It’s taken us about four years since my wife quit her job to ‘trust the math’ and spend up to a level that is reasonable given our savings. And it’s quite a big jump (2x) from where we were while we were working. In my case, the calculation is driven my the risk-based spending guardrails approach we’re using to calculate our annual spending level. Using this approach with conservative inputs for longevity, portfolio returns and inflation, I trust that even if the market and returns get choppy or come in less than expected we have plenty of discretionary spending room to adjust as needed and plenty of time to recover and get back on track. Life’s good - we feel very fortunate.
Nice summary, Adam. I’d add a couple of thoughts based on my own experience trying to determine our best approach to the Roth question.
While people focus a lot on marginal tax rate, it’s important (and maybe obvious to most) to consider your state’s tax rate as well. For instance, here in California although our marginal rate is 22%, our marginal state tax rate is 9.3%, which adds nearly 50% to the cost of doing a Roth conversion.
On the advice of our fee-only financial advisor, we started looking at how to max out the after-tax value of our accounts, which include a significant amount of capital gains. With a $96,000 allowance in the 0% tax bracket and the market at or near all-time highs, it’s very tax effective for us to harvest some of those gains each year. Due to the way income stacking works with the 1040 deduction (standard or itemized), you are better off doing one or the other - cap gains harvesting or Roth converting - rather than trying to do a little of both each year.
If your calculation ends up being a close call between converting and not converting, you might want to consider expected longevity. None of us knows how long we’ve got, even after taking account of family history. In our case, we both have long-lived parents and grand parents. But our calculations indicate the break-even point for Roth conversion isn’t until I’m in my late 80s. While I expect to live that long, that’s a long time to stand by and watch and hope that the bet was worth it. I’d rather take my chances and hang onto what we’ve got, pay the piper when the time comes,
Great share of a fascinating data point I hadn’t come across before. Thank you. In my early post-career phase I took to mentoring tech sector startup founders, helping them craft their pitch decks and value propositions. This was something I was proficient with due to decades in management consulting. When introducing myself the founders would ask me what I could do for them and I’d often summarize it, saying “I’m a words guy.” A commencement speaker back in the ‘80s said that the purpose of a good education is to gain proficiency in three areas:
critical thinking
the ability to express oneself orally and in prose
taste
Now there’s research to back up the second one. Love it.
“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.
Comments
It’s taken us about four years since my wife quit her job to ‘trust the math’ and spend up to a level that is reasonable given our savings. And it’s quite a big jump (2x) from where we were while we were working. In my case, the calculation is driven my the risk-based spending guardrails approach we’re using to calculate our annual spending level. Using this approach with conservative inputs for longevity, portfolio returns and inflation, I trust that even if the market and returns get choppy or come in less than expected we have plenty of discretionary spending room to adjust as needed and plenty of time to recover and get back on track. Life’s good - we feel very fortunate.
Post: The Leap of Faith
Link to comment from November 7, 2026
Nice summary, Adam. I’d add a couple of thoughts based on my own experience trying to determine our best approach to the Roth question.
Post: Roth Conversions
Link to comment from November 7, 2026
Great share of a fascinating data point I hadn’t come across before. Thank you. In my early post-career phase I took to mentoring tech sector startup founders, helping them craft their pitch decks and value propositions. This was something I was proficient with due to decades in management consulting. When introducing myself the founders would ask me what I could do for them and I’d often summarize it, saying “I’m a words guy.” A commencement speaker back in the ‘80s said that the purpose of a good education is to gain proficiency in three areas:
- critical thinking
- the ability to express oneself orally and in prose
- taste
Now there’s research to back up the second one. Love it.Post: A Million Words to a Million Dollars?
Link to comment from October 17, 2026
“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