FALL 2026

It’s that beautiful time of year when the air outside is comfortable and crisp, pumpkins appear on every front stoop, and the trees erupt into spectacular shades of red, yellow, orange and brown. At least they do here in the northeast. As you head farther south, they experience a different version of seasonal fall change. But at least they get to see an array of colors too.

For us retirement geeks, this is an exciting time as we await the Cost-of-Living Adjustment (COLA) announcements from the federal government. Over the next few weeks, the Internal Revenue Service (IRS) and the Social Security Administration (SSA) will be announcing increases in tax brackets, contribution limits and social security benefits, among other things, as a result of inflation adjustments. We also will be getting Medicare premium increase updates, so not all news will put a smile on your face.

Of course, higher COLAs occur because our everyday costs are going up. So the smile you get when you learn there may be more money in your social security check most likely will disappear once you get to the grocery store or gas station. Frankly it is probably more accurate to describe the news of a social security increase as one that will lessen your frown since you’ve already been living with higher prices.

Inflation is a significant issue in retirement, and it is probably not the first time you’ve seen someone write about it. However, the #2^ndHalfPlan newsletter tries not to talk about what everyone else is discussing. We tackle issues that may not be top of mind but are just as important. Sure, you may say “why do I care” until we hit that one topic that makes you go “Eureka!” And until you come across that topic, enjoy the memes. This quarter, we cover a do-over option for social security and a tax-friendly option for people with company stock in their 401(k). We will start with what could be the aforementioned eureka moment for many of you: permission to spend.

PERMISSION SLIP NOT INCLUDED

A few months ago, I ran into Stephanie's office to tell her I'd just read one of the best retirement articles I had come across in a long time. Before I could finish, she asked if it was Dan Haylett's piece.

It was. Who knew that after 25+ years of working together she may know something about me?

Dan's article, The Permission Paradox, addresses something we see all the time. For most of our lives, permission for the way we live is given from somewhere else. Your paycheck gives you permission to spend. Your employer gives you permission to take a vacation. Then you retire, the paycheck stops, and suddenly the only person left to answer "Am I allowed to do this?" is you.

And this isn't only about money. We spend enormous effort making sure we have a retirement plan to last 30 or 40 years. But, to be honest, you may not have 30 or 40 years to do all the things you want to do. You might run out of money. You will run out of time.

We invited Dan to join us on our podcast to discuss this important insight. Together, we talked about why it’s so hard to shift into a spending mindset. We explored ways to successfully adjust our thinking.

After Dan logged off, I announced to Stephanie that I hated him. He captured, in one simple article title, how to sum up something I've been trying to explain to clients for years. Ok, so maybe I didn’t hate him. Perhaps it was something closer to envy at the succinct way he explained one of the main issues faced by retirees today.

A newsletter blurb can't do this one justice. But if you've ever looked at something you could afford and still thought, "I probably shouldn't," listen to this episode.

SOCIAL SECURITY LUMP-SUM OPTION

Let’s pivot and take a deep dive into social security. One of the stress points for many people when talking about social security is the concern about making a decision that cannot be undone. It is a legitimate concern, but our Social Security system is more flexible than most assume. There are times when you can change your mind.

For example, after you start your benefit, you have 12 months to change your mind. You can withdraw your application, pay back what you've received, and it is essentially as if you never filed at all. Once you reach Full Retirement Age (FRA), you can also suspend your benefit and let it start growing again, up until age 70, even if you filed early.

But there is yet another feature of this program that is worth understanding – Time Travel.

Here's a Social Security feature many people have not heard about: if you file after reaching FRA, the SSA may let you backdate your application by up to six months, depending on how many months have passed since you hit your FRA. This is called a Retroactive Filing. For instance, if your age is FRA and two months, then you can backdate your application retroactively by two months. You're essentially telling them, "I wish I'd filed two months ago," and they'll cut you a lump-sum check for those now-missed months.

It sounds like free money. It isn't.

If the backdate lands before age 70 (and if it doesn’t why were you waiting?), you're also giving back some of the Delayed Retirement Credits you earned by waiting — a bigger check today in exchange for a smaller one for the rest of your life. DRCs are earned at 2/3 of 1% per month after FRA, up until you reach age 70. This equates to a 4% difference in your monthly check if you go back for the whole six months. Whether that trade is worth it depends on your health, your cash needs, and (if you're the higher earner) the fact that those credits can also boost your spouse's survivor benefit down the road. There's a Medicare/HSA wrinkle too, if you delayed Part A to keep funding an HSA.

Why would you consider this option? The most obvious (and depressing) reason is the doctor informs you your life expectancy is a lot shorter than you thought. As you think about this option, be sure to consider whether the size of your benefit is higher than your spouse’s. If yours is larger, then you may not want to file retroactively because your spouse would not inherit as big of a survivor benefit. If yours is smaller, or if you’re single, then you don’t have to worry about passing on the benefit after you’re gone.

In a less depressing scenario, maybe you and your spouse were planning to wait until age 70 to claim the benefit but, after talking with a brilliant, unnamed, retirement planner, you realize it makes more sense for one of you to claim it earlier. Perhaps you need a chunk of cash and don’t have another option. The trade-off is you will be getting less money each month for the rest of your life. However, if your situation requires cash now, then this could be a solution.

Moral of the story: Social Security will let you change the past. Just remember that changing the past changes the future, too.

NUA & 401(k)s

Deciding whether to move an old retirement plan usually isn't a tax question — you’re deciding if it should go into an IRA, stay where it is or move to your new employer’s plan, if you are still working. Yes, if you decide to just take the money out of the plan and spend it, that’s taxable, but not a common choice.

But if your old 401(k) holds some shares of your employer's stock, taxes can make that decision interesting.

That’s because there’s a specific tax break for this scenario: Net Unrealized Appreciation, mercifully shortened to NUA.

Fewer plans offer company stock than they used to. But if yours does, then you may have heard rumors about it, even without the details. Here they are.

Say your 401(k) holds company stock worth $500,000, with a $100,000 cost basis (what you paid for it). Roll it into another plan or an IRA, and the full $500,000 eventually gets taxed as ordinary income. Move the stock (the actual stock, not the proceeds) into a taxable account instead, and you owe ordinary income tax on just the $100,000 basis now — the $400,000 gain gets long-term capital gains treatment whenever you sell, even the next day. Since long-term capital gains rates generally run lower than ordinary income rates, NUA can work significantly in your favor.

Yes, paying tax on an additional $100,000 can sting. But pain now may mean less pain later.

The IRS attaches conditions. Your entire balance from that employer's plan of the same type must be paid out within one calendar year, and it’s tied to four ”triggers”: turning 59½, leaving the job (in IRS speak this is called “separation from service”), death, or (if self-employed) disability. Timing is strict — taking money out of your account after any one of these triggers becomes effective will start the clock, but missing the year-end payout kills the NUA option, although another trigger can reopen the door later.

Don't start this at year-end, either. This process takes time, as anyone who's moved an old 401(k) knows. The account has to be fully empty by December 31, and that includes late additions: a dividend or forfeiture reallocation that shows up before year-end has to be swept out too, or you lose the tax benefit.

This isn't always an easy call. You're paying tax on the basis now (and maybe the 10% penalty if no exception exists), so that math doesn't always favor NUA, especially if you expect a lower bracket in retirement. It is something to consider with the advice of skilled financial advisor or tax professional. NUA is a genuinely useful tool. But just because you can use it doesn't mean you should.

We're not writing this because the December 31 deadline is looming. Think of this as planning for whenever your next trigger event happens — next year, or well down the road — not a last-minute scramble.

Decide before you roll anything over. After, changing your mind generally isn't on the table.

THAT’S ALL, FOLKS

As is the tradition with the Fall issue, please remember to review your accounts before year end. Have you taken your RMDs? Are you aware of what your capital gains are for the year? Have all of your charitable gifts been completed? Remember, once December 31^st comes and goes, you’re normally stuck with those numbers when April 15^th arrives.

Since the shameless promoting of that marvelous podcast Take Back Retirement happened earlier in the newsletter, and this part is dedicated to self-promotion, please share this newsletter with people you know who might benefit from our wisdom (or should it be “wisdom?”). If someone did send this to you, you can start getting your own copy here: #2ndHalfPlan Newsletter Sign-up

Yes, we covered some heavy stuff in this issue. Please remember, we talk about all of this so it’s easier for you to relish the things you want to enjoy down the road. Does anyone HAVE to work for the rest of their life?

As always, we thank you for taking time to read this newsletter. Also please follow us on Facebook for thoughts in between newsletters.

Do not be shy about contacting us to discuss anything you feel deserves a more in-depth coverage. And if it allows for bad memes, all the better.

Thank you,

Kevin