital gains harvesting may make sense
  • Why these strategies must be coordinated, not implemented one by one
  • Why retirement tax planning is about timing taxes wisely, not just avoiding them

Resources / related episodes:
ACA Tax Credits:  The Cliff is Back in 2026:  

$3m Net Worth, Free Healthcare(case study): 

Aggressive Conversions to makeSocial Security Tax Free: 

Thank you for listening!

-Kevin

Are you interested in working with me 1 on 1?⁠⁠⁠⁠⁠⁠⁠⁠ 

⁠⁠⁠⁠⁠⁠⁠⁠You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.

Connect with me here:

Or, ⁠⁠⁠⁠⁠⁠⁠⁠visit my website

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Ep. 120: 5 Retirement Strategies to Protect Your Portfolio During the Iran Oil Crisis

Are you retiring soon or recently retired and worried about market volatility, sequence of returns risk, and what the Iran conflict could mean for your plans?

In this episode, I’m diving into what retirees should be considering as we head into potential prolonged volatility.

I’ll discuss the short term market impact of the conflict.

Then, I’ll touch on what I think might be an underlying long-term goal for the US getting involved.

And most importantly, we’ll touch on 5 strategies to help you prepare for and execute a successful retirement, despite this new wave of uncertainty. I hope it helps!

-Kevin

Are you interested in working with me 1 on 1?⁠⁠⁠⁠⁠⁠⁠⁠ 

⁠⁠⁠⁠⁠⁠⁠⁠You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.

Connect with me here:

Or, ⁠⁠⁠⁠⁠⁠⁠⁠visit my website

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Should You Annuitize in Retirement?  4 Surprising Truths About Annuities

Let me start with complete transparency: I don’t sell annuities, I don’t receive commissions from them, and frankly, I dislike most annuity products on the market. They’re often complicated, expensive, and in many cases, they’re sold rather than planned.

My skepticism runs deep. Nearly 18 years ago, in my first financial role out of college, there was a veteran in my office who had one solution for everything: annuities. Client had an IRA rollover? Annuity. Extra money beyond their 401 (k)? Annuity. Worried about market volatility? You guessed it – annuity. This approach made me sick and shaped my career trajectory as a fee-only planner.

But this isn’t about bashing annuities like Ken Fisher does. When used correctly – specifically when used the way they were designed to be used – annuities can create outcomes that surprise even sophisticated investors and retirees. After 17-18 years of retirement planning, I’ve learned that bringing bias to the table and simply saying “annuities are bad” isn’t helpful.

Today, I want to walk you through four surprising benefits of annuitizing a portion of your fixed income and how this fits into well-designed retirement income planning.

The big takeaway? Retirement planning isn’t just about growing assets anymore – it’s about turning those assets into reliable, efficient, and sustainable income.

1. Lower Stress During Market Volatility: The Emotional Game-Changer

Here’s something most people don’t understand until they experience it firsthand: having an annuitized portion of your portfolio dramatically reduces stress during market downturns in retirement.

Consider this reality: if you retire at 60 and plan to live until 90, that’s a 30-year time horizon. Historically, there’s a 20% market downturn or bear market approximately once every five years. This means you could experience five or even six major bear markets during your retirement.

Bear markets hit differently when you’re retired.

When you’re accumulating wealth, you might even feel somewhat positive about a bear market – subconsciously, you know you’re buying shares at discounted prices. It’s uncomfortable, but manageable. When you’re withdrawing money for living expenses, volatility can feel nauseating.

I’ve been working with retirees for 18 years. In that time, I’ve witnessed very sophisticated retirees panic during downturns by bailing out of well-thought-out, diversified strategies right in the middle of a bear market. I’ve watched vacations get ruined, and couples argue over whether they should cut spending during market downturns.

But here’s what I’ve never seen:

I’ve never had a client with guaranteed lifetime income layered on top of other income sources – whether Social Security or a pension – say they regret securing that income stream. It’s always the opposite.

During COVID in 2020, during the 2022 downturn, and going back to 2008, when markets dropped 20% or more, clients with annuitized income consistently told me: “I’m so glad I have that guaranteed income check showing up every month.”

That predictability changes behavior, and in retirement, behavior matters infinitely more than spreadsheets.

Yes, you can hold bonds or cash for safety, but 2022 reminded us that bonds can fall double digits, and cash loses purchasing power over time. Your safe money isn’t about maximizing returns – it’s about minimizing emotional risk. And emotional risk in retirement is incredibly expensive.

2. Reduced Withdrawal Pressure: The Mathematical Advantage

This is where the math really shines, and it’s one of my favorite impacts of annuitization.

Most retirees follow traditional withdrawal frameworks. Let’s use the 4% rule as an example. Say you have $2 million invested and need $80,000 annually – that’s exactly 4%, which should theoretically work fine.

Now let’s see what happens with partial annuitization:

Instead of relying solely on systematic withdrawals, let’s say you annuitize $500,000 of your fixed income allocation. Using a conservative 7% payout rate (and I’ll explain why this is conservative in a moment), that $500,000 generates $35,000 annually in guaranteed income.

Your remaining portfolio balance is now $1.5 million, but it only needs to produce $45,000 because you’re receiving $35,000 from the lifetime income stream. Divide $45,000 by $1.5 million, and you get an effective 3% withdrawal rate on the remaining portfolio.  That reduced withdrawal rate on the invested balance could allow for better long-term growth, all because you maximized the cash flows from your ‘safe bucket.’ 

That difference matters enormously over the long term.

Why can annuities offer higher payout rates than bonds? Two reasons: mortality credits and longevity pooling. You’re not just earning bond-like returns – you’re benefiting from pooled longevity risk. Some people in the pool won’t live very long; others will live much longer. This pooling effect creates higher payout rates than you could achieve with individual bonds or CDs.

I broke down Marilyn’s real case study on YouTube: She was earning approximately 8.6% on her TIAA traditional annuity – well above the conservative 7% I used in the example above.

Surprisingly, partial annuitization increased the ending ‘legacy’ to her two adult children!  Despite dropping her liquidity after annuitizing that portion of her assets.

This higher payout rate reduces strain on your equity portfolio, which means:

  • Lower sequence of returns risk
  • Fewer forced sales during market downturns
  • More compounding potential for long-term growth

Annuities don’t just create income – they reduce selling pressure on everything else. This structural shift is often misunderstood but incredibly powerful.

The timing of this strategy matters significantly. We’ve had three consecutive years of bull market returns – double digits in the 20% range for two years, then 16% last year. But who knows how much longer this will continue?

We had about 11-12 years between 2008 and 2020 with minimal bear markets, but then just a two-year gap before the 2022 downturn. Markets are cyclical, and short-term, they’re driven by emotion and irrationality.

The question is:

  1. What’s your plan for the next bear market?
  2. Can partial annuitization help you navigate it emotionally while avoiding the need to sell riskier assets with better long-term growth potential?

3. Higher Legacy Potential: The Counterintuitive Truth

This surprises people more than anything else, and honestly, it shocked me initially, too. I spent considerable time manipulating financial planning software because I didn’t believe the results. But the math is sound and makes perfect sense once you understand it.

Annuitizing a portion of your assets can actually result in higher legacy amounts, not lower ones.

This shocks people because the common assumption is: “If I annuitize, my kids lose out because that money isn’t liquid anymore.” While liquidity does disappear with annuitization, if longevity plays out in your favor – which is the entire purpose of annuitization – the results can be dramatically different.

Here’s why: If you plan to live into your 80s or 90s, the annuity keeps paying throughout that entire period. Meanwhile, because you’ve reduced withdrawal pressure on your equity portfolio, those riskier assets with higher long-term growth potential can compound more efficiently.

In stress tests I’ve run with real case studies, including Marilyn’s situation, the numbers consistently support this outcome. For Marilyn, the breakeven point was approximately 81 years old. Beyond that point, the legacy outcome was significantly higher with partial annuitization than without it.

Legacy’s biggest threat

The biggest threat to legacy isn’t annuitization – it’s poor returns early in retirement. Poor sequence of returns risk combined with higher withdrawals damages portfolios far more than partial annuitization ever could.

If you retire into a bear market, the value of reduced withdrawal strain becomes even more powerful. I’ve seen this play out with clients who annuitized portions of their portfolios 10-15 years ago. They’ve been able to take full advantage of the bull run we’ve enjoyed since 2008, with their remaining investments growing much more efficiently because they weren’t forced to sell during downturns.

4. True Longevity Insurance: Beyond Social Security and Bonds

Most retirees over-allocate to bonds because they fear volatility. But bonds don’t solve longevity risk – they just reduce volatility temporarily.

If you live 25 or 30 years in retirement, how long will that safe bond allocation actually last?

Longevity risk is particularly real for people who take care of themselves, have good genetics, and access to excellent healthcare. As modern medicine continues to evolve and AI advances rapidly, life expectancies may increase significantly. Even if the most optimistic predictions don’t materialize, many people will still live well into their 90s or beyond.

Social Security provides powerful longevity insurance, but for many high-income retirees, it won’t cover enough expenses. This is where partial annuitization becomes valuable – it can convert part of that underutilized fixed income allocation into maximized income streams that protect against longevity risk.

The annuity will pay whether you live to 85 or 105.

I see the bond or fixed income bucket consistently underutilized by retirees. People are often afraid to commit large lump sums to annuities because liquidity disappears. This is exactly why having a comprehensive plan and strategy is crucial – this isn’t an all-or-nothing decision.

Liquidity matters. Health matters. Legacy goals matter. Interest rates, payout rates, specific annuity contracts, and terms all matter significantly.

This isn’t about annuitizing everything – it’s about intelligently designing the fixed income sleeve of your portfolio, building an income floor, creating emotional stability, and giving growth assets room to compound. That’s true retirement income planning.

Four Critical Questions to Ask Yourself

If you’re approaching retirement or recently retired and wondering whether partial annuitization makes sense, consider these four questions:

1. What is my true risk tolerance in retirement?

Really internalize this. How do you actually feel about risk – not today while you’re still working, but when you’re actually retired and watching your portfolio fluctuate? If you are retired, how do you feel when the market drops 10%, 20%, or even 30%?

2. Do I expect longevity in my family?

Consider both yourself and your spouse. Do you have good genetics, take care of your health, and have access to quality healthcare? Are you planning for the possibility of living 25, 30, or more years in retirement?

3. What percentage of my expenses are covered by guaranteed income sources?

If Social Security only covers 25% of your total expenses, that’s not substantial coverage. You could be much more subject to the sequence of returns risk than someone with higher guaranteed income coverage.

4. Am I reacting emotionally to the word “annuity,” or am I evaluating strategically?

Are you considering annuities as part of an overall retirement income plan, or are you dismissing them based on preconceived notions?

If your income stability ratio is low – meaning most expenses must come from portfolio withdrawals – you’re much more exposed to sequence risk. This doesn’t automatically mean you need annuities, but it absolutely means you should evaluate them objectively.

This is especially true if you have access to quality annuities, such as TIAA traditional products, where older vintages can offer very attractive payout rates. Before surrendering or transferring these products, understand the crediting rates, liquidity restrictions, income options, and payout rates.

The Bottom Line: Building Resilient Retirement Income

Retirement income planning isn’t about collecting the highest returns – it’s about building a resilient retirement income plan that can weather various economic storms while providing the lifestyle you want.

People who succeed in retirement aren’t those chasing performance; they’re the ones who design their plans intelligently, balancing growth potential with income security.

The mathematical advantages of partial annuitization – reduced withdrawal pressure, higher effective payout rates through mortality credits, potential legacy benefits, and true longevity protection – can create outcomes that surprise even sophisticated investors.

But remember: this strategy requires careful planning, appropriate product selection, and integration with your overall financial plan. The goal isn’t to annuitize everything, but to strategically design your fixed-income allocation to deliver maximum benefit across all your retirement objectives.

As we face potential market volatility ahead – with tariff uncertainties and the conflict in Iran – having a portion of your income guaranteed can provide the emotional stability needed to let your growth investments do what they do best: grow over time.

The question isn’t whether annuities are good or bad in isolation. The question is whether partial annuitization can help you build a more resilient, less stressful, and ultimately more successful retirement income plan.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Ep. 119: Social Security for Married Couples: The Survivor Benefit Mistake

If you’re married, your Social Security claiming strategy is not just about your benefit — it’s about protecting your spouse’s income for life. In this video, I’ll explain the most overlooked Social Security rule for married couples and how it can dramatically affect the surviving spouse’s financial security.

Many retirees don’t realize that when one spouse passes away, one Social Security check disappears. The surviving spouse only keeps the larger of the two benefits, which means the higher earner’s claiming decision may be the most important Social Security decision you make.

Using a real-life style example, we’ll walk through how delaying Social Security can significantly increase the survivor benefit, potentially adding thousands of dollars per month for the spouse who lives the longest. I’ll also explain why couples who claim too early may unintentionally reduce the surviving spouse’s income during the most financially vulnerable years of retirement.

However, this strategy doesn’t apply to everyone. I’ll also share three situations where it may actually make sense to ignore the typical advice to delay Social Security, including health considerations, investment strategies, and withdrawal rate concerns.

If you are within 5–10 years of retirement, married, and have saved $1M or more, this Social Security strategy could have a major impact on your long-term retirement income plan.

Enjoy the episode!

~Kevin

Are you interested in working with me 1 on 1?⁠⁠⁠⁠⁠⁠⁠⁠ 

⁠⁠⁠⁠⁠⁠⁠⁠You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.

Connect with me here:

Or, ⁠⁠⁠⁠⁠⁠⁠⁠visit my website

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Ep. 118: Should You Annuitize in Retirement?

Are annuities really that bad?

I’ve spent most of my career skeptical of annuities.  Especially the expensive, complicated products often sold to retirees. I don’t sell annuities. I don’t earn commissions from them. And in most cases, I still am skeptical of how they are ‘sold’and not planned for.

In this episode, I break down four surprising benefits of annuitizing part of your fixed income, especially if you’re approaching retirement with $1M+ saved and want a smarter retirement income strategy.

We’ll cover:

• Why everyone is a bull… until the market drops 10%
• How annuitization can reduce sequence of returns risk
• Why payout rates (like 6%–8%+) is hard to replicate with a ‘safe withdrawal rate’
• How annuities can actually improve legacy outcomes in certain scenarios
• The math behind lowering withdrawal pressure on your equity portfolio
• How to evaluate TIAA Traditional payout options and vintages

Retirement isn’t just about asset allocation.

It’s about income design.

And if you’re over 55, retiring soon, or already retired, understanding annuitization could materially impact your retirement income, stress level, and long-term legacy. Hope you find this useful.

-Kevin

Are you interested in working with me 1 on 1?⁠⁠⁠⁠⁠⁠⁠⁠ 

⁠⁠⁠⁠⁠⁠⁠⁠You can start with our Retirement Readiness Questionnaire linked on our website so we can learn more about how we can help in your journey to and through retirement.

Connect with me here:

Or, ⁠⁠⁠⁠⁠⁠⁠⁠visit my website

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

Retirement Planning Opportunities If You’re in the Top 20% of Savers (Ages 55–70)

If you’ve ever Googled “retirement savings by age,” you’ve probably seen those benchmark numbers that either made you panic or feel like you’re crushing it. But here’s the thing – both reactions might be completely wrong.

Understanding retirement savings by age is something many people get hung up on, but the reality is that these average numbers rarely tell the complete story. Today, we’ll dive into real data from major financial institutions and explain why, if you’re reading this, you’re probably already in the top tier of savers.  And if you’re in that top tier, we’ll discuss specific planning opportunities to help you optimize your retirement. 

What the Average Retirement Savings Data Really Shows

Let’s start by looking at what the major studies actually reveal about retirement account balances across different age groups.

401k Balance by Age: Fidelity’s Latest Numbers

Fidelity releases quarterly benchmarking studies that track average retirement account balances by age. Their data shows that for people in their peak earning years (55-70), the average 401(k) balance hovers around $250,000.

Financial planner in Chattanooga, TN

But here’s the problem with this data: it only includes accounts held at Fidelity. It completely excludes external accounts, creating a major blind spot. There are no taxable brokerage accounts, no HSAs, and no retirement accounts held at other institutions, such as Vanguard or Schwab. This means Fidelity’s numbers aren’t really representative of the entire U.S. retirement landscape – especially not for people who are serious about their financial planning.

The Federal Reserve’s Complete Picture

The Federal Reserve’s Survey of Consumer Finances, conducted every few years, gives us the closest thing to a national financial scoreboard. The 2022 data reveals some eye-opening statistics.

For households in the 55-64 age range:

  • About 8% have retirement account balances between $500,000 and $1 million
  • Roughly 9% have over $1 million in retirement accounts
  • This means approximately 17% of U.S. households in this age group have retirement savings exceeding $500,000

If you’re reading this article and have accumulated at least $500,000 in retirement accounts by your late 50s or early 60s, you’re already in the top 20% nationally. Many readers are likely in that top 10% tier with over a million dollars saved.

The Fed’s survey includes a broad sample of American households – from lower wealth to middle class to high net worth families. Many of the households surveyed may have very little, if any, assets in 401(k)s or IRAs, which skews the averages significantly lower.

Empower’s More Complete Data Set

Empower’s data provides both average and median retirement account balances, which matters because averages can be skewed by ultra-high savers with multiple seven-figure accounts.

For people in their 50s and 60s, Empower shows:

  • Average retirement account balance: roughly $1 million
  • Median balance: about 50% of that average

What makes Empower’s data more valuable is that it doesn’t just include accounts held directly with them. It also incorporates retirement accounts imported through their personal dashboard tool. If someone has accounts at Fidelity, Vanguard, or other institutions, those balances get aggregated into the study, making it more representative of people who actively manage their finances across multiple platforms.

However, even Empower’s data has limitations – it still doesn’t include other retirement assets like taxable brokerage accounts, business investments, or real estate.

Why You’re Probably Not Average

Here’s the reality: if you’re actively researching retirement savings by age and reading detailed financial content, you’re already demonstrating behavior that puts you in a completely different category than the “average” American saver.

The average retirement savings by age data includes everyone, including people who have never opened a 401(k), those who cash out their retirement accounts when changing jobs, and households that prioritize other financial goals over retirement savings.

But you’re different. You’re likely someone who:

  • Has built substantial retirement account balances
  • Maintains accounts across multiple institutions
  • Has diversified beyond just retirement accounts into taxable investments
  • Owns real estate or business assets not captured in these studies

Someone might have $400,000 in a 401(k), but another $1-2 million in taxable brokerage accounts or $3 million in real estate investments. If you’re only comparing retirement accounts, you’re missing half the picture.

This is the key point: if you’re consuming this type of content, you’re probably already in that top 20% of households. You’ve likely saved at least $500,000, and many readers have accumulated seven figures or even multiple seven figures for retirement. You’re playing a completely different retirement game than the average American.

Essential Retirement Planning Strategies for Top-Tier Savers

When you’re in the top tier of savers, your biggest risk isn’t running out of money – it’s retirement planning inefficiency. Here are the critical strategies you need to consider:

Tax Planning: Your Biggest Opportunity

Taxes can actually be one of your biggest expenses in retirement – often ranking as the number one, two, or three largest annual expenses for retirees.

Large pre-tax account balances mean large future required minimum distributions (RMDs). These large RMDs can potentially push you into higher income tax brackets, trigger higher taxes on Social Security income, increase capital gains rates, and activate other hidden taxes. These tax hits compound over time.

If you retire early, you may have lower income years before RMDs kick in at age 73 or 75. This window represents one of the best tax planning opportunities of your lifetime–what’s called the “Roth conversion window.”

Maximizing Roth Conversion Strategies in Early Retirement

During your early retirement years, before RMDs begin, you have the opportunity to strategically convert pre-tax retirement funds to Roth accounts. This means paying taxes now at potentially lower rates to minimize the impact of those ballooning RMDs later.

Roth conversion strategies can also help you:

  • Minimize IRMAA surcharges (hidden taxes on Medicare premiums based on income)
  • Make Social Security income more tax-efficient
  • Create tax-free legacy assets for your heirs

Once this conversion window closes, it shuts for good, making this timing critical for long-term tax efficiency.

Optimizing Your Retirement Withdrawal Strategies

When you have substantial assets across multiple account types–taxable accounts, tax-deferred accounts, and tax-free accounts–the order you withdraw money matters enormously for the longevity of your retirement plan.

The classic approach follows this sequence:

  1. Taxable accounts first
  2. Tax-deferred accounts second
  3. Tax-free accounts last

This default strategy makes sense for many people, but it’s not always optimal. Sometimes it makes more sense to tap Roth accounts first and let tax-deferred accounts continue compounding. Other times, a multi-pronged approach works best–taking baseline distributions from taxable accounts while filling remaining income needs from tax-deferred accounts, even before RMDs begin.

The key insight: retirement withdrawal strategies shouldn’t follow a one-size-fits-all approach. Each year brings a new tax situation that needs to be evaluated and optimized based on your specific circumstances.

Investment Strategy: Risk Capacity vs. Risk Tolerance

Most retirees and many financial advisors focus solely on risk tolerance–how aggressive you feel comfortable being emotionally. But for higher net worth households, we need to discuss something different: risk capacity.

Understanding the Difference

Risk tolerance is emotional and psychological. It’s about how you feel when the market drops 20%. Do you panic? Can you sleep well at night? Can you stay disciplined?

Risk capacity is different – it’s not about feelings, it’s about what your plan can mathematically survive. Can you afford to take on risk in retirement?

Here’s the counterintuitive part: a retiree with a smaller portfolio may actually have less risk capacity than someone with a larger balance.

A Real-World Example

Consider a retiree with $500,000 who needs $30,000 annually (6% withdrawal rate). If the market drops 25%, their portfolio becomes $375,000, but they still need that $30,000. Now their withdrawal rate jumps to 8% – entering the danger zone where retirement plans can fail due to the sequence of returns risk.

Compare this to someone with $2 million who needs $80,000 annually (4% withdrawal rate). If their portfolio drops 25% to $1.5 million, their withdrawal rate only increases to 5.3%. They have margin for error. They can reduce withdrawals, skip inflation adjustments, rebalance, or even take advantage of the downturn.

This is risk capacity: how much volatility can your plan absorb before forcing you to make bad financial decisions?

Where You Hold Investments Matters

Asset location is different from asset allocation. Asset allocation is what you’re invested in. It’s your mix of stocks, bonds, real estate, and cash. Asset location is where you hold those investments.

When you have substantial balances across taxable, tax-deferred, and tax-free accounts, where you locate specific investments can significantly impact your after-tax returns.

The Tax Drag Problem

Taxable accounts face ongoing tax drag. Investments may pay quarterly dividends, generate interest income, or distribute capital gains even when you’re not selling anything. When you’re in higher tax brackets, this drag becomes significant and represents one of the most overlooked ways wealth gets eroded–not from market performance, but from unnecessary taxes.

If your taxable account holds high-yield bonds, REITs, and high-turnover funds, you might pay substantial taxes annually even if you’re not spending that income. Meanwhile, your IRA and Roth accounts might be better locations for these less tax-efficient investments.

The goal of asset location is simple: ensure your taxable accounts aren’t dragging down your net after-tax returns. You don’t just need good performance. You need good after-tax performance. It’s not about what you earn; it’s about what you keep.

Legacy Planning for High-Net-Worth Families

If you’re in the top tier of savers, there’s a good chance you won’t spend down all your assets, even if your goal is to “die with zero.” This means you’re optimizing not just for lifetime income, but also for legacy–specifically, tax-efficient legacy.

This becomes especially important if your heirs are high earners themselves: doctors, entrepreneurs, attorneys, or other professionals. What you leave behind matters significantly.

Leaving a pre-tax IRA or 401 (k) to high-income beneficiaries creates a different tax impact than leaving a Roth account or a taxable brokerage account. The most effective planning involves being strategic about which assets to spend aggressively during your lifetime versus which to preserve for beneficiaries.

The Real Takeaway for Top-Tier Savers

If you’ve built substantial wealth and find yourself in the top 20% of U.S. households, your retirement plan is no longer about chasing returns or worrying about having “enough” money. Instead, your focus should shift to:

  • Maximizing retirement plan efficiency
  • Controlling the timing and tax impact of distributions
  • Minimizing lifetime taxes through strategic planning
  • Managing Medicare thresholds and IRMAA surcharges
  • Optimizing Social Security income timing and taxation
  • Taking advantage of Roth conversion windows
  • Planning for tax-efficient legacy transfer

Once you’ve done the hard part–saving and investing to reach financial independence–the game becomes about keeping more of what you’ve built. The strategies that got you to this point aren’t necessarily the same ones that will optimize your wealth throughout retirement.

The Bottom Line

Stop comparing yourself to average retirement savings by age. If you’re actively planning and have accumulated substantial assets, you’re already playing in a different league. Your focus should be on advanced strategies that maximize the efficiency of the wealth you’ve built, not on whether you’re “keeping up” with benchmarks that don’t reflect your reality.

Remember, retirement planning for high-net-worth individuals isn’t about accumulating more. It’s about optimizing what you have for the best possible outcomes throughout your retirement years and beyond.

At Imagine Financial Security, we help individuals over 50 with at least a million dollars saved navigate these complex retirement decisions. If you are looking to

  • Maximize your retirement spending
  • Minimize your lifetime tax bill
  • Worry less about money

You can start by taking our Retirement Readiness Questionnaire on our website at www.imaginefinancialsecurity.com, so we can learn more about how we can help you on your journey to and through retirement.

Not quite ready to take the questionnaire, but want helpful tips and resources? Sign up for our monthly newsletter and/or subscribe to our YouTube channel.

This is for general education purposes only and should not be considered as tax, legal, or investment advice.

info@imaginefinancialsecurity.com
(904) 323-2069

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