Category: Retirement

How Much Should You Have in Your 401(k) by Age?

Posted on by Brian Colvert

How Much Should You Have in Your 401(k) by Age?

Most people know they should be saving for retirement.

They know they should be contributing to their 401(k). They know they should probably be saving more than they are. They know retirement will be expensive. They know Social Security probably will not be enough on its own.

But here is where the confusion starts.

How much should you actually have in your 401(k) by age?

Is the average 401(k) balance a good benchmark? Is maxing out your 401(k) enough? Should all your retirement money be in one account? And if your 401(k) balance looks healthy, does that automatically mean your retirement plan is on track?

Not necessarily.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

A 401(k) can be one of the most powerful retirement savings tools available, but it was never meant to be your entire retirement plan. The problem is that many people have been trained to look at one number, their 401(k) balance, and assume that number tells the whole story.

It does not.

There is a big difference between having a large retirement account and having a retirement strategy that actually works. Your 401(k) balance matters, but so does where that money is held, how it will be taxed, how much flexibility you have, what fees you are paying, and whether you will be able to use your money in the way you want when retirement arrives.

So let’s walk through how much you should aim to have saved by age, what the averages really mean, and why the number alone is only part of the picture.

Why Your 401(k) Balance Is Not the Whole Story

A lot of people treat their 401(k) like it is their entire retirement plan.

They contribute every paycheck, maybe increase the percentage every few years, and occasionally check the balance. If the number is going up, they assume they are doing okay.

That is understandable. It feels productive. It feels responsible. And in many ways, it is.

But a 401(k) balance can be misleading.

For example, having $1 million in a traditional pre-tax 401(k) is not the same as having $1 million spread across a traditional 401(k), a Roth account, and a taxable brokerage account.

The total balance might look the same on paper, but the retirement experience can be very different.

That is because traditional 401(k) money has not been taxed yet. Every dollar you withdraw in retirement is generally treated as ordinary income. That means your tax bill, Medicare premiums, Social Security taxation, and required minimum distributions can all be affected by how much money you have sitting in pre-tax accounts.

In other words, the question is not just, “How much do I have?”

The better question is, “How much control will I have over my income, taxes, and withdrawals in retirement?”

That is where many people miss the bigger picture.

A big 401(k) balance is great. But if all of your money is locked in one tax bucket, you may have fewer choices than you think.

The History of the 401(k), and Why It Matters

The 401(k) was not originally designed to carry the entire weight of someone’s retirement.

Decades ago, many workers had pensions. Employers were responsible for funding a meaningful portion of retirement income. The 401(k) was meant to be a supplemental savings vehicle, something that worked alongside pensions, Social Security, and personal savings.

Over time, that changed.

As pensions became less common, more of the responsibility shifted from employers to employees. The 401(k) became the primary retirement savings tool for millions of Americans.

That shift matters because the burden is now on individuals to make decisions that used to be handled, at least in part, by employers and pension systems.

  • You have to decide how much to contribute.
  • You have to choose your investments.
  • You have to understand your fees.
  • You have to figure out Roth versus traditional contributions.
  • You have to think about taxable savings.
  • You have to plan for taxes, withdrawal strategies, and required minimum distributions.

That is a lot to put on someone who may have never been taught how retirement planning actually works.

This is why simply asking, “How much should I have in my 401(k)?” is a good start, but it is not enough.

You also need to know whether your overall plan is built correctly.

Average 401(k) Balances by Age

One of the most common mistakes people make is comparing themselves to average retirement savings numbers. The problem is that “average” does not always mean “on track.”

If the average person is underprepared for retirement, being above average may still leave you short.

According to the figures discussed in the episode, average 401(k) balances look roughly like this:

Age Average 401(k) Balance
30 $37,000
40 $97,000
50 $190,000
60 $271,000

At first glance, those numbers may not sound terrible. A 40-year-old with nearly $100,000 saved might feel like they are making progress. A 50-year-old with close to $200,000 might feel like they have built a decent foundation.

And they have.

But progress is not the same as being on pace. The real question is whether those balances are enough to support the lifestyle, tax flexibility, health care costs, inflation, and longevity risks that retirement can bring.

For many people, the answer is no.

How Much Should You Have Saved by Age?

A more useful benchmark is based on your income.

Instead of asking how your 401(k) compares to the national average, ask how your savings compare to your annual salary.

Here are the general targets discussed in the episode:

Age Retirement Savings Target
30 1x annual salary
40 3x annual salary
45 4x to 6x annual salary
50 6x to 10x annual salary
55 8x to 10x annual salary
60 to 62 $1 million to $1.5 million total savings
Retirement Around 20x annual salary

These are not perfect numbers for every person, but they give you a better sense of whether you are building toward a retirement that gives you options.

Let’s break that down.

How Much Should You Have in Your 401(k) by Age 30?

By age 30, a common goal is to have about one times your annual salary saved.

So if you earn $60,000 per year, you would ideally have around $60,000 saved for retirement by age 30.

That does not mean you have failed if you are not there. Many people start saving later because of student loans, lower early-career income, family expenses, or simply not knowing what they should be doing yet.

But age 30 is when momentum starts to matter.

The biggest advantage you have in your 20s and early 30s is time. Every dollar invested early has more years to compound. That means even modest contributions can become meaningful later.

At this stage, the most important habits are:

  • Contributing consistently.
  • Getting your employer match if one is available.
  • Increasing your contribution rate as your income rises.
  • Starting Roth contributions if they make sense for your situation.
  • Avoiding high-fee investments when lower-cost options are available.

If you are 30 and behind, do not panic. But do not ignore it either. Small changes made early can carry a lot of weight over time.

How Much Should You Have in Your 401(k) by Age 40?

By age 40, the target is roughly three times your annual salary.

If you earn $80,000 per year, that means aiming for around $240,000 in total retirement savings.

This is where the gap between averages and targets becomes more obvious.

If the average 40-year-old has around $97,000 in a 401(k), but the target for someone earning $80,000 is closer to $240,000, the average person may be less than halfway to where they should be.

Your 40s are an important decade because you still have time, but you no longer have unlimited time.

This is often when income starts rising, but so do expenses. Mortgage payments, kids, college savings, home repairs, aging parents, lifestyle upgrades, and business or career changes can all compete for cash flow.

That is why this decade requires intention.

If you are in your 40s, your goal is not just to save more. Your goal is to start organizing your retirement money more strategically.

That means looking at:

  • How much is in traditional pre-tax accounts.
  • How much is in Roth accounts.
  • Whether you have taxable brokerage savings.
  • Whether your investment allocation still matches your timeline.
  • Whether your fees are quietly eating into your returns.
  • Whether your contribution rate is high enough to close the gap.

By 40, the conversation should shift from “Am I saving?” to “Am I saving in the right way?”

How Much Should You Have in Your 401(k) by Age 50?

By age 50, the target is often six to ten times your annual salary.

If you earn $100,000 per year, that means aiming for $600,000 to $1 million in total retirement savings.

That number can feel intimidating.

But age 50 is also where an important opportunity begins: catch-up contributions.

Once you reach age 50, you can generally contribute more to your 401(k) than younger workers. That can make your 50s one of the most powerful savings decades of your life.

This is especially important for people who feel behind.

Many people assume that if they are not where they should be by 50, the game is over. That is not true.

It does mean you need a real plan.

Your 50s are often a high-earning period. Kids may be getting older. Some expenses may eventually decrease. You may have more clarity about when you want to retire and what kind of lifestyle you want.

This is the decade to get serious.

That may include maxing out your 401(k), using catch-up contributions, building Roth assets, saving into a taxable brokerage account, reducing debt, and creating a more detailed retirement income plan.

The mistake is waiting until 60 to start asking whether you are on track.

By then, you still have options, but fewer of them.

How Much Should You Have by Age 55?

By age 55, a strong target is eight to ten times your annual salary.

At this point, retirement may no longer feel like a distant idea. It may be 10 years away, maybe less.

This is also when account mix becomes increasingly important.

If most or all of your retirement savings are in a traditional 401(k), you may be building a future tax problem without realizing it.

That does not mean traditional 401(k)s are bad. They can be extremely useful. Pre-tax contributions may reduce your taxable income today, and employer matches can be valuable.

But if every retirement dollar is pre-tax, you may have less flexibility later.

By your mid-50s, you should start thinking seriously about where your retirement income will come from.

  • Will withdrawals come from a traditional 401(k)?
  • A Roth IRA?
  • A Roth 401(k)?
  • A taxable brokerage account?
  • Cash reserves?
  • Social Security?
  • Business income?
  • Real estate?

The more tax buckets you have, the more flexibility you may have when it is time to create income.

How Much Should You Have by Age 60?

How Much Should You Have by Age 60?

By age 60 to 62, the target discussed in the episode is roughly $1 million to $1.5 million in total retirement savings.

For some people, that number will be too high. For others, it may not be high enough.

It depends on your lifestyle, location, health care needs, debt, retirement age, inflation assumptions, Social Security timing, and how much income you want in retirement.

But by age 60, the big questions become much more practical.

  • Can you retire when you want?
  • How much can you safely spend?
  • When should you claim Social Security?
  • How much will taxes reduce your income?
  • Do you have enough outside your 401(k)?
  • How will required minimum distributions affect you later?
  • Will your Medicare premiums increase because of your income?
  • Do you have enough flexibility to handle unexpected expenses?

At this stage, your retirement plan needs to become more specific. Broad rules of thumb are helpful, but they cannot replace actual planning.

The Real Retirement Target: Around 20x Annual Income

The episode discusses a long-term target of around 20 times your annual salary by retirement.

For example, if you earn $70,000 per year, that would mean a target of about $1.4 million.

Again, this is a general benchmark. It is not a personalized financial plan.

Some retirees need less because they have low expenses, no debt, strong Social Security benefits, or other income sources. Others need more because they want to travel, support family, retire early, live in a high-cost area, or maintain a more expensive lifestyle.

The point is not that everyone needs the exact same number.

The point is that retirement requires more than crossing your fingers and hoping your 401(k) balance is good enough.

You need a target. You need a strategy. And you need to understand how that money will actually turn into income.

Why Fees Matter More Than People Think

One of the most overlooked parts of 401(k) planning is fees.

Many people do not know what they are paying inside their retirement plan. They see investment options, choose a fund, and assume the cost is minor.

Sometimes it is. Sometimes it is not.

The transcript gives a simple example:

Two people invest $500 per month for 30 years.

Both earn the same 7% return.

One pays a 0.5% expense ratio.

The other pays a 1.5% expense ratio.

The difference over time is significant. The person paying the higher fee could end up with around $100,000 less, even though they contributed the same amount and earned the same gross return.

That is the problem with fees. They are easy to ignore because they do not usually show up as a bill in your mailbox.

You do not feel them leaving your account every month.

But they still reduce your return.

And over decades, even a 1% difference can become a very large number.

If you have not reviewed your 401(k) fees, this is one of the simplest places to start.

Look at the expense ratios on your investment options. If you are paying more than 1%, check whether your plan offers lower-cost index funds or other more efficient options.

This one change may not solve your entire retirement plan, but it can make a meaningful difference.

The Tax Problem With a Large Traditional 401(k)

A traditional 401(k) gives you a tax break today.

That can be valuable.

But the tradeoff is that you generally pay taxes later when you withdraw the money.

For many people, that sounds fine. They assume they will be in a lower tax bracket in retirement.

Sometimes that is true. But not always.

If you build a large pre-tax balance, your future withdrawals can create a large taxable income stream. Once required minimum distributions begin, the IRS can force you to take money out even if you do not need it.

That can create several problems.

  • It can push you into a higher tax bracket.
  • It can cause more of your Social Security benefits to be taxable.
  • It can increase Medicare-related costs.
  • It can reduce your flexibility in managing retirement income.

This is why a $1 million traditional 401(k) is not the same as $1 million spread across different types of accounts.

When all your money is in one tax bucket, you may have fewer levers to pull.

Why Account Mix Matters

Account mix refers to where your money is saved, not just how much you have saved.

A strong retirement strategy often includes a combination of:

  • Traditional pre-tax accounts.
  • Roth accounts.
  • Taxable brokerage accounts.
  • Cash reserves.
  • Other income sources, depending on your situation.

Each account type has a different tax treatment.

  • Traditional accounts may reduce taxes today, but withdrawals are generally taxable later.
  • Roth accounts do not usually provide the same upfront tax deduction, but qualified withdrawals can be tax-free.
  • Taxable brokerage accounts may offer more flexibility and different tax treatment, depending on the investments and how long you hold them.

Having a mix of account types can give you more control.

For example, in a high-income year, you may choose to draw more from Roth or taxable accounts. In a lower-income year, you may draw more from traditional accounts. That flexibility can help you manage taxes over time.

The goal is not to avoid taxes completely. The goal is to avoid building a retirement plan where taxes control you instead of the other way around.

Roth vs. Traditional 401(k): Which Is Better?

There is no one-size-fits-all answer. A traditional 401(k) may make sense if you are in a high tax bracket today and expect to be in a lower tax bracket in retirement.

A Roth 401(k) may make sense if you expect your tax rate to be higher later, want tax-free income in retirement, or need more tax diversification.

Many people benefit from having both.

The mistake is assuming the traditional 401(k) is always the default best choice simply because it lowers taxes today.

A tax break today can feel good, but it may create a tax bill later.

On the other hand, Roth contributions can feel more expensive today because you do not get the same upfront deduction. But they may give you more flexibility in retirement.

This is where planning matters.

The right answer depends on your income, age, tax bracket, retirement timeline, savings rate, existing account balances, and long-term goals.

What If You Feel Behind?

If you feel behind, you are not alone. Almost everyone who looks seriously at retirement for the first time feels some level of panic.

That does not mean you are doomed. It means you need clarity.

The worst thing you can do is avoid the numbers because they make you uncomfortable. The numbers are not there to shame you. They are there to give you direction.

If you are behind, your next steps may include:

  • Increasing your contribution rate.
  • Capturing your full employer match.
  • Reducing high investment fees.
  • Using catch-up contributions if you are eligible.
  • Considering Roth or taxable savings.
  • Reviewing your investment allocation.
  • Creating a debt payoff strategy.
  • Running a real retirement projection.
  • Looking at your expected Social Security benefits.
  • Identifying your desired retirement lifestyle.

The gap may be smaller than it feels once you have a plan. But guessing is not a plan.

Your 50s Can Be a Powerful Catch-Up Decade

One of the most encouraging parts of the episode is the reminder that your 50s can be incredibly powerful.

If you are 50 and feel behind, you still have tools available.

Catch-up contributions allow you to save more into retirement accounts once you reach certain ages. For people with strong income and the ability to increase savings, those extra contributions can make a major difference.

The episode gives an example of someone age 50 with $300,000 saved. By maximizing contributions, using catch-up opportunities, receiving an employer match, and earning a steady return, that person could potentially grow the balance substantially by age 63.

The key lesson is not that every person will get the exact same result.

The key lesson is that the math may still work better than you think.

But you have to act.

The people who benefit most from catch-up contributions are the ones who start using them as soon as they are eligible, not the ones who wait until the last few years before retirement.

The Biggest 401(k) Mistakes to Avoid

There are several common mistakes that can hurt your retirement plan.

  1. The first is contributing too little. Many people contribute just enough to get the employer match, then stop there. That is better than doing nothing, but it may not be enough to reach your goals.
  2. The second is ignoring fees. High expense ratios can quietly reduce your long-term returns. If lower-cost options are available, it is worth reviewing them.
  3. The third is putting everything into a traditional pre-tax account. This can create a lack of tax flexibility later.
  4. The fourth is assuming average means safe. Average retirement savings numbers can make you feel better, but they may not reflect what you actually need.
  5. The fifth is waiting too long to plan. Retirement planning becomes more powerful when you start before you are forced to make decisions.
  6. The sixth is thinking a 401(k) balance equals retirement readiness. It does not. Retirement readiness includes income planning, tax planning, investment strategy, health care costs, estate planning, risk management, and lifestyle planning.

So, How Much Should You Have in Your 401(k) by Age?

Here is a simple recap:

  • By age 30, aim for one times your annual salary.
  • By age 40, aim for three times your annual salary.
  • By age 45, aim for four to six times your annual salary.
  • By age 50, aim for six to ten times your annual salary.
  • By age 55, aim for eight to ten times your annual salary.
  • By age 60 to 62, aim for roughly $1 million to $1.5 million in total retirement savings, depending on your income and goals.
  • By retirement, a broader target may be around 20 times your annual income.

But remember, the number is only part of the story.

A strong retirement plan also considers:

  • Taxes.
  • Fees.
  • Account mix.
  • Withdrawal flexibility.
  • Roth versus traditional savings.
  • Required minimum distributions.
  • Social Security.
  • Medicare costs.
  • Inflation.
  • Longevity.
  • Your actual lifestyle goals.

That is why the best retirement plans are not built around one account. They are built around a coordinated strategy.

Final Thoughts

Your 401(k) is important. It may be one of the most valuable wealth-building tools available to you. But your 401(k) is not, by itself, a complete retirement plan.

The real goal is not just to build the biggest balance possible. The real goal is to build a retirement strategy that gives you flexibility, control, and confidence when you actually need to use the money.

  • That means knowing your target number.
  • It means understanding whether you are on track.
  • It means checking your fees.
  • It means thinking carefully about taxes.
  • It means building the right mix of traditional, Roth, and taxable assets.
  • And most importantly, it means having a plan that is specific to your life, not just based on averages.

If your numbers feel behind, do not ignore them. Start there. Get clear. Look at what you have, what you need, and what changes could help close the gap.

Because the sooner you understand where you stand, the more options you may have. And in retirement, options matter.

Next Steps: Build a Retirement Plan, Not Just a 401(k)

Knowing how much you should have in your 401(k) by age is a helpful starting point, but it is not the full plan. The real question is whether your savings are structured in a way that gives you flexibility, tax efficiency, and confidence in retirement.

That is where the Bonfire Method comes in.

At Bonfire Financial, we take a planning-first approach that looks at your full picture: savings, investments, taxes, income needs, account mix, and long-term goals. Then we help you build a retirement strategy designed around your life, not just a generic benchmark.

Because a strong retirement is not just about how much you have saved. It is about having the right money, in the right places, with the right plan behind it.

Ready to stop guessing? Schedule a call with Bonfire Financial to see how the Bonfire Method can help you build a retirement plan that actually works.

8 Retirement Assets Wealthy Retirees Avoid

Posted on by Brian Colvert

The Most Overrated Retirement Assets

When most people think about building wealth in retirement, they focus on buying more assets. More real estate, more investments, more financial products. More “opportunities.” But wealthy retirees often think very differently. Instead of chasing every investment idea that gets pitched to them, they focus heavily on simplicity, cash flow, flexibility, and avoiding unnecessary financial drag.

That distinction matters.

Some retirement assets look impressive on paper but quietly create stress, reduce liquidity, increase fees, or slowly eat away at retirement income over time. Others are sold aggressively because they generate commissions for someone else, not because they are necessarily the best fit for your situation.

We regularly meet retirees who own assets they barely understand, properties that lose money every month, or financial products that sounded great in the sales presentation but became frustrating later. The goal is not to say every one of these retirement assets is automatically bad. In some cases, they can absolutely make sense. The key is understanding whether the asset truly supports your retirement lifestyle and long-term financial goals.

Here are eight retirement assets wealthy retirees often avoid, or at the very least approach with much more caution.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

1. Investment Real Estate That Does Not Cash Flow

Real estate can absolutely be a fantastic investment. Many wealthy individuals have built substantial wealth through real estate ownership.

But there is a major difference between owning productive real estate and owning a property that consistently drains your cash flow.

One of the most common retirement asset mistakes people make is buying investment properties that lose money every month while convincing themselves the appreciation will eventually make it worthwhile. Often the justification becomes:

“It’ll be paid off someday.”

The problem is that retirement is about cash flow now, not just theoretical future equity decades later.

If a property requires constant subsidizing, expensive maintenance, ongoing repairs, rising insurance premiums, and unpredictable tenant issues, it may not actually be serving your retirement lifestyle the way you think it is.

That does not mean every property must generate massive profits immediately. Some investors intentionally pursue appreciation-focused strategies. But wealthy retirees usually understand exactly why they own a property, what role it serves, and whether it is helping or hurting their financial picture.

The key question is simple:

Is this retirement asset improving your life and strengthening your finances, or is it becoming a burden?

2. Complex Financial Products You Do Not Understand

One thing wealthy retirees often avoid is unnecessary complexity.

Many financial products sound incredibly appealing because they promise downside protection, enhanced income, or sophisticated strategies unavailable to average investors. Structured notes and highly engineered financial products are often marketed this way.

The issue is not necessarily that these products are always bad. Some can absolutely serve a purpose in certain situations.

The problem is when people buy retirement assets they do not truly understand.

If you cannot clearly explain:

  • How the investment works
  • What risks exist
  • When you can access your money
  • How returns are generated
  • What the fees are

then you probably should not own it.

Wealthy retirees who sleep well at night often prioritize clarity over complexity. They know where their money is, what it is doing, and why they own it. That level of simplicity becomes incredibly valuable in retirement.

3. Timeshares

Timeshares are one of the most heavily sold retirement assets on the market.

The sales presentations are designed to feel emotional and exciting. Beautiful resorts, family memories, beachfront views, luxury vacations, and the promise of saving money long-term can make timeshares sound extremely appealing in the moment.

But the reality often looks very different later.

Many retirees eventually realize they committed themselves to:

  • Long-term contracts
  • Ongoing maintenance fees
  • Limited flexibility
  • Rising costs
  • Difficult resale markets

Life changes over time. Health changes. Travel preferences change. Family dynamics change.

A vacation property that seemed perfect ten years ago may no longer fit your lifestyle today.

Wealthy retirees often value flexibility more than people realize. Instead of locking themselves into long-term vacation commitments, many prefer the freedom to travel wherever they want, when they want, without ongoing contractual obligations.

The issue is not necessarily the vacation itself. The issue is becoming financially trapped by an asset that no longer serves your lifestyle.

4. Whole Life Insurance as an Investment

Insurance is incredibly important.

But insurance and investing are not always the same thing.

One of the more controversial retirement assets is whole life insurance used primarily as an investment vehicle. These policies are often marketed as:

  • Forced savings
  • Tax advantages
  • Borrowing opportunities
  • Stable growth
  • Wealth-building tools

And while there are situations where whole life insurance absolutely makes sense, many retirees end up purchasing expensive policies that may not align with their actual needs.

One major issue is cost.

Whole life insurance policies can involve:

  • High premiums
  • Significant commissions
  • Slow early growth
  • Complex structures
  • Lower long-term returns compared to other investments

That does not automatically make them bad. But wealthy retirees typically understand exactly why they are purchasing a policy before committing to one.

If the primary need is protecting a spouse or family financially, there may be simpler and more efficient ways to accomplish that goal.

This is why many retirees should approach whole life insurance carefully rather than assuming it is automatically a strong investment.

5. High-Fee Annuities

Annuities are another retirement asset that can create strong opinions.

The truth is, annuities are not inherently bad. In fact, some retirees benefit tremendously from them.

At their core, annuities function somewhat like personal pensions by providing guaranteed income streams.

That can be extremely valuable in retirement.

However, many retirees buy annuities without fully understanding:

  • The fees
  • Liquidity restrictions
  • Tax implications
  • Surrender periods
  • Income limitations

Some annuities contain fees that quietly reduce returns year after year. Others lock up money for extended periods, making access difficult without penalties. This becomes especially problematic when retirees need flexibility later.

Wealthy retirees often avoid retirement assets that unnecessarily trap capital or create confusion. If they use annuities, it is usually because the product fits a very specific need within an overall retirement strategy.

Not because it was aggressively sold as a one-size-fits-all solution.

6. Vacation Homes That Become Financial Burdens

Vacation homes sound amazing in theory.

And for some wealthy retirees, they absolutely can be.

But there is an important difference between enjoying a second home and becoming financially overextended because of one.

Many retirees underestimate the true cost of owning multiple properties. Beyond the mortgage itself, there are:

  • Taxes
  • Insurance
  • Maintenance
  • Utilities
  • Repairs
  • Furnishing costs
  • HOA fees
  • Travel expenses

In some cases, retirees discover they spend more time maintaining the property than actually enjoying it.

Instead of feeling like a relaxing escape, the property slowly becomes another responsibility.

Wealthy retirees tend to evaluate retirement assets based on lifestyle value, not just emotional appeal. If a second home genuinely improves quality of life and fits comfortably within the financial plan, that is one thing.

But if it is creating stress, adding too many expenses, reducing flexibility, or draining cash flow, it may no longer be serving its intended purpose.

Sometimes renting luxury vacations when desired creates far more freedom than owning another home full-time.

7. High-Fee Actively Managed Mutual Funds

Many retirees assume actively managed mutual funds must be superior because professional managers are selecting investments on their behalf.

But statistics consistently show that many actively managed funds underperform their benchmarks over long periods of time, especially after fees.

This becomes one of the biggest hidden problems with certain retirement assets.

Fees matter enormously over time.

Even small percentage differences can compound into substantial reductions in long-term wealth over decades.

Wealthy retirees often focus heavily on:

  • Low costs
  • Tax efficiency
  • Diversification
  • Simplicity
  • Long-term consistency

That is one reason index investing has become increasingly popular.

The issue is not that every actively managed fund is bad. Some managers absolutely outperform. The challenge is identifying them consistently in advance.

Many retirees end up paying high fees for performance that ultimately fails to justify the added cost.

8. Oversized Homes

A home is not automatically a bad retirement asset.

But oversized homes can quietly become major financial drains in retirement.

Many retirees remain in houses far larger than what they realistically use because of emotional attachment or habit. Meanwhile, the ongoing costs continue rising:

  • Property taxes
  • Insurance
  • Utilities
  • Repairs
  • Landscaping
  • Cleaning
  • Maintenance

A large home can also create physical stress as people age.

Wealthy retirees often prioritize functionality and lifestyle over simply owning the biggest house possible. They understand that reducing unnecessary overhead can significantly improve retirement flexibility and reduce financial pressure.

This does not mean everyone should downsize immediately. But retirees should honestly evaluate whether their current home still serves their life today or whether it is simply consuming resources unnecessarily.

Sometimes simplifying housing creates one of the biggest quality-of-life improvements in retirement.

The Common Theme Behind These Retirement Assets

Every retirement asset on this list shares something in common.

They often:

  • Look impressive initially
  • Are heavily sold
  • Sound financially sophisticated
  • Create hidden costs
  • Reduce flexibility
  • Add complexity
  • Slowly transfer value away from the owner

Wealthy retirees who feel financially secure often approach retirement differently.

They tend to value:

  • Cash flow
  • Simplicity
  • Liquidity
  • Flexibility
  • Low fees
  • Clear understanding
  • Lifestyle alignment

They know exactly what their money is doing and why they own each asset.

That level of clarity becomes incredibly important in retirement because complexity often creates stress, confusion, and hidden financial inefficiencies.

Simplicity Often Wins in Retirement

One of the biggest misconceptions about wealth is that wealthy retirees own the most complicated portfolios or sophisticated financial products.

In reality, many financially successful retirees keep things surprisingly simple.

They focus on:

Retirement should ideally create freedom, not additional stress.

The goal is not accumulating impressive-sounding retirement assets. The goal is building a financial life that supports your lifestyle, protects your long-term security, and gives you confidence moving forward.

Final Thoughts

Not every retirement asset is automatically good or bad.

The real question is whether the asset aligns with your goals, cash flow needs, risk tolerance, and retirement lifestyle.

Many retirement products are marketed aggressively because they generate commissions, fees, or long-term contracts. That does not mean they are wrong for everyone. But it does mean retirees should approach them carefully and fully understand what they are buying before committing.

At Bonfire Financial, we believe retirement planning works best when people clearly understand how every piece of their financial picture fits together. If you want help evaluating your retirement assets and building a coordinated retirement strategy, learn more about The Bonfire Method and schedule a conversation with our team.

Why a Pension Changes Everything in Retirement

Posted on by Brian Colvert

How a Pension Changes Retirement Planning

If you have a pension, your retirement strategy should look very different from someone relying entirely on a 401(k) or IRA. Yet many people with pensions still approach retirement the exact same way as everyone else. They assume they need millions saved, they invest too conservatively, and they often overlook just how valuable their pension actually is.

That can create unnecessary stress and lead to poor financial decisions.

The reality is that pension retirement planning changes nearly everything about how you think about retirement income, investing, risk, and long-term financial security. A pension is not just another retirement account. In many cases, it is one of the most valuable financial assets you will ever own.

We regularly meet people who feel anxious about retirement until they finally understand how much their pension changes the equation. Once they see the numbers differently, their entire perspective shifts.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

What Is a Pension?

A pension is a retirement plan where an employer promises to pay you a guaranteed monthly income during retirement. Unlike a 401(k), where you are responsible for saving and investing your own money, pensions place much of the responsibility on the employer.

Most pensions calculate retirement income based on factors like:

  • Years worked
  • Salary history
  • Retirement age
  • A percentage multiplier

For example, someone who worked for a company for 30 years may receive 60% to 75% of their average highest salary years as retirement income.

One of the most powerful parts of a pension is that the payments are generally designed to continue for life. That means the burden of managing investment risk shifts away from the retiree and toward the company or pension system.

That is a major advantage in pension retirement planning.

Why Pension Retirement Planning Is Different

The main goal of retirement planning is replacing income. Most people spend decades trying to build enough investments to create retirement cash flow later in life.

But if you already have a pension, part of that work may already be done.

This is where many people get confused.

They continue comparing themselves to generic retirement advice online, even though their situation is completely different.

The “How Much Do I Need?” Problem

One of the most common retirement questions is:

“How much money do I need to retire?”

For someone without guaranteed income, the answer can be very large.

Using the traditional 4% withdrawal rule, someone needing $80,000 per year in retirement may need roughly $2 million invested to sustainably generate that income.

That number alone causes a lot of stress for people.

But pension retirement planning changes that dramatically.

Example Without a Pension

  • Retirement spending need: $80,000
  • Needed portfolio at 4% withdrawal rate: About $2 million

Example With a Pension

Now imagine someone receives a $60,000 annual pension.

Suddenly, they only need investments to generate another $20,000 annually.

That changes the required portfolio dramatically.

  • Retirement spending need: $80,000
  • Pension income: $60,000
  • Remaining income gap: $20,000
  • Needed portfolio at 4% withdrawal rate: About $500,000

That is a completely different retirement picture.

Most People Undervalue Their Pension

Many retirees focus almost entirely on their investment balances while barely considering the true value of their pension.

That is a mistake.

A strong pension can effectively represent the equivalent of a multimillion-dollar asset because it provides guaranteed lifetime income.

Trying to recreate that same income stream using investments alone could require enormous savings.

This is one reason pension retirement planning needs to be viewed differently. Your pension is not just “extra income.” It may actually be the foundation of your retirement plan.

The Emotional Advantage of a Pension

Retirement is not just about math.

It is also about peace of mind.

One of the biggest advantages of a pension is psychological stability.

When markets decline, retirees who rely heavily on investments often panic because they worry about running out of money. Pension holders typically have more stability because a guaranteed check continues arriving every month regardless of what the market does.

That changes how retirement feels emotionally.

During major downturns like 2008 or the COVID market decline, retirees with strong pensions often had much less pressure because their core income was still secure.

That consistency matters more than people realize.

Why Pension Holders Often Invest Too Conservatively

This is one of the biggest mistakes we see in pension retirement planning.

Many people assume that once they near retirement, they should move heavily into conservative investments.

For some retirees, that may make sense.

But pension holders need to think differently because they already have guaranteed income built into their financial picture.

Your Pension Already Acts Like Fixed Income

A pension functions similarly to a very large bond or fixed-income investment because it provides predictable monthly income.

That means your overall financial picture may already be far more conservative than you realize.

As a result, your investment portfolio may not need to be as defensive as someone without a pension.

That does not mean every pension holder should become aggressive investors. Risk tolerance, age, goals, and health still matter. But many retirees fail to recognize that their pension already provides stability.

Inflation Is the Biggest Threat to Pension Retirement

While pensions are extremely valuable, they are not perfect.

The biggest long-term threat to pension retirement planning is inflation.

Even if your pension feels substantial today, rising costs over time can slowly reduce purchasing power.

Why Inflation Matters So Much

Many pensions include COLAs, or cost-of-living adjustments, but those increases are not always enough to fully keep pace with inflation.

Healthcare, insurance, food, housing, and travel costs can all rise significantly over a 20- or 30-year retirement.

That means retirees still need growth.

This is one reason why being too conservative with investments can actually create problems later.

Your investment portfolio may need to help offset inflation so your lifestyle does not slowly erode over time.

The Balance Pension Holders Need

Good pension retirement planning often involves balancing two goals:

  1. Maintaining stability
  2. Keeping pace with inflation

The pension provides foundational income stability. The investment portfolio helps provide long-term growth.

When those two pieces work together properly, retirement becomes much more sustainable.

Lump Sum vs. Monthly Pension Payments

One of the biggest pension decisions retirees face is whether to take:

  • A lump sum payout
  • Monthly pension payments

This decision is highly personal and should never be rushed.

Why Some People Prefer the Lump Sum

A lump sum gives retirees full control over the money immediately.

That flexibility can be appealing for people who:

  • Want investment control
  • Have strong investing experience
  • Have health concerns
  • Want estate planning flexibility
  • Worry about the company’s financial stability

In some situations, taking the lump sum absolutely makes sense.

Why Monthly Payments Can Be Extremely Powerful

Many people automatically assume the lump sum is better.

That is not always true.

In fact, monthly pension payments can be incredibly valuable because they provide:

  • Guaranteed income for life
  • Reduced market risk
  • Protection against running out of money
  • Less stress during market downturns

With monthly payments, the pension provider takes on much of the investment risk for you.

That can be especially helpful during periods of market volatility.

Understanding Sequence of Returns Risk

One of the biggest hidden dangers in retirement is sequence of returns risk.

This refers to the danger of experiencing poor market returns early in retirement while simultaneously withdrawing money from investments.

Even if long-term market averages eventually recover, early losses combined with withdrawals can significantly damage retirement sustainability.

Pensions help reduce this risk because retirees are not forced to rely entirely on investment withdrawals for income.

That is one of the most overlooked advantages of pension retirement planning.

The Most Important Pension Decision

The most important pension decision is often not lump sum versus monthly payments.

It is survivor benefits.

And once this decision is made, it is often irreversible.

Single Life vs. Joint Survivor Benefits

When retiring with a pension, many retirees must choose between:

  • Single life payouts
  • Joint survivor payouts

A single life option typically provides the highest monthly payment while the retiree is alive.

But there is a major catch. When the pension holder dies, the payments stop.

That can create serious financial problems for a surviving spouse.

Why Survivor Benefits Matter

Joint survivor benefits reduce the monthly payout somewhat, but they allow a spouse to continue receiving income after the pension holder passes away.

This decision should never be treated casually.

When evaluating survivor options, retirees should consider:

  • Other retirement assets
  • Social Security income
  • Age differences
  • Health conditions
  • Life expectancy
  • Lifestyle needs
  • Debt obligations

Many people focus too heavily on maximizing monthly income today without fully considering long-term consequences for their spouse later.

Why Pensions Are Becoming Rare

Traditional pensions are becoming increasingly uncommon.

Many companies have shifted toward 401(k)-style plans where employees bear most of the investment responsibility themselves.

As a result, workers with pensions today often underestimate how valuable they truly are because fewer people around them still have them.

In reality, a strong pension can provide retirement stability that many households struggle to recreate using investments alone.

Common Pension Retirement Mistakes

There are several mistakes we repeatedly see in pension retirement planning.

1. Undervaluing the Pension

Many retirees focus only on investment balances while ignoring the value of guaranteed lifetime income.

2. Being Too Conservative

Pension holders often invest too defensively, even though they already have stable income built into their retirement.

3. Ignoring Inflation

Some retirees assume their pension alone will maintain purchasing power forever.

4. Rushing the Lump Sum Decision

This decision should be carefully analyzed based on personal goals and financial circumstances.

5. Choosing the Wrong Survivor Option

This mistake can significantly impact a surviving spouse’s financial future.

Pension Retirement Requires a Different Mindset

The biggest takeaway is simple:

If you have a pension, your retirement strategy should not look like everyone else’s.

You already have something many retirees desperately want but never achieve: guaranteed income.

That changes:

  • How much you may need saved
  • How you should think about investing
  • Your withdrawal strategy
  • Your market risk exposure
  • Your retirement confidence

Pension retirement planning is not about ignoring investments. It is about understanding how all the pieces work together.

Final Thoughts

A pension can be one of the most powerful retirement tools available, but only if you fully understand how it changes the financial picture.

Too many retirees continue planning from a place of fear because they are comparing themselves to people in completely different situations.

The numbers may not need to be as large as you think.

Your investment strategy may not need to be as conservative as you assume.

And your retirement may be far more secure than you realize.

The key is building a coordinated strategy that properly accounts for your pension, investments, taxes, inflation, and long-term income needs.

At Bonfire Financial, we help clients build retirement plans around the full picture, not just an account balance. If you have questions about your pension retirement strategy or want help understanding your options, learn more about The Bonfire Method and schedule a conversation with our team.

The Retirement Tax Strategies Most People Miss

Posted on by Brian Colvert

Most people spend decades focused on one thing when it comes to retirement: saving enough money. They contribute to their 401(k), build investment accounts, and hope that one day the numbers will finally work in their favor. But there is a major piece of retirement planning that often gets ignored until it is too late, and that is taxes.

The truth is that retirement taxes can quietly become one of the biggest expenses you face later in life. Even people who did an incredible job saving can end up paying far more in taxes than they expected simply because they never built a strategy around how they would actually withdraw their money.

That is where retirement tax strategies become incredibly important.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

The Difference Between Saving and Keeping Wealth

The wealthy are not using secret offshore accounts or questionable loopholes to avoid taxes in retirement. In reality, most high-net-worth families are simply using the tax code strategically and planning years ahead of time. They understand how different account types are taxed, how Medicare premiums are calculated, how required minimum distributions work, and how to create tax-efficient income streams that give them more flexibility later in life.

Unfortunately, many retirees discover these strategies after key planning windows have already closed.

If you want to keep more of what you worked your entire life to build, understanding retirement tax strategies before retirement can make a significant difference.

Why Retirement Taxes Become More Complicated Than Most People Expect

During your working years, taxes tend to feel relatively predictable. You earn a paycheck, taxes are withheld, and your income generally stays within a certain range each year. Retirement changes that dynamic entirely.

Once you stop working, every withdrawal decision starts impacting multiple areas of your financial life at the same time. Pulling additional money from a retirement account can potentially increase your taxable income, push you into a higher tax bracket, increase your Medicare premiums, and cause a larger percentage of your Social Security benefits to become taxable.

Many retirees are shocked to learn that retirement income is not all treated equally.

For example, traditional IRA and 401(k) withdrawals are generally taxable as ordinary income. Capital gains may receive different tax treatment. Roth withdrawals can potentially be tax-free if structured correctly. Health savings account withdrawals used for qualified medical expenses can also be tax-free.

This creates opportunities for people who plan carefully, but it can create expensive mistakes for people who simply withdraw money without a coordinated strategy.

One of the biggest retirement tax surprises is something called IRMAA, which stands for Income Related Monthly Adjustment Amount. This is the surcharge Medicare adds to Part B and Part D premiums when your income exceeds certain thresholds. Many retirees do not realize that even seemingly harmless income increases can trigger substantially higher Medicare costs two years later.

That means retirement tax strategies are not just about reducing taxes. They are also about controlling the ripple effects that taxable income can create throughout retirement.

Roth Accounts Remain One of the Most Powerful Retirement Tax Strategies

When people think about retirement tax strategies, Roth accounts are usually one of the first tools discussed, and for good reason.

A Roth account allows money to grow tax-free, and qualified withdrawals in retirement are also tax-free. That combination can become incredibly valuable over time, especially for retirees trying to manage future tax brackets and Medicare costs.

One of the biggest misconceptions surrounding Roth accounts is that high earners cannot use them. While income limits may prevent direct Roth IRA contributions for some individuals, there are still strategies available that allow higher-income households to build Roth assets over time.

One commonly used strategy is the backdoor Roth IRA. This approach involves contributing after-tax money into a traditional IRA and then converting those funds into a Roth IRA. While the rules surrounding this strategy should always be reviewed carefully with a qualified advisor or tax professional, many high-income earners use this approach to continue building tax-free retirement assets.

Roth 401(k)s can also play a major role in retirement tax planning. Many employer-sponsored plans now allow Roth contributions, which gives individuals the opportunity to contribute significantly larger amounts compared to a Roth IRA alone.

The long-term value of Roth assets often becomes much more obvious once retirement begins. Unlike traditional retirement accounts, qualified Roth withdrawals generally do not increase taxable income. That means they typically do not increase Medicare premiums or cause additional Social Security taxation.

For retirees trying to maintain flexibility, having tax-free buckets of money can create enormous planning opportunities.

Roth Conversions Can Create Major Long-Term Tax Savings

One of the most overlooked retirement tax strategies involves Roth conversions during lower-income years.

There is often a window between retirement and age 73, when required minimum distributions begin, where taxable income may temporarily drop. For many retirees, these years can represent some of the lowest tax years of their adult lives.

That creates an opportunity.

A Roth conversion allows you to move money from a traditional IRA into a Roth IRA. The converted amount becomes taxable in the year of conversion, but future qualified growth and withdrawals become tax-free.

At first glance, intentionally creating taxable income may seem counterproductive. However, many retirees find that strategically paying taxes earlier at lower rates can help them avoid much larger tax bills later.

This becomes especially important for individuals with large traditional retirement accounts. Required minimum distributions can eventually force significant taxable withdrawals later in retirement, even if the retiree does not actually need the income.

By gradually converting portions of those accounts during lower-income years, retirees may potentially reduce future RMDs while creating larger pools of tax-free income for later years.

One common approach involves “filling the bracket.” This strategy looks at your current tax bracket and determines how much additional income could be recognized before crossing into the next tax bracket. Retirees may then choose to convert enough money to fully utilize that lower bracket without unnecessarily triggering a higher rate.

Retirement tax strategies like this require careful coordination because conversions can also impact Medicare premiums and other areas of the financial plan. However, when executed thoughtfully, Roth conversions can become one of the most valuable long-term tax planning tools available.

Understanding the IRMAA Trap

One of the most expensive retirement tax traps involves Medicare surcharges.

Many retirees assume Medicare premiums are relatively fixed, but higher-income retirees can end up paying dramatically more due to IRMAA.

What makes this especially frustrating is that the surcharge is based on income from two years earlier. By the time someone receives the notice that their premiums increased, the income event that caused it has already happened.

This is why retirement tax strategies need to consider more than just federal income taxes.

A large IRA withdrawal, a major Roth conversion, investment gains, or even municipal bond income can potentially push retirees over IRMAA thresholds.

This surprises many people because municipal bonds are often promoted as tax-efficient investments. While municipal bond interest is generally exempt from federal income tax, it can still count toward modified adjusted gross income for IRMAA calculations.

That means someone could technically avoid federal taxes on bond interest while still triggering higher Medicare premiums.

Wealthier retirees and proactive planners often focus heavily on building income sources that remain “invisible” for IRMAA purposes. Qualified Roth withdrawals and tax-free HSA reimbursements are two examples that can potentially provide income without increasing Medicare surcharges.

Understanding how all these moving parts interact is one of the key reasons retirement tax strategies should never be handled in isolation.

HSAs Are One of the Most Underrated Retirement Tax Strategies

Health savings accounts are often overlooked, but they can be one of the most tax-efficient accounts available.

In fact, many advisors refer to HSAs as triple tax-free accounts because they potentially offer three separate tax advantages.

First, contributions may be tax-deductible. Second, investments inside the account can grow tax-free. Third, withdrawals for qualified medical expenses can also be tax-free.

Very few financial tools receive all three benefits simultaneously.

Unlike flexible spending accounts, HSAs do not require you to spend the funds each year. The balance can remain invested and continue compounding over time.

This makes HSAs particularly valuable for retirement planning because healthcare expenses often become one of the largest retirement costs later in life.

Many retirees underestimate how much they may eventually spend on dental work, hearing aids, vision care, long-term healthcare expenses, and other out-of-pocket medical costs.

By allowing HSA funds to grow for many years, retirees may eventually create a dedicated pool of tax-free healthcare dollars that can help reduce pressure on taxable retirement accounts.

One important consideration is timing. Eligibility to contribute to an HSA generally ends once you enroll in Medicare, which means the accumulation window is not unlimited.

For individuals still working and enrolled in high-deductible health plans, maximizing HSA contributions can become a very effective long-term retirement tax strategy.

Cash Value Life Insurance Can Play a Specialized Role

Cash value life insurance tends to generate strong opinions, and it is important to approach this strategy carefully and realistically.

This is not a strategy that makes sense for everyone, and it should generally be evaluated only after other tax-advantaged opportunities have been fully explored.

However, in certain situations, cash value life insurance can become part of a broader retirement tax strategy.

Permanent life insurance policies such as whole life or indexed universal life may accumulate cash value over time. Policyholders can potentially borrow against that cash value later in retirement.

Because policy loans are generally treated differently than taxable income, retirees may be able to access funds without increasing taxable income or triggering IRMAA surcharges.

That said, these strategies come with complexity, costs, and risks that should not be ignored.

Poorly designed policies, excessive fees, underfunding, or improper loan management can create significant problems later. Some policies may not perform as illustrated, and policy loans can potentially create tax consequences if the policy lapses.

This is why retirement tax strategies involving insurance should be approached carefully with qualified guidance and realistic expectations.

Used appropriately in the right circumstances, cash value policies may provide additional flexibility. Used improperly, they can become expensive mistakes.

Qualified Charitable Distributions Can Reduce Retirement Taxes

For retirees who are charitably inclined, qualified charitable distributions can become an extremely effective tax strategy.

A QCD allows individuals age 70½ or older to transfer money directly from an IRA to a qualified charity. These distributions can count toward required minimum distributions while potentially avoiding taxable income treatment.

This creates several possible advantages.

First, the money donated through a QCD generally does not increase adjusted gross income the same way a normal IRA withdrawal would. That may help reduce exposure to Medicare surcharges and Social Security taxation.

Second, it allows retirees to satisfy charitable goals using pre-tax retirement dollars.

For individuals who regularly give to charities anyway, using IRA funds instead of personal checking accounts may create better overall tax efficiency.

QCDs can become especially valuable for retirees with large IRA balances who may not actually need all of their required minimum distributions for living expenses.

Instead of recognizing unnecessary taxable income and then donating after-tax dollars separately, QCDs may provide a cleaner and more tax-efficient solution.

Retirement Tax Strategies Work Best When Coordinated Together

One of the biggest mistakes retirees make is evaluating each strategy individually rather than viewing the entire financial picture together.

For example, a Roth conversion might reduce future required minimum distributions but temporarily increase Medicare premiums. Delaying Social Security could create more room for Roth conversions during lower-income years. Using Roth withdrawals strategically may help control taxable income later while preserving flexibility.

The key is coordination.

The most effective retirement tax strategies are rarely isolated tactics. They are usually part of a larger long-term plan that considers taxes, investments, healthcare costs, estate planning, and income needs together.

This is why many wealthy families spend significant time planning not just how to accumulate wealth, but how to distribute it efficiently later.

Retirement is not only about building assets. It is about creating sustainable income while minimizing unnecessary financial drag.

Why Timing Matters So Much

One of the hardest truths about retirement tax planning is that many opportunities are time sensitive.

The best Roth conversion years may only exist for a short period. HSA contribution opportunities eventually close. Required minimum distributions eventually force taxable income whether you need it or not.

That is why retirement tax strategies work best when addressed proactively instead of reactively.

Waiting until retirement begins can limit many of your planning opportunities. For example, once RMDs begin, Roth conversion strategies often become less effective, and enrolling in Medicare may end your ability to make future HSA contributions.

The earlier someone begins thinking strategically about taxes, the more flexibility they often have later.

This does not mean you need to overhaul your entire financial plan overnight. It simply means retirement tax planning deserves the same level of attention as investment planning.

Because ultimately, it is not just about how much money you save.

It is about how much of it you actually get to keep.

Final Thoughts on Retirement Tax Strategies

Retirement taxes can quietly erode wealth if they are ignored, but thoughtful planning can create meaningful long-term advantages.

The families who tend to navigate retirement most efficiently are often the ones who understand how different income sources interact, how Medicare premiums are calculated, and how to build flexibility into their withdrawal strategies.

Retirement tax strategies like Roth conversions, HSAs, qualified charitable distributions, and careful income planning are not exotic loopholes. They are legitimate planning tools written directly into the tax code.

The challenge is that many people discover them too late.

If you are approaching retirement, already retired, or simply trying to build a more tax-efficient long-term plan, now is the time to start evaluating how taxes may impact your future income.

Because keeping more of what you worked your entire life to build may ultimately matter just as much as building it in the first place.

Next Steps

At Bonfire Financial, we believe retirement planning should be about far more than just managing investments. That is why The Bonfire Method starts with taxes first. Before making recommendations, we help clients understand how their retirement income, withdrawals, investments, Medicare costs, insurance, and estate planning all work together as one coordinated strategy.

Most advisors start by talking about returns. We start by helping you keep more of what you have already built.

If you want to learn how retirement tax strategies could potentially impact your future and explore ways to create a more tax-efficient retirement plan, we invite you to learn more about The Bonfire Method. In just 30 days, our team walks you through a coordinated financial plan designed to help you better understand your taxes, investments, retirement income, insurance, and overall financial picture.

You can learn more about The Bonfire Method and schedule a conversation with our team at Bonfire Financial.

How to Increase Your Social Security Benefits (Before It’s Too Late)

Posted on by Brian Colvert

By 2033, Social Security benefits are projected to be reduced by about 25%. That’s not speculation, that’s straight from the Social Security Administration.

And if nothing changes long term, those cuts could get even worse. That matters more than most people realize.

If you’re expecting $2,000 a month, a 25% reduction brings that down to $1,500. That’s $6,000 a year gone. For many retirees, that’s the difference between feeling stable and feeling stressed every single month.

Here’s the part most people miss: Your Social Security benefit is not fixed.

There are real, practical moves you can make right now that can increase what you receive for the rest of your life. Below are five of the most impactful strategies to help you get the most out of what you’ve earned.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

First, How Social Security Actually Works

Before we get into the strategies, it helps to understand how your benefit is calculated.

Every paycheck you’ve earned included a 6.2% contribution to Social Security (your employer matched it). Over time, that adds up.

When it’s time to calculate your benefit, the government:

  • Adjusts your earnings for inflation
  • Takes your 35 highest earning years
  • Averages them out over 420 months
  • Runs that number through a formula to determine your monthly benefit

That final number is called your Primary Insurance Amount (PIA), which is what you receive at full retirement age.

Everything you’re about to read either increases or decreases that number.

1. Work at Least 35 Years

This is one of the most overlooked factors.

If you don’t have 35 working years, Social Security doesn’t adjust the formula. It still divides by 420 months, which means missing years show up as zeros.

Those zeros drag your average down, and that lowers your benefit permanently.

The fix doesn’t have to be extreme. Even part-time work or side income in later years can replace a zero with a real number, and that can increase your monthly benefit more than you might expect.

2. Replace Low-Earning Years

Even if you already have 35 years, you’re not done.

Your benefit is based on your highest 35 years. That means lower-earning years still bring your average down.

If you’re earning more now than you did earlier in your career, continuing to work can replace those lower-income years with higher ones.

For example, replacing a $20,000 earning year with a $100,000 year can meaningfully increase your average and your future benefit.

Before stepping back or retiring early, it’s worth understanding what that decision could cost you long term.

3. Delay Filing (If It Makes Sense)

This is one of the most powerful strategies available.

You can start collecting Social Security at age 62, but there’s a trade-off:

  • You’ll lose about 6% per year you claim early
  • That reduction is permanent

On the flip side:

  • For every year you delay past full retirement age (up to 70), your benefit increases by about 8% per year

That can add up quickly.

A benefit of $2,300 at full retirement age could grow to nearly $2,900 by waiting a few years. And since Social Security adjusts for inflation, that higher base compounds over time.

This isn’t a one-size-fits-all decision. Health, income needs, and life expectancy all matter. But if you’re able to delay, it’s often one of the most effective ways to increase your lifetime benefit.

4. Coordinate Spousal Benefits

If you’re married, this is where strategy really matters.

Social Security isn’t just an individual decision; it’s a joint one.

A lower-earning spouse can receive up to 50% of the higher earner’s benefit, but timing is critical. Claiming early reduces that amount.

There’s also an important long-term consideration:

When one spouse passes away, the surviving spouse keeps the higher of the two benefits.

That means the higher earner’s decision about when to file doesn’t just affect them, it can directly impact their spouse’s financial security for the rest of their life.

Coordinating your strategy as a couple can make a significant difference.

5. Check Your Earnings Record

This might be the most underrated strategy on the list.

The Social Security Administration has acknowledged that billions of dollars in wages have gone unmatched to the correct records.

If your earnings history is wrong, your benefit could be lower than it should be, and you may never know unless you check.

Here’s what to do:

  • Create an account at SSA.gov
  • Review your earnings history year by year
  • Compare with old W-2s or tax returns if something looks off

Fixing an error could increase your monthly benefit for the rest of your life, and it might only take 30 minutes to catch.

Why This Matters More Than Ever

Over 40% of retirees rely on Social Security as their primary source of income. Even for those with savings, it often forms the foundation of a retirement plan. Small decisions made today can have a six-figure impact over time.

The five strategies are simple:

  • Work 35 years if possible
  • Replace lower-earning years
  • Delay filing when it makes sense
  • Coordinate with your spouse
  • Check your earnings record

None of these are complicated, but they do require awareness and intentional planning.

The Bottom Line

You’ve been paying into Social Security your entire working life.

It’s worth taking the time to understand how it works and making sure you’re getting everything you’ve earned.

Most people spend more time planning a vacation than they do planning this.

That’s a mistake you can avoid.

Next Steps.

If you want to look at your specific situation and figure out the right Social Security strategy for you, that’s exactly what we do. At Bonfire Financial, we help you coordinate your taxes, investments, and income into one clear plan so you can move forward with confidence.

Before you make any decisions, grab our free Social Security Cheat Sheet with the updated 2026 numbers. It’s a quick, easy reference that breaks down when to claim, how benefits are calculated, and the key thresholds you need to know. Download it and make sure you’re not leaving money on the table.

What to Sell Before Retirement: 5 Things Most People Miss

Posted on by Brian Colvert

What to Sell Before Retirement: 5 Things Most People Miss

Here’s the truth most people don’t expect to hear: a great retirement isn’t built by adding more. In fact, many of the common retirement mistakes people make come from holding onto the wrong things. A great retirement is built by knowing what to let go of before retirement.

For decades, the focus is on accumulation. Save more. Invest more. Build more. And that’s exactly what you should be doing during your working years. But as you approach retirement, the strategy shifts. What once helped you build your life can start to quietly work against you if you carry it forward without intention.

The happiest retirees we work with at Bonfire Financial aren’t the ones with the most stuff. They’re the ones who understand the difference between what they own… and what owns them.

This isn’t about cutting back or depriving yourself. It’s about optimizing your life so retirement actually feels like freedom, not a different kind of stress.

Let’s walk through five things to seriously consider selling or letting go of before retirement that most people miss.

Keep reading, or if you prefer to listen or watch… check out the Podcast or full YouTube video.

1. The Oversized House

A large home makes perfect sense during your working years. It supports a busy life, growing kids, and everything that comes with it. But before retirement, that same house often starts to feel very different.

Rooms go unused. Mortgage is expensive, and maintenance becomes more of a burden. Costs remain high, even as your lifestyle shifts.

Here’s what most people misunderstand: downsizing isn’t always about a huge financial win. In many cases, people move into a home with a similar price point. The real benefit is lifestyle.

A smaller, more intentional home often means:

  • Less maintenance
  • Lower ongoing costs
  • A space that actually fits how you live today

Before retirement, the question isn’t “How big is my house?” It’s “Does this house still serve my life?”

2. The Toys You Don’t Use

We’re talking about the extra car, the boat, the second home, the motorcycle, or anything that once made sense but now mostly sits idle.

These aren’t just possessions, they’re ongoing expenses.

Before retirement, it’s easy to hold onto these things because of what they represent. The memories. The identity. The “someday” you might use them again.

But here’s the reality: if something has become more of a chore than a joy, it’s costing you more than it’s giving you.

Every unused asset comes with:

  • Insurance
  • Maintenance
  • Taxes
  • Time and mental energy

Letting go doesn’t erase the memories. It simply frees up resources for what you actually enjoy now.

3. Financially Supporting Adult Children

This is one of the hardest, but most important, things to address before retirement.

Every parent wants to help their kids succeed. That instinct doesn’t go away. But there’s a line where helping turns into consistently funding… and that can quietly derail your retirement.

We’ve seen it too many times:

  • $25,000 here
  • $50,000 there
  • Repeated support for lifestyle gaps or failed ventures

It adds up quickly.

Before retirement, it’s critical to shift this mindset. Your retirement savings are meant to support your life. Not to continuously subsidize someone else’s.

Letting go here doesn’t mean you stop caring. It means:

  • Setting clear boundaries
  • Protecting your future
  • Allowing your kids to grow through their own experiences

It’s a hard conversation. But it’s one of the most important ones you’ll have.

4. Your Work Identity

For many people, this is the one they never see coming.

Who you are becomes deeply tied to what you do. Your career provides structure, purpose, and a sense of identity. And then one day, it stops.

Before retirement, you need to start separating your identity from your job.

Because the question isn’t just: “When will I retire?”

It’s: “What does my life look like the day after I retire?”

The people who transition well into retirement already have answers to that. They’ve started building a life that includes:

  • Hobbies and interests
  • Social routines
  • Purpose outside of work

Without that, retirement can feel less like freedom and more like a loss of direction.

5. Lifestyle Creep and Unrealistic Upgrades

Before retirement, it’s tempting to think of this next chapter as the time to upgrade everything.

More travel. Nicer hotels. Bigger experiences. And while retirement should absolutely be enjoyed, it still needs to be grounded in reality.

A sustainable retirement isn’t about jumping to a completely new level of spending. It’s about maintaining and enjoying the lifestyle you’ve already built.

A simple way to think about it: If you’ve lived comfortably at one level your entire life, retirement isn’t the time to suddenly double your lifestyle expectations.

Before retirement, the goal is alignment:

  • Your spending matches your resources
  • Your expectations match your plan
  • Your lifestyle is sustainable long term

A Simple Framework to Use Before Retirement

As you evaluate what to keep and what to let go of before retirement, use this three-question framework:

1. Does this still serve my life going forward… or my past life?
Many things made perfect sense in a different chapter. That doesn’t mean they belong in the next one.

2. What is this actually costing me?
Not just financially, but in time, energy, and attention.

3. If I let this go, what becomes possible?
This is where the shift happens. Letting go of the right things can create space for:

  • Travel
  • Experiences
  • Flexibility
  • Peace of mind

The Real Goal Before Retirement

Retirement isn’t about having less. It’s about having the right things.

The right structure, the right priorities and the right mindset.

When you approach it this way, letting go doesn’t feel like loss. It feels like control.

You’ve spent decades building your life. Before retirement, the real opportunity is deciding what actually deserves to come with you into the next chapter.

And if you’re not sure what that looks like for your specific situation, that’s exactly the kind of conversation we have every day at Bonfire Financial.

Because the goal isn’t just to retire.

It’s to retire well.

Next Steps

If you’re getting close to retirement and want clarity on what actually makes sense for your situation, this is exactly what we do.

The Bonfire Method is a focused, step-by-step process designed to help you understand your full financial picture, identify what’s working, what’s not, and what needs to change before retirement.

If you’re ready to make smarter decisions and move into retirement with confidence, you can apply now.

Common Investing Mistakes (And How to Fix Them)

Posted on by Brian Colvert

Common Investing Mistakes (And How to Fix Them)

Most people think investing is about picking the right stock or timing the market, but that’s not what actually builds lasting wealth.

In reality, some of the biggest investing mistakes aren’t made by beginners. They’re made by high earners who are doing a lot of things right, but still feel like something is off.

They’re saving, they’re investing. They have a 401(k). On paper, everything looks solid.

And yet, there’s still uncertainty. Still hesitation. Still the question: am I actually doing this the right way?

After years of working with clients on financial planning, retirement strategy, and long-term investing, the patterns become clear. The issue usually isn’t effort. It’s structure. It’s mindset. And it’s a handful of common investing mistakes that quietly compound over time.

If you want to build real wealth and actually feel confident in your financial life, these are the mistakes worth paying attention to.

Keep reading, or if you prefer to listen or watch…check out the Podcast or full YouTube video.

Mistake #1: Thinking Investing Is About Picking Winners

One of the most common investing mistakes is believing that success comes from finding the next big stock.

High earners are often smart, analytical, and used to solving problems. So naturally, they approach investing the same way. They try to outthink it. They look for the edge. The opportunity others are missing.

But investing doesn’t reward that behavior consistently.

Real wealth is not built on a few big wins. It’s built on consistency over time. It’s built on a system that works regardless of headlines, trends, or market noise.

The sooner you shift from trying to pick winners to focusing on a repeatable strategy, the sooner things start to click.

Mistake #2: Relying Too Heavily on a 401(k)

A 401(k) is a great tool, but it’s not a complete strategy.

This is one of the most common investing mistakes high earners make. They do exactly what they were told,  contribute consistently, and they take the match. And over time, they build a meaningful balance.

But then they realize most of their wealth is locked away.

That creates a lack of flexibility. If you want to retire early, invest in something outside the market, or simply have access to capital before traditional retirement age, your options become limited.

The solution isn’t to avoid a 401(k). It’s to avoid relying on it exclusively. Building wealth the right way means having multiple buckets, each serving a different purpose.

Mistake #3: Letting Too Much Cash Sit Idle

Another common investing mistake is holding excessive cash.

This often comes from a good place. It feels safe. It feels responsible. Especially for high earners who have worked hard to build what they have.

But over time, idle cash quietly loses value mostly due to inflation. It doesn’t grow. It doesn’t compound. And it doesn’t contribute to long-term wealth in any meaningful way.

The goal isn’t to eliminate cash completely. It’s to be intentional about how much you keep liquid and how much you put to work.

Mistake #4: Waiting Until Everything Feels “Perfect”

A lot of high earners delay making decisions because they want to get it right.

They want the right strategy, the right timing, the right plan.

The problem is that waiting is its own decision, and it usually costs more than getting started imperfectly.

Compounding only works if you give it time. The longer you wait, the more you give up.

You don’t need a perfect plan to start building wealth. You need a solid foundation and the willingness to move forward.

Mistake #5: Confusing Income With Financial Security

Making more money does not automatically lead to feeling secure.

This is one of the most overlooked investing mistakes. High earners often assume that as income increases, everything else will fall into place.

But without structure, higher income can actually create more complexity.

More accounts, more decisions, and more variables.

Financial confidence doesn’t come from income. It comes from clarity. It comes from knowing how everything fits together and why you’re doing what you’re doing.

Mistake #6: Ignoring the Role of Mindset

Many investing mistakes aren’t technical. They’re behavioral.

If someone grows up with a scarcity mindset, that doesn’t disappear when their income increases. It often carries forward into how they save, spend, and invest.

That can lead to hesitation, second-guessing, or an inability to enjoy what they’ve built.

On the flip side, overconfidence can lead to unnecessary risk and poor decisions.

Building wealth isn’t just about numbers. It’s about how you think about money and how that thinking shows up in your actions.

Mistake #7: Overcomplicating the Strategy

High earners are used to complexity in their professional lives, so they often assume investing needs to be complex as well.

It doesn’t.

In fact, complexity is often one of the biggest barriers to success.

The fundamentals are simple. Have a solid foundation. Invest consistently. Use the right mix of accounts. Stay disciplined over time.

It’s not flashy. But it works.

What Actually Builds Wealth Over Time

If these are the most common investing mistakes, what does the right approach look like?

It starts with a foundation.

An emergency fund that covers three to six months of expenses. No high-interest consumer debt. Stability before growth.

From there, it’s about using the tools available to you.

Taking advantage of employer matches. Building additional investment accounts that provide flexibility. Creating a structure that supports both long-term growth and short-term access.

And then, most importantly, staying consistent.

Investing month after month. Letting compounding do its job. Avoiding the temptation to constantly adjust based on what’s happening in the moment.

Why Consistency Beats Timing

Trying to time the market is one of the most common investing mistakes, even among experienced investors.

The problem is that it requires being right twice. When to get in and when to get out.

Consistency removes that pressure.

When you invest regularly over time, you smooth out the highs and lows. You participate in growth without needing to predict it.

And over the long run, that approach tends to outperform most attempts at timing.

The Difference Between Looking Wealthy and Being Wealthy

There’s a difference between looking successful and actually being financially secure.

Looking wealthy is often tied to visible things. Cars, homes, lifestyle.

Building wealth happens behind the scenes. It’s in the structure. The discipline. The decisions no one sees.

Many people who appear wealthy are financially fragile. And many people who are truly wealthy don’t feel the need to prove it.

Understanding that difference changes how you approach money.

What a Rich Life Actually Means

At some point, the definition of wealth shifts.

It moves away from accumulation and toward freedom.

The ability to make decisions without financial pressure. To spend time how you want. To create experiences with people you care about.

That’s what money is supposed to support.

Not just a number, but a life that you actually enjoy living.

Final Thoughts

Most investing mistakes don’t feel like mistakes in the moment.

They feel reasonable, they feel safe, and they feel like the right thing to do.

But over time, they add up.

The good news is that the solution isn’t complicated.

It’s about focusing on the fundamentals. Building the right structure. And staying consistent long enough for it to work.

If you can avoid the common investing mistakes high earners make and shift your approach toward clarity and simplicity, you put yourself in a completely different position.

Not just to build wealth, but to actually enjoy it.

Next Steps

Reading about investing mistakes is one thing. Fixing them in your own situation is another.

The Bonfire Method is designed to give you a clear plan across every part of your financial life, not just your investments. In 30 days, you’ll know exactly where you stand and what to do next.

If you’re ready to get out of the guesswork and into a real strategy, you can apply here.

Retiring Soon? It’s Time to Revisit Your Portfolio

Posted on by Brian Colvert

What Retiring Soon Means for Your Investment Strategy

If you are retiring soon, you are standing at the threshold of one of life’s biggest transitions. Retirement changes more than just your daily routine. It transforms how you view your investments, how you handle risk, and how you plan for the years ahead.

For decades, your portfolio likely sat quietly in the background. You contributed to it regularly. You watched it grow. And when markets dipped, you trusted time and future income to smooth things out.

But retirement marks a shift. When your portfolio becomes your income, the stakes feel different. Market swings become more personal. Risk feels more real. And decisions that once felt theoretical suddenly feel permanent.

That is why the year you retire, or the year before, is one of the most important times to step back and reassess how your portfolio is structured.

Today, we’ll cover why retiring soon requires a different way of thinking about risk, how portfolios should evolve as income stops, and what to review before you officially retire. Read to the end to understand how a few thoughtful adjustments can help protect both your finances and your peace of mind as you enter this next phase.

Listen Now: iTunes | Spotify | iHeartRadio | Amazon Music

Retirement Is a Financial Shift and a Psychological One

One of the most common misunderstandings about retirement is when it actually begins.

For most people, retirement does not start on their last day of work. It starts on the first day that their paycheck no longer arrives and their portfolio takes over that role.

That transition is both financial and psychological.

When you are working, market volatility tends to feel distant. If the market drops 15 or 20 percent, it may not feel good, but it does not usually change how you live your life. Your income continues. Bills get paid. Time is on your side.

When you are retiring soon, that relationship changes.

Suddenly, the value of your portfolio is no longer just a long-term number. It represents years of future spending, travel, healthcare, and lifestyle. A market decline that once felt like a temporary setback can now feel like a direct threat to your plans.

This psychological shift is often underestimated, and it is one of the biggest reasons portfolios need to be revisited before retirement rather than after.

When Your Portfolio Becomes Your Paycheck

During your working years, your portfolio’s job is relatively simple. It is there to grow.

You add to it regularly. You tolerate volatility because you have time to recover. You may even welcome downturns as buying opportunities.

But when you are retiring soon, your portfolio takes on a new role. It becomes your paycheck.

This is a fundamental change. Instead of adding money, you are now pulling money out. Instead of letting markets ride, you must consider how withdrawals interact with market performance.

This is where many people encounter what is known as sequence of returns risk. Poor market performance early in retirement, combined with withdrawals, can have an outsized impact on how long your money lasts.

The goal is no longer just growth. The goal becomes sustainability.

If you’re retiring soon, one of the most helpful first steps is understanding how much income your portfolio can realistically support. Using a retirement calculator can help.

Why Risk Feels Different Once Income Stops

Risk is not just a mathematical concept. It is emotional.

While you are working, a 20 percent market decline might show up as a percentage on a statement. In retirement, it shows up as a dollar amount tied directly to your lifestyle.

A portfolio that drops from $1 million to $800,000 feels very different when that portfolio is funding your income. People do not think in percentages at that point. They think in years of spending, missed opportunities, and lost security.

This is why we often say that risk tolerance changes whether you realize it or not when you are retiring soon.

Even people who have considered themselves aggressive investors for decades often find that their comfort level shifts once withdrawals begin. That does not mean they made a mistake earlier. It simply means their life stage has changed.

The Accumulation Phase vs the Distribution Phase

Most people spend far more time thinking about how to save than how to spend from their savings.

Accumulation is relatively straightforward. Spend less than you earn. Invest consistently. Stay disciplined.

Distribution is more complex.

When you are retiring soon, you must decide not only how much to withdraw, but where to withdraw it from, when to do so, and how those withdrawals interact with taxes, market conditions, and long-term sustainability.

This complexity is another reason portfolios often need to evolve at retirement. A structure that worked well for accumulation may not be well-suited for distribution.

There Is No One-Size-Fits-All Retirement Portfolio

Rules of thumb like “100 minus your age” or the classic 60/40 portfolio are often repeated because they are simple. But simplicity does not equal suitability. Truth is, there is no perfect “retirement age.”

When you are retiring soon, your portfolio should reflect your specific situation, not a generic formula.

Key factors include:

  • How much you have saved

  • How much income you need from your portfolio

  • Other income sources like pensions, Social Security, or real estate

  • Your spending flexibility

  • Your emotional comfort with volatility

Two people of the same age can require very different portfolios depending on these variables.

Why Many People Are Too Aggressive Heading Into Retirement

One of the most common issues we see is that people approach retirement with portfolios that are still built for growth rather than income stability.

This is understandable. Growth worked for decades. It is familiar. And markets may have performed well leading up to retirement.

But familiarity can create blind spots.

If you are retiring soon, too much exposure to volatile assets can magnify stress and increase the risk of having to sell investments at unfavorable times to fund living expenses.

This does not mean eliminating growth assets altogether. It means balancing growth with stability in a way that supports consistent withdrawals and emotional comfort.

Timing Matters More Than Market Predictions

It is important to be clear about what this conversation is not about.

Revisiting your portfolio because you are retiring soon is not about predicting market tops or bottoms. It is not about guessing what interest rates will do or which sectors will outperform.

It is about aligning your portfolio with a life change.

The best time to make adjustments is when markets are relatively strong, not after a significant decline. Once a downturn has occurred, changing risk levels often locks in losses rather than preventing them.

This is why planning ahead is so important. Waiting until after retirement, or after a market correction, can severely limit your options.

Liquidity Becomes a Bigger Priority

Another often overlooked factor when retiring soon is liquidity.

During your working years, illiquid investments may not pose much of an issue. You are not relying on them for income. Time is on your side.

In retirement, access matters.

If a portion of your portfolio is tied up in assets with limited liquidity or restricted withdrawal windows, it can complicate income planning. You may be forced to sell other assets at inopportune times to cover expenses.

Reviewing liquidity ahead of retirement allows you to plan cash flow more intentionally and avoid unnecessary stress.

Cash Flow Planning Is More Important Than Ever

When you are retiring soon, portfolio planning shifts from abstract returns to practical cash flow.

Questions become more detailed:

  • Which accounts will fund income first?

  • How do withdrawals interact with taxes?

  • How much cash should be available for short-term needs?

  • How do required distributions fit into the picture?

Answering these questions in advance helps create a smoother transition into retirement and reduces the likelihood of reactive decisions.

Managing Down Years Without Panic

No retirement portfolio avoids down years entirely.

Markets will fluctuate. Corrections will happen. The goal is not to eliminate risk, but to manage it in a way that allows you to stay invested through difficult periods.

When your portfolio is aligned with your retirement reality, down years become manageable rather than frightening. You are less likely to panic, make emotional changes, or abandon a long-term plan.

That emotional resilience is just as important as the numbers themselves.

Retirement Is a Process, Not a Single Event

One of the most helpful mindset shifts for people retiring soon is to view retirement as a process rather than a single moment.

Your portfolio does not need to be perfect on day one. It needs to be adaptable.

Your spending patterns may evolve. Your priorities may change. Your comfort with risk may continue to shift. A well-structured portfolio allows for those adjustments without requiring drastic changes.

The Value of Having the Conversation Early

Many people delay this conversation because it feels uncomfortable. While you are still working and accumulating, it can feel premature to think about pulling money out.

But this is precisely why the conversation matters before retirement, not after.

When you are retiring soon, having time on your side gives you flexibility. You can adjust gradually. You can plan thoughtfully. You can avoid rushed decisions driven by fear or urgency.

Bringing It All Together

Retirement is one of the few life events that touches every aspect of your financial life at once. Income, taxes, investments, psychology, and lifestyle all converge.

If you are retiring soon, revisiting your portfolio is not about fear or pessimism. It is about preparation.

It is about ensuring that the assets you worked so hard to build are positioned to support the life you want to live next.

If you would like help reviewing your portfolio, understanding how risk changes in retirement, or planning the transition from accumulation to income, we are always happy to have that conversation. Take a moment today to schedule a call with us to start the conversation.

You have earned this phase of life. The right planning helps you enjoy it with confidence.

RMD Questions Answered – Timing, Taxes, and Inheritance

Posted on by Brian Colvert

RMDs tend to show up quietly on the retirement timeline, and then suddenly they feel very loud. One year you are simply managing your investments. The next, the IRS is telling you that money must come out, whether you need it or not. For many people, that is where the confusion starts.

When exactly do RMDs begin? How much do you have to take? How are they taxed? And what happens if those accounts are still around when your kids inherit them?

Today we break down the most common questions we hear about RMDs and clear up the misconceptions that often lead to costly mistakes.

Listen Now: iTunes | Spotify | iHeartRadio | Amazon Music

What Are RMDs and Why Do They Exist?

RMDs, or Required Minimum Distributions, apply to retirement accounts that received a tax benefit upfront. These include traditional IRAs, 401(k)s, SEP IRAs, and SIMPLE IRAs.

The government allowed you to deduct contributions or defer taxes while the money grew. RMDs are the mechanism that eventually forces a portion of that money back onto your tax return.

A common misconception is that once RMDs begin, the entire account becomes taxable. That is not true. Only a calculated portion of the account must be distributed each year.

When Do RMDs Start?

Under current rules, RMDs generally begin at age 73. If you were born after 1960, that age increases to 75.

The year you reach your RMD age is the year the requirement starts. It does not matter if your birthday is early in the year or late in the year. That year counts.

There is one important planning nuance. Your very first RMD can be delayed until April 15 of the following year. This flexibility can be helpful, but it also creates a potential tax trap.

If you delay the first RMD, you will still need to take your second RMD by December 31 of that same year. That means two taxable distributions in one calendar year. Depending on your income, that could push you into a higher tax bracket or affect Medicare premiums.

This is why RMD timing decisions should be made intentionally, not automatically.

How Are RMDs Calculated?

RMDs are based on:

  • Your account balance on December 31 of the prior year

  • Your age

  • IRS life expectancy tables

The IRS essentially estimates how many years you have remaining and requires that a portion of the account be distributed each year. As you age, the required percentage gradually increases.

This also means that market performance matters. If your account grows, your future RMDs may increase as well, even if you are withdrawing money each year.

How Are RMDs Taxed?

RMDs are taxed as ordinary income, just like wages or business income.

If your income is $100,000 and you take a $25,000 RMD, your gross income becomes $125,000. That additional income can ripple through your entire tax picture, affecting tax brackets, Medicare premiums, and deductions or credits.

One planning strategy that often gets overlooked is the Qualified Charitable Distribution, or QCD.

Once you reach age 70½, you can direct up to $100,000 per year from your IRA directly to a qualified charity. That distribution still counts toward your RMD but is not included in your taxable income.

This can be especially powerful for people who are charitably inclined but no longer itemize deductions.

Recordkeeping is critical here. Most custodians report only the total amount distributed, not how much was taxable. The burden is on you and your CPA to properly document charitable distributions.

Do Roth IRAs Have RMDs?

Roth IRAs do not have RMDs during the original owner’s lifetime.

Because taxes were paid upfront, the IRS does not require withdrawals later. This gives Roth accounts a unique level of flexibility and makes them valuable tools for both retirement income planning and estate planning.

It is also why Roth balances are often preserved for later years or passed on to heirs rather than spent early in retirement.

What Happens to Your IRA When You Pass Away?

This is where RMD planning intersects with estate planning.

If your spouse inherits your IRA, the account typically becomes theirs and is treated as their own. RMDs are then based on your spouse’s age and situation.

If the account passes to children or other non-spouse beneficiaries, the rules change significantly.

Most inherited IRAs are now subject to the 10-year rule. This means the entire account must be distributed within 10 years of the original owner’s death. Withdrawals are taxable to the beneficiary as ordinary income.

RMDs during that 10-year window, if required, are usually not enough to fully empty the account. Beneficiaries must plan additional withdrawals, often during their highest earning years.

This is why inherited IRAs frequently create unexpected tax consequences for families.

Can Roth Conversions Reduce Future RMD Issues?

In some cases, yes.

Roth conversions allow you to pay taxes now in exchange for tax-free growth later. If you expect your heirs to be in higher tax brackets than you, converting some assets to Roth during your lifetime may reduce the overall tax burden on your family.

That said, Roth conversions are not universally beneficial. They require careful analysis of current tax rates, future income, cash flow, and estate goals. Sometimes the numbers work beautifully. Other times they do not.

The key is running the analysis rather than relying on assumptions.

The Bigger Picture With RMDs

RMDs are not just a retirement rule. They are a tax planning issue, a cash flow decision, and an estate planning consideration all at once. Handled well, they can be managed smoothly and strategically. Ignored or misunderstood, they can create unnecessary taxes and stress later on.

If you want to understand how RMDs apply to your situation, how they fit into your broader plan, or whether strategies like charitable giving or Roth conversions make sense, we are happy to help.

You can listen to the full podcast episode for a deeper discussion, or reach out to our team  to talk through your specific circumstances.

Am I Ready to Retire? Risk, Returns, and Real Answers

Posted on by Brian Colvert

Retirement shouldn’t be about spreadsheets. It should be about pickleball at 10am on a Tuesday.

But enjoying that freedom starts with knowing the answer to one question:

Am I ready to retire?

It is one of the most common questions we hear from clients and is also one of the hardest to answer with a simple yes or no.

Closely followed by two others:

  • Will I run out of money?

  • What kind of returns should I realistically expect?

These questions come up whether you are five years from retirement or already there. They also tend to show up together, because retirement planning is not just about hitting a number. It is about understanding risk, income, and how your money needs to function once your paycheck stops.

In this client Q&A, we break down how to think about retirement readiness, how much risk makes sense, and how to set realistic expectations for investment returns without guessing or chasing what someone else is doing.

Listen Now: iTunes | Spotify | iHeartRadio | Amazon Music

Q: Am I On Track for Retirement?

This is a big question, and it is a loaded one. Am I Ready to Retire?

There are a lot of moving parts, which is why blanket rules and online calculators often miss the mark.

That said, there is a simple way to get a back-of-the-napkin answer that gets you most of the way there.

Start With Your Lifestyle, Not a Formula

You will often hear that people spend less in retirement. In reality, that is not always true.

What we typically see is this:

  • Early retirement spending is often the same or higher

  • Travel increases

  • Deferred experiences finally happen

  • Time, not money, becomes the constraint

Because of that, a good starting point is your current spending, not what someone says you should spend in retirement.

Look at what you actually spend on:

  • Housing

  • Food

  • Travel

  • Utilities

  • Transportation

  • Entertainment

  • Insurance

  • Everything that supports the life you want

It is usually best to look at this over a full year, since some months are naturally higher than others. December might look very different than April. Summer might be more expensive than winter. What matters is the average.

Savings contributions are different. If you are actively saving into a 401(k), Roth IRA, or HSA, those contributions can usually be removed from your retirement spending estimate.

What remains is a realistic picture of what it costs to live your life.

Identify Income That Comes In Automatically

Once you know what you spend, the next step is to identify income that comes in without you working.

Start with the basics:

  • Social Security

  • Pension income, if applicable

  • Rental income or other passive income streams

Add up everything that shows up consistently without you having to lift a finger.

At this point, you should have two numbers:

  1. What you spend

  2. What comes in automatically

If income exceeds spending, you are already in a strong position. If there is a gap, that gap needs to be filled by your investment portfolio.

Using the 4 Percent Rule as a Reality Check

This is where retirement accounts come into play.

IRAs, 401(k)s, brokerage accounts, and other invested assets are typically used to fill the gap between spending and guaranteed income.

A commonly used guideline here is the 4 percent rule.

The idea is simple:

  • Take the total value of your investment assets

  • Multiply by 4 percent

  • That is a reasonable annual withdrawal amount that historically has kept pace with inflation

This is not perfect math. It is not a guarantee. But it does get you close enough to answer the question: Am I ready to retire?

For example:

  • $1,000,000 x 4 percent = $40,000 per year

  • Combine that with Social Security and other income

  • Compare it to your annual spending

If the numbers line up, you are likely on track.

If they do not, something has to change:

  • Save more

  • Spend less

  • Work longer

  • Adjust expectations

There is no judgment in that. It is simply math.

Q: Will I Run Out of Money?

This is the biggest fear most people have going into retirement. And it is not one that disappears just because someone explains it to you.

In many cases, the fear only fades once you actually live through retirement and see that the plan works.

Why This Fear Exists

When you are working, income feels unlimited. You may change jobs, get raises, or work longer if needed.

When you retire, that changes.

Your income is no longer tied to your effort, and that psychological shift is significant. You are moving from accumulation to distribution, and that transition can be uncomfortable.

Expenses can still be unpredictable. Medical costs, inflation, and market volatility all add uncertainty.

That is why risk management matters so much in retirement.

The Risk Most Retirees Take Without Realizing It

One of the most common mistakes we see is retirees taking more risk than they actually need to.

Often this happens because:

  • Friends are doing it

  • Headlines are loud

  • Recent returns look impressive

  • The market has been strong

  • FOMO

When you are working, market swings matter less. If the market drops 30 percent and you are still earning a paycheck, you are not forced to sell investments at a bad time.

In retirement, that changes.

If you need to pull income from your portfolio and the market is down, you may be forced to sell at exactly the wrong moment. That can permanently damage a retirement plan.

Sometimes, when the game is already won, you do not need to keep playing aggressively. You may not need to dominate. You may simply need to avoid losing.

That shift in mindset is critical.

Playing to Win vs Playing Not to Lose

This is where retirement planning becomes personal.

If your biggest fear is running out of money, then your portfolio should reflect that. That often means being more conservative than you were during your working years.

If your biggest goal is maximizing growth and you have more flexibility, you may be able to take more risk.

Neither approach is inherently right or wrong. What matters is that your investment strategy matches:

  • Your goals

  • Your income needs

  • Your tolerance for volatility

  • Your actual situation, not someone else’s

Old rules like “your age equals your bond allocation” are outdated. Retirement planning today needs to be far more individualized.

Q: What Returns Should I Expect?

This is another question that we get when someone asks “Am I Ready to Retire?” is “What Returns should I expect” This often gets oversimplified.

Returns depend entirely on what you are invested in.

Stocks

For a diversified stock portfolio, long-term expectations in the range of 8 to 12 percent are reasonable. That comes with volatility, sometimes significant volatility.

Fixed Income

Fixed income investments like bonds, CDs, and Treasuries are designed for stability and income, not growth.

In recent years, expected returns here have been much lower, often in the 3 to 5 percent range.

The trade-off is reduced volatility and more predictable cash flow.

Why Comparisons Matter

One of the biggest mistakes investors make is comparing apples to oranges.

Stocks should be compared to stocks. Bonds should be compared to bonds.

If an equity-heavy portfolio is averaging 5 percent over a long period, that may be a red flag. If a conservative, income-focused portfolio is doing the same, it may be completely appropriate.

Context matters.

Understanding Alternative Investments and Liquidity

Alternatives include investments that are not traditional stocks, bonds, ETFs, or cash. Examples include:

The biggest thing you give up with alternatives is liquidity.

If you own a publicly traded stock, you can sell it and have cash quickly.

With alternatives:

  • Money may be locked up for years

  • Access may be limited to quarterly windows

  • Redemptions may be capped or delayed

Because of that, you should expect higher returns in exchange for giving up liquidity.

As a general guideline:

  • Private equity often targets higher returns than public markets

  • Private credit should pay more than traditional fixed income

  • If an illiquid investment offers the same return as a liquid one, the liquid option usually makes more sense

Liquidity is flexibility, and flexibility matters in retirement.

Why Most Advisors Focus on Diversification, Not Beating the Market

Data consistently shows that most active managers do not outperform the market over long periods.

That does not mean advisors have no value. It means their value lies in:

  • Portfolio construction

  • Risk management

  • Behavioral coaching

  • Planning integration

The goal is not to win every year. The goal is to build a portfolio that supports your life and holds up across different market environments.

Am I Ready To Retire? The Bottom Line

Retirement readiness is not about a single number or a perfect return. When you ask yourself “Am I ready to retire?” remember:

It is about alignment.

  • Does your income support your lifestyle?

  • Does your risk match your goals?

  • Are your expectations realistic?

  • Is your portfolio built for the phase of life you are in?

If you can answer those questions honestly, you are already ahead of most people.

And if you cannot, that is where thoughtful planning comes in.

If you have questions about your own situation, we are always happy to talk through it with you one-on-one. Schedule a call today!

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