Let’s start with the basics. Most retirement accounts like 401(k)s and traditional IRAs grow tax-deferred, meaning you’ll pay taxes when you take money out. Once you hit age 73 (or 75, depending on your birth year), Required Minimum Distributions (RMDs) kick in. These are mandatory withdrawals that count as taxable income. Miss one, and the IRS hits you with a 25% penalty. Ouch. But there are ways to reduce your tax bill, like using standard deductions, itemizing when possible, and making Qualified Charitable Distributions (QCDs) to donate directly from your IRA.

Next, let’s talk tax brackets. Many people think all their income is taxed at the highest bracket they fall into. Not true. We have a marginal tax system. That means your income is taxed in layers: 10%, 12%, 22%, and so on. That also means there’s room to be strategic. For example, you could do Roth conversions to fill up lower brackets before tax rates go up in the future (as they’re currently set to do).

Speaking of Roths, they’re a powerful tax escape hatch. Unlike traditional retirement accounts, Roth IRAs offer tax-free withdrawals and aren’t subject to RMDs. Plus, they don’t count as provisional income, which helps when it comes to Social Security taxes and Medicare premiums.

Social Security benefits themselves can be taxable depending on your provisional income, which includes half your Social Security, your adjusted gross income, and even tax-exempt interest. Couples earning over $32,000 could find 50% to 85% of their benefits taxed. And since these income thresholds aren’t indexed for inflation, more and more retirees are getting caught in the tax net.

Then there’s IRMAA—the Income-Related Monthly Adjustment Amount. This affects your Medicare premiums if your income from two years ago was too high. Single filers earning over $106,000 or joint filers over $212,000 will pay more for Part B and Part D. Roth conversions, tax-efficient investing, and proper withdrawal strategies can help reduce your IRMAA exposure.

Capital gains are another important area. Long-term capital gains are taxed at 0%, 15%, or 20%, depending on your taxable income. Real estate can be tricky here. While you get exclusions for a primary residence ($250,000 single, $500,000 married), rental properties are fully taxable and subject to depreciation recapture. However, a 1031 exchange can defer those taxes.

Retirees often forget that no one is automatically withholding taxes for them anymore. You may need to make quarterly estimated tax payments. Miss those, and the IRS charges penalties—currently about 8% annualized interest.

Watch out for IRA rollovers, too. A direct rollover avoids taxes, but if you take possession of the funds even briefly, 20% gets withheld. Fail to redeposit the full amount within 60 days, and it’s taxable and potentially penalized.

Mutual funds outside of retirement accounts can generate tax bills from capital gains and dividends—even if your investment value goes down. Consider using ETFs or index funds instead. They’re generally more tax efficient.

High earners need to be aware of the 3.8% Net Investment Income Tax (NIIT), which applies to interest, dividends, and rental income over $200,000 (single) or $250,000 (married).

There’s also the widow’s penalty: after one spouse passes, the surviving spouse files as single, which could push them into a higher tax bracket on the same income. Planning ahead with Roth conversions and income splitting strategies can soften the blow.

Lastly, think about where you live. State taxes vary widely. Alaska is the most tax-friendly, while New York tops the chart for retirees with a tax burden of 12.3%.

The bottom line? Don’t wait until retirement to start tax planning. With the right strategies in place, you can avoid the worst traps, stretch your savings further, and enjoy the retirement you worked so hard to earn.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post Retirement Tax Traps appeared first on ROI TV.

Let’s start with Roth conversions. Alex from Massachusetts asked whether he should convert more of his traditional IRA into a Roth while staying in the 24% tax bracket. Even if he remains in that bracket, the flexibility of Roth accounts is invaluable. Roth IRAs allow for tax-free withdrawals and are not subject to required minimum distributions (RMDs), giving you more control over your income in retirement. Plus, if one spouse passes away, the surviving spouse may be taxed at a higher single rate, making Roth conversions even more compelling. Putting higher-growth investments into a Roth also means more long-term gains without added tax burdens.

Then there’s Steve from San Diego. In just five years, he grew his portfolio from $100,000 to $775,000 by following tough-love advice from Joe and Big Al. With $40,000 from work and $47,000 from Social Security, his income is nearly covering his $100,000 annual expenses. The suggestion? He may be able to retire soon, but adding a bit more to savings and shifting some investments to safer assets can help protect against sequence-of-return risk—the danger of retiring during a market downturn.

Now let’s talk about real estate. Mike asked whether forming an LLC for his three duplexes would help with taxes. The short answer is no—LLCs don’t provide tax benefits for rental properties. Their primary value lies in asset protection. If a tenant sues, the LLC can shield your personal assets. While separate LLCs for each property offer the most protection, they also come with higher administrative costs. Liability insurance can be a simpler alternative or complement.

Charitable giving is another area where strategy matters. Qualified Charitable Distributions (QCDs) allow individuals over 70½ to donate directly from their IRA to charity—up to $100,000 annually, indexed for inflation. This reduces taxable income and fulfills RMD requirements. QCDs are ideal for those who are charitably inclined and taking the standard deduction.

For larger charitable intentions, Charitable Remainder Trusts (CRTs) or specifically Charitable Remainder Unitrusts (CRUTs) may be worth exploring. Horry wanted to know if he could use his IRA to fund a CRUT. Yes, but the structure must ensure at least 10% of the trust’s value goes to charity. The trust sells assets tax-free, provides income to the donor, and then donates the remainder. However, because CRUTs have administrative costs and complex tax rules, they’re best suited for those with significant assets.

Finally, Joe and Big Al reminded us of the importance of lowering equity risk as you approach retirement. Markets fluctuate, and pulling from stocks during downturns can rapidly drain your portfolio. Keeping enough in cash or bonds to cover a few years of expenses can help ride out rough markets without touching your long-term investments.

Retirement planning isn’t one-size-fits-all. But with careful tax management, smart charitable strategies, and a balanced investment approach, you can make your money last and leave a legacy you’re proud of.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post How to Retire Smarter: Tax Strategies, Rental Property Tips, and Giving Back appeared first on ROI TV.

Psychological Barriers That Keep Retirees from Spending

Retirees often face internal conflicts when it comes to spending their nest egg. These psychological biases can create fear, guilt, and hesitation, even when they are financially secure.

Loss aversion makes retirees more sensitive to the idea of losing money than they are motivated by the joy of spending it. Even small withdrawals can feel like big losses.

Framing bias causes retirees to view income as “safe to spend” while treating their retirement savings as off-limits, almost like a safety net that must not be touched.

Narrow bracketing leads retirees to mentally separate their savings from other financial sources, making it emotionally harder to use those funds.

How Retirees Actually Spend

Data shows a striking difference between how retirees treat guaranteed income versus their personal savings. While retirees are comfortable spending money from Social Security or pensions, they are far more conservative with investments.

Retirees spend roughly 80% of their guaranteed income but withdraw only about 2% annually from their personal investment portfolios.

Guaranteed income sources like pensions and annuities encourage more confident spending compared to self-managed investment accounts.

How Required Minimum Distributions (RMDs) Influence Behavior

RMDs, which require retirees to withdraw funds from qualified retirement accounts after a certain age, serve as a useful nudge for those reluctant to spend.

Average spending from qualified accounts starts at 2.1% at age 65 and increases to 3.84% by age 80, largely because RMDs force retirees to use their savings.

This mandate can help reframe savings as usable income rather than an untouchable asset, easing psychological resistance.

Strategies to Build Spending Confidence

There are practical ways to reframe retirement savings as a reliable source of income, rather than a fragile pile of money to be protected at all costs.

Use managed payout funds that distribute regular monthly income, simulating the effect of a paycheck.

Set up automatic monthly withdrawals from investment accounts to establish consistency and reduce anxiety about “deciding” when to spend.

Consider annuitizing a portion of your portfolio to create guaranteed income streams, which have been shown to increase retirees’ comfort with spending.

The Importance of a Healthy Retirement Mindset

Mindset plays a major role in retirement satisfaction. Shifting the way you view your savings can dramatically improve your ability to enjoy retirement.

Think of your savings as your retirement paycheck money you’ve already earned and earmarked for this phase of life.

Spending in retirement isn’t reckless; it’s essential for enjoying the life you planned and saved for.

Remember, the goal of saving wasn’t just to watch numbers grow it was to give you freedom, comfort, and joy in retirement.

Final Thought

Spending in retirement shouldn’t feel like a guilty indulgence. With the right mindset and strategy, you can confidently enjoy your savings, knowing they’re doing exactly what they were meant to do: support the life you deserve.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post Why Retirees Struggle to Spend Their Savings and How to Fix It appeared first on ROI TV.

The Retirement Readiness Pop Quiz

1. What age do you plan to retire?

It sounds simple, but most people underestimate this. The average retirement age in the U.S. is 62, often not by choice.

2. How long will you live?

Consider current life expectancy: about 84 for men and 87 for women. A 65-year-old couple has a 50% chance one of them lives to 92.

3. How much annual income will you need?

Base it on lifestyle goals, not a vague percentage of pre-retirement income.

4. How much have you saved for retirement so far?

Roughly 46% of U.S. households have $0 saved. Where do you stand?

5. How much do you plan to spend annually in retirement?

Create a detailed budget, including discretionary and fixed expenses.

6. What are your sources of retirement income?

Include Social Security, pensions, rental income, annuities, and investment withdrawals.

7. When will you claim Social Security?

Claiming early at 62 reduces benefits permanently. Delaying increases them significantly.

8. What is your Social Security breakeven age?

This is the age when total lifetime benefits from claiming later surpass those from claiming early.

9. Are you coordinating benefits with your spouse?

Delaying the higher earner’s benefit can increase survivor income.

10. What is your retirement savings goal?

Fidelity suggests 10x your income by age 67. Is your number realistic?

11. What is your withdrawal strategy?

The 4% rule is a starting point. Will you withdraw the same amount each year, or adjust with the market?

12. What is your portfolio allocation?

Stocks vs. bonds? Domestic vs. international? Are you considering risk tolerance and time horizon?

13. Are you accounting for inflation?

With 3% inflation, $1 today will be worth $0.81 in 20 years.

14. Have you considered healthcare costs?

Fidelity estimates a 65-year-old couple may need $300,000 for out-of-pocket medical expenses.

15. Are you planning for long-term care?

Consider whether you want insurance or will self-insure. Long-term care can derail a retirement budget.

16. Have you created a tax plan?

Taxes can be your biggest expense in retirement. Are you strategically withdrawing from pre-tax and Roth accounts?

17. Are you prepared for required minimum distributions (RMDs)?

RMDs start at age 73 or 75, depending on your birth year, and apply to pre-tax accounts.

18. Do you have a written retirement plan?

Only 33% of workers do. A written plan increases confidence and retirement success.

Key Takeaways from Joe and Big Al

• Start early and save consistently $750/month from age 30 or $1,530/month from age 40 can grow to $1 million by retirement.
• Use Roth conversions while tax brackets remain low until 2026.
• Don’t underestimate healthcare or inflation plan ahead.
• Your investment vehicle matters less than your asset allocation.

Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.

IMPORTANT DISCLOSURES:

• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.

• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.

• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.

The post Retirement Pop Quiz: 18 Questions to Get You Ready to Retire appeared first on ROI TV.

Credit Card Debt: Face It, Then Fix It

Too many Americans are in the dark about how much they owe, what their interest rates are, or even how many credit cards they have. The truth is, credit cards can be tools—if used wisely. But carrying a balance month to month? That’s a recipe for trouble.

The only two reasons I consider “acceptable” for credit card debt are unexpected medical bills and long-term job loss. Anything else is likely a sign of overspending or relying on “buy now, pay later” schemes that snowball into long-term debt.

If you’re stuck, here’s my 5-step plan:

1. List all your cards.
2. Write down your balances.
3. Track each card’s interest rate.
4. Make the minimum payment on all of them.
5. Direct any extra cash to the card with the highest rate.

Avoid raiding your IRA, borrowing from your 401(k), or using home equity to dig yourself out. And please—steer clear of those “debt relief” companies making bold claims. They’re often scams.

Stock Options: Diversify or Regret It

If your employer gives you stock options, it’s tempting to hold on. But unless you want to risk ending up like the folks at Enron or Lehman Brothers—jobless and with worthless stock—consider selling those shares once you’re allowed.

Don’t keep more than 15% of your total investments in company stock. Diversification is not just a buzzword—it’s essential to protect yourself from volatility. Professional investors cap individual stocks at 3% of their portfolios. You should too.

Understand RMDs or Face Big Penalties

Required Minimum Distributions (RMDs) can trip up even the savviest retirees. Don’t wait until you’re 70½ to figure them out. You need to take your first RMD by April 1 of the year after you turn 70½—but doing so may mean two withdrawals in one year, which could spike your taxes.

My advice? Take your first RMD before December 31 in the year you turn 70½. Hire a tax advisor to make sure you stay compliant and avoid the 50% penalty for missing a required distribution.

Smart College Planning with Financial Aid and 529 Plans

Kim Clark shared valuable tips on making college more affordable. One of the easiest things you can do? Apply to multiple schools. Doing so can increase your scholarship opportunities by 30%.

Fill out the FAFSA early. It’s what schools use to put together your financial aid package, and knowing you’ve applied to competing schools might get you better offers.

Also, don’t ignore community colleges or study-abroad programs. Many international universities offer low-cost or free tuition if you’re willing to study in another language. And if you’re saving for education, use a 529 plan—it grows tax-free and gives you flexibility on who the funds can be used for.

When to Let Go of Real Estate

Rao was facing a tough decision: sell his townhouse at a $40,000 loss or hang on. I advised him to cut ties. Emotional attachment is real, but it shouldn’t hold you back from making sound financial moves. Let the first decent offer be the one you take—move on and free yourself.

Rethinking Retirement Relocation

Not everyone needs to head for the Florida sunshine. In fact, most retirees stay within 20 miles of where they currently live. It’s not about palm trees; it’s about being close to people who matter. Before you buy that dream home across the country, think twice. Retirement is as much about lifestyle as it is about location.

All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Whenever there are hyperlinks to third-party content, this information is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals or points of view outside Edelman Financial Engines. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice.

Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.

The post Common-Sense Strategies for Debt, Investing, and College Planning appeared first on ROI TV.

What Are Required Minimum Distributions (RMDs)?

RMDs are the minimum amounts that the Internal Revenue Service (IRS) mandates individuals to withdraw annually from their tax-deferred retirement accounts upon reaching a certain age. This requirement ensures that funds in these accounts are eventually subjected to taxation. Accounts subject to RMDs include Traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, 457(b)s, and Thrift Savings Plans (TSPs). Notably, Roth IRAs are exempt from RMDs during the original owner’s lifetime.

When Do RMDs Begin?

As of 2025, individuals must commence RMDs at age 73. The first distribution is required by April 1 of the year following the year you reach 73. Subsequent RMDs must be taken by December 31 of each year. For example, if you turn 73 in 2025, your first RMD is due by April 1, 2026, and your second by December 31, 2026. Delaying the first RMD until April 1 results in two distributions in the same year, which could have tax implications.

irs.gov

How Are RMDs Calculated?

The RMD amount is determined by dividing your account balance as of December 31 of the previous year by a life expectancy factor provided by the IRS. These factors are detailed in the IRS Uniform Lifetime Table. For instance, at age 75, the life expectancy factor is 22.9. If your account balance is $500,000, your RMD would be approximately $21,834 ($500,000 ÷ 22.9).

irs.gov

Penalties for Failing to Take RMDs

Failing to withdraw the full RMD amount can result in substantial penalties. The IRS imposes an excise tax of 25% on the amount not withdrawn as required. However, if the shortfall is corrected within two years, the penalty may be reduced to 10%. Timely and accurate withdrawals are crucial to avoid these unnecessary costs.

investopedia.com

Strategies for Managing RMDs

1. Early Withdrawals: Consider initiating withdrawals from tax-deferred accounts at age 59½, the age at which withdrawals can be made without incurring a 10% early withdrawal penalty. This approach can help spread the tax liability over a more extended period, potentially keeping you in a lower tax bracket. schwab.com
2. Roth Conversions: Converting portions of your Traditional IRA or 401(k) into a Roth IRA can reduce future RMDs, as Roth IRAs are not subject to RMDs during the owner’s lifetime. This strategy requires paying taxes on the converted amounts but can offer tax-free withdrawals later. schwab.com
3. Qualified Charitable Distributions (QCDs): Individuals aged 70½ or older can donate up to $100,000 annually directly from their IRA to a qualified charity. These QCDs can satisfy RMD requirements and exclude the donated amount from taxable income. usbank.com
4. Strategic Withdrawals: Align your withdrawal strategy with your financial needs and tax situation. Taking only the RMD allows the remaining funds to continue growing tax-deferred, which can be advantageous if you don’t require the funds immediately. merrilledge.com

Impact on Retirement and Legacy Planning

Understanding and managing RMDs is vital for effective retirement planning. By strategically planning withdrawals, you can control your taxable income, potentially reduce your tax burden, and ensure that your retirement savings last throughout your lifetime. Additionally, thoughtful RMD management can play a significant role in legacy planning, allowing you to maximize the assets passed on to your heirs.

In conclusion, proactive management of RMDs is a critical component of a comprehensive retirement strategy. By staying informed and implementing tailored strategies, you can optimize your retirement income and achieve greater financial security.

All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.

The post Are You Making This RMD Mistake? appeared first on ROI TV.