Retirement Income Strategies for 2026 Video from Savant Wealth Management

Download our complimentary guide books, checklists, and other useful financial resources at savantwealth.com/guides.

 

Good afternoon. Welcome to Savant’s webinar series on topics relevant to retirement and other financial planning areas.  my name is Joel Kundik. I’m a financial adviser with Savant’s Vienna, Virginia office. And it’s my pleasure today to be talking with you about retirement income strategies for 2026. We’re off to a new year.  there’s some new tax code issues at play. People are thinking about retirement maybe in 2026 or an upcoming year and thinking, “All right, well, how should I organize everything?” And it’s one of my favorite topics as a result. There’s a lot of ways we can go here today. We’re going to cover what we can over the next 4550 minutes. I would say I’m going to give a presentation here. I’m going to give some time to Q&A at the end. Please post any questions that you have into the Q&A box throughout here. So, not the chat window, into the Q&A box. We’ll get to them as we can over the course of our meeting. if we can’t get to them or don’t get to them in, you know, by the time if you don’t feel like your questions been answered, I’d love to be having a conversation back and forth here, but   just post it into the  survey that you get at the end of the meeting and we’ll make sure that somebody gets an answer to your question. That’s our goal here, that we’re giving useful content to people who are at a stage of need and questioning to make sure that you can make better answers get better answers for your life. All right; that’s the goal of the whole webinar series. So, if you haven’t watched any of the others, feel free to go to our website and browse through them. But we’re going to get through retirement income today. And it is kind of an interesting topic because the most uncertain factor of all our retirements is when we’re going to die, right? None of us know that. And if everyone could just know that, then coming up with the total solution for how you should handle retirement income would be so much easier.  social security claiming strategies would make much more sense. The order of when to take distributions out of IAS, Roth IAS, taxable accounts, how to handle realized gains. All these questions really are made more complex as a result of uncertainty. And the biggest place of uncertainty we have is when I am going to die and when am I going to need money, right? Am I going to need extra expenses in my final years? We’re going to cover those topics today. We’re going to talk about the different sources you have for retirement income. We’re going to talk about how to be tax efficient with our withdrawal strategies. And that’s going to be an interesting question because there’s tax efficiency with just 2026 in mind and there’s tax efficiency with an arc of retirement in mind. And sometimes those two answers could be polar opposites of one another. We have to decide what time frame do we want to look at. We’re look at managing income in volatile markets because one thing we know is that things are going to be uncertain, right? We do not know where markets are going to turn in any one year. Anyone who indicates at the beginning of 2026 they have a great clear idea of exactly how markets will do in 2026, I would suggest that you go back and look at their track record. Have how they predicted 2022.  which ended up being a down year of 19% on the S&P 500. Nobody called it. How take a look at how they did in 2020.  nobody predicted a 35% market decline in three months and nor did they predict an over 70% rise in markets from that point to year end. So even over time frames as short as one year it’s really almost impossible, I would say impossible to predict what markets will do. Longer periods of time we have a better idea and that’s going to we’re going to look at the lens that we’re using to evaluate how to manage income when markets are going to be volatile. We’ll look at minimizing health care costs and then aligning our income with our spending goals, which is a favorite topic of mine. I every once in a while, put on a seminar about confident spending in retirement.  I’d encourage you to attend that one because there’s some really relevant topics.  retirement income sources. Let’s just start there. Most of us on this call used to be a significant percentage, more and more, almost all people are going to have access to social security. There’s still some state pensioners that are not going to. They didn’t contribute to social security but are getting a state pension. But I would suspect almost all of us listening today are going to get social security. So, the question though is well when should I claim when should I claim file for my social security benefit? There is a nuance to the present time on that because we are about 7 to 8 years from the social security system as we know it.  in going through a major change. There could be a change made in the intervening years. I would hope that there is because the change absent any adjustment by Congress is going to be kind of drastic. But even then, estimates are saying 20 to 25% benefit reduction is what would happen. If social security exhausts itself, you know, it no longer has sufficient assets to cover all claims, then there would be a 20 to 25% benefit reduction for everyone, and then the system becomes solvent for another 60 years. So, if you’re thinking, well, I just don’t know that I can rely on anything from Social Security, I wouldn’t say that’s the case. the only say place that you may run into bigger drops than that is if they add means testing to social security for those who have a substantial amount of assets or income and there’s so many bridges to go over before we would get to that situation. U so I would just say we need to figure out a claiming strategy for social security and do we when would we defer benefits?

I would say the number one thing to do here is to just pause. Hit pause before you file. You have lots of choices before you file. Once you file, you’ve really limited yourself. There used to be do overs. I remember 15 20 years ago when I was doing this with clients, we could undo a decision that they’ve made and that’s a lot less a possibility now. So, we want to first before anything else consider health and life expectancy. If you have some kind of condition that has substantially reduced your expected life expectancy, then I would make a much faster decision on claiming likely to suggest claiming. There still can be situations between spouses we might defer something, but generally we’re going to claim earlier when we don’t expect to live as long. If we have no insight on how long we’re going to live, maybe we delay. All right. Then we’re going to look at earnings tests before full retirement age. So social security is an arc. It starts at age 62 that you can claim and it ends really at age 70. Delaying beyond age 70 is not beneficial.  there are exceptions to this like if you have a survivor benefit you can claim at 60 instead of 62. But generally, we’re dealing with an arc of 62 to 70. There really is no difference in the acceleration of benefits that happens from 62 to full retirement age. for most of us on this call is going to be 67 versus the acceleration that happens from 60 to 7 to 70. Every month you wait to take social security; you get a slightly higher benefit. However, there is a big difference from prior to full retirement age to post full retirement age. And that’s that any benefit you claim prior to full retirement age is going to be subject to an earnings test. If you earn more than roughly $20,000 in a tax year earned income, so I don’t mean withdrawals from IAS, I mean earned income. If you receive more than $20,000 of earned income in that year, your Social Security benefit will be reduced by a dollar for every $2 you are over the threshold. So often we just tell clients if you are before full retirement age and you are earning income, substantial earned income, don’t claim your benefit because it will be backed out on an earnings test. You’ll receive it and then it’ll be reclaimed when you file your taxes. Okay?  Once you reach full retirement age, and I mean the actual age, so the year that you turn, it’s not enough. It’s the day that you reach full retirement age. From that point forward, you can claim and still earn whatever you want. So that’s really the difference with this full retirement age point. After full retirement age, file for the benefit, get all the benefit, get whatever earned income you want. prior to full retirement age. If you have earned income and it’s substantial, then your social security benefits will be reduced or eliminated by the amount you were over the threshold or half the amount you were over the threshold. Spousal benefits factor into this as well. So now we have to think about the ages of both spouses. We have to think about when they can qualify for a benefit and how much their benefit will be. So, the most critical part of planning for Social Security is to log into social security.gov and print up your statement so you have a clear picture of, oh, here’s what I currently qualify for and here’s what my spouse currently qualifies for. At minimum, a spouse, current spouse should qualify for half of a worker’s benefit. So, if a worker qualified for a $4,000 a month benefit for social security, their spouse could qualify for a $2,000 per month benefit at each of their full retirement ages. So, if the spouse claims their spouse will benefit before full retirement age, it’s discounted and it would be earnings tested. Okay.  beyond full retirement age, the worker gets additional increments to how much they would receive. a spousal benefit does not. So sometimes we’re in a situation where two spouses age 67 are thinking of delaying all social security filing but when we look at things we realize oh the worker benefit will accumulate an extra 8% per year delayed but the spousal benefit will not. The spousal benefit is fixed so that eats into the expected growth in the social security benefit. We need to factor that into our analysis. espouse benefits. If you had a marriage that lasted for 10 years or longer and you are not remarried, then you can qualify for an espouse benefit. That should be something that should be factored into this. Can you claim for an ex- spouse benefit and delay your worker benefit in some situations? Yes. Same situation if you have a deceased spouse. Are you eligible to claim a survivor benefit? Yes. Can you defer your own benefit while you take your survivor benefit? Yes. So, it’s the nuanced situations that we really get into a lot of detailed planning on social security. I will say that many people these days are deciding to file earlier than they otherwise might because of the upcoming potential drop in Social Security benefits. And one of the factors that influences that from my perspective as a financial adviser is you’re likely the reason you delay a benefit is to receive a higher cumulative benefit by the time you’re in your early 80s or so. There’s a crossover point, right? If I decide not to file at 67 and forego three years of benefits and then I file at 70, I’m going to be playing catch-up for a while. It’s a higher benefit, but I missed out on three years of benefits. Right? That’s that crossover point is going to happen somewhere around age 80. And what I find is that many clients in their early to mid-80s are deciding that they don’t need to spend near as much as they spent before. So you can be in a situation where you deferred you avoided receiving income in early years so that you could receive more later and then later you looks back and says I don’t really want to spend any of this money. Why’d you do that? Now, you could still say, “Well, that’s for the future you who’s going to potentially have long-term care needs, and we want to have as much guaranteed income available to us at that stage, but we’re, you can see how we’re getting into personal situations very quickly. Personal circumstances matter a great deal in these decision processes.” All right? So, I can’t give you a hard and fast rule of thumb for when you should file for Social Security in a setting like this. I can tell you factors to consider, right? And all of these are very relevant factors to consider.  so you could elect because you want the highest guaranteed benefit for life to defer your benefit to 70. Many couples do that for the higher earning spouse at minimum because they say, well, we want the highest guaranteed benefit for the survivor. What do I mean by that? Let me take a step back. When the first spouse passes away, Social Security looks to the two benefits. If the benefit the surviving spouse is receiving on their own work record is higher than what they would have received on this deceased spouse’s record, they just continue receiving their own benefit and the deceased spouse’s benefit goes away. If, however, the benefit they’re receiving is lower than what the deceased spouse was receiving, they can stop their own payments and start receiving this deceased spouse’s payments. And so, you can see why in those situations many times a couple considers deferring one person all the way to age 70 to get the highest guaranteed benefit not just for that person but for the survivor if that person were to die earlier. All right, lots there so I’d say social security is definitely an income source that a great deal of planning needs to be done around. Right. So, then we have other income sources and the next most common for everyone is employer plans and IAS. So, an employer plan could be a 401k, a 403b, a SE IRA, a cash balance plan, and a pension. There’s any number of things that an employer plan could be, but we have to look at what is in the employer plan and what are we likely to be able to receive from it. So, there are abilities in the late years of working once you’re 50 and over and then now with the new tax bill between 62 and 65, there’s another catch up that’s available that allows us to defer more into our plan to maximize that amount that’s in there. I will say interestingly enough if for those of you on this  call who are in your late working years who are getting toward retirement  but using this call to think about well what how does it work when I retire think carefully before you take the Roth option on your retirement plan available to you at work in your late working years because while in your early working years the number one benefit you’re going to get from a retirement plan is the tax defer the growth, right? The ability to put money aside and let it accumulate and kind of get that hockey stick growth, right? I’d love to save in our 20s and 30s because that’s going to be where the greatest growth occurs. Once we get to our late 50s and early 60s, the number one benefit of a retirement plan to me as a financial adviser is actually the income deferral aspect. If I’m in a very high income bracket and at retirement I’m going to be in a considerably lower income bracket, it may be a good idea for me to defer money  using the traditional option so that I knock down my income in this current year simply so that I can shift income into a future year where my  taxable income is going to be lower. This is tax arbitrage, right? And similar things can be said there. There’s ways to hypercharge that if you have like a executive deferred compensation plan at work or something like that. Any deferrals that allow you to shift money out, an HSA plan, right, that allows you to put money aside tax-free and then take it out at retirement tax free. These are great vehicles to be using in late retirement to get income out of a current year and shift it into retirement years. All right, but we have that Roth versus traditional IRA consideration. It could be that Roth makes the most sense for your situation. It could be that it doesn’t. What I know is once we get to retirement, Roths will become much more important. And we’ll have a slide on that to come. But now, as I look at, all right, we’re through these saving years and where is my cash flow going to come from. That’s where we should do some analysis. You can see a chart here. What we’re going to look at when we work with clients is, you know, what’s going to come from social security in one color. what’s going to come from postretirement income, like an executive deferred comp plan. That’s going to be like in the yellow here. Blue is going to be what’s coming from social security throughout retirement. Green is going to be what we’re having to take out from retirement plans once we reach 73 in the case of like a 401k or an IRA. What is the required amount that’s going to have to come out? So, there’s all of these things that we have to pre-plan first and say, “All right, here’s when social security is going to hit. Here’s when a retirement plan’s going to hit. Now we start looking at well where else can we fill in gaps? Okay. And where we choose to fill in gaps can be quite simple. If the only method we saved was a traditional 401k, then there’s really only one note we can play on that piano, right? Where there’s only one source, we can draw the funds from. But many of people listening today are going to have a taxable brokerage account. They’re going to have a Roth IRA. They’re going to have a traditional IRA. And those are our three tax buckets. And there’s very different taxes depending on where we take the money from. And we can get into quite an interesting window here where in early retirement we have low income coming out to us and in later retirement we’re going to have higher income with our required distributions. Well, what could we do to avoid that? We can move some income into the early years of retirement via Roth conversions. Take extra money out of our traditional account, put the money into Roth. That helps us in two ways. Number one, it allows our required distribution to be smaller when we reach age 73. If we have knocked down the balances in those retirement plans in advance of having to take money out since the money that has to come out as a percentage of what’s in there, if the balance is lower, the requirement is lower. But number two, we’ve also now created a tax-free vehicle that we can defer for the next 2530 years for heirs and that matters a great deal as well. So, Roth conversions can be very important in the early retirement years, and they can also influence whether we file for social security or not. Right? One of the strongest tools that would be available to us at that point would be a large taxable brokerage account. If we have a large taxable brokerage account, that’s going to give us a lot of flexibility because we can take money from that at very low tax and then use the IAS and tradition Roth IAS  or you know Roth 401ks and traditional 401ks to do a lot of conversion strategies to shift money around between those buckets. All right, so that’s what we’re going to look at when we get to that stage. Now, there’s differences in where we want to draw from depending on the timing of our age. So, a classic example I’ll give is that you know people don’t think about this necessarily, but it really matters and it really matters as a result who you’re listening to as a financial adviser because somebody who’s not really trained on some of these issues could actually guide you very wrongly.  if you are under age 55, you’re going to want to take taxable brokerage accounts or potentially Roth IAS. That’s really the best source of funds. If you’re between 55 and 59 and a half and you left your last employer at age 55 or later, you have a very unique window. And if anyone telling you that you should move money from a retirement plan over to an IRA in that window could be giving you bad advice because what you really want to do is leave that money in that retirement plan because someone who’s 55 and has retired or retired from their last company  can start taking money out of a traditional 401k without penalty. You still have to pay income taxes, but you don’t have to pay penalties. Whereas once you move it over into a traditional IRA, the limit on IAS is 59 and a half without penalties. So, you have four and a half years of withdrawals that you can take from a 401k without penalty that if you’re in an IRA, you have to pay penalties. Very important window to be considering. So those of you on this call who are considering early retirement need to be very careful about careful about what you do with your retirement plan. And I see a question about whether that’s applicable only to 401ks. It’s not. It’s applicable to 401ks and 403bs and TSPs. So, there’s a wide range of retirement plans that are affected by that rule. All right. The bottom line is you have to work till age 55 before you retire. And then once you’ve retired, you cannot roll that money over from that 401k. You have to start withdrawing from it. If you then decide to go back to work with another employer after you started those distributions, that’s okay. You’re allowed to still continue to withdraw penalty-free from those accounts. All right? So, there’s a lot of nuances to that. It’s another reason it’s good to be sitting down with someone when you’re making these big decisions about where is the money going to come from when I retire. Okay. So, now let’s look at some tax efficient withdrawal strategies. The number one thing we need to know about here and it’s going to give you a headache when I put up the slide but this is where we do all our work right where we base everything is on the tax brackets and the tax brackets really matter  the inflection points there are some hidden inflection points that are not going to show up  on a tax bracket table I’ll cover those some of those on the next slide but basically we need to be mindful of whenever we’re going to hit into the 12 to 22% bracket. That’s a big inflection point, right? Because we have a 10 and a 12, then it jumps by 10% to 22. The next big inflection point is that jump from 24 to 32. So, when you’ve got a big, you know, a 22 to a 24% tax bracket, not substantial for planning purposes. We can do some nuance planning there. Sure, that’s fine. But certainly, when we’re going between being taxed at 24% or 32%. If we do proper tax efficient withdrawal strategies and we can move money out of the 32% bracket into the 24% bracket, we’re engaged in some substantial savings here. I don’t have up here the state income tax brackets. That’s going to be very variable for so many of you here, but state income tax brackets are going to play into this. And another factor that we can I can already see, you know, being relevant would be if somebody’s considering moving to another state. if they retire at age 62 and their plan is at age 66 to move from the state of New York which is a very high income tax state to the state of Tennessee which is a very low income tax state  0% income tax state then  we want to do some very careful tax planning around that so that we avoid taking out money in the years that you’re living in a very high income tax state and  defer some of those withdrawals to years where you’re going to be in a low income tax state. One of the things maybe you’re hearing there that I want to make sure is clear is there’s a big difference between saving taxes in 2026 and saving taxes across 2026 to 2036. Very different considerations. If I’m just trying to minimize taxes in 2026, well, if I just take every dollar out of my Roth IRA, I’ll pay zero tax. And I’ve had people come to me and say, “I’m really happy. Look, I mean, I owed zero taxes last year.” That’s amazing, isn’t it? And I kind of sheepishly say, actually, that’s not where we want to be. That we do not want you to have a year of zero tax between when you’re 62 and 73. And the reason is, take a look at these brackets. There’s a 10% bracket at 12, then we jump to a 22 and a 24. If I know that because of required distributions, you’re going to be in the 22 or the 24% bracket. By the time you get to 73, I want to be soaking up those 10 and 12% brackets in early retirement either with distributions, simple distributions to live on from traditional IAS or Roth conversions. Right? So, at minimum, I want to take a piece of my money from a taxable brokerage account and a piece of my money from a traditional IRA if I can do that. But even the better strategy if I’ve got enough in a taxable brokerage would be to Roth convert and get some tax-free growth out of that was what was a traditional IRA. Okay.  so seven current brackets. There’s an additional year of inflation adjustments starting in 2026 for the 10 and 12. So the 10 and 12% brackets this year jumped a little more than we would expect them to long term because they did a 2-year adjustment on inflation. There were no changes made to the current capital gains tax rates. Those are not changed near as often as income tax rates even though they can have a very substantial impact on people’s retirement. So those of you who have high amount of unrealized capital gain in a taxable brokerage account, there is so much planning work that can be done for you.  I would say a great deal more than could be done 5 years ago. We’ve been a long time in a situation where we had to say, well, pay the gain now, pay the gain later. At some point, you’re going to have to pay the gain unless you hold it until you pass away.  And now that’s not the case anymore.  the some of the strategies to accomplish that are complex, but there are ways to avoid capital gains taxes by taking withdrawals from a taxable account. And I’d have to talk in a lot more detail with you about that, but there’s going to be a whole team of advisors at Savant that are very well versed on helping you with that. And that plays hugely into these tax efficient withdrawal strategies. I said there are some hidden brackets. The reason there are hidden brackets is because things like this for 2026, there are these new deductions that play in. So, seniors 65 and over could get an additional deduction on their taxes for $6,000. However, it phases out by 6% of modified adjusted gross income above 75,000 for single and above 150,000 for joint. So, in other words, from the point you reach 150,000 if you’re married filing joint until you reach around 180,000 or so, let’s say, you are phasing out of the benefits that you could get on this additional deduction. So, what is that? That’s a stealth tax, right? It’s a hidden bracket of taxes within the larger brackets. So, you could actually be in a 30% effective bracket between 150 and 160 for example because of the way that reducing deduction is affecting your tax payments. Okay.  It’s in addition to the deduction for those 65 and up which you’ve always had for single filers and joint filers that they can take as a standard deduction. So, it’s termed as seniors pay no taxes on social security benefits. That that’s how the politics of this was framed. It’s not how it works in actuality. In actuality, it is a deduction on income that has nothing to do with whether you filed for social security tax, social security benefits or not.  and it is u contingent on your income staying below certain thresholds. So, you can see every time one of these tax bills comes in, I think, well, maybe they’ll make things easier, and I’ll have less work to do, and people will be less likely to need a financial adviser for these transactions. And inevitably then with something like this, this pops up and it just gets nothing but more complex and it it’s valuable to have some external person or software look at your individual tax situation to see where are you and where could you be from a taxable income perspective. Okay. So, we’re going to use those 2026 tax brackets to evaluate when should we do Roth conversions, when should we take money out of traditional IAS or not?  Are there windows of time that matter here?  and you know even if somebody used to be if somebody came at you know age 70 to try and have some tax management there was little we could do because the required distribution was going to start at 70 and a half with the delay of the required distribution to age 73 for most people retire all people retiring in the next few years.  that gives us even more room and eventually that’s going to move to 75 as a required distribution age. We’re going to want to use those years potentially to insert some income in there. We’re also going to look at years like that. Do we want to do some capital gain harvesting, tax loss harvesting, tax loss harvesting is a strategy where it says you’re in an investment, it’s gone down in value.  You like being in the market, you want to hold things long term, but you don’t like the loss. Well, you sell an investment, you lock in the loss, you reinvest in something else. It cannot be identical. So, there’s a lot of tricks to that trade, but you can lose harvest in that you can get a tax benefit this year for that loss and remain invested in your portfolio for the long term. That could be a technique. Gain harvesting is going to happen in years where you have very low taxable income. You don’t want you’ve decided you don’t want to do Roth conversion strategies, but you decide that you do want something that’s going to help you reduce tax. Well, if you’re married filing joint and your income’s under $90,000, we could take some capital gains and pay 0% tax on some of those long-term capital gains. So, there’s another window that we might want to consider. There’s a lot of tools in the toolbox. I think this is something, you know, people often will look at in their lives as they close in on retirement and say, “Well, the portfolio is done just fine. I’ve been fine doing this by myself. I kind of didn’t trade in the middle of any market decline. I was confident and I just knew that this was long-term money. I didn’t touch it. Why would I really need any additional help? This is a reason why additional help would be necessary because instead of a situation where you have WN2 income every year and you’re just trying to grow it to the maximum amount you can, right? You want to get raises at work; you want to go to new positions at new companies that pay you more money. That’s the only goal, right? Maximize income. Once you get beyond that taxable income stage, you are now retired. Then income from a tax perspective is totally flexible. You have a lot of choice over where you’re going to take money from and the places you choose to draw that money from are going to have huge impacts on your taxes. So, what my general advice would be is to try and optimize your lifetime taxes, which means if you’re 65 and you were thinking of paying zero taxes in 2025, 2026, then how about you consider another option? How about you consider looking at a 10-year strategy and looking at the tax brackets across those 10 years and deciding, well, what if I engaged in some strategies that kicked my income slightly up in these early years to adjust my income down in later years, especially if I’m playing with brackets like 24 versus 32 or 10, 12 versus 22. These are places where those multi-year tax analyses can really help.  adjusting income timing, right? When am I going to receive the income can make a big difference as we’ve been discussing?  I want to utilize my tax loss harvesting opportunities available to me. And then I want to implement estate tax planning which really just has to do with am likely to move at some stage and if I am likely to move what’s the likely state to move to?  That can help me on an income tax perspective. It can also help me on an estate tax perspective. This is spoken as a Maryland resident, right? Where I live in Maryland and Maryland has its own state its state tax and its own   inheritance tax. I did one of the almost I think might be the only state in the union that has both an inheritance tax and an estate tax in play. And so, moving out of the state of Maryland for certain people can be a very advantageous move not just from an income tax perspective but from an estate tax perspective. And the last is to use charitable giving strategies. And I can’t emphasize this one enough. It gets one bullet on this presentation, but it’s really important.  the reasoning here is many people have a design at their death to pass money to charity, but charitable giving is one of the strongest tax deductions available to us in the tax code. It’s not to say that we should give charitably to get to save on taxes. That should never be the purpose because when I give charitably, I’m losing dollars. So, but only for those who are already inclined to give charitably, why not move some of your charitable giving into your lifetime to get an income tax benefit to that charitable giving that you are not going to get if you wait until your death in many cases. Okay.  lots to consider. So, what are the tools we have available to us that Savant is thinking about? We’re thinking about well number one let’s use funds in in in our investment plan that are going to have low turnover and low costs. Costs are the enemy of performance and high turnover is the enemy of performance too because it creates taxes. Okay. So, tax managed funds matter for certain clients. It matters to have municipal bonds. If you’re in a very high tax bracket and you have to invest in bonds in a taxable account, we should be looking at municipal bonds.  We can tax engineer asset locate. What does that mean? This is, you know, an interesting approach. It says, well, if I have a taxable account, a Roth IRA, and a traditional IRA, where should I put which investments? And the simplest thing to say that, you know, probably the easiest to grasp intuitively is, well, I want that Roth IRA in the most aggressive investments because it grows tax free. One of the less intuitive ones is to say, well, I want the traditional IRA to grow slower than the other two accounts. I want my higher growth stuff in the taxable account, the Roth account. It’s not that I don’t want the traditional to grow. It’s just if I could pick where growth happens, that’s the worst place to have it happen. And so, I’ve had people come to me in the situations where they have their most aggressive investments in their traditional IRA or 401k and they’re very proud of it because it’s experienced a lot of growth. And I can’t argue growth is good, but I can say there’s better places for growth, right? So, designing to locate the assets in the right type matters. Tax loss harvesting, we’ve discussed. Roth conversions, we’ve discussed planning distributions over multiple years. We have all kinds of tools to help with that. Engineering our estate, making sure that we are leaving assets to our kids in the best format. Let me give an example of this. We’ve been talking about how if I move money over to a Roth IRA, I get tax-free growth for the rest of my life. But it’s not just for the rest of my life. Because when I die and if I’m leaving my IAS to my children, any money that’s left to my children in a traditional IRA, traditional 401k, any of those types of vehicles, they’re going to have 10 years to take the money out. No stretch over their lifetime. Up until about 5 years ago, they could just take it out over the rest of their lifetime. They can’t do that now. They have 10 years to take that money out. Okay? But if they put it in a Roth, you put it in a Roth, you get 10 extra years of tax-free growth. So, one situation potentially puts adult children in a tax bind where they’re trying to qualify for, for example, financial aid for their children for college and they’re having to recognize additional taxable income on their   1040 in those tax years, which limits their ability to get aid. And another method where it’s all Roth and it grows another 10 years tax free. So, I know that some people out there say, “Well, whatever children get is a windfall to them. I’m not going to worry about that.” That’s okay. But you can in the timing of how you recognize income really affect the dollars that are truly inherited because a dollar inherited in a traditional IRA is not worth near as much as a dollar inherited in a Roth IRA, for example. Okay. And then we already talked about charitable strategies. Very important to consider over the course of retirement when we’re going to time our charitable giving. Okay, so Roth conversions. Let me dive a little bit deeper into what a Roth conversion is. It’s to decide to transfer money from your pre-tax traditional IRA to a tax-free Roth IRA. And you’re not limited on income at all. You could convert $500,000 from a traditional IRA to a Roth IRA. You have to look at the tax impact because the best way that a Roth conversion is going to make sense is if you have money in another source that you can use to pay the taxes. You move the whole $500,000 out of the Roth IRA to the I out of the traditional IRA to the Roth IRA, but then you’re going to have about$150 $200,000 tax bill that you have some other account that you can use to pay those taxes. Why would you do that? Well, I probably wouldn’t do a $500,000 one. It’s too big. But I can certainly see the event at ad advantage of someone who’s 60 years old and just retiring and is going to be taking   waiting until required distribution age to withdraw from their traditional IRA to take $50,000 a year out of their Roth IRA for the next 13 years. And by having done that, you’ll have moved $650,000 out of a traditional IRA. You’ll have substantially reduced what has to come out of the traditional IRA when you get to 73 and you have grown out a tax-free account. It could be a very low tax strategy depending on what your investments in your portfolio look like. So, once you’ve done that conversion everything in that Roth IRA grows tax free from that point forward. You don’t have to pay taxes when you take money out and you have no required distribution when you reach 73. The government no longer looks at that account. The only reason they want to take money out of a traditional IRA is because they haven’t been paid their taxes yet on a Roth where they’re not going to get any tax dollars. They say just take it out when you want. So that can give you a greater overall investment account for your legacy planning and can reduce your future taxes. Hu huge opportunity for certain people, right? And we just have to look at your individual situation to see if it’s appropriate. So, what do we do though when we contemplate volatility in markets? How do we manage income that way? The first thing I’ll point out that I said earlier is that volatility is unavoidable. You can’t get away from it. It’s going to happen in retirement. However, we can keep volatility in perspective. We can keep you focused on your goals. Let me show you one of the most important charts I’m aware of to help you understand volatility. This is starting in 1979 and going to 2024 and looking at all right what was the total return for the year. That’s the green bar and the red bar. And you can see to start off with there’s only eight years of that time period that the S&P 500 ended the year I’m sorry that Russell 3000 is the index we’re using here.  only eight years in which the Russell 3000 ended the year down. All the rest was up. That looks like a great calm story, but for those of you who were around for 2001 and 2002 or for 2008 and felt what that feels like that that can be really stressful. The interesting thing here is the u the candlesticks that are in this chart. So, you can see candlesticks, like for example 1980 markets ended up over 30% for the year but at the high point they were up over 50% and at the low point they were down almost 20%. So, this is to say that in any year almost every year the markets are going to have a down at some point and the down is generally going to be well below where it ends the year. So, we should expect volatility any an average year we should expect that at some point during the year there’s going to be a 10% drop in the market because if you look at this here’s this 10% needle there’s not that many years where there wasn’t at some point in the year a drop greater than 10%. That’s not to say that, you know, markets are going to end the year that way. It just says that it’s a rough ride over the short term. So, you maintain your sanity. You don’t rely on headlines. And what really gets difficult when you’re in retirement is to stay the course when you’re now withdrawing from the money, right?  It’s not too hard when you’re in your working years and withdrawals are a theoretical future occurrence. It’s a lot harder in years where wait a second, this is money that I need to live on over the course of my retirement. The way that we manage that is with a defensive allocation in the portfolio. So, we need a strong defensive allocation to be able to absorb the down years. Let’s say we have a 20201202 occur again here those three in a row down years. So, eight bad years and three of them happened right on the heels of one another. Well, having a defensive allocation in our portfolio that we can just turn off withdrawals from stocks and only withdraw from the defensive investments can be a real big help to calm the system in a time where markets are dropping substantially that you may not be in a situation where you need that. You may have saved so much relative to your expenses that you can just afford to stay in stocks. But we don’t want to put an allocation so aggressive that when the market drops, you’re going to be inclined to change your allocation, right? That’s when things get bad. Let me show you the data on why. So, if you stayed full stayed fully invested in the S&P 500 over 35 years from 1990 to 2024, you got 10.9% per year. If you just missed the one best day, so you were just out of the market, the one best day, your return drops by.3% per year. And you know, extrapolating it out, let’s just go all the way to the worst. If you just missed 25 trading days, the 25 best single trading days, your return dropped to 6% per year. So, getting out of the market and telling yourself, well, I will get back in when things feel more comfortable by definition is a trade down in investment return. When things feel more comfortable, the market will be priced higher than the point that you exited. The reason you exited was because things felt uncomfortable. And the reason things are going to feel comfortable is because markets have improved. So that trade-off is by definition buying high and selling low, which is the opposite of what we all know what we want to do. But when we get into those difficult environments, it can be tough. So, I just want to say that as we think about maximizing income in retirement, one of the ways we do that is by getting our asset allocation right so that we have a nice strong moat for when the bad years come. We can draw from them and not touch stocks because stocks are going to be volatile. One of the ways you can think about this kind of like a bucket strategy. You can say, “Well, the money that I’m taking the first two years of retirement, I’m going to put in cash, and the money I’m going to take over the next five years after that, I’m going to have in bonds, and the money I’m going to take after that, I’m going to have in kind of a percentage stocks and percentage bonds.” That can help you mentally adjust to a withdrawal mode instead of a saving mode. Let’s talk about minimizing health care costs. So, Milleman’s retiree health cost index in 2024 projected that a healthy 65-year-old couple can expect to spend over almost $400,000 on health care costs in retirement. So, you’re going to spend a lot on health care costs. A lot of that’s going to be Medicare premiums. And so, we want to get Medicare right. Okay? That’s a huge part of retirement. And deciding, for example, between a Medicare standard and a Medicare Advantage plan is a really important decision that has long-term impact. You can get into a Medicare Advantage plan that seems like the lower cost vehicle at the time. realize that you as health care costs rise, you would prefer to be in standard Medicare and you can be rated, meaning that they get to evaluate you on Medicare now for your premium and they can say, “Well, we’re not going to put you on Medicare standard because your health isn’t good enough or we’re going to charge you a much higher premium for Medicare standard. This is not what you want to go through, right? So, you have to be very careful. There are some decisions you make early in retirement that can have long-term implications on your income that we want to make very careful decisions on.” Okay. But as part of our ideal future process, one of the things we’ll take clients through is an evaluation of their health expectations. We look at what your specific health situation is.  It’s not that complex a questionnaire to get to a number that we can then overlay into our retirement income plan to start saying, “Well, here’s a reasonable amount to think you might need in long-term care costs.” and a reasonable age at which you might need them. And that overlay can be really helpful as a stress test to a retirement income plan where otherwise what might just say is well you have u home income home   asset that you’re not going to be drawing from in retirement. So, we’ll just, you know, if you need money for health care costs late in retirement, we’ll just plan on that as a potential asset to sell to be a back stop to assist. That’s the kind of the back of the napkin decision-m that we want to expand on and say, “No, let’s do this more thoroughly. Let’s look at your situation and let’s do an overlay of what long-term costs might look like for you.” Okay. And then last, what we’re trying to do is we’re trying to align our income with our spending goals. And this is really where I’m most passionate about as a financial adviser.  There are people who retire in their early 60s and hold back and hold back and hold back in the interest of saving for potential costs that might come up later on that they have kind of ex expanded mentally to say that they’re much bigger in expense than they really are and they forgo spending. They get to their 80s. They have a lot of money left over and no desire to spend it. and they been living in a house that probably could have used some updates to the bathrooms or the kitchen or added an additional room to the house or moved to a different place or bought a vacation home that they could have afforded to do if they’d really taken a serious look at their assets and income early on. So, what we want to do here is we want to ask the important questions about when is the money needing to be spent, what goals do you have over the course of your retirement, and what can you afford to do? 2026 is an example where you know there have been many strong years of return even if we’re potentially going to have lower returns, right? that that that could be a time frame when you’d want to take a large distribution out from an investment portfolio to help with things that were needed because of how well markets performed for  2023, 2024, and 2025. We just have to look at that, right? So, let’s say I’m retiring at age 60. I’m thinking of updating my kitchen and adding a screen Porsche or I just want to maintain my current lifestyle and retire early. What’s the difference in those two? What if I wait 3 years from now? Could I travel more extensively? And those can be very big differences in outcomes.  and I’m not talking about outcomes in terms of money left over. I’m not talking about outcomes and investment return. I’m talking about quality of life experienced over the course of a retirement. And that’s what you save the money for, right? You’ve done a lot of work over the course of your career saving money to have a great retirement. And to defer that great retirement until you don’t even feel like going out and doing fun things can really be a hidden risk of poor retirement planning. So, we want to watch out for those things. We want to ask the important questions and figure out what is affordable and reasonable. So, we budget for our essentials, lifestyle, and healthcare. Get that car handled. We want to make sure we’re guarding against the things that can go wrong. And then we want to look at what we can spend, and we want to get serious about what that really is. All right. And everybody’s going to have a different situation. Some people are going to say, “Well, if I just have $200,000 reserved, set aside. That’s going to make me feel so much better about all this other spending.” That’s important to figure out because maybe that is the lowest cost. Even though you say, “Well, wait a second. That’s going to be in cash. It’s not going to be earning any money, but it’s leading you to be able to spend what you wanted to spend and not feel worry and concern.” That can make a big difference. True spending and lifestyle costs are unknown.

You just don’t know what they’re going to be. There’s one thing I tell people, I got this from a good friend Carl Richards, who I follow in the world of financial planning. He says one thing we know when we do a financial plan is it’s wrong. Even if we’re planning for retirement the day before you retire, one of the things we know is that the financial plan is wrong. We’re not trying to get it 100% right. We’re trying to point in the right direction and be ready to handle the surprises as they come because every year is going to have a surprise and that’s okay, right? We can plan for that. We can adjust for that. But let’s get that into our retirement income plan to be able to handle uncertainty. Market returns will change. Inflation will change. Interest rates will change. There’s going to be life events in your life and the lives of those you care about that are all going to be surprises. That’s okay. We can build that into the plan. So, I just, you know, I can’t emphasize enough the importance of personal financial planning being personal. It’s much more about your life than it is anyone else’s. So, articles, while they might seem helpful and educational, may not get you all the story that you need about your own financial life. And having someone sit down with you and looking at your own personal situation can deliver a lot more value. So, what would I recommend to you overall as you’re trying to figure out retirement income? Sharpen your pencil. Don’t think of it as a one-time initiative. Look at how taxes work this year. Look at how they work next year. Look at how they work the year after that. There will be new tax bills.  Make sure you’re planning for the big-ticket items when they should happen. Don’t put off a big-ticket item unreasonably far. If you can afford to spend it earlier, prioritize your flexibility and be ready to make adjustments. But when you have social security and Medicare and pension and investment decisions, take it’s the world of construction, right? Measure twice once. Take time to think about those decisions. If you think about moving somewhere in retirement, test it out. B, you know, rent an Airbnb in that place for a while first. You think, well, that’s a lot of cost. It’s a lot lower cost than making the wrong housing purchase. So, just be careful. and then factor in your healthcare and longevity. You can do this. All right?  And I would say, you know, if you would like to have some outside review of your situation, a Savon adviser would be glad to sit down with you. So, you can click the link that’s going to come in the chat at this point to schedule a free 15-minute introductory call. Okay? We’re we we’re more than happy to talk to you about your personal situation and whether you know, you kind of fall in that general category of no, everything looks good. you’re kind of a pretty straightforward retirement to oh wow there’s a lot of variables here that that that bear consideration. It’s about knowing the right questions to ask. Okay. And not being just it’s going to be your first time seeing the movie and there are a lot of people who have seen this movie before and can help ask   hidden questions to draw out things that might seem well that was just intuitive to well no there were more factors at play than you thought. Okay. That was my presentation. I’m going to turn to questions here. Let me see what I can get to with the time we’ve got remaining. Okay., all right. What kinds of situations are unique that need individual attention? Oh, okay. That’s actually relevant to what I just talked about. I would say two spouses that are of very different ages is a place where there’s a lot of work to be done.  Having an adult child with special needs, having a very large charitable intent, that’s going to be unique.  Living in a high tax state is going to be really unique.  having a diversified bucket of accounts, right? A lot of traditional IRA that when you have a very large traditional IRA, that’s going to be something that’s going to trigger, but especially if you have taxable account and Roth account with that, we’re going to want to look at that carefully. So, those are some factors that that that maybe just help you kind of say, “Oh, wait. Maybe I’m in that territory, right?”, if you stand to inherit a great deal of money. , if you’re worried about how children or a spouse are going to handle money when you’re gone, there will probably be two others. Okay. , is it better to take from a Roth in early years to avoid taxes? If not, when should I take money out of a Roth IRA? I get it. Okay. Yeah. Because you save money to a Roth IRA, you’re like, “Well, that’s my best asset, right? It’s tax free. I should take money out of that IRA.” Yeah.  it depends on what we’re trying to optimize for. So, if we’re trying to just optimize for taxes this year, there’s no question. We just take it from the Roth IRA this year. We take zero tax. Wasn’t that nice? But if we’re trying to optimize for inheritance, then I’m probably never going to draw from that Roth IRA. I’m going to I’m going to defer taking money from that as long as I can. and I’m going to live off distributions from my taxable brokerage account and my traditional IAS as opposed to taking from my Roth. So that those are the two extremes and that we’re probably going to live somewhere in the middle, right? So maybe we’re going to take from a Roth IRA in years where we’re going to take a very large amount out of the portfolio that would otherwise trigger really high taxes. Maybe we’re going to target using the Roth IRA in that year to keep our taxes down. Something like that. Okay. And I think I can do one more question with the time we’ve got, what is the better asset for kids to inherit? All right, that’s somewhat similar, but a little different. What I’d say here, and I don’t think I covered it in much detail on this call, is that a taxable account and a Roth IRA are not all that different from a tax perspective to inheritors, right? Those who inherit from us.  a taxable account at your death, the assets in it will receive what’s called a step up in cost basis. Meaning, hey, I didn’t want to sell any of that Exxon stock in there because it was at hundreds of thousands of dollars of gain. Well, if I hold it in my own personal portfolio until I die, it doesn’t matter what I paid for it after I die. It matters what it was worth as of my date of death, and then my kids get to inherit that, sell it tax free, right?  The only advantage of the Roth IRA at that point is it gets 10 more years of tax-free growth where the taxable account just has to be received right away. The really bad asset to inherit is a traditional IRA because of this new clock that they’ve put on it where you have 10 years to take it all out.  That is really disadvantageous. So, it doesn’t mean you don’t leave that to your kids, but it does mean, for example, that if you had a large charitable intent, that’s the place to focus your charitable intent is to leave money from that IRA because it’s not going to be fun asset to inherit by individuals. All right, I think that’s the time we have for questions today. As I said before, make sure you put in the survey if we didn’t get to one of your questions, and I know we didn’t, , that’s okay. put it in in in the question afterwards and we’ll make sure we get somebody to give you a good response on that question that you posed. All right. Best of luck to you as you save for retirement and then you start into your retirement income years.  They have the potential to just be wonderful, and I would encourage you to have confidence and optimism with what you do and that really involves getting good advice. When you get good advice, you can feel in a position of strength. Thank you for your time. Have a wonderful day. If you enjoyed this webinar, visit savantwealth.com/guides and download our complimentary guide books, checklists, and other useful financial resources.