“Moderation is best in all things.” To which I’d add: including moderation (!) Occasionally we have unbudgeted (aka spontaneous) expenditures of some size. We were shopping for a new sofa and my wife saw a dining set that spoke to her. We ended up with both. I decided to take up a new hobby that required a sizable capital purchase to pursue. If we only stick to our budget there’s a very high likelihood we’ll outlive our savings. My only child and her husband both have great careers and earn enough to be comfortable, send their kids to private schools, fund their 529s, and use up their annual vacation allotment. They’ll be fine with our without anything left over from us. I expect that as I get into my 80s I’ll be in a better position to ‘give with warm hands’. Until then, it’s about living the life we worked for.
While I understand your desire to max out AGI/MAGI up to the various bracket limits, if we’re only talking about $1k or $2k for the non-itemizers, seems to me like that’s trying to run a little too close to the wind. And anyway, IRMAA is based on MAGI so I don’t think the answer to this question affects that. In any case, I’ve just gone through my tax planning for the year and I’m leaving myself a healthy amount of leeway on my calculations in case dividends or interest come in a bit more than I expected.
Great and timely article, Adam. Thank you! The timing is good for me because I’m in the midst of a rebalancing of my portfolio as we come up on your end. I’m looking at taking some capital gains off the table and reinvesting in either the same positions or otherwise shifting my asset allocation. One of the things I am just getting started with is rotating out of some of the bond ETF positions I’m holding and moving into REITs via VNQ. Any thoughts on using alternatives like REITs as a hedge against equity and bond market volatility?
Sorry to hear about your abrupt forced change of employment. Sounds like you are well-prepared for it, though, financially. Nicely done! I was in a similar situation - laid off at 58, one year into what was supposed to be a 3 year swan-song job. I spent a couple months looking for another job until I decided I was actually well and truly done with working. We had the numbers, and had lost the passion for my work. So I told my wife “I’m done.” Fortunately I’d had some “practice retirements” during my career -layoffs lasting up to 2 years. So I knew a little about having nothing but time on my hands each day. I’ve been out for 8 years now and never looked back. Love retirement! Coincidentally, this article just dropped today on another site I follow - might be of interest to you: https://esimoney.com/win-the-retirement-game-joy-gratitude-humor-and-purpose/ Good luck with your journey - I’m sure you will be fine once you reorient to this new way of being.
PS - as I write this the stock market is continuing its decline, the S&P down around 3.5% YTD, and about 5% off its recent record highs. This is a good time to do a gut check on how confident you are in your current decumulation set up. Are you feeling at all queasy as you watch the daily stream of red parade across the ticker? Or are you feeling calm or maybe even a little excited, filled with the anticipation of a great buying opportunity or a chance to do some Roth conversions?
As a thought experiment I guess this is one way to help each person discover any “blind spots” they might have related to either of these two. As an actual dichotomy, I don’t see the need to choose. It’s like asking a right-footed soccer play which leg is more important, their left or their right? As defined benefit pensions go the way of the dodo bird, a growing number of retirees are faced with turning their hard-earned savings into an income stream that they need to make last for 20-40 years or more (usually without ever knowing how long they will actually live). Not an easy trick to pull off, but doable if the right withdrawal strategy and portfolio management approach is used. The reality is that either one of these - inflation or bear market - has the potential to derail a retiree’s decumulation plan, and the ways to protect against them are well-known and relatively easy to implement. Both are a good idea, and having just one is going to be inadequate to protect against the other. So - asset allocation to buffer market volatility and inflation over the long haul; and a fixed income source (bonds, pension, social security, passive income) to protect against sequence of returns risk when cash is needed during a bear market. Some people like a bond ladder made up of TIPS to provide a mid- to long-term source of inflation-protected cash.
Really depends on “where the lines cross” in terms of break-even age. I’ve run this analysis is income lab and in our case it doesn’t break even until I’m in my late 80s. So many things can change between now and then in terms of my health, the tax code and numerous other things. so to me, it doesn’t make sense to sustain a sure immediate tax bill that is way out of the ordinary and would require me to incur capital gains on investments just to pay it. i’d rather take my chances and see how things pan out in terms of the tax laws associated with the huge tax bills that these relatively new accounts will incur for the older retirees who started saving in them before anyone really understood how the decumulation from them would pan out.
If you have a enough to itemize from any combination of high state taxes, mortgage interest, property tax, and charitable contributions (not counting the first 0.5% of AGI in your cash contributions), you may find that you have already exceeded your standard deduction amount and can itemize. From there, all your charitable cash donations are deductible on Schedule A after not counting the first 0.5% of your AGI. Higher income taxpayers sometimes will bunch together their contributions and only make one bigger contribution every couple of years in order to push them into having enough to itemize.
Great post, Adam. Love the simplicity of just targeting the bracket rather than having the goal of converting all pre-tax to Roth by a certain date no matter what the early tax hit is. In terms of total life-time taxes, seems to me state taxes figure into the calculation, too, for people who live in high-tax states like California (which is where I live). The progressive income tax brackets here go in roughly 1% steps from 0 to over 13%. Most retirees won’t exceed 9.3% with its upper income limit of $740,000 MFJ. We hit the 8% bracket, though, in 2025 and will again in 2026 with very little ordinary income, no Roth conversions - just LTCG and qualified dividends. As a result, our state tax will exceed our Federal tax in 2026 by 4 to 1. The other consideration for us is the ACA subsidy, which my wife will need for another 7 years. This costs us another $7000 because every dollar counts against the ACA subsidy income threshold whether it’s qualified dividends or regular income. So lots to consider when trying to minimize lifetime taxes in retirement.
So what are one’s ‘means’ if one has no pension; and social security and dividend income aren’t enough to cover one’s annual spending? In decumulating one’s portfolio for retirement income, which is what an ever-increasing percentage of retirees are faced with, ‘means’ becomes an extraordinarily squishy notion. How long are you going to live? Are you going to have huge medical expenses along the way? What if the market tanks? What if the market takes off and never stops? What if inflation goes through the roof? Or remains dead flat? For most new retirees, any sort of concrete number for means very quickly becomes fuzzy, if not meaningless. I like to think of more as analogous to an electron probability cloud. The goal isn’t to know what the number is at any given time. It’s to understand what it’s liable to be, and what I’m going to do if when it turns out to be different
Comments
“Moderation is best in all things.” To which I’d add: including moderation (!) Occasionally we have unbudgeted (aka spontaneous) expenditures of some size. We were shopping for a new sofa and my wife saw a dining set that spoke to her. We ended up with both. I decided to take up a new hobby that required a sizable capital purchase to pursue. If we only stick to our budget there’s a very high likelihood we’ll outlive our savings. My only child and her husband both have great careers and earn enough to be comfortable, send their kids to private schools, fund their 529s, and use up their annual vacation allotment. They’ll be fine with our without anything left over from us. I expect that as I get into my 80s I’ll be in a better position to ‘give with warm hands’. Until then, it’s about living the life we worked for.
Post: Anyone For S.K.I.ing?
Link to comment from September 26, 2026
While I understand your desire to max out AGI/MAGI up to the various bracket limits, if we’re only talking about $1k or $2k for the non-itemizers, seems to me like that’s trying to run a little too close to the wind. And anyway, IRMAA is based on MAGI so I don’t think the answer to this question affects that. In any case, I’ve just gone through my tax planning for the year and I’m leaving myself a healthy amount of leeway on my calculations in case dividends or interest come in a bit more than I expected.
Post: Does the new-for-2026 $1000/$2000 charitable deduction for non-itemizers reduce AGI?
Link to comment from September 26, 2026
Great and timely article, Adam. Thank you! The timing is good for me because I’m in the midst of a rebalancing of my portfolio as we come up on your end. I’m looking at taking some capital gains off the table and reinvesting in either the same positions or otherwise shifting my asset allocation. One of the things I am just getting started with is rotating out of some of the bond ETF positions I’m holding and moving into REITs via VNQ. Any thoughts on using alternatives like REITs as a hedge against equity and bond market volatility?
Post: Structuring Bonds
Link to comment from September 19, 2026
Sorry to hear about your abrupt forced change of employment. Sounds like you are well-prepared for it, though, financially. Nicely done! I was in a similar situation - laid off at 58, one year into what was supposed to be a 3 year swan-song job. I spent a couple months looking for another job until I decided I was actually well and truly done with working. We had the numbers, and had lost the passion for my work. So I told my wife “I’m done.” Fortunately I’d had some “practice retirements” during my career -layoffs lasting up to 2 years. So I knew a little about having nothing but time on my hands each day. I’ve been out for 8 years now and never looked back. Love retirement! Coincidentally, this article just dropped today on another site I follow - might be of interest to you: https://esimoney.com/win-the-retirement-game-joy-gratitude-humor-and-purpose/ Good luck with your journey - I’m sure you will be fine once you reorient to this new way of being.
Post: Fear of the Unknown…
Link to comment from July 25, 2026
PS - as I write this the stock market is continuing its decline, the S&P down around 3.5% YTD, and about 5% off its recent record highs. This is a good time to do a gut check on how confident you are in your current decumulation set up. Are you feeling at all queasy as you watch the daily stream of red parade across the ticker? Or are you feeling calm or maybe even a little excited, filled with the anticipation of a great buying opportunity or a chance to do some Roth conversions?
Post: What, Me Worry?
Link to comment from March 14, 2026
As a thought experiment I guess this is one way to help each person discover any “blind spots” they might have related to either of these two. As an actual dichotomy, I don’t see the need to choose. It’s like asking a right-footed soccer play which leg is more important, their left or their right? As defined benefit pensions go the way of the dodo bird, a growing number of retirees are faced with turning their hard-earned savings into an income stream that they need to make last for 20-40 years or more (usually without ever knowing how long they will actually live). Not an easy trick to pull off, but doable if the right withdrawal strategy and portfolio management approach is used. The reality is that either one of these - inflation or bear market - has the potential to derail a retiree’s decumulation plan, and the ways to protect against them are well-known and relatively easy to implement. Both are a good idea, and having just one is going to be inadequate to protect against the other. So - asset allocation to buffer market volatility and inflation over the long haul; and a fixed income source (bonds, pension, social security, passive income) to protect against sequence of returns risk when cash is needed during a bear market. Some people like a bond ladder made up of TIPS to provide a mid- to long-term source of inflation-protected cash.
Post: What, Me Worry?
Link to comment from March 14, 2026
Really depends on “where the lines cross” in terms of break-even age. I’ve run this analysis is income lab and in our case it doesn’t break even until I’m in my late 80s. So many things can change between now and then in terms of my health, the tax code and numerous other things. so to me, it doesn’t make sense to sustain a sure immediate tax bill that is way out of the ordinary and would require me to incur capital gains on investments just to pay it. i’d rather take my chances and see how things pan out in terms of the tax laws associated with the huge tax bills that these relatively new accounts will incur for the older retirees who started saving in them before anyone really understood how the decumulation from them would pan out.
Post: Tax Smart Retirement
Link to comment from March 8, 2026
If you have a enough to itemize from any combination of high state taxes, mortgage interest, property tax, and charitable contributions (not counting the first 0.5% of AGI in your cash contributions), you may find that you have already exceeded your standard deduction amount and can itemize. From there, all your charitable cash donations are deductible on Schedule A after not counting the first 0.5% of your AGI. Higher income taxpayers sometimes will bunch together their contributions and only make one bigger contribution every couple of years in order to push them into having enough to itemize.
Post: What is the best way to donate to charity in 2026?
Link to comment from March 7, 2026
Great post, Adam. Love the simplicity of just targeting the bracket rather than having the goal of converting all pre-tax to Roth by a certain date no matter what the early tax hit is. In terms of total life-time taxes, seems to me state taxes figure into the calculation, too, for people who live in high-tax states like California (which is where I live). The progressive income tax brackets here go in roughly 1% steps from 0 to over 13%. Most retirees won’t exceed 9.3% with its upper income limit of $740,000 MFJ. We hit the 8% bracket, though, in 2025 and will again in 2026 with very little ordinary income, no Roth conversions - just LTCG and qualified dividends. As a result, our state tax will exceed our Federal tax in 2026 by 4 to 1. The other consideration for us is the ACA subsidy, which my wife will need for another 7 years. This costs us another $7000 because every dollar counts against the ACA subsidy income threshold whether it’s qualified dividends or regular income. So lots to consider when trying to minimize lifetime taxes in retirement.
Post: Tax Smart Retirement
Link to comment from March 7, 2026
So what are one’s ‘means’ if one has no pension; and social security and dividend income aren’t enough to cover one’s annual spending? In decumulating one’s portfolio for retirement income, which is what an ever-increasing percentage of retirees are faced with, ‘means’ becomes an extraordinarily squishy notion. How long are you going to live? Are you going to have huge medical expenses along the way? What if the market tanks? What if the market takes off and never stops? What if inflation goes through the roof? Or remains dead flat? For most new retirees, any sort of concrete number for means very quickly becomes fuzzy, if not meaningless. I like to think of more as analogous to an electron probability cloud. The goal isn’t to know what the number is at any given time. It’s to understand what it’s liable to be, and what I’m going to do
ifwhen it turns out to be differentPost: What does ”means” mean?
Link to comment from February 14, 2026