SPRING 2026

Greetings and salutations, friends. We appreciate you taking the time to read our latest pontifications as we approach that greatest of days on the calendar: TAX DAY!

Now, we cater to a wide range of readers here and, for some of you, Tax Day is a big deal. To our CPA/EA readers, we offer our respect and encouragement that, with the arrival of Tax Day, you are finally on the brink of getting some sleep for the first time in weeks, maybe.

After offering up seasonal veneration to our tax pro friends, let’s move on to sunnier topics. I, for one, am excited for the approach of warmer weather. Unfortunately, that also means having to get ready for bathing suit season. It is a real challenge for us middle-aged men, always being objectified:

It’s not often both tax preparers and us fat dudes get a special shout out, so you might question what could possibly follow on the newsletter’s agenda with an opening like this one. Well, wait no more. Prepare to be riveted by such topics as the Earnings Test/Bad Advice, Beneficiary IRAs, and the ever-popular Taxes!

RMDs & Taxes

As we file our taxes this year, how many of us actually celebrate when we are able to keep our tax bill lower than anticipated? I know I do. While we’re in the workforce, most of us don’t have much flexibility in controlling our income. But once we enter retirement — when income is primarily Social Security and savings — it becomes easier (not easy, just easier) to control our income, and consequently, our taxes.

In the beginning of retirement, we often focus on keeping distributions low since lower income can mean lower taxes, lower Medicare premiums (the dreaded IRMMA surcharge), and less Social Security taxation, in addition to wanting to preserve your savings to last a long lifetime. However, this is more of a delay than true avoidance.

Once the Required Minimum Distributions (RMDs) from our retirement accounts kick in at age 73 (for now), we lose some flexibility — and the tax risk can actually increase each year. The issue is that the percentage of your pre-tax retirement accounts (not Roth IRAs) that must be withdrawn rises over time. Assuming reasonable investment returns, your distributions can continue increasing for years before they ever start reducing the account balance.

For example, you don’t have to take more than 6% of your retirement account until you hit your mid-80s. Meanwhile the average return earned in a "typical" (60/40 allocation) account has been around 7%. This means your balance grows despite withdrawing money. To be clear, this is not the worst problem to have during retirement.

What this means is we potentially could win the Tax Battle of one retirement year but lose the Lifetime Tax War. When that happens, several things tend to show up at once. Higher taxable income pushes you into a higher bracket. Medicare IRMAA premiums increase. More of your Social Security benefits can become taxable. Some deductions will be reduced or lost completely. None of this is happening because you are spending more — it is happening because you’re forced to take more income.

This is the tradeoff that often gets missed. Minimizing income early in retirement can feel like a win, but it may simply be postponing a larger and less manageable problem later.

That doesn’t mean the goal should be to pay more tax today just for the sake of it. It means the goal is to be intentional about drawing income over the course of retirement. Money taken from a retirement fund does not necessarily have to be spent but can be converted into a Roth IRA (surprise, we’re mentioning Roth Conversions) or a savings/investment account. It’s choosing strategically when to pay those withdrawals. In some cases, that may mean using the early retirement years — and the window before RMDs begin — to receive income on your terms instead of the IRS’s.

Planning in retirement is not just about how much you have. It is about how and when you use it. The difference between those two can determine whether your income remains flexible… or eventually becomes forced.

Inherited Roth IRAs

One of the advantages of a Roth retirement account is that there is no RMD. You can keep your money in your account for as long as you want. However, that statement stops being true when we start talking about inherited Roth accounts. For an inherited Roth, you do have to take the money out.

While this has always been true, when the SECURE Act was passed back in 2019 it made inherited Roths even more complicated, as it did with all inherited retirement accounts.

As a reminder, there are now three types of beneficiaries when it comes to retirement accounts:

· Non-Designated Beneficiaries (NDBs) — entities like estates, charities, or certain trusts that have no "life expectancy" to measure. They follow either a 5-year rule (if the owner died before the Required Beginning Date (RBD) to take RMD kicked in) or the remaining life-expectancy rule based on the deceased owner (if after the RBD).

· Eligible Designated Beneficiaries (EDBs) — the protected group with the most flexibility. This includes the surviving spouse, the owner's minor child, a disabled individual, a chronically ill individual, or someone not more than 10 years younger than the owner.

· Non-Eligible Designated Beneficiaries (NEDBs) — generally adult children and most other named individual beneficiaries. They're subject to the 10-year rule with no stretch option. I’ll explain what this means below.

In the interest of time, we’ll ignore NDBs here, although I strongly encourage anyone who is using trusts to talk more with us and your estate lawyer to make sure these trusts are still the best way to express your wishes.

For the NEDBs, the conversation is straight forward. All you need to worry about is making sure you empty the account within 10 years. You do not have any annual distribution requirements like you do with inherited traditional retirement accounts. (Traditional means whomever is taking the money out has to pay income taxes on it as opposed to a Roth which is not taxed in most scenarios).

It is when we get to EDBs that the conversation gets “interesting”. That is because EDBs have a choice in how the distributions can be taken. First option, they can use life expectancy, which means annual RMDs are calculated using the Single Life Expectancy table and then reduced each year by a life-expectancy factor of one. So if you inherit a Roth at age 71, the divisor is 18 which means you could keep this account for 18 years but you have to take some money out each year.

Alternatively, EDBs can elect to use the 10-year rule that NEDBs use. Even though the account needs to be emptied within 10 years, you do not have to take any money out in years 1-9. This means the entire account can sit untouched, growing tax-free, for 10 years.

Which option is better? Like most retirement-related things, the answer is “It depends.” Different situations could make either option the better option. This is yet another reason why understanding all of the rules allows you to take advantage of all your options.

In what some may call burying the lede, if you are the spouse of the deceased account owner, then you can ignore all of this if you want and just make the IRA yours. Then you don’t have to worry about any of these damn rules.

SOCIAL SECURITY EARNINGS TEST

One of the more interesting features of this job is getting to hear all of these “Can’t Miss” strategies that clients ask us about. Sometimes they are factually correct (or at least mostly correct), but the execution can be challenging without invoking the ire of the IRS (Two I hear a lot about are owning either physical gold or a rental property within an IRA).

Perhaps those ideas could work. But other problematic strategies are the ones that are just out and out wrong. We’re not talking about scams, just to be clear, but about random advice you hear around the water cooler, at the PTA meeting or on the Internet. The most egregious one that I’ve heard (and the penalties are brutal) is you don't have to pay income tax.

Recently we heard a new one that left us shaking our collective heads. Another advisor was talking about a client who found a surefire way to avoid the earnings test on Social Security benefits. The client thought that by deferring most of his income into his 401(k) he could keep his income below the threshold and avoid any of his Social Security payment from being reduced for earning too much.

As a reminder, the earnings test comes into play when you claim your Social Security benefit before you reach your Full Retirement Age (FRA). Prior to FRA, if you earn over a certain amount (as low as $24,480 in 2026), the SSA will withhold part of your monthly check for each dollar you’re over. Yes, if your earnings are high enough, your entire check could be held back.

So while the gentleman was correct that keeping his income low would work to preserve his benefit, his strategy missed one simple fact. Retirement plan contributions are reflected in Box 1 of your W-2 form but the SSA looks at Box 3 (Social Security Wages) for the earnings test. Guess which box is not reduced for 401(k) plan contributions?

Clearly his plan did not work. However, the purpose of this story isn’t to say “look at this silly idea” but to remind everyone that there are a LOT of schemes out there that will only serve to put the person who attempts them into the crosshairs of an IRS auditor. Talk with your financial advisor (hopefully us!) or tax pro before jumping on that next great idea you see on TikTok, etc.

ROUNDING THIRD AND HEADING FOR HOME

Yep, baseball season has started so it’s time to dust off my favorite broadcast sign-off.​

By now, most readers know we like to talk about all things retirement, but we will concede that there could be tangential topics worthy of inclusion. If there is anything you would like to see discussed here or think there is a topic we couldn’t possibly work stupid memes into, please reach out to throw down your challenge... er, make your suggestion.

Following up on last quarter’s newsletter topic of Donor Advised Funds (DAFs), and to shamelessly plug our podcast Take Back Retirement, we recently did an episode about charitable giving, including DAFs and Qualified Charitable Distributions. We spent more time talking about different options than we did in the newsletter, so please listen to the podcast to learn more.

The upside to the podcast for most of you is the complete lack of silly memes, plus you get to hear Stephanie’s melodic voice. The downside? You must suffer through Kevin’s droning. For those of you who do enjoy the memes and suspect that means we’re exaggerating about droning…

As always, we thank you for taking time to read this newsletter. We hope that one topic, at least, gets you thinking about doing something differently or confirms how you are currently doing things.

Moreover, do not be shy about contacting us to discuss anything you feel deserves a more in-depth investigation. It doesn’t have to be something covered here; it can be anything except the designated hitter rule. That topic will just generate a one-sided rant from Kevin.

Play ball!

Thank you,

Kevin