Category: Podcast

Year End Planning – The Two Minute Drill for Your Financial Life

Posted on by Brian Colvert

Year End Planning: Your Guide to Finishing the Year Strong

As the calendar turns toward the final weeks of the year, it becomes clear how quickly time moves. Life fills up, schedules accelerate, and before we know it another December arrives. While the holiday season often brings celebration and reflection, it also presents one of the most important financial opportunities of the year. Thoughtful Year End Planning ensures you take advantage of key tax benefits, avoid costly penalties, and position yourself for a stronger financial foundation heading into teh new year.

 Year End Planning is not about scrambling or stressing. Instead, it is about making smart, timely decisions that help you keep more of what you earn and stay on track toward your long term goals. Whether you are still actively saving for retirement or already enjoying it, the last part of the year is the moment to make sure your accounts, contributions, and required actions are in good order.

This guide walks through the most important Year End Planning steps to consider. We will cover health accounts, retirement plans, Roth strategies, Required Minimum Distributions, charitable giving, and more. Each section is designed to help you understand what needs to happen before December 31, why it matters, and how to maximize the benefits available to you.

Let’s begin.

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Why Year End Planning Matters

Year End Planning gives you the chance to close the year with clarity and control. Many tax advantaged financial opportunities are tied to the calendar year. If they are missed, they cannot be corrected retroactively. The last weeks of the year create a natural deadline that requires decisive action.

Proactive Year End Planning can help you:

• Reduce taxable income
• Maximize tax advantaged savings
• Use funds that will otherwise be forfeited
• Optimize charitable giving strategies
• Avoid penalties
• Confirm that your financial strategy remains aligned with your goals

Most importantly, Year End Planning helps prevent reactive decision-making. When you intentionally prepare, you make the most of your financial landscape instead of leaving opportunities on the table.

Understanding Your Health Accounts: FSA and HSA

Health accounts are one of the most overlooked parts of Year End Planning. They are also among the most impactful, especially from a tax perspective. Two main types of accounts are tied to healthcare costs: the Flexible Spending Account (FSA) and the Health Savings Account (HSA). Both can provide substantial benefits, but each functions differently, especially at year end.

Flexible Spending Accounts: Use It or Lose It

An FSA allows you to set aside pre-tax dollars to pay for qualified medical expenses if you participate in a low deductible health insurance plan. FSAs are incredibly beneficial, but they come with a strict rule: they are use it or lose it accounts.

If you have unused FSA funds by the end of the year, those dollars may be forfeited. Some employers allow a small carryover amount or a brief grace period, but many follow the strict calendar deadline.

As part of your Year End Planning, review your FSA balance as early as possible. If you still have remaining funds, consider eligible expenses such as:

• Prescription medications
• Over the counter drugs
• First aid supplies
• Contact lenses and glasses
• Sunscreen
• Medical devices
• Certain wellness items

Retailers often label items as FSA eligible, making it easier to identify qualifying purchases. The key is awareness. These funds are yours, and Year End Planning ensures they do not go unused.

Health Savings Accounts: Maximize Your Contribution

An HSA operates differently from an FSA. It is available to individuals with high deductible health plans and is widely considered one of the most powerful tax advantaged vehicles available.

HSAs offer a triple tax benefit. Contributions are tax deductible, growth is tax deferred, and withdrawals for qualified medical expenses are tax free. HSAs also roll over from year to year and can accumulate indefinitely. They even function as a supplemental retirement account for medical expenses later in life.

As part of your Year End Planning, confirm that you have fully funded your HSA for 2025:

• Single coverage limit: 4,300
• Family coverage limit: 8,550
• Catch up contribution for age 55 and older: Additional 1,000

>>>> Check here for the most current limits.

You can view your contributions through your employer benefits portal or your health plan administrator. If you are not yet at the maximum, consider increasing your final payroll contributions or making a lump sum deposit before year end.

The more you fund your HSA, the more long term tax advantage you gain.

Maximizing Retirement Savings Before the Deadline

Retirement accounts remain one of the most critical components of Year End Planning. Certain contributions, particularly to employer sponsored plans like 401ks, must be completed by December 31 to count for the current tax year.

401k Employee Contributions

If you participate in a 401k, your employee contribution must be processed by December 31. Employer contributions, such as profit sharing, can often be made later, but your personal salary deferrals are tied to the calendar year.

For 2025, the limits are:

• Standard contribution limit: 23,500
• Catch up contribution (age 50 and older): Additional 7,500
• Special catch up for ages 60 to 63: 11,250 instead of 7,500

This means individuals aged 60 to 63 can contribute up to 34,750 in total.

>>>> Check here for the most current limits.

Whether you choose pre tax or Roth contributions, the action must occur before year end. If you are behind on your savings goals, consider adjusting your final pay periods of the year to boost your contributions.

Traditional vs Roth 401k Contributions

Choosing between pre tax and Roth contributions is a personal decision based on your current income, future tax expectations, and financial priorities.

• Traditional 401k contributions reduce your taxable income today.
• Roth 401k contributions are made with after tax dollars but grow tax free.

If you no longer qualify to contribute to a traditional Roth IRA due to income limits, your workplace Roth 401k may be your only remaining tax free savings option. Year End Planning is the moment to ensure you are taking advantage of it.

Roth Conversions: A Powerful Year End Opportunity

Roth conversions involve moving funds from a traditional IRA or 401k into a Roth account. This shifts the tax burden to the current year but provides the benefit of tax free growth and no required minimum distributions in the future.

Unlike IRA contributions, Roth conversions must be completed before December 31. They cannot be retroactively applied to a prior year.

Why might you consider a Roth conversion during Year End Planning?

• You expect to be in a higher tax bracket later.
• This year is a low income year.
• You want to reduce future RMDs.
• You want to leave tax free assets to heirs.

Before converting, it is wise to consult with your financial advisor or CPA. Roth conversions can affect Social Security taxation, Medicare premiums, and your overall tax bracket. With proper planning, however, they are one of the most valuable tools available.

Required Minimum Distributions: What You Need to Know

If you have a traditional IRA, SEP IRA, SIMPLE IRA, or certain employer retirement plans, the IRS requires you to begin withdrawing funds once you reach age 73. These Required Minimum Distributions, or RMDs, ensure that tax deferred dollars eventually become taxable income.

Your first RMD must be taken by April of the year following the year you turn 73. Every year after that, your RMD must be taken by December 31.

Year End Planning is the time to verify:

• Have you taken your full RMD for the year
• If you turned 73 this year, will you take your first RMD now or wait until early next year
• If you have multiple accounts, are you taking the correct amount from each

Missing an RMD results in a steep penalty. Avoiding that penalty is one of the most important Year End Planning tasks for retirees.

Qualified Charitable Distributions (QCDs)

For individuals who give to charity, a QCD can be a highly effective strategy. A QCD allows you to direct up to 100,000 per year from your IRA to a qualified 501c3 charity. The distribution counts toward your RMD and is not included in your taxable income.

QCDs allow you to:

• Support causes you care about
• Reduce taxable income
• Satisfy your RMD without increasing your tax liability

If you write checks from an IRA checkbook (common with Charles Schwab accounts), make sure the charity cashes the check before year end. Some organizations delay processing donations until January, which can create reporting issues. Sending QCDs early in December and keeping detailed records is essential.

Additional Year End Planning Actions to Consider

While health accounts, retirement savings, and RMDs are the most time sensitive steps, Year End Planning also includes several broader financial reviews.

Charitable Giving and Tax Deductions

If you plan to itemize deductions, year end is a good time to finalize charitable donations. You may consider:

• Cash gifts
• Donor advised fund contributions
• Gifting appreciated securities
• Qualified Charitable Distributions (if applicable)

Gifts must be completed by December 31 to count for the current tax year.

Portfolio Rebalancing and Tax Loss Harvesting

Although not required by year end, many investors use December as a moment to rebalance their portfolios back to their target allocation. Market movements throughout the year can shift your risk exposure.

Tax loss harvesting may also be available. This involves selling investments at a loss to offset taxable gains. It is a specialized strategy and should be discussed with your advisor.

Reviewing Employer Benefits

Open enrollment typically occurs in the fall, but Year End Planning gives you a chance to confirm your benefit choices, especially if you are adjusting contributions to FSAs, HSAs, or retirement plans for the coming year.

Evaluating Cash Flow and Savings Goals

Year end is an ideal time to look forward as well as backward. Consider:

• Are you on track for your emergency fund goals
• Do you need to adjust automatic savings for 2026
• Are there financial milestones you want to prioritize next year

Good planning now makes next year smoother and more predictable.

The Human Side of Year End Planning

We understand that even with the best intentions, financial planning can slip through the cracks. Life gets busy. Work demands increase. Family schedules take center stage. That is precisely why Year End Planning exists. It provides a clear moment to pause, recalibrate, and make sure your financial systems are working for you.

No one enjoys paying more taxes than necessary. Year End Planning gives you the tools to minimize tax burden, maximize savings, and protect your long term security. When done well, it transforms December from a stressful deadline into a meaningful opportunity.

Our team is here to help you navigate these decisions thoughtfully. Whether you need to review contribution levels, analyze Roth conversion strategies, calculate an RMD, or simply understand what steps apply to your unique situation, we are ready to support you.

Finishing the Year with Confidence

As the year comes to a close, take the time to review your accounts, contributions, and required actions. The goal of Year End Planning is not perfection. It is awareness, clarity, and intentional action.

By focusing on the steps that matter most, you can:

• Protect your tax advantages
• Reduce unnecessary financial stress
• Strengthen your retirement outlook
• Support the causes you care about
• Enter 2026 with confidence

Year End Planning is one of the most impactful habits you can build. When you take advantage of each year’s opportunities, you create powerful momentum for your financial life.

If you would like guidance or want to review your personal situation, our advisors are here to help.

Schedule a call today with our team to get started!

Your Biggest Retirement Questions Answered: Client Q&A

Posted on by Brian Colvert

Retirement planning is one of the most important financial transitions you will ever navigate. It is also one of the most misunderstood. People spend decades saving money in different accounts, following rules, avoiding mistakes, and trying to do “the right thing,” but once retirement approaches, a new wave of questions always shows up.

When should I take money out?
Should I convert to a Roth?
Will I be penalized?
How much will taxes take?
How do I actually get paid when I retire?

These are not small questions. They are real concerns for real people who want to retire confidently, avoid surprises, and feel like the years of hard work were worth it.

In this extended Q&A guide, we break down the most common questions we hear from clients who are planning for retirement. Everything is based directly on real conversations, real scenarios, and real planning strategies that actually work.

Grab a coffee, settle in, and let’s dive in.

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Retirement Questions We Hear Most Often from Clients

Q: What exactly is a Roth conversion, and when does it make sense?

A:  Roth conversion is the process of taking money from an account that grows tax deferred, like a traditional IRA or traditional 401k, and moving it into a Roth IRA. After it moves, the money grows tax free.

To convert it, you pay ordinary income tax on whatever amount you move over. There is no penalty, but the conversion itself counts as taxable income.

So when does it make sense?

For many people, the sweet spot tends to be around the mid fifties to early sixties. That time period is often ideal for three reasons.

First, you have a long time horizon before age 73 or 75, which is when Required Minimum Distributions begin. Once RMDs begin, the government forces you to take out a percentage of your IRA each year, whether you need the money or not. This can push people into higher tax brackets later in life.

Second, in these years you are often in control of your income. You might have retired early, switched careers, slowed down, or otherwise entered a stage where your taxable income is lower than it will be in your seventies. Lower income means lower tax cost for the conversion.

Third, Medicare has not begun yet. Once you turn 65, your Medicare premiums can increase based on your income. This is called IRMAA, which stands for Income Related Monthly Adjustment Amount. A big Roth conversion after age 65 can cause a spike in your premiums two years later due to the Medicare lookback rule. Doing conversions before you hit Medicare avoids a lot of that stress.

For someone in their mid fifties to early sixties who has not yet started Medicare and who has a window of lower income, a Roth conversion can be incredibly smart.

Q: Why do people get surprised by taxes in retirement?

A: There is a common belief that you will be in a lower tax bracket when you retire. It sounds reasonable. You are no longer working. You are not earning a full salary. Your expenses might be lower.

But for a lot of people, that is not what actually happens.

People often enter retirement with seven figure IRAs, real estate income, Social Security, pensions, interest income, and dividends. Once RMDs begin at 73 or 75, they are required to pull out a large chunk of money each year and pay taxes on it. Combined with other sources of income, this sometimes pushes retirees into the same or even higher tax brackets than they were in during their working years.

This is the opposite of what many people were told when they first started contributing to their IRAs decades ago. Back then, the message was simple. Save pre tax money now, enjoy a deduction today, and pay lower taxes in retirement.

For many high income professionals, business owners, and diligent savers with strong investment portfolios, that message simply did not play out as promised.

This is why Roth conversions have become such a powerful planning strategy. They help you control the tax impact before RMDs begin. This gives you more freedom later.

Q: How do Roth conversions affect Medicare?

A: This is a very common retirement question and a very important one.  Medicare premiums are influenced by your income. The higher your income, the more you pay. This is what IRMAA refers to.

Here is the catch. Medicare looks back two years at your income. That means if you do a Roth conversion at age 67, Medicare will look back to your income from age 65 and adjust your premiums.

Clients are often surprised by this. They retire, believe their income will drop, and then suddenly their Medicare premiums jump by two hundred or three hundred dollars a month. That adds up quickly.

This is why doing conversions before 65 can be very helpful. It completely avoids IRMAA and ensures you do not get surprised once Medicare starts.

For people already on Medicare, conversions may still make sense, but it depends heavily on your cash flow, tolerance for temporarily higher premiums, and long term goals. It requires thoughtful planning and precise math.

Q: Can a poorly timed Roth conversion push me into a higher tax bracket?

A: Absolutely. This is one of the biggest risks.

If you are in the 32 percent bracket, for example, and you convert too much, you may cross into the 35 percent bracket. That means the portion of your conversion that crosses the line gets taxed at a higher rate. That is usually not ideal.

The goal with Roth conversions is to fill your tax bracket, not blow past it. Think of it like carefully filling a bucket of water. You want to stop right before it spills over the edge.

This is why end of year planning is so important. By November or December, you know your income for the year. You know where your tax bracket will land. At that point, you can decide exactly how much room you have left to convert without going into a higher bracket.

That kind of intentional planning can save thousands of dollars.

Q: Should I contribute to a Roth 401k or a traditional 401k?

A: This is another very common retirement question.

Most employers now offer a Roth option inside their 401k, although some still do not. The main difference is this:

A traditional 401k uses pre tax dollars. This lowers your taxable income for the year. The money grows tax deferred. You pay taxes when you take it out later in life.

A Roth 401k uses after tax dollars. You do not get a deduction this year. The money grows tax free. Withdrawals are tax free in retirement.

So which one is better?

For many people, especially younger individuals or anyone in their thirties, forties, or even early fifties, the Roth 401k is incredibly attractive. You are likely in a lower tax bracket right now than you will be later in life. You also get decades of tax free growth.

For high income earners, the Roth 401k is also powerful because there are no income limits. Even if you earn too much to contribute to a traditional Roth IRA, you can still contribute to a Roth 401k through your employer plan. The contribution limits are much higher as well.

The only time a traditional 401k may make more sense is when cash flow is very tight. Because Roth contributions are after tax, they can slightly reduce take home pay compared to traditional contributions. If that reduction causes stress or prevents someone from saving at all, then a traditional 401k is the better fit.

You can also split your contributions. Many people do a 50 50 split so they can enjoy some tax savings now while also building tax free money for later.

Q: If I retire, how do I actually get my money?

A: This might be the most common question we hear from new retirees. For decades, clients have received a paycheck on a set schedule. Money shows up in the bank account like clockwork. Bills get paid. Life stays predictable.

Once you retire, the paycheck stops. That is understandably unsettling.

So how do you replace it?

Here is how we coach clients through this transition.

We recreate the paycheck.

We set up an automatic ACH transfer from your investment accounts to your bank account. You choose how often you want to be paid. Weekly, twice a month, monthly. You choose the amount. It might be five thousand dollars. It might be twenty thousand dollars. Whatever fits your lifestyle and plan.

The money flows in on a schedule that feels familiar. Your bills get covered. Your life continues smoothly.

Behind the scenes, the investments fund this income stream. Sometimes the money comes from interest on bonds or private credit. Sometimes it comes from dividends. Other times we sell a small portion of investments that have grown well.

This is where a diversified portfolio becomes very important. Markets rise and fall. Some investments might be down while others are up. A diversified strategy gives us choices. If stocks are down, we can pull from income producing investments instead of selling at a low. If stocks are up, we might trim gains.

Once retirees experience this system, the anxiety usually fades. The predictability of the paycheck returns. The only difference is that you are now the one paying yourself from your own money.

It is empowering once you become comfortable with it.

Q: What if I want six months of income upfront instead of monthly payments?

A: Some people believe they would prefer to take several months of income at once. Maybe ten thousand dollars a month feels uncomfortable, so they want sixty thousand dollars all at once.

What we have consistently seen is that this approach creates more stress, not less.

Large withdrawals make bank balances rise and fall dramatically. People begin worrying about calling for more money. They wonder if it is a good time in the market. They hesitate because the number in their investment account drops. They wait too long. Then they need another large withdrawal. Then they worry again. The cycle repeats.

A regular monthly income smooths all of that out. It recreates the working life rhythm people are used to. It keeps anxiety lower. It keeps planning simple.

There is no need to constantly ask for money, question timing, or wonder whether you are making a mistake. The system runs automatically.

Q: What role does diversification play in retirement income?

A: Diversification is the quiet workhorse of a good retirement plan. You want assets that move in different ways so you are not forced to pull money from something that is temporarily down.

When the market is strong, you may use gains from equities to fund your monthly income. When the market is weak or volatile, you may rely more on interest from bonds, CDs, private credit, or dividend paying investments.

Diversification protects you from making the worst possible mistake, which is selling something at a loss just to free up cash for living expenses. A well built portfolio gives you options at any point in time.

It keeps your long term plan intact even when short term conditions are unpredictable.

Q: How do I know how much I can safely take out in retirement?

A: This is one of the biggest fears retirees face. No matter how much money someone has, the thought is often the same.

Will I run out?
Will we be okay?
Will our lifestyle hold up?

This is incredibly common and completely normal.

The goal of retirement planning is to run the numbers ahead of time. We assess income sources, pension amounts, Social Security timing, investment balances, medical costs, spending patterns, and inflation. We create scenarios for normal markets, good markets, and difficult markets.

When clients see the full picture, confidence increases. The fear begins to fade. They understand how their income gets funded, why it is sustainable, and what guardrails are in place.

Retirement becomes less about worry and more about living.

Q: Is retirement income planning really that personal?

A: Yes. Retirement planning is not one size fits all. It is shaped by your income, your tax bracket, your assets, your health, your values, your spending habits, and your vision for life after work.

Two people with the exact same portfolio balance can have completely different answers to every question on this list.

This is why running the numbers matters. This is why understanding RMDs, Roth conversions, income timing, tax brackets, and Medicare impacts is so important.

Guidance based on general rules is helpful, but guidance based on your exact situation is powerful.

Q: What is the most important takeaway from all of this?

A: Retirement planning is all about timing and strategy. Small decisions made years before retirement can have a massive impact later. It is good to start asking your retiement questiosns as early as possible.

Knowing when to convert, when to save, how to file, when to claim Social Security, and how to structure your income matters more than most people realize.

With the right plan, retirement becomes clear, predictable, and surprisingly simple. Without a plan, retirement becomes a maze of questions, penalties, tax bills, and surprises that could have been avoided.

A good plan builds confidence. A great plan builds freedom.

Final Thoughts

These are the retirement questions people ask us every day. They are real concerns from hardworking people who simply want to retire with clarity.

If you have similar questions and want to run your own numbers, explore scenarios, or create a retirement income plan that actually fits your life, reach out to us today. We help people walk into retirement with confidence, not confusion.

And as always, if this guide was helpful, feel free to share it with someone who might benefit.

What Does Fee Only Really Mean

Posted on by Brian Colvert

The financial world has a jargon problem. It is filled with terminology that feels like it was designed to confuse people. And for decades, some parts of the industry preferred it that way. When clients do not fully understand how advisors get paid, it becomes easier for advisors to hide conflicts of interest, justify unnecessary expenses, or disguise sales incentives as financial guidance.

But there is one term that cuts through a huge amount of that confusion: fee only.

This single phrase tells you almost everything you need to know about the type of advice you are getting, the level of transparency you can expect, and whether your advisor is required to put your interests ahead of their own. At Bonfire Financial, we believe fee only advice is the future of the industry and the clearest path to an honest, trust centered financial relationship.

Today we are going to break down exactly what fee only means, how it compares to commission based advice, why the fiduciary standard matters, and how to protect yourself in a world where not all advisors are required to work in your best interest. Let us dive in.

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Why the Term “Fee Only” Matters More Than Most People Realize

Most people assume their financial advisor works for them. They believe the advice they receive is based on what is best for their financial future, not what is best for the advisor’s paycheck. But unfortunately, that is not always the case.

There are three main types of advisors:

  1. Commission based advisors

  2. Fee based advisors

  3. Fee only advisors

These terms sound similar, but the differences are massive.

A commission based advisor gets paid when they sell something. It could be a mutual fund, an annuity, a life insurance policy, or even a stock transaction. Every recommendation is tied to a payout.

A fee based advisor is a mix of both. They can charge a fee and also collect commissions. This creates one of the most confusing and dangerous environments for clients because you never know which hat they are wearing when they give you advice.

A fee only advisor, which is what we are at Bonfire Financial, gets paid only by the client and only through a transparent fee arrangement. Fee only advisors cannot accept commissions on the products they recommend.

Why does this matter?

Because the way an advisor gets paid directly shapes the advice you receive. If someone makes money when you buy or sell a product, the incentives shift. Suddenly, the advice you receive might not be about what is best for you. It might be about what keeps their mortgage paid that month.

Fee only removes those conflicts. It creates a clean, transparent, and aligned relationship where your advisor only wins when you win.

How Commission Based Advice Became the Industry Norm

To understand why fee only matters, we have to look back at how the financial industry operated for decades.

Before financial planning became a profession, most advisors were essentially stockbrokers. Their job was to call clients and recommend trades.

  • Buy this stock.
  • Sell that fund.
  • Switch into this new product.

Every single trade generated a commission. If an advisor could convince a client to buy something or sell something, they got paid. It did not matter whether the advice was good, bad, or neutral.

This created three dangerous realities:

1. Advisors could profit regardless of performance.

A client could lose money and the advisor could still get paid.

2. Advisors were incentivized to create activity even when unnecessary.

Buying and selling generated income. Holding did not.

3. Advisors could recommend expensive, high commission products even when cheaper, better solutions existed.

Clients rarely knew the difference.

This setup created a system where investors could not always trust whether a recommendation was truly for their benefit or simply profitable for the advisor.

And while the industry has evolved, this commission based model is still alive today.

The Suitability Standard vs the Fiduciary Standard

(Why You Should Care)

One of the biggest problems with commission based advice is the standard advisors are held to.

Commission based advisors follow the suitability standard.

Fee only fiduciaries follow the fiduciary standard.

Let us look at what that means.

The Suitability Standard: A Low Bar

Under suitability, an advisor only has to demonstrate that a recommended product is “suitable” for someone of your general profile.

For example:

  • You are 40

  • You make 150,000 dollars a year

  • You have moderate risk tolerance

If a product could be considered reasonable for someone in that demographic, it meets the suitability requirement.

The advisor does not have to choose the best option.

  • They do not have to choose the cheapest option.
  • They do not have to disclose conflicts.
  • They do not have to put you first.

This is an incredibly low bar.

The Fiduciary Standard: A Higher Level of Care

Fee only Registered Investment Advisors (RIAs) are held to a true fiduciary standard.

This means:

  • They must act in your best interest.

  • They cannot put their compensation ahead of your outcome.

  • They must disclose conflicts.

  • They cannot sell commission based products.

  • They must recommend the best option available, not just a suitable one.

This is a completely different universe of advice.

The Hidden Conflicts Many Investors Never See

When someone can earn a commission, several conflicts appear whether they want them to or not.

Here are the biggest ones.

1. Advisors might recommend a product because it pays more.

Annuities, private REITs, insurance products, and certain mutual funds can pay commissions as high as 5 to 10 percent.

If two products accomplish the same goal but one pays a big commission, which one will a commission based advisor be tempted to recommend?

2. Advisors might encourage unnecessary trading.

If selling generates income, sales magically become more appealing.

3. Advisors might prioritize their own cash flow needs over your goals.

It might not be intentional.
It might not be malicious.
But it happens.

4. Advisors are not required to disclose these conflicts upfront.

Most people only discover these details buried in long documents filled with legal language.

This is the opposite of transparency.

The Power of Fee Only Advice

Fee only eliminates all of the above.

Here is what fee only advisors cannot do:

  • They cannot collect commissions.

  • They cannot be paid more for selling specific products.

  • They cannot hide compensation in product costs.

  • They cannot recommend something because it pays better.

What fee only advisors can do:

  • Charge a clear, transparent fee.

  • Put the client first.

  • Provide unbiased advice.

  • Focus on planning, not product sales.

  • Build long term relationships based on trust.

This is why fee only advice has become the gold standard among educated investors and why more people are seeking RIAs instead of commission based advisors.

How Fee Only Advisors Actually Get Paid

Fee only advisors typically charge one of three ways.

1. Hourly Fees

Like attorneys or accountants. Not our favorite model because clients often rush conversations or avoid asking questions.

2. Flat or Project Based Fees

Great for specific projects like financial plans, retirement strategies, or education planning.

3. AUM Fees (Assets Under Management)

A percentage of assets the advisor manages. For example, 1 percent per year on one million dollars equals ten thousand dollars annually.

This fee covers:

  • Portfolio management

  • Ongoing planning

  • Consultations

  • Strategy work

  • Adjustments

  • Support during major life changes

AUM fees align incentives because the advisor only grows their revenue when your portfolio grows. Your success becomes their success.

How to Know if an Advisor is Truly Fee Only

Sadly, many advisors use confusing language to appear fee only when they are not.

Here are five questions you should always ask:

1. Do you accept commissions of any kind?

The answer must be a clear, direct “no”.

2. Are you always acting as a fiduciary?

Not sometimes. Not only when convenient. Always.

3. Are you dually registered?

If yes, they can switch hats between fee only and commission.

4. How are you compensated?

They should be able to explain it in one clean sentence.

5. Can I see your Form ADV?

This document legally outlines how they get paid.

Any hesitation is a red flag.

Why Fee Only Protects Your Financial Future

Fee only advice is not just about fees.
It is about trust, transparency, and alignment.

When you choose a fee only fiduciary, you get:

  • Clear recommendations

  • No hidden agendas

  • Advice rooted in your best interests

  • More confidence in your long term plan

  • A healthier advisory relationship

Money is emotional. It is tied to your goals, your family, your future, and your security. You deserve an advisor who treats your financial life with the care and clarity it deserves.

Why Bonfire Financial Chose Fee Only

Bonfire Financial was built from the belief that clients deserve transparency, honesty, and unbiased advice. There should never be a moment where a client wonders:

“Are you recommending this because it helps me or because it pays you more?”

That question should not exist in a healthy advisory relationship.

By choosing the fee only RIA model, Bonfire Financial removed all product based compensation and all commission conflicts. When we sit across from a client, we can give clear, direct, transparent advice without worrying about how a product pays or whether a transaction generates revenue.

Fee only allows us to:

  • Dive deeper into planning

  • Spend more time understanding clients

  • Give unbiased recommendations

  • Build long term trust

  • Support families through major life events

  • Focus on what is best for you

This model creates what we consider the healthiest and most ethical advisor client relationship.

Final Thoughts: Fee Only Is the Standard Every Investor Deserves

The financial industry can be confusing, and that confusion often benefits advisors who profit from opacity. But you do not have to accept that. You can choose a relationship built on transparency and aligned incentives.

Fee only advice is not a marketing buzzword. It is a higher standard of care, a commitment to honesty and a structure that ensures your interests come first.

At Bonfire Financial, it is the only way we believe financial advising should work.

If you want to explore what fee only advice looks like for your family, schedule a call with us today to learn more.

Your financial future deserves clarity. Fee only gives you that clarity.

The End of the Penny and What It Means for The Future of Money

Posted on by Brian Colvert

The future of money is changing. The penny has officially met its end. For the first time since 1793, the United States minted its final one-cent coin. While the penny may be small, what it represents is anything but. The decision to stop producing the penny is a perfect example of how money changes, adapts, and evolves as society evolves. It is a reminder that the things we consider permanent are sometimes anything but.

Today we will explore what the death of the penny means, why it happened, and how this simple moment fits into a much larger story about the future of money.

If you care about what is happening with your money, how it might change over the coming years, and what steps you can take now to stay ahead, you are in the right place.

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RIP Penny:  What it means for the future of money

On November 12, 2025  the United States Mint produced the very last penny that will ever be stamped in America. For most people, this news might pass by without much thought. After all, how often do any of us use a penny anymore? You might have a few sitting in a junk drawer or rattling around in your car console. You might occasionally dump them into a Coinstar machine if you still keep a jar of change. But when is the last time you paid for something using pennies?

The truth is simple. The penny has stopped matching the world we live in.

Here are the key facts that led to its demise:

It costs more to make a penny than it is worth.

The United States government spent about four cents to create one penny. That is a losing proposition from every direction, especially in a world with rising national debt and rising costs of production.

Stopping penny production saves real money.

Estimates show that discontinuing the penny will save the government up to 56 million dollars annually. That is not a small number.

Its practical use is nearly zero.

Most Americans do not use pennies in everyday transactions. Retailers increasingly round to the nearest five cents. Cash payments are dropping. Digital transactions have taken over.

Inflation eliminated its buying power.

There was a time when a penny could buy something. There was a time when five or ten cents could get you into a movie theater. Today, a penny does not buy anything. Inflation has slowly erased its value.

All of this makes the penny a symbol. Its retirement is not just a cost cutting measure. It is a sign that money is changing and the systems around money are changing with it. It is the perfect starting point for a larger conversation about the future of money.

Looking Back: A Short History of the Penny and Why It Lasted So Long

The United States penny began in 1793. That means it survived through the birth of the country, the Civil War, the Industrial Revolution, the rise of automobiles, the invention of the internet, and countless cultural and technological shifts.

So why did the penny persist for so long?

Tradition

Americans love tradition. The penny is familiar. It reminds people of childhood piggy banks, luck, sayings, and small rituals like picking up a penny for good fortune.

Habit

Once a system is in place, it often stays in place simply because change is uncomfortable or inconvenient.

Sentiment

Abraham Lincoln sits on the face of the penny. There was resistance for decades from people who felt strongly about maintaining a coin representing such an influential historical figure.

Inertia

Government decisions are slow, and the process of adjusting currency systems takes time.

Despite all of that, the economics finally won. If something costs more to produce than it is worth, eventually the math forces the conversation. Inflation and rising material costs made this inevitable.

The penny had a long, respectable run, but the world moved faster than it could.

The Symbolism Behind the End: What It Reveals About the Future of Money

Removing the penny is not just a financial decision. It is a window into something much bigger. The future of money is not fixed. It is not stationary. It is evolving constantly, and we are in the middle of one of the biggest financial transitions in modern history.

Money has always changed forms:

• It started with bartering
• Then came precious metals
• Then came coins
• Then paper money
• Then checks and cards
• Then online banking
• Now digital payments
• And finally, digital assets and cryptocurrencies

The end of the penny is one more chapter in that story.

It signals a turning point. We are slowly leaving behind the age of physical currency. Coins and paper are becoming less central to everyday life. Cash is still useful in some situations, but most people rarely carry it.

Instead, most transactions happen through:

• Cards
• Phones
• Online platforms
• Digital wallets
• Bank transfers
• Crypto exchanges
• Peer to peer payment apps

The penny is disappearing because the world that required physical currency is disappearing with it.

Inflation, Value, and What a Penny Used to Mean

One reason the penny became irrelevant is inflation. In 1910, a penny could buy something. In 1940, a handful of pennies could buy a soda. In 1960, kids bought candy with pennies. But each decade pushed the buying power of one cent lower and lower.

Inflation is a slow, sometimes invisible force. It pushes the cost of everything upward and pushes the purchasing power of currency downward.

The penny is a real world example, visible to everyone, of what inflation does over time. As money changes, as prices move, and as society advances, currency must adapt.

This idea is central to understanding the future of money.

  • Inflation forces evolution.
  • Technology accelerates evolution.
  • Consumer behavior seals it.

The penny became a victim of all three.

The Real Cost of Creating Money and Why Efficiency Matters

Most people never think about the cost of producing currency. It feels like something that simply exists. But physical money requires real materials, real labor, and real energy. Coins require metal and manufacturing. Paper money requires printing and distribution.

When the cost of creating a unit of currency exceeds its value, a problem emerges. The penny is the clearest example of that economic mismatch.

For decades, economists pointed out how wasteful the penny was. Each year, millions of dollars were poured into production even though the coin contributed nothing useful to the economy.

Ending penny production is a perfect case study in financial efficiency. If something is not working, not useful, and unnecessarily expensive, it eventually needs to be removed.

This same logic applies when thinking about the evolution of digital money. Efficiency matters. That principle drives innovation in everything from payment systems to cryptocurrencies.

Rounding Up, Rounding Down, and Daily Life Without Pennies

Will daily life change without pennies? Probably not much.

Many other countries stopped using one cent coins and transitioned smoothly:

• Canada
• Australia
• New Zealand
• Several European countries

Retailers simply round up or down to the nearest five cents during cash transactions. Digital payments remain exact.

Studies show that rounding neither helps nor harms consumers overall. It averages out and becomes an invisible part of pricing.

The reality is simple. Most people will not even notice that pennies are gone.

The symbolic meaning, however, is noticeable. It is one more reminder that we are quietly moving into a new era of money. The future of money is becoming lighter, faster, and more digital.

From Silver Coins to Clipped Edges: A Story of Money Changing Throughout History

Before the penny became too expensive to produce, there were other times in history when money had to evolve.

For example, certain coins have ridges along the edges. These ridges were originally created to prevent people from clipping off small pieces of precious metal. When coins were made from silver or gold, some people shaved tiny amounts off the edges, collected them, and still spent the full coin.

The ridges stopped that.

It is a small detail that reveals something important. Whenever money is valuable, people will find creative ways to manipulate it. Whenever money is vulnerable, systems must adapt.

Money never stays the same.

Coins were eventually made from cheaper materials. Paper money replaced large amounts of metal. Credit cards replaced wallets full of cash. Digital payments replaced checks. QR codes are replacing swipe machines.

Every major shift happened because something became inefficient or outdated. The penny is simply the next example.

The Digital Revolution: How Technology Is Redefining the Future of Money

The biggest force shaping the future of money is technology.

Technology made payments faster, simpler, safer, and more immediate. Today we can transfer money across the world in seconds. We can buy groceries without touching a keypad. We can invest without calling a broker. We can check account balances from our phone.

Here are the major digital shifts happening now:

1. Mobile wallets are becoming the standard.
Apple Pay, Google Pay, Samsung Pay. Millions of people no longer reach for a wallet at all.

2. Peer to peer payments are normal.
Zelle, Venmo, Cash App. Splitting dinner bills has never been easier.

3. Online banking has taken over.
Branches are closing because the demand simply is not there.

4. Cards are becoming contactless.
Tap to pay is now more common than inserting a chip.

5. International transfers are cheaper and faster.
Digital platforms outperform banks.

6. Cryptocurrencies introduced a new model of value exchange.
Bitcoin created a decentralized store of value. Stablecoins introduced digital currency that can mimic the dollar.

7. Businesses accept digital payments automatically.
Whether you are paying rent, buying a coffee, or ordering from Amazon, you rarely use cash.

All of this leads to one conclusion. The penny was not built for this world. Physical coins were not built for the pace of modern money. The future of money is digital because life is digital.

Bitcoin, Crypto, and Why They Matter in the Conversation About Money

You cannot talk about the evolution of money without talking about Bitcoin.

Bitcoin is not just a digital currency. It is a new way of thinking about value. It introduced the idea of currency that does not rely on a government, does not inflate endlessly, and cannot be counterfeited.

This does not mean every cryptocurrency has value. In fact, many are questionable. But Bitcoin introduced the idea of digital scarcity. It created a decentralized network where no government or company controls the system.

So what does Bitcoin have to do with the penny?

Both reveal the same truth. Money is always evolving. The penny shows how physical money is becoming outdated. Bitcoin shows where some parts of money may be heading next.

More people are becoming open to digital assets. Large institutions are adopting Bitcoin as part of their investment strategy. Younger generations are growing up with digital payment systems instead of physical cash. In many ways, Bitcoin is not a futuristic idea anymore. It is part of the financial present.

For anyone thinking about the future, understanding Bitcoin is becoming essential.

Why the Dollar Is Not Backed by Gold and Why That Matters

For many decades, the United States dollar was backed by gold. That meant every dollar represented a specific amount of gold stored in a vault. In 1971, the United States ended the gold standard. From that point forward, the dollar became what is known as a fiat currency.

Fiat currency gets its value from the belief that the government guarantees it. The dollar is worth one dollar simply because the United States says it is. This system works, but it also means the government can print more money in response to economic needs.

Printing more money can help during recessions, stimulate the economy, and fund government programs. But it also creates inflation, which reduces purchasing power over time.

This is another reason the penny lost value. Inflation gradually erased its buying power until it became useless.

Understanding this helps us understand why people are curious about digital currencies like Bitcoin. Bitcoin cannot be printed or inflated. There is a fixed supply, which is why people sometimes refer to it as digital gold. Whether Bitcoin becomes a permanent part of the financial system or not, it represents a pushback against inflation and an alternative to fiat currency systems.

This is one more element shaping the Future of Money.

How Financial Behavior Is Changing and What It Means for Your Wallet

Consumers are changing the way they interact with money. These changes have serious implications for the future.

Cash is fading.
Many people simply do not carry cash anymore.

People expect instant access.
Real time banking and instant transfers are becoming standard.

Consumers prefer automation.
Automatic bills, automatic savings, automatic investing.

People want transparency.
They want to know where their money is and how it is working for them.

Digital tools are improving literacy.
Apps that track spending, budgeting systems, and investment platforms have made financial education more accessible.

All of these trends push financial systems to evolve. The penny could not survive this new environment. Other parts of the financial world will evolve too. The Future of Money will be shaped by convenience, technology, and consumer expectations.

How Businesses Are Preparing for a Less Physical Future

Companies are deeply aware of the direction money is moving. The rise of digital payments has changed how retailers operate.

Here are the biggest shifts businesses are making:

• Installing tap to pay systems
• Reducing cash registers
• Increasing automated checkout
• Adding QR code payments
• Offering online payment portals
• Exploring blockchain based invoicing
• Reducing the cost of cash handling
• Rounding prices to eliminate coin dependency

These changes make commerce faster and more efficient. They also make the penny unnecessary.

Businesses will continue moving toward digital systems because digital systems cost less and function better.

The Fear of Change and Why New Money Systems Feel Scary

Most people are not afraid of losing the penny. But many people are uneasy about digital money, cryptocurrencies, and newer financial technologies.

This is normal.

History shows that anything unfamiliar creates discomfort. When credit cards were invented, people distrusted them. When online banking began, people worried it was unsafe. When mobile banking started, many questioned whether it would last.

Eventually these technologies became everyday life.

The Future of Money will follow the same pattern. At first it feels unfamiliar. Then it feels optional. Then it becomes normal. The key is to stay educated and stay aware. The more familiar something becomes, the less intimidating it feels.

What You Can Do Now: Preparing for the Future of Money

You do not need to become an expert in crypto or technology to prepare for the future. But you should become proactive.

Here are the most important steps you can take:

1. Update your financial tools.
Use banking apps, digital payment systems, and modern budgeting tools.

2. Understand inflation.
Know how inflation affects your money and long term savings.

3. Explore digital assets responsibly.
You do not need to invest in crypto, but you should understand it.

4. Diversify your investments.
A mix of assets prepares you for a changing financial landscape.

5. Review your long term plan.
The future will look different. Your plan should adapt.

6. Stay informed.
Financial literacy is your greatest asset in a changing world.

At Bonfire Financial, we believe the best way to approach the Future of Money is with clarity, confidence, and strategy. Our clients come to us because they want to stay ahead rather than be surprised later.

Final Thoughts: What the End of the Penny Teaches Us

The penny is a reminder that nothing in finance is permanent. The systems we use today will not be the systems we use forever. Money evolves because the world evolves.

The end of the penny teaches us three important lessons:

1. Efficiency always wins.
If something costs more than it is worth, it eventually disappears.

2. Technology is shaping the next era of money.
Digital systems are not the future. They are the present.

3. The best way to prepare is to stay educated.
Understanding how money works will always put you ahead.

As we move into a more digital world, the Future of Money will continue to unfold in ways that surprise us. Whether it is the rise of Bitcoin, the decline of coins and cash, or the growth of digital payment ecosystems, one thing is certain: change is happening.

The end of the penny is not the end of money. It is the beginning of the next chapter.

Bonfire Financial is here to guide you through every chapter with clarity, confidence, and customized planning that makes sense for your life.

>> If you are ready to understand what comes next and position yourself for the future, reach out and schedule a call with us today. The future is coming either way. It is better to walk into it prepared.

Should I Pay Off My Mortgage Before Retirement

Posted on by Brian Colvert

Should I Pay Off My Mortgage Before Retirement?

For generations, owning your home outright has been considered the hallmark of financial success. The American Dream, after all, often ends with a white picket fence and a paid-off house. But as retirement approaches, one big question often comes up: Should I pay off my mortgage before retirement?

Like many financial questions, the answer isn’t one size fits all. It depends on your interest rate, your cash flow, your investments, and just as importantly, your peace of mind. Let’s unpack the numbers, the psychology, and the modern realities behind this age-old debate.

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The Traditional View: A Paid-Off Home Equals Freedom

For decades, financial advice was straightforward: work hard, buy a house, pay it off, and retire mortgage free. The reasoning made sense. If you own your home outright, that’s one less bill in retirement. Without a mortgage, your monthly expenses drop, freeing up cash for travel, hobbies, or simply living with less financial stress.

And there’s no denying the appeal. Having a home that’s 100% yours can provide a strong sense of security. There’s pride in knowing the roof over your head can’t be taken by a bank or lender.

But the financial landscape has shifted. Low interest rates, rising home values, and new investment opportunities have changed the equation. What once was a clear-cut goal is now a nuanced decision that deserves a closer look.

The Reality: Paid Off Doesn’t Mean Free

Even if you’ve paid off your mortgage, homeownership still comes with ongoing costs. Property taxes, insurance, and maintenance don’t disappear once the bank is out of the picture. In fact, they often increase over time.

Property taxes: As home values rise, so do property tax bills. Many retirees are surprised by how much their annual taxes climb, especially in fast-growing areas.

Insurance: Natural disasters, inflation, and rebuilding costs have driven insurance premiums higher across the country.

Maintenance: From replacing the roof to fixing the HVAC, repairs don’t stop just because the mortgage is gone.

A paid-off home certainly reduces your expenses, but it doesn’t eliminate them. That’s an important distinction when calculating how much income you’ll actually need in retirement.

The Numbers: When It Makes and Doesn’t Make Financial Sense

Let’s look at the math. Suppose you have a $250,000 mortgage at 3% interest, and you’re debating whether to pay it off using part of your investment portfolio, which averages 8 to 10% annual returns.

If you use your portfolio to pay off the mortgage, you’ll save 3% in interest, but you’ll give up the potential to earn 8 to 10% on that same money. That’s a 7% opportunity cost every year.

In simple terms, paying off your mortgage early might give you peace of mind, but it could cost you significantly in long-term growth.

Example:
Mortgage balance: $250,000
Interest rate: 3%
Investment return: 10%

By keeping your mortgage and investing your savings instead, you could earn roughly $70,000 per year in growth (10% of $700,000, for example), while only paying about $7,500 per year in interest. That’s a strong case for not rushing to pay it off.

Of course, this assumes your investments continue to perform well. Markets fluctuate, and returns aren’t guaranteed. That’s why the decision isn’t purely mathematical, it’s also emotional and strategic.

The Psychology: Mind vs. Math

When we talk to clients about this topic, there’s usually a turning point in the conversation: the difference between what feels right and what makes sense on paper.

Some clients say, “I just can’t sleep knowing I owe money.” Others say, “I’d rather have my investments working for me.” Neither mindset is wrong.

Here’s how we break it down:

Mindset-Driven Decision: Paying off the mortgage gives emotional relief and a sense of accomplishment. If eliminating debt provides peace and doesn’t threaten your overall financial health, it can absolutely be worth it.

Math-Driven Decision: Keeping a low-interest mortgage while investing your money elsewhere can lead to higher long-term wealth, especially if your mortgage rate is under 4%.

The key is to align your financial plan with both your numbers and your comfort level. Money decisions are as emotional as they are logical. You can’t separate the two.

Understanding Arbitrage: When Borrowing Is Smart

The word arbitrage simply means taking advantage of the difference between two financial opportunities. In this case, it’s the spread between your mortgage interest rate and your investment return.

If your investments are earning more than your mortgage costs you, you’re effectively making money by keeping the mortgage. For instance:

Mortgage rate: 3%
Investment return: 8%
Net gain: 5%

That’s a win, mathematically speaking. Your money is working harder than the cost of your debt.

This is especially true for homeowners who refinanced during the years of record-low interest rates between 2008 and 2022. Many borrowers locked in mortgages around 2.5% to 3.5%. Paying those off early rarely makes financial sense when your portfolio can reasonably outperform that.

The Tax Angle: Mortgage Interest and Deductions

While the 2017 Tax Cuts and Jobs Act limited some deductions, mortgage interest is still tax deductible for many households. If you itemize deductions, the ability to write off mortgage interest can lower your taxable income, effectively reducing your true borrowing cost even further.

For example, if your mortgage rate is 3.5% but your effective tax benefit brings that down to 2.8%, paying it off early becomes even less compelling financially.

However, tax rules can change, and not everyone benefits equally. It’s best to consult with a financial planner or CPA to see how this impacts your specific situation.

When Paying Off the Mortgage Makes Sense

Despite all the math, there are situations where paying off your home is the smarter move. It comes down to your goals, risk tolerance, and stage of life.

1. High-Interest Mortgage
If your mortgage rate is above 6% or 7%, the math starts to shift. The guaranteed return of eliminating that interest cost may outweigh potential market gains.

2. Lack of Investment Discipline
If you’re unlikely to actually invest the money you would’ve used to pay down your mortgage and would instead let it sit idle, then paying it off can be a productive use of funds.

3. Approaching Retirement with Limited Income Sources
If your pension, Social Security, or savings provide just enough to cover expenses, removing your largest bill can add valuable breathing room.

4. Peace of Mind and Simplicity
Some people simply feel more comfortable owning their home outright. If that emotional security outweighs potential gains, then paying it off can absolutely be the right call.

When It Doesn’t Make Sense

1. You Have a Low Interest Rate
If your mortgage is under 4%, and your investments can reasonably earn more, keeping the loan is usually the better play.

2. You’d Need to Drain Investments
Using a large portion of your retirement savings to pay off a mortgage can weaken your liquidity and reduce your ability to generate income.

3. You’re Early in the Loan Term
Most of your early payments go toward interest, not principal. Accelerating payments doesn’t save as much as you might think unless you’re closer to the end of the loan.

4. Your Portfolio Is Growing Strongly
If your investment accounts are compounding steadily, you’re better off keeping that money in the market rather than locking it into illiquid home equity.

The Hidden Cost of Home Equity

Many retirees proudly say, “We have a million dollars in home equity.” That sounds impressive, but what can you actually do with that equity?

Unless you sell your house or borrow against it, that money is trapped. It doesn’t produce income. It doesn’t pay bills. You can’t use it for groceries, travel, or healthcare expenses.

If you sell your home, you’ll need to buy another one or rent somewhere else, which eats into those proceeds. If you borrow against your equity, you’re right back to having a mortgage payment.

So while home equity absolutely contributes to your net worth, it’s not the same as liquid wealth that can fund your retirement lifestyle. It’s an asset, but not one that easily generates cash flow.

The Downsizing Myth

Another common assumption is that you can just downsize when you retire and live off the difference.

In theory, it sounds great. In reality, it rarely works that way. Most retirees who sell a larger home and buy a smaller one end up spending just as much or more on the new home. Why? They often choose better locations, newer builds, or communities with desirable amenities.

Downsizing may simplify your life, but it doesn’t always free up the financial cushion you might expect.

The Real Question: What’s Best for Your Plan

The goal isn’t simply to own your home. It’s to build a retirement plan that provides security, flexibility, and long-term sustainability.

When deciding whether to pay off your mortgage, consider the following:

  1. Interest Rate vs. Investment Return – What’s the spread between your mortgage rate and your portfolio’s performance

  2. Tax Implications – Are you getting a deduction that reduces your effective interest rate

  3. Cash Flow Needs – Would paying off your home free up significant monthly income

  4. Liquidity – Will you still have accessible funds for emergencies or opportunities

  5. Emotional Satisfaction – Would being debt free improve your peace of mind enough to outweigh any mathematical downside

A good financial plan blends both head and heart. The numbers should make sense, but so should how you feel about them.

Planning for Cash Flow in Retirement

If you enter retirement with a mortgage, the key is ensuring your income sources can comfortably support it. That might mean adjusting withdrawal strategies, timing Social Security benefits strategically, or balancing which accounts you draw from first.

At Bonfire, we run cash flow projections that show how different choices, like paying off a mortgage early versus keeping it, affect your retirement readiness over time. Sometimes, just seeing the numbers on paper brings clarity.

What most clients discover is this: having a mortgage in retirement isn’t a deal breaker. It’s simply another line item to plan around.

The Bottom Line

So, should you pay off your mortgage before retirement?

If you have a low interest rate, strong investment returns, and solid cash flow, keeping your mortgage can make good financial sense. It allows your money to stay invested and growing, giving you more flexibility in the long run.

If your mortgage rate is high or being debt free gives you genuine peace of mind, then paying it off can be equally valid. What matters most is that the decision fits your broader retirement plan, not just a cultural ideal.

Final Thoughts

The dream of a mortgage-free retirement is still alive for many Americans, but it’s no longer the default definition of financial success. The real measure is whether your plan supports the life you want.

A house is part of your story, but it’s not the whole story.

At Bonfire Financial, we help clients look beyond the headlines and build customized strategies that balance math, mindset, and meaning. Whether your goal is a paid-off home, stronger cash flow, or simply a confident retirement, we’ll help you find the right path forward.

Need help deciding whether to pay off your mortgage before retirement?

Schedule a call with our team to run your personalized retirement plan and see what makes the most sense for your future.

High Income to High Net Worth: The Smart Way to Build Wealth That Lasts

Posted on by Brian Colvert

High Income to High Net Worth

If you’re making a good living but don’t quite feel wealthy, you’re not alone. Many high earners find themselves wondering why their bank account doesn’t reflect their paycheck. You work hard, you’re responsible, and yet your net worth hasn’t grown the way you expected. That’s the difference between high income and high net worth.

We see it all the time: successful professionals earning six figures (or more) who still feel like they’re on a treadmill. The money comes in, the money goes out, and lifestyle upgrades happen faster than wealth accumulation. The good news? Turning high income into lasting wealth isn’t about luck or secret strategies; it’s about mindset, discipline, and simple systems that work automatically in your favor. Let’s dig in.

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High Income vs. High Net Worth: Understanding the Gap

First, it helps to define the terms. High income is what you earn. It’s your salary, bonuses, commissions, and business profits. It fuels your lifestyle, your savings, and your spending. High net worth, on the other hand, is what you keep. It’s the total value of your assets: cash, investments, real estate, business equity, minus your debts.

The two are connected, but not automatically. You can earn a lot and still build very little wealth if every dollar is spent as quickly as it’s made. This gap between income and wealth is what we help clients close every day. The key lies in managing the flow of money, how it moves from income to savings, from savings to investment, and from investment to financial freedom.

The Happiness Factor: What Money Really Buys

There’s a saying that “money can’t buy happiness.” That’s only partly true. Money absolutely buys security. If you’ve ever worried about paying bills, covering an emergency, or affording a safe home, you know that financial stability brings peace of mind.

But beyond a certain level, money doesn’t make life better, it just enhances it. It gives you better seats, not necessarily a better show. That’s why the real goal isn’t endless accumulation, it’s freedom. Freedom to make choices, to take time off, to support your family, to enjoy the finer things without financial stress tagging along for the ride. So the focus becomes: how do you turn that high income into the kind of wealth that gives you lasting freedom?

Step 1: Automate Your Savings

The easiest way to save more money? Stop relying on willpower. When you automate your savings, direct deposits, investment contributions, and retirement funding, it removes emotion from the equation. You’re not constantly deciding whether to save or spend. It just happens.

Think of it like your own version of a tax. The government takes their cut before you ever see your paycheck. You should, too. Except this time, you benefit from it. Set up automatic transfers to your 401(k) or retirement account, a high-yield savings account, an investment account for long-term goals, and a “freedom fund” for travel, experiences, or passion projects. The goal is to make saving so consistent that it becomes invisible, and therefore, sustainable.

Step 2: Spend Less Than You Make (Even When You Can Afford More)

Simple advice. Hard to do. As income rises, spending tends to rise right alongside it. This is called lifestyle creep, and it’s the quiet killer of net worth. Maybe you upgraded your car, your house, your vacations, or your wardrobe. Individually, none of those things are bad. But collectively, they can keep you stuck in the same financial position year after year.

A smarter approach is to grow your lifestyle one step behind your income. If you get a raise, increase your savings rate before you increase your spending. You’ll still feel the benefit of your success—but your wealth will grow faster in the background.

We often use what we call the Stair Step Strategy: start small, cover the essentials and save a little. Increase savings before upgrading lifestyle. Repeat each time income rises. Over time, your wealth compounds while your lifestyle still improves, just at a sustainable pace.

Step 3: Invest Intentionally

Saving is important. Investing is essential. Cash sitting in a low-interest account loses value every year to inflation. The key to building true wealth is putting your money to work.

That doesn’t mean chasing risky investments or trying to outsmart the market. It means building a portfolio that matches your goals, your timeline, and your tolerance for risk. We like to remind clients that wealth is built through boring consistency—not excitement.

Focus on diversified investments across stocks, bonds, and alternatives, tax-efficient strategies to minimize what you lose to Uncle Sam, regular rebalancing to keep your risk in check, and staying invested even when markets get choppy. Compounding returns are quiet, but they’re powerful. Every dollar you invest today buys your future freedom.

Step 4: Protect What You’re Building

Once you’ve started building wealth, protecting it becomes just as important as growing it. That means reviewing your insurance, your estate plan, and your tax strategy regularly.

Too often, high earners overlook this step because it doesn’t feel urgent—until it is. A lawsuit, illness, or tax mistake can undo years of progress. Protect your wealth with the right levels of life, disability, and liability insurance, an updated estate plan and beneficiaries, a tax strategy that captures deductions and deferrals, and a trusted team of advisors who coordinate your entire financial picture. Wealth without protection is fragile. Think of this step as the safety net beneath your financial ladder.

Step 5: Redefine “Enough”

One of the biggest mindset shifts in wealth building is deciding what “enough” looks like for you. If your financial goals are vague, “I just want more”, you’ll never know when you’ve arrived.

Start defining enough in concrete terms: enough savings to cover emergencies, enough income to support your lifestyle without stress, enough net worth to give you options. That clarity helps you make smarter choices. It also helps you enjoy what you’ve already achieved, instead of constantly chasing the next level. Remember: wealth isn’t just money, it’s freedom, flexibility, and peace of mind.

Step 6: Align Your Money With Your Values

Money should serve your life, not the other way around. Take a step back and ask: what do I actually want my money to do for me? Maybe it’s early retirement. Maybe it’s starting a business, funding your kids’ education, or giving back to causes you care about.

When your money aligns with your values, your financial plan feels less like restriction and more like empowerment. That’s the real difference between high income and high net worth: it’s not just about how much you earn or own, but about how intentionally you use it.

Common Pitfalls That Keep High Earners Stuck

Even smart, successful people make these mistakes. Avoiding them is half the battle.

  1. No system for saving. If you wait until the end of the month to see what’s left, there rarely is anything left. Automate it.

  2. Letting debt linger. Car loans, credit cards, and lifestyle debt eat away at your ability to invest. Pay them down strategically.

  3. Ignoring taxes. Taxes are often a high earner’s biggest expense. A proactive plan can save thousands every year.

  4. Overinvesting in lifestyle. A bigger house, nicer car, and luxury trips can feel rewarding, but they can delay true wealth. Don’t fall into FOMO.

  5. Not asking for help. You don’t need to BE a financial expert to build wealth. You just need a plan and the right people guiding you.

Step 7: Make It Boring (So It Works)

The best wealth-building systems are simple and repeatable. Automate your savings. Invest regularly. Spend with intention. Revisit your goals once or twice a year. That’s it. It’s not flashy, but it works. And when you stop thinking about money every day, that’s when you know you’re winning. Because financial freedom isn’t about constant optimization, it’s about not worrying anymore.

Step 8: Measure Progress, Not Perfection

One of the biggest motivators in wealth building is tracking your progress. Just like tracking workouts or health goals, seeing your net worth increase, even slowly, keeps you motivated.

Start by reviewing your finances quarterly. How much are you saving? Is your debt decreasing? Are your investments growing? Are you still aligned with your goals? Progress compounds. Don’t let small setbacks derail you. Focus on trends, not perfection.

The Real Goal: Freedom

In the end, going from high income to high net worth isn’t about accumulating stuff, it’s about creating freedom. Freedom to take time off, freedom to retire early, freedom to say no, and freedom to live life on your own terms.

When your money supports your life instead of controlling it, that’s wealth. So keep saving. Keep investing. Keep taking those steady stair steps upward. You’ll wake up one day and realize you’re not just earning well, you’re living well.

Ready to Turn Your High Income into Real Wealth?

If you’re ready to build a plan that works automatically in the background while you focus on living your life, we can help. At Bonfire Financial, we help professionals and families create smart, personalized strategies to grow wealth, reduce stress, and enjoy more freedom.

Let’s make your money work as hard as you do. Book a call with us today to get started.

Charitable Giving Strategies to Maximize Your Tax Deductions

Posted on by Brian Colvert

Charitable Giving Strategies

When it comes to giving, generosity and good planning often go hand in hand. The joy of supporting causes you care about is its own reward, but when done strategically, it can also create meaningful tax advantages. With several tax changes coming, there’s never been a better time to revisit your approach to charitable giving.

Today, we’ll break down smart charitable giving strategies to help you give intentionally, reduce your tax bill, and make a greater impact on the organizations you care about most.

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Why Timing Matters: Planning Your Giving

Tax laws ebb and flow, and timing can make a real difference in how much benefit you receive from your charitable contributions. If you’ve been thinking about opening a Donor-Advised Fund (DAF), bunching your deductions, or gifting from your IRA, now may be the sweet spot to act.

Because of upcoming changes to deduction thresholds and standard deduction amounts, what you give, and when, can significantly affect your tax outcome. Waiting until next year could mean leaving money on the table. By planning ahead, you can align your giving with the years that will produce the largest tax impact.The Power of Donor-Advised Funds

One of the most flexible charitable giving strategies is the Donor-Advised Fund (DAF). A DAF allows you to make a large charitable contribution in one year, receive an immediate tax deduction, and then recommend grants to your favorite charities over time.

If you typically take the standard deduction and don’t have enough itemized deductions to exceed it, a DAF can help. By “bunching” several years’ worth of charitable giving into one year, you can itemize in that year and potentially claim a much larger deduction — while still supporting your causes in future years through the fund.

Example:
If you usually donate $10,000 each year, consider giving $30,000 to a DAF in 2025. You’ll receive the full deduction in 2025, then distribute that money to charities gradually over the next few years.

It’s a way to amplify your tax savings without changing your charitable goals.

Qualified Charitable Distributions (QCDs): A Win-Win for Retirees

For those over age 70½, one of the most underused charitable giving strategies is the Qualified Charitable Distribution (QCD).

A QCD allows you to donate up to $105,000 per year directly from your IRA  (check here for the current year’s limits) to a qualified charity. The key advantage is that the amount given is excluded from your taxable income. This is especially valuable if you’re already taking Required Minimum Distributions (RMDs,  since a QCD can satisfy all or part of that RMD without increasing your taxable income.

This approach doesn’t just reduce your tax bill; it can also keep your adjusted gross income lower, which may help you avoid Medicare surcharges or taxation on Social Security benefits.

Quick facts about QCDs:

  • You must be at least 70½ years old at the time of the distribution.

  • The gift must go directly from your IRA to the charity.

  • You can give up to $105,000 per person per year in 2025.

  • The charity must be a qualified 501(c)(3) organization — not a private foundation or donor-advised fund.

A practical tip

If your IRA is held at Schwab, you can even write checks directly to the charity from your IRA account. Just remember: the funds must already be in cash, not invested, or the check could bounce.

It’s a simple, elegant way to give and one that can significantly enhance your retirement-age tax efficiency.

Avoiding Common QCD Mistakes

Even the most generous donors can lose out on tax savings if they overlook the details. Here are a few pitfalls to avoid:

• Forgetting to track your QCDs on your tax return.
Your IRA custodian will issue a 1099-R showing your total distributions, but they won’t specify how much was donated. It’s up to you (or your CPA) to note the amount that was given as a QCD so it isn’t counted as taxable income.

• Writing the check before ensuring cash is available.
In an IRA, investments must be sold before cash becomes available. Confirm your balance before writing your QCD check.

• Giving through the wrong type of account.
QCDs only work for IRAs , not 401(k)s or donor-advised funds. If you’re planning to give from another account, talk with your advisor about rolling funds into an IRA first.

Small mistakes can make a big difference come tax time, so double-checking the details can protect your deduction and avoid unpleasant surprises.

Combining Giving with Retirement Planning

For retirees or those approaching retirement, charitable giving can be more than just generosity ,  it can be part of a broader income and estate plan.

A few key charitable giving strategies to consider:

• Coordinate QCDs with your RMDs.
If you don’t need your RMD income for living expenses, direct it straight to charity. You’ll meet your distribution requirement and avoid adding to your taxable income.

• Donate appreciated assets.
Instead of selling stocks or mutual funds and paying capital gains, you can donate the shares directly. You’ll avoid the capital gains tax and may still receive a deduction for the full fair market value.

• Create a charitable remainder trust (CRT).
If you’d like to generate income while still giving back, a CRT allows you to donate assets, receive a partial tax deduction, and collect income for life or a set term with the remainder going to charity.

Strategic giving lets you support what you care about while strengthening your overall financial plan.

Why Timing Matters in your Charitable Giving Strategy

Tax laws and deduction thresholds are always evolving, which means the timing of your charitable contributions can make a meaningful difference.

If you’ve been thinking about setting up a donor-advised fund, making a larger contribution, or simply becoming more intentional with your giving, taking action sooner rather than later can often lead to greater tax advantages.

Waiting too long to implement your plan can mean missing out on opportunities under the current rules. You’re not losing the opportunity to give, you’re just leaving some chips on the table if you wait.

Important Tip: Keep Good Records

The IRS requires documentation for any charitable contribution you plan to deduct, regardless of size. Always keep:

  • Donation receipts or acknowledgment letters from charities

  • Records of QCD checks or transfers from your IRA

  • Details of any appreciated assets donated (including cost basis and fair market value)

Your CPA will need these records at tax time to ensure your deductions are correctly applied and your income accurately reported.

Matching Your Giving to Your Values

Financial planning isn’t just about numbers, it’s about aligning your resources with what matters most to you. Charitable giving is one of the most rewarding ways to make that connection tangible.

Ask yourself:

  • Which causes have shaped your life or your family’s story?

  • What impact do you want to leave behind?

  • How can your financial plan make those goals real?

When giving is built into your plan, it stops being a once-a-year consideration and becomes part of a long-term legacy.

How Bonfire Financial Helps Clients Build a Giving Plan

At Bonfire Financial, we believe that true wealth includes the ability to give generously. Our advisors help clients create customized giving strategies that align with their financial goals, tax situation, and personal values.

Here’s what that might look like:

  • Reviewing your charitable history and identifying missed opportunities for deductions

  • Coordinating your CPA and investment accounts for smooth execution of QCDs or DAF contributions

  • Timing gifts for maximum tax efficiency, especially ahead of any new rule changes

  • Helping you decide whether to give cash, appreciated assets, or IRA distributions

By taking a proactive approach, you can make every dollar of generosity go further, both for your finances and your favorite causes.

Small Steps, Big Impact

Even modest contributions can create a significant difference over time, especially when combined with thoughtful planning. Whether you’re contributing monthly through your IRA, setting up automatic grants from a donor-advised fund, or gifting shares of appreciated stock, each move adds up to a meaningful impact.

The goal isn’t just to give,  it’s to give wisely.

Final Thoughts: Plan Well, Give Generously

Charitable giving is one of the few financial strategies that truly benefits everyone involved. You help organizations that matter to you, potentially reduce your tax bill, and reinforce a sense of purpose and gratitude in your financial life.

As tax laws evolve, so should your giving plan. Review your strategy annually, especially before major tax. With the right plan, you can give more effectively, reduce your taxes, and create a legacy that reflects your values.

Ready to Create Your Charitable Giving Strategy?

If you’d like help evaluating your options or setting up a tax-efficient giving plan, our team at Bonfire Financial can walk you through the details. From donor-advised funds to QCDs and beyond, we’ll help you make the most of your generosity.

👉 Schedule a consultation today to get started.

Qualified vs. Non Qualified Accounts: What It Really Means for Your Money

Posted on by Brian Colvert

Qualified vs. Non-Qualified Accounts?

The account type you choose could change your tax bill, and your retirement timeline.

Understanding how your investments are taxed isn’t just for accountants. It’s one of the most important pieces of your long-term financial picture. The truth is, not all investment accounts are created equal, and the difference between qualified and non-qualified accounts can have a big impact on how much you keep and how much goes to the IRS.

Today we’ll break down what each account type means, how they’re taxed, when you can access your money, and how a well-balanced mix can set you up, on your own timeline.

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What Is a Qualified Account?

Let’s start with the basics.

A qualified account is a retirement account that meets specific IRS rules to receive tax advantages. Think of these as the “officially recognized” retirement savings vehicles like your 401(k), Traditional IRA, Roth IRA, SIMPLE IRA, or SEP IRA.

The key benefits?

  • You might receive a tax deduction on your contributions.

  • Your investments grow tax-deferred (or tax-free in the case of Roth accounts).

  • You may be eligible for employer matching in workplace plans.

These accounts are designed to help you save for the long term. The IRS offers these benefits to encourage people to plan for retirement, but in exchange, there are rules about when and how you can access the money.

How Qualified Accounts Are Taxed

In most qualified accounts, you’re either deferring taxes until later or paying them upfront for future tax-free growth.

Here’s the quick breakdown:

Type of Account When You Pay Taxes Tax Advantage
Traditional 401(k) / IRA When you withdraw Contributions reduce your taxable income today; growth is tax-deferred
Roth 401(k) / IRA Before you contribute Withdrawals in retirement are tax-free (if rules are met)

When you eventually take money out, typically in retirement, it’s taxed as ordinary income. That means the withdrawals get added to your income for that year and taxed at your marginal rate.

There are also Required Minimum Distributions (RMDs) for most qualified accounts, starting at age 73 (for most individuals). The government wants its share eventually.

Withdrawal Rules

The biggest limitation of qualified accounts is accessibility. The IRS designed them for retirement, so you can’t typically touch the money until age 59½ without paying penalties. Withdraw early, and you’ll likely face:

  • 10% early withdrawal penalty

  • Income tax on the amount you take out (unless it’s a Roth contribution)

There are exceptions, for example, certain first-time home purchases, education expenses, or hardship withdrawals, but for most investors, it’s best to view these accounts as untouchable until retirement.

What Is a Non-Qualified Account?

Now let’s look at the other side of the coin.

A non-qualified account is any investment account that isn’t registered under a retirement plan. It’s funded with after-tax dollars, meaning you don’t get a deduction for contributing, but you gain flexibility.

Examples include:

  • Brokerage accounts

  • Trust accounts

  • Individual or joint investment accounts

There’s no contribution limit, no withdrawal restriction, and no early penalty for accessing your money. You can invest as much as you want, whenever you want, and withdraw it at any time.

The trade-off? You’ll pay taxes on your earnings as they happen.

How Non-Qualified Accounts Are Taxed

Here’s where it gets interesting, and where many investors get tripped up.

In a non-qualified account, you’ve already paid taxes on the money you put in. You won’t be taxed again on your original investment. But you will owe taxes on the growth, the profits your money earns through dividends, interest, or capital gains.

Let’s use an example:

You invest $100,000 in a brokerage account. Over time, it grows to $150,000.

  • Your original $100,000 has already been taxed.

  • The $50,000 gain is what’s subject to tax.

How much you pay depends on how long you held the investments and what type of income it generated.

Type of Gain Holding Period Taxed As
Short-Term Capital Gains Less than 1 year Ordinary income (your regular tax rate)
Long-Term Capital Gains More than 1 year 0%, 15%, or 20%, depending on income
Dividends / Interest Varies Typically ordinary income or qualified dividend rate

Flexibility and Liquidity

The beauty of non-qualified accounts is access. You don’t have to wait until you’re 59½ to use the money. That makes these accounts especially useful if you plan to retire early, buy a property, or fund a child’s education before your official retirement age.

They also provide a way to keep investing after you’ve maxed out your qualified accounts. For clients striving for financial independence before 65, non-qualified accounts are often the bridge between the working years and full retirement.

Taxes in Motion: Comparing the Two

Think of the difference like this:

  • Qualified accounts are “pay later.” You get a tax break now, but pay taxes when you withdraw.

  • Non-qualified accounts are “pay as you go.” You pay taxes on the earnings each year, but enjoy flexibility and liquidity.

Here’s a side-by-side summary:

Feature Qualified Account Non-Qualified Account
Tax Treatment Tax-deferred or tax-free (Roth) Earnings taxed annually
Contribution Limits Yes (e.g., $23,000 for 401(k) in 2025) None
Withdrawal Rules Restricted until age 59½ Withdraw anytime
Penalties Possible early withdrawal penalties None
Required Minimum Distributions Yes No
Ideal For Long-term retirement savings Flexible, mid-term, or early-retirement goals

The Strategy Behind Both

Having both types of accounts is like having different tools in a toolbox. Each serves a purpose depending on your financial goals and timeline.

1. Tax Diversification

Just as you diversify your investments, you should also diversify your tax exposure. When you have both account types, you can strategically decide where to withdraw from each year to minimize taxes in retirement.

For example:

  • In years when your income is lower, you can withdraw from qualified accounts at a lower tax rate.

  • In higher-income years, you can rely more on non-qualified accounts or Roth assets, avoiding additional taxable income.

That’s what we call tax-efficient retirement income planning.

2. Tax-Loss Harvesting

One of the most talked-about strategies in non-qualified accounts is tax-loss harvesting, the art of turning market dips into potential tax savings.

If you sell an investment at a loss, you can use that loss to offset gains elsewhere in your portfolio. If your losses exceed your gains, you can even use up to $3,000 to offset ordinary income, carrying the rest forward for future years.

It’s not always fun (because it means something went down), but it’s a smart way to make volatility work for you.

Remember: tax-loss harvesting only applies to non-qualified accounts, not to IRAs or 401(k)s, because those are tax-sheltered until you withdraw.

3. Borrowing Against Your Investments

This is a little-known but powerful strategy.
In a non-qualified account, you can borrow against your portfolio using an asset-based line of credit.

For example, if you hold $500,000 in appreciated stock, you could borrow against it for liquidity,say, for a real estate purchase—without selling the stock or realizing a taxable gain.

The stock remains your collateral, your investments stay intact, and you get access to cash when needed. This is often how high-net-worth investors fund major purchases tax-efficiently.

4. Planning for Early Retirement

If your goal is to retire before 59½, non-qualified accounts are essential. While qualified plans are excellent for long-term growth, they’re not designed for early withdrawals. Having a healthy non-qualified balance gives you bridge money to cover the years before you can access your retirement accounts penalty-free.

That flexibility can make the difference between retiring at 55 and waiting until 65.

Qualified vs. Non-Qualified Account Comparision

Qualified-vs.-Non-Qualified-Accounts-Comparison

Common Mistakes to Avoid

Even experienced investors can make missteps with how they use their accounts. Here are a few pitfalls to watch for:

  1. Overfunding one account type.
    Putting every dollar into your 401(k) can leave you “asset rich but cash poor” if you want to retire early.

  2. Ignoring tax consequences of trading.
    Frequent buying and selling in a non-qualified account can create unnecessary short-term gains.

  3. Not planning withdrawals strategically.
    Taking all income from one source in retirement can push you into higher tax brackets.

  4. Neglecting beneficiary designations.
    Qualified and non-qualified accounts can pass differently to heirs—another reason to coordinate your estate plan.

Building a Balanced Financial Plan

The most effective financial strategies don’t rely on a single type of account, they blend them intentionally.

At Bonfire Financial, we help clients balance qualified vs. non-qualified accounts based on their goals, income, and retirement vision. For some, that means prioritizing 401(k) contributions for the tax deduction. For others, it’s about maximizing brokerage savings for flexibility and access.

The right mix depends on:

  • Your income level (and current tax bracket)

  • Your retirement timeline

  • Your desired lifestyle before and after 59½

  • Your comfort with market risk and liquidity

By coordinating both account types, you can minimize lifetime taxes, maintain flexibility, and design a strategy that adapts as your life changes.

The Big Picture

At the end of the day, qualified vs. non-qualified isn’t a competition, it’s a collaboration.

Qualified accounts help you build a tax-deferred foundation for the long haul. Non-qualified accounts give you the agility to handle life’s changes along the way.

When you understand how these accounts work, and more importantly, how they work together, you can make smarter decisions that keep more money in your pocket and help you retire on your terms.

Final Thoughts

The account type you choose truly can change your tax bill, and your retirement timeline. But you don’t have to figure it out alone. The best strategies are built around your specific goals, lifestyle, and timeline.

If you’re ready to make your money work harder, and smarter, for you, our team at Bonfire Financial can help you create a plan that balances tax efficiency, liquidity, and long-term growth.

→ Schedule a meeting with us to start building your personalized investment strategy.

Maxed Out Your 401k? Here’s What to Do Next

Posted on by Brian Colvert

What to Do After You’ve Maxed Out 401k Contributions

For high-income earners and diligent savers, few milestones feel as rewarding as realizing you’ve maxed out your 401k for the year. It’s a signal that you’re prioritizing your financial future and taking full advantage of one of the most powerful retirement savings tools available.

But once you’ve hit the annual contribution limit, an important question arises: what do you do next?

Should you explore Roth options? Open a taxable brokerage account? Look at real estate? Or maybe even consider advanced strategies like a mega backdoor Roth? Today we’ll explore all this and more.

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Understanding the 401k Contribution Limits

Before exploring what to do next, it’s important to understand what “maxing out your 401k” really means.

Each year, the IRS sets limits on how much you can contribute to your 401k as an employee. These limits vary depending on your age, and additional “catch-up” contributions are available if you’re over a certain age. Employers can also make contributions, such as matches or profit-sharing, which can significantly increase the total amount going into your account.

When people say they’ve maxed out their 401k, they’re typically referring to reaching the maximum amount they’re personally allowed to defer from their salary. That doesn’t always include employer contributions, which can add even more to your retirement savings.

Since these numbers are updated regularly, you’ll want to check the most current limits here: Current Contribution Limits.

Step One After Maxing Out: Consider a Roth IRA

Once you’ve maxed out your 401k, the next logical place to look is a Roth IRA.

With a Roth IRA, you contribute after-tax dollars, but your money grows tax-free, and withdrawals in retirement are also tax-free. This makes Roth accounts incredibly valuable for long-term planning.

Contribution & Income Rules

Roth IRAs come with their own annual contribution limits and income restrictions. High-income earners often find themselves phased out of direct Roth eligibility, but there’s a solution: the backdoor Roth.

The Backdoor Roth IRA Strategy

If your income is too high for a direct Roth contribution, you can use the backdoor Roth strategy:

  1. Contribute after-tax dollars into a Traditional IRA.

  2. Convert those funds into a Roth IRA.

This effectively sidesteps the income restrictions.

Caution: If you already have money in a Traditional IRA, SEP IRA, or SIMPLE IRA, the conversion could trigger unexpected taxes due to the pro-rata rule. Work with a professional before making the move.

The Mega Backdoor Roth: Supersizing Your Roth

For those who want to go beyond traditional Roth IRAs, the mega backdoor Roth may be an option.

This strategy involves making after-tax contributions inside your 401k and then converting them into Roth dollars, either within the plan or through a rollover.

Not every 401k allows this, so check your plan’s rules. If it’s available, it can dramatically increase how much money you can shift into tax-free Roth savings.

Taxable Brokerage Accounts

After you’ve fully leveraged your 401k and Roth options, a taxable brokerage account is often the best next step.

Why It’s Valuable

  • No contribution limits: You can invest as much as you want.

  • Investment flexibility: Stocks, ETFs, mutual funds, options, and more.

  • Liquidity: No early withdrawal penalties.

  • Bridge to early retirement: Money is accessible well before traditional retirement age.

Tax Considerations

  • Gains on investments held less than a year are taxed at regular income rates.

  • Gains on investments held longer than a year qualify for long-term capital gains rates.

A taxable brokerage account provides unmatched flexibility and can complement your retirement accounts beautifully.

Real Estate: Diversifying Beyond the Market

Once your 401k is maxed out, real estate becomes an attractive alternative for many investors.

Options include:

  • Rental properties for steady cash flow

  • House flipping projects

  • REITs (real estate investment trusts)

  • Syndications or real estate funds

Real estate adds diversification, offers potential tax benefits, and gives you a tangible asset. However, it also requires active management and carries risks like vacancies and market downturns.

Cryptocurrency: A Modern Diversifier

For investors who are looking for ways to expand beyond traditional markets, cryptocurrency can be an exciting and innovative option.

Bitcoin, often called “digital gold,” has established itself as a legitimate asset class over the past decade. It offers a way to diversify away from traditional stocks and bonds, while also providing exposure to a technology that’s reshaping global finance. Many investors see it not just as a speculative play, but as a long-term hedge against inflation and currency debasement.

Why Crypto Appeals to Investors

  • Decentralization: Unlike traditional assets, cryptocurrencies operate outside the control of central banks or governments.

  • Scarcity: Bitcoin has a fixed supply, which creates a built-in scarcity similar to precious metals.

  • Accessibility: Crypto markets operate 24/7, offering flexibility that traditional exchanges don’t.

  • Innovation: Beyond Bitcoin, blockchain technology is driving new opportunities in decentralized finance (DeFi), tokenization, and smart contracts.

Tax & Portfolio Considerations

Crypto is treated as property for tax purposes, which means gains are subject to capital gains rules. Like any investment, it comes with volatility—but that volatility is also what creates potential for outsized returns. For many high-income earners, allocating even a small portion of their portfolio to crypto can provide diversification and long-term upside.

In other words, crypto isn’t just a speculative side bet, it can be a strategic addition to a modern wealth-building plan.

Insurance Products: A Niche Option

I’ve talked at length about how insurance is not an investment; however, life insurance policies that build cash value, such as whole life or universal life, can sometimes be used as investment vehicles after your 401k is maxed out.

Pros

  • Cash value grows tax-deferred

  • Loans can be taken tax-free

  • Provides death benefit protection

Cons

  • Higher costs and fees

  • Complexity and potential restrictions

  • Usually only makes sense for very high-income earners in specific situations

For most people, insurance shouldn’t be the first place you look, but it may be worth exploring with professional guidance if you’ve exhausted other options.

Tax Efficiency: Today vs. Tomorrow

When thinking about where to invest after your 401k is maxed out, it helps to balance two tax goals:

  1. Reducing taxes today through pre-tax contributions.

  2. Reducing taxes tomorrow by building tax-free money in Roth accounts.

Most investors benefit from having a mix of tax-deferred, tax-free, and taxable accounts, giving them flexibility no matter what future tax policy looks like.

Suggested Order of Operations

If you’ve maxed out your 401k and are wondering where to go next, here’s a general roadmap many investors follow:

  1. Contribute enough to your 401k to get the full employer match.

  2. Max out your 401k contributions.

  3. Fund a Roth IRA (or use the backdoor Roth if necessary).

  4. Explore the mega backdoor Roth if your plan allows.

  5. Open and invest in a taxable brokerage account.

  6. Add real estate, Bitcoin, or other alternative investments.

  7. Consider insurance-based strategies only if, and only if,  they fit your situation.

Final Thoughts

Hitting the point where you’ve maxed out your 401k is an incredible financial milestone. It means you’re saving aggressively and building a solid foundation for retirement. But the journey doesn’t end there. From Roth accounts to brokerage accounts, real estate, and beyond, there are countless ways to keep your money working for you.

The best approach depends on your goals, income, and risk tolerance. For many, working with a financial advisor can help align these options into a personalized plan.

Next Steps

At Bonfire Financial, we specialize in helping high-income earners and diligent savers make the most of every opportunity. If you’ve maxed out your 401k and are wondering what to do next, we’d love to help you create a clear plan for building wealth beyond the limits.

👉 Book a meeting with us today to map out your next steps.

What to Do with an Old (or Forgotten) 401k

Posted on by Brian Colvert

Why Old 401ks Matter

If you’ve ever switched jobs, there’s a good chance you’ve left behind an old 401k. In fact, studies estimate there are millions of forgotten retirement accounts in the U.S., holding billions of dollars in unclaimed savings.

Whether you left $500 in a plan years ago or have tens of thousands tied up with a former employer, those accounts matter more than you might realize. An old 401k could be costing you money in unnecessary fees, or worse,  you might lose track of it entirely.

Today we will walk you through everything you need to know about handling an old 401k. From your rollover options, to how to track down a forgotten plan, to avoiding common mistakes — you’ll come away knowing exactly what to do to make sure every dollar you earned is working toward your future.

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What Happens to Your Old 401k When You Leave a Job

When you leave an employer, your 401k doesn’t vanish,  but it doesn’t automatically follow you either. Depending on your balance, several things can happen:

  • Balances over $5,000: Most employers allow you to keep the money in the plan if you choose.

  • Balances between $1,000–$5,000: Some companies may automatically roll your account into an IRA in your name, but you may not realize it.

  • Balances under $1,000: Employers may cash you out, sending a check (minus taxes and penalties if you’re under age 59½).

If you don’t take action, your old 401k can become “out of sight, out of mind.” That’s where problems start.

The Risks of Leaving an Old 401k Behind

Why not just leave your old 401k where it is? After all, it’s still invested, right? While that’s true, there are downsides:

  1. Losing track of accounts – Multiple jobs often mean multiple accounts. Over time, it’s easy to forget login info or overlook one entirely.

  2. Higher fees – Old employer plans may have more expensive mutual funds or administrative costs compared to an IRA.

  3. Limited investment options – Most 401ks restrict you to a small menu of mutual funds, while IRAs offer far broader choices (ETFs, individual stocks, etc.).

  4. Difficulty managing a unified strategy – Spreading your retirement savings across several accounts makes it harder to stay on top of allocation, rebalancing, and overall performance.

Bottom line: consolidating old 401ks can simplify your life, reduce costs, and help your money grow more effectively.

Your Options for an Old 401k

When you leave an employer, you generally have four choices:

1. Leave the Money in the Old 401k

  • Pros: Simple, no immediate action required. You might benefit from institutional pricing on mutual funds.

  • Cons: Easy to forget about, limited investment choices, and fees may be higher.

2. Roll It Into Your New Employer’s 401k

  • Pros: Keeps all your workplace retirement savings in one account, making it easier to track. No tax consequences for direct rollovers.

  • Cons: You’re limited to the new employer’s fund lineup. Some plans have clunky rollover processes.

3. Roll It Into an IRA

  • Pros: Maximum control and flexibility. You can invest in almost anything (ETFs, individual stocks, bonds). Many custodians now charge $0 commissions.

  • Cons: May lose access to special institutional share classes of mutual funds. Requires you to manage the account yourself or work with an advisor.

4. Cash Out the 401k (Least Recommended)

  • Pros: You get the money immediately.

  • Cons: Taxes plus a 10% penalty if you’re under age 59½. You risk derailing your long-term retirement savings.

How to Track Down a Forgotten 401k

Maybe you lost track of an old account years ago. Don’t worry,  there are ways to find it.

Start with the Employer

If you remember the company, call their HR or benefits department. They can direct you to the plan’s recordkeeper.

Use the Department of Labor’s Form 5500 Search

Employers file this form for their retirement plans. Search by company name to see details on who administers the plan.

Contact Major 401k Providers

Firms like Fidelity, Vanguard, Empower, and Nationwide handle a huge portion of retirement plans. A quick call with your Social Security number can often locate accounts.

Check the National Registry of Unclaimed Retirement Benefits

This online database lets you search for old accounts using your Social Security number. While legitimate, always be cautious and make sure you’re on the official site.

The Cost Factor: Fees and Share Classes

One overlooked detail about old 401ks is share class pricing.

Large employer plans often get access to cheaper mutual fund share classes. But when you roll money into an IRA, you may move into a more expensive version of the same fund. On the flip side, IRAs allow access to ETFs and individual stocks, which can often be cheaper overall.

Action step: Always compare expense ratios and fund availability before deciding whether to keep money in an old 401k or roll it out.

Why Consolidating Accounts Matters

Consolidating your old 401ks into fewer accounts isn’t just about neatness,  it’s about strategy.

  • Easier to monitor performance.

  • One investment strategy instead of several scattered ones.

  • Simpler rebalancing.

  • Lower risk of losing track.

Think of it like cleaning out a closet. You might find things you forgot you owned,  and you’ll feel more in control once everything is in one place.

FAQs About Old 401ks

Q: Can I have multiple old 401ks?
Yes,  and many people do. Each employer you’ve worked for likely had its own plan.

Q: Will my old 401k keep growing if I leave it alone?
Yes, it stays invested. But without oversight, you risk misallocation and higher fees.

Q: What if my old employer went out of business?
Your account still exists. Use the Department of Labor’s Form 5500 search to track down the recordkeeper.

Q: Can my old 401k be lost forever?
Not exactly. Even if you lose track, there are ways to recover it, but it may take effort.

Q: Should I always roll into an IRA?
Not always. If your new employer has a great low-cost plan, rolling into it might be easier. Compare before deciding.

Conclusion: Don’t Let Your Old 401k Collect Dust

Your old 401k is your money. Whether it’s a few hundred dollars or a few hundred thousand, every dollar counts toward your retirement future. By consolidating accounts, lowering fees, and keeping everything organized, you can maximize growth and reduce headaches.

The key is to be proactive. Don’t wait until years later when you can’t remember the login or whether you even had a plan. Track it down now, roll it over wisely, and keep your retirement savings working hard for you.

Ready to Take Control of Your Old 401k?

Don’t let your hard-earned savings sit forgotten with a past employer. Whether you need help tracking down an old 401k, deciding between a rollover or IRA, or building a bigger retirement strategy, we’re here to help.

👉 Book a meeting with us  and let’s make sure every dollar you’ve earned is working toward your future.

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