Joe Lucey

If you’ve spent decades maxing out your 401(k) contributions, you’ve done what every financial expert told you to do. But can you have too much in tax-deferred accounts?

For many high earners approaching retirement, the answer is yes. What felt like smart saving during your working years can turn into a significant tax burden in retirement once RMDs kick in.

The Tax-Deferred Time Bomb

Tax-deferred accounts like 401(k)s and traditional IRAs are powerful wealth-building tools. But they come with a big catch. Every dollar you withdraw in retirement is taxed as ordinary income.

That might not sound concerning now, but RMDs are based on your account balance, not your actual income needs. A large distribution can push you into higher tax brackets, and a higher income affects your Medicare premiums through IRMAA surcharges. 

If most of your retirement savings sits in tax-deferred accounts, you have limited flexibility. You’re forced to make withdrawals on the IRS’s timeline (not yours), and you pay taxes at whatever rate applies that year.

The Case for Tax Diversification

Tax diversification means spreading your retirement savings across different account types so you have more control over your taxable income in retirement. There are three main types of retirement savings accounts and they all have different tax implications. When you have money in all three buckets, you can strategically choose where to pull from each year based on your tax situation.

Tax-deferred: Traditional 401(k) or Traditional IRA
Contributions reduce your taxable income now, but withdrawals are fully taxed in retirement. RMDs are required starting at age 73.

Tax-free: Roth 401(k) or Roth IRA
Contributions are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free. No RMDs required during your lifetime.

Taxable: Brokerage or Savings Accounts
No tax benefit on contributions, but more flexibility in how and when you access funds. Long-term capital gains are typically taxed at lower rates than ordinary income.

Strategies to Rebalance Before Retirement

If you’re still working and think you might be too concentrated in tax-deferred accounts, there are several strategies to start rebalancing:

Consider Roth 401(k) contributions. If your employer offers a Roth 401(k) option, consider splitting your contributions between traditional and Roth accounts. This can be especially beneficial if you expect to be in a higher tax bracket in retirement.

Explore Roth conversions. Converting traditional IRA dollars to a Roth IRA creates a tax bill now, but eliminates future RMDs and creates tax-free income later. This strategy works best during lower-income years or before RMDs begin.

Build taxable accounts. Contributing to a brokerage account doesn’t offer upfront tax benefits, but it gives you more flexibility in retirement and access to preferential long-term capital gains rates.

Use QCDs strategically. Once you’re over 70½, qualified charitable distributions allow you to send IRA money directly to charity, satisfying your RMD without increasing your taxable income.

Let’s Review Your Strategy

If you’re concerned about having too much tied up in tax-deferred accounts, now is the time to evaluate your options. A comprehensive tax diversification strategy takes into account your current income, projected RMDs, retirement timeline, and long-term tax outlook.

At Secured Retirement, we specialize in helping clients build tax-efficient retirement strategies that give them more control and flexibility.

If you’re ready to review your account mix and explore ways to minimize your future tax burden, let’s talk. Give us a call at 952-460-3290. 

Medicare eligibility begins at age 65 for most people. But if you retire before then, you need to bridge the gap. Depending on your income and assets, that coverage can be expensive. Without a clear plan, healthcare costs during this transition period can erode your retirement savings faster than you anticipated.

For retirees, healthcare options typically include:

COBRA continuation coverage lets you continue your employer’s group health insurance for up to 18 months, but you’ll pay the full premium plus administrative fees.

ACA marketplace plans provide another option, though subsidy eligibility depends on your income. You could have substantial retirement savings but still qualify for subsidies if your annual income is modest.

Spouse’s employer coverage is often the most cost-effective solution if your spouse is still working and offers family health benefits.

Private health insurance purchased directly from insurers is typically the most expensive option with fewer protections than ACA plans.

No matter what gap coverage you choose, verify your doctors are in-network for any plan you’re considering. And if you plan to travel extensively or split time between locations, understand how your plan coverage works outside your primary service area.

Tax Planning Strategies to Manage Costs

Strategic tax planning during the 62-to-65 window affects both your current healthcare costs and future Medicare premiums through IRMAA surcharges. Your modified adjusted gross income determines ACA subsidy eligibility now and Medicare costs later.

Control your income timing. Delaying Social Security or spacing out IRA withdrawals can keep your income within ranges that make healthcare coverage more affordable. 

Strategic Roth conversions. Converting traditional IRA dollars to Roth reduces future required minimum distributions and shifts money into tax-free accounts before IRMAA calculations begin affecting Medicare costs. However, if you’re relying on ACA subsidies, conversions can backfire by pushing income above subsidy thresholds.

Consider whether working longer makes sense. For some, the most cost-effective strategy is delaying full retirement to maintain employer-sponsored coverage. Even part-time work with benefits can bridge the gap more affordably than individual coverage.

Start Planning Now

Ideally, you should model your healthcare costs and income scenarios at least two to three years before your planned retirement date to avoid surprises. These aren’t simple calculations. They require detailed tax projections and an understanding of how different strategies interact across multiple years.

At Secured Retirement, we specialize in tax-efficient retirement planning that accounts for healthcare costs, income timing, and long-term optimization. If you’re approaching retirement and need help modeling your options, we’re here to help.

Give us a call at 952-460-3290. Let’s make sure your healthcare strategy protects both your health and your wealth.

In 2026, you’ll likely start hearing about “Trump Accounts,” a new savings vehicle for children under 18. As media coverage increases, our goal is to help you understand what they are, how they work, and whether they make sense for your family.  For more detailed information, we recommend you visit TrumpAccounts.gov.

Trump Accounts Overview

Established through the Working Families Tax Cuts Act, Trump Accounts offer tax-advantaged growth for children under 18. If you’re thinking about your family’s financial future, here’s what you need to know about these accounts and how they fit into your broader planning strategy.

Trump Accounts are IRA-style investment accounts designed specifically for U.S. citizen children under 18. They’re administered through IRS.gov and offer tax-deferred growth similar to traditional retirement accounts.

Eligibility: Any U.S. child with a Social Security number can have an account opened on their behalf.

Incentives: 

• Children born between January 1, 2025, and December 31, 2028, will receive a $1,000 government deposit to start their account.
  
  
• A $250 bonus is available for the first 25 million children aged 10 and under who meet certain income bracket requirements.

Contribution Limits: Starting July 5, 2026, parents and guardians can contribute up to $5,000 per year using Form 4547.

Growth: Funds are invested in a market index and grow tax-deferred until the child reaches age 18, when it transitions to a traditional IRA.

Withdrawal Procedure

At age 18, account holders can withdraw funds without penalties for three specific purposes:

• Education expenses
• Purchasing a first home
• Starting a business

This flexibility sets Trump Accounts apart from 529 Accounts that limit usage to education only. The tax treatment of withdrawals depends on how the funds are used, similar to how Roth IRAs handle qualified distributions.

If the funds remain untouched, they continue growing tax-deferred. The compounding potential over decades could result in substantial savings by the time the account holder reaches their 50s or beyond.

Planning for the Future

For families with the capacity to fund multiple savings accounts, Trump Accounts add another tool to the planning toolkit. The government seed deposit provides a meaningful head start, and the withdrawal flexibility at age 18 gives the next generation more options beyond pursuing higher education.

Whether you’re a parent just starting to think about your child’s financial future or a grandparent looking to leave a legacy, these accounts deserve a place in the conversation.

Want to discuss how Trump Accounts fit with your family’s broader financial plan? We’ll help you think through the strategy that makes sense for your situation. Give us a call at 952-460-3290.