The Rules for Spousal IRA Contributions

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

One of the basic requirements for contributing to an IRA is having earned income, or what the IRS generally refers to as taxable compensation. But what happens when one spouse works and the other spouse does not?

Many married couples assume that the non-working spouse cannot contribute to an IRA because that spouse does not have earned income of their own. Fortunately, that is not always the case. The spousal IRA contribution rules can allow a married couple filing a joint tax return to use the compensation earned by one spouse to support IRA contributions for both spouses.

This can be particularly valuable when one spouse leaves the workforce to raise children, care for a family member, attend school, or simply because the household is supported by one income. Instead of losing years of potential retirement savings, the couple may be able to continue funding an IRA for the non-working spouse.

In this article, we will cover:

• How spousal IRA contributions work

• The 2026 spousal Roth IRA contribution rules

• The 2026 traditional IRA deduction limits for married couples

• How workplace retirement plans can change the traditional IRA deduction

• Common mistakes that can result in excess contributions, taxes, or penalties

• How the backdoor Roth IRA strategy can interact with spousal IRA contributions

What Is a Spousal IRA Contribution?

The term “spousal IRA” can be a little misleading because there is not actually a special account called a spousal IRA. The account is simply a traditional IRA or Roth IRA owned by the spouse.

Normally, an individual's IRA contributions cannot exceed that individual's taxable compensation for the year. However, special rules apply to married couples who file a joint federal income tax return. If one spouse has little or no taxable compensation, the couple may still be able to contribute to an IRA for that spouse based on the compensation earned by the other spouse.

It is helpful to think of this as a special contribution rule rather than literally transferring or assigning income from one spouse to the other. Each spouse must have their own IRA, and each spouse is subject to the applicable annual IRA contribution limit. You cannot put both spouses' contributions into a single IRA.

For 2026, the IRA contribution limit is $7,500 per person. Individuals age 50 or older can contribute an additional $1,100 catch-up contribution, bringing their 2026 limit to $8,600. These limits apply across an individual's traditional and Roth IRAs combined.

This means that, assuming sufficient compensation and all other requirements are satisfied, a married couple under age 50 could potentially contribute a combined $15,000 to IRAs for 2026, even if only one spouse works.

Spousal Roth IRA Contributions in 2026

For many married couples, the Roth IRA is the easiest place to begin the spousal IRA discussion.

Roth IRA contributions are made with after-tax dollars. There is no immediate income tax deduction for making the contribution, but qualified distributions from a Roth IRA can generally be received tax-free in retirement.

There is one major hurdle: Roth IRA contributions are subject to income limitations.

For 2026, married couples filing jointly are subject to the following Roth IRA modified adjusted gross income, or MAGI, limits:

As long as the couple meets the applicable income and compensation requirements, the fact that one spouse does not work does not automatically prevent that spouse from funding a Roth IRA.

Example: Scott and Tina

Assume Scott and Tina are married and file their tax return jointly. Scott earns $150,000 per year, while Tina does not currently work. Both are under age 50.

Because their income is below the 2026 Roth IRA income phaseout range and Scott has sufficient compensation, Scott could contribute $7,500 to his Roth IRA, and the couple could also contribute $7,500 to Tina's Roth IRA under the spousal IRA rules.

Their total Roth IRA contributions for the year would be $15,000.

This is an important planning opportunity. Without the spousal IRA rules, a couple might incorrectly assume that Tina has to wait until she returns to work before she can begin saving in an IRA again. Instead, she can potentially continue accumulating retirement assets in an account in her own name.

Over a period of many years, those additional contributions and the investment growth on those contributions can become significant.

The Couple Must Have Enough Compensation

The Roth IRA income limit is not the only number that matters. The couple also needs enough eligible compensation to support their combined IRA contributions.

For example, assume a married couple under age 50 has only $10,000 of eligible compensation for the year. They generally cannot contribute $7,500 to one spouse's IRA and another $7,500 to the other spouse's IRA simply because the individual IRA limit is $7,500. Their available compensation is not sufficient to support $15,000 of combined contributions.

This distinction can become important when a spouse works only part of the year, retires during the year, or has income that does not qualify as compensation for IRA purposes.

Investment income, interest, dividends, pension income, and many other forms of income are not treated the same as wages or self-employment earnings for purposes of determining IRA contribution eligibility. Before making a spousal IRA contribution, it is important to verify that the household has sufficient qualifying compensation.

Traditional Spousal IRA Contributions Are More Complicated

Traditional IRA contributions require another layer of analysis.

The first question is whether the couple is eligible to make the IRA contribution. The second—and separate—question is whether the contribution is deductible for income tax purposes.

These two questions are frequently confused.

A married couple may have enough compensation to make traditional IRA contributions for both spouses but still discover that some or all of the contributions are not deductible because of their income and participation in an employer-sponsored retirement plan.

For purposes of determining the traditional IRA deduction, you need to know whether each spouse is covered by a retirement plan at work.

2026 Traditional IRA Deduction Limits When the Contributor Is Covered by 401(k) or 403(b)

Assume a married couple files jointly and the spouse making the traditional IRA contribution is covered by an employer-sponsored retirement plan, such as a 401(k) or 403(b).

For 2026, the traditional IRA deduction phaseout for a married couple filing jointly when the IRA contributor is covered by a workplace retirement plan is:

Now consider the spouse who is not covered by a retirement plan at work.  If that spouse is married to someone who is covered by a workplace retirement plan, a different—and much higher—income phaseout applies.

2026 Traditional IRA Deduction Limits for the Spouse Who Is Not Covered by 401(k) or 403(b)

For a married couple filing jointly, when the IRA contributor is not covered by a workplace retirement plan but their spouse is, the 2026 deduction limits are:

The important point is that each spouse's workplace retirement plan coverage matters separately.

A couple should not simply look at their household income and assume that the same traditional IRA deduction limit applies to both spouses. One spouse could potentially be prohibited from deducting a traditional IRA contribution while the other spouse remains eligible for a full deduction.

The IRS specifically provides the higher $242,000–$252,000 phaseout range for 2026 when the IRA contributor is not covered by a workplace plan but is married to someone who is.

Example: One Spouse Is Covered by a 401(k)

Assume Scott and Tina file jointly and have modified AGI of $160,000. Scott works and participates in his employer's 401(k), while Tina does not work and is not covered by an employer-sponsored retirement plan.

Scott may have enough earned income to support IRA contributions for both himself and Tina. However, that does not mean their traditional IRA contributions receive identical tax treatment.

Because Scott is covered by a workplace retirement plan and their modified AGI exceeds $149,000, Scott would generally not be entitled to a traditional IRA deduction under the 2026 limits.

Tina is treated differently.

She is not covered by a workplace retirement plan. Because she is married to someone who is covered, her traditional IRA deduction is instead subject to the $242,000–$252,000 phaseout range. At $160,000 of modified AGI, she could potentially make a traditional IRA contribution and receive a full deduction, assuming the other requirements are satisfied.

Same household. Same income. Two very different IRA deduction results.

What If Neither Spouse Is Covered by a Retirement Plan at Work?

This is another important distinction.

If neither spouse is covered by a retirement plan at work, the income-based traditional IRA deduction phaseouts discussed above generally do not apply. Assuming the couple otherwise qualifies, their traditional IRA contributions can generally be deductible regardless of their income.

This is why it is important not to automatically associate a high income with an inability to deduct a traditional IRA contribution. Whether the taxpayer or their spouse is covered by a workplace retirement plan is a critical part of the analysis.

Making the Contribution and Deducting the Contribution Are Two Different Tests

This concept is worth emphasizing because it is the source of many IRA mistakes.

When evaluating a traditional IRA contribution, think of the process as two separate tests.

Test #1: Can you contribute?

The couple needs to satisfy the rules for making an IRA contribution, including having sufficient qualifying compensation and, for a spousal IRA contribution, generally filing a joint return.

Test #2: Can you deduct it?

Once you establish that the contribution can be made, you then determine whether it is fully deductible, partially deductible, or nondeductible. This calculation depends in part on modified AGI and whether the individual making the contribution—or that individual's spouse—is covered by a workplace retirement plan.

Failing the deduction test does not necessarily mean that the taxpayer cannot contribute to a traditional IRA. It may simply mean the contribution is nondeductible.  That distinction leads us to another potential strategy: the backdoor Roth IRA.

Spousal IRA Contributions and the Backdoor Roth IRA

What happens when a married couple earns too much to contribute directly to Roth IRAs and also earns too much to deduct their traditional IRA contributions?

This is where the backdoor Roth IRA strategy may become relevant.

For 2026, married couples filing jointly begin losing their ability to contribute directly to Roth IRAs when modified AGI reaches $242,000, and direct contributions are eliminated at $252,000. However, Roth conversions do not have the same income restriction.

As a result, an individual may be able to:

1. Make a nondeductible contribution to a traditional IRA.

2. Convert the traditional IRA to a Roth IRA.

3. Properly report the nondeductible contribution and Roth conversion on their tax return.

However, there is an important trap: the pro-rata rule.

Watch Out for the Pro-Rata Rule

A backdoor Roth IRA is not automatically tax-free simply because the original traditional IRA contribution was nondeductible.

If an individual already has pre-tax money in traditional IRAs, SEP IRAs, or SIMPLE IRAs, the IRS generally looks at the individual's aggregate applicable IRA balances when determining the taxable and nontaxable portions of a Roth conversion. You generally cannot isolate only the after-tax dollars and convert those dollars while leaving all of the pre-tax IRA money untouched.

For married couples, there is an especially important distinction: the pro-rata calculation is generally determined separately for each spouse.

For example, assume Scott has a $300,000 rollover traditional IRA containing pre-tax money, while Tina has no traditional, SEP, or SIMPLE IRA balances. Scott's existing IRA could create a significant pro-rata issue for his own backdoor Roth strategy. It does not automatically contaminate Tina's backdoor Roth transaction simply because they are married and file jointly.

Each spouse owns their IRA individually.

That can create valuable planning opportunities, but it also makes careful tax reporting extremely important. Nondeductible traditional IRA contributions are generally reported on IRS Form 8606, which tracks the individual's after-tax basis in traditional IRAs.

Common Spousal IRA Contribution Mistakes

Spousal IRA contributions can be straightforward when the rules are followed, but several mistakes can create unwanted tax consequences.

One common mistake is assuming that a non-working spouse cannot contribute at all. Another is making the maximum contribution for both spouses without first confirming that the couple has enough qualifying compensation to support the contributions. Couples can also mistakenly make direct Roth IRA contributions before realizing that their year-end modified AGI exceeds the applicable Roth IRA income limit.

Traditional IRAs introduce additional opportunities for mistakes. A couple might assume a contribution is deductible without checking workplace retirement plan coverage, or they may make a nondeductible contribution but fail to properly report the basis on Form 8606. With a backdoor Roth IRA, overlooking existing pre-tax traditional, SEP, or SIMPLE IRA balances can result in a larger taxable conversion than anticipated.

If too much is contributed to an IRA, an excess contribution may need to be corrected. If it is not handled properly and within the applicable deadlines, additional taxes or penalties may apply.  This is one reason year-end IRA planning should involve more than simply asking, “How much can we contribute?”

The better questions are: How much can we contribute, where should each spouse contribute it, is the contribution deductible, are we eligible for a Roth IRA, and will any existing IRA balances affect a Roth conversion?

Why Spousal IRA Contributions Can Be So Valuable

It is easy to overlook retirement savings for a spouse who temporarily or permanently leaves the workforce.   But retirement is usually a household goal.

If a married couple can afford to save $15,000 instead of $7,500 in 2026, using the spousal IRA rules could substantially increase the amount accumulated for retirement over time. Just as importantly, the non-working spouse is building retirement assets in an account legally owned in their own name.

Consider a spouse who remains out of the workforce for ten years while raising children. If the family ignores the spousal IRA rules, that could potentially represent ten years of missed IRA contributions and investment growth.  The spousal IRA rules can help close that retirement savings gap.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions About Spousal IRA Contributions

1. Can I contribute to an IRA if I do not work but my spouse does?
   Potentially, yes. If you are married, file a joint federal income tax return, and your spouse has sufficient qualifying compensation, the spousal IRA rules may allow a contribution to an IRA in your name even if you have little or no compensation of your own.
2. What is the spousal IRA contribution limit for 2026?
   The 2026 IRA contribution limit is $7,500 per individual. If you are age 50 or older, the limit is $8,600 because of the additional $1,100 catch-up contribution. The limit applies to each individual's traditional and Roth IRA contributions combined.
3. Can a non-working spouse contribute to a Roth IRA in 2026?
   Yes, assuming the couple satisfies the spousal IRA requirements and the Roth IRA income limitations. For married couples filing jointly in 2026, the Roth IRA contribution phaseout occurs between $242,000 and $252,000 of modified AGI. At $252,000 or more, a direct Roth IRA contribution is generally not permitted.
4. Do spousal IRA contributions have to go into a special spousal IRA account?
   No. A "spousal IRA" is not a separate type of retirement account. The contribution is made to a traditional IRA or Roth IRA owned by the spouse. IRAs are individual accounts, so each spouse needs their own IRA.
5. Do married couples have to file jointly to make a spousal IRA contribution?
   Generally, yes. The special spousal IRA contribution rules allowing one spouse's compensation to support the other spouse's IRA contribution apply to married couples filing a joint return. Filing status is therefore an important consideration before assuming a non-working spouse is eligible to contribute.
6. Is a spousal traditional IRA contribution always tax-deductible?
   No. Eligibility to contribute and eligibility to claim a deduction are separate issues. If either spouse participates in an employer-sponsored retirement plan, modified AGI can limit or eliminate the traditional IRA deduction. In 2026, the phaseout is $129,000-$149,000 for a married-filing-jointly IRA contributor who is covered at work, while a contributor who is not covered but whose spouse is covered has a $242,000-$252,000 phaseout range.
7. Can I make a traditional IRA contribution if my income is too high to deduct it?
   Potentially, yes. Income can prevent a traditional IRA contribution from being deductible without necessarily preventing the contribution itself. In that situation, the contribution may be treated as nondeductible and should generally be reported appropriately on Form 8606.
8. Can both spouses do a backdoor Roth IRA?
   Potentially. If direct Roth IRA contributions are unavailable because of income, each spouse may be able to make a nondeductible traditional IRA contribution and subsequently convert it to a Roth IRA. However, the tax consequences should be evaluated separately for each spouse, particularly if either spouse owns pre-tax traditional, SEP, or SIMPLE IRA assets.
9. Does my spouse's traditional IRA create a pro-rata problem for my backdoor Roth IRA?
   Generally, the pro-rata calculation is applied at the individual level rather than combining both spouses' IRA balances. If one spouse has a large pre-tax traditional IRA and the other has no pre-tax IRA assets, their backdoor Roth tax consequences may therefore be very different even though they file a joint tax return.
10. What happens if we make an IRA contribution and later discover we were not eligible?
    An ineligible contribution may be considered an excess IRA contribution and should not simply be ignored. Depending on the circumstances and timing, there may be methods available to correct the contribution, but failure to correct an excess contribution can result in additional taxes or penalties. If your income is close to a Roth IRA phaseout limit or your compensation is uncertain, consider reviewing your eligibility with a tax professional before the applicable correction deadlines.

How Does an ESOP Plan Work?

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

If you work for an employee-owned company, you may have heard the term ESOP when discussing your retirement benefits. But how does an ESOP plan actually work, how do you know what your company stock is worth, and what happens to your ESOP when you retire or leave the company?

An Employee Stock Ownership Plan (ESOP) is a qualified retirement plan designed to invest primarily in the stock of the company sponsoring the plan. Instead of simply receiving a traditional employer 401(k) contribution, employees participating in an ESOP can accumulate an ownership interest in the company where they work.

ESOPs are frequently associated with privately held businesses. Unlike shares of Apple, Microsoft, or other publicly traded companies, shares of a privately held ESOP company typically do not trade every day on a stock exchange. This creates some important differences when it comes to determining what your shares are worth and eventually turning those shares into cash.

For employees, an ESOP can potentially become a very valuable retirement benefit. But it can also create some unique financial planning questions.

In this article, we will explain:

• How an ESOP works

• Why business owners establish ESOPs

• How employees receive company stock

• Why an ESOP can potentially create significant wealth for long-term employees

• How the value of privately held ESOP shares is determined

• How an ESOP may work alongside a 401(k) plan

• How the age 55 ESOP diversification rule works

• What happens to your ESOP when you leave or retire

• The tax consequences of taking an ESOP distribution versus completing a rollover

‍What Is an ESOP?

ESOP stands for Employee Stock Ownership Plan.

At its core, an ESOP is a retirement plan that gives employees an ownership interest in their employer. The plan holds company stock for the benefit of eligible employees, with shares or their value allocated among participants according to the terms of the plan.  One of the most important things for employees to understand is that the ESOP owns the shares for your benefit through the retirement plan. You aren't normally receiving stock certificates that you can take home and sell whenever you want.

For example, assume you work for ABC Manufacturing, a privately held company with an ESOP.

Over the course of your employment, company stock may be allocated to your ESOP account. As you continue working for the company and satisfy its vesting requirements, more of that account becomes yours.  If ABC Manufacturing grows substantially over the next 20 years, the value of those shares could potentially increase significantly.  That's where an ESOP can become an extremely powerful retirement benefit.

Why Does a Company Sponsor an ESOP?

Why would the owners of a successful privately held company give employees an opportunity to become owners?  There can be several reasons.

Succession Planning

Imagine that a business owner has spent 30 or 40 years building a successful company and is ready to retire.  What happens to the business?

One option is to sell it to a competitor or private equity firm. Another is to pass it to family members. But those options aren't always attractive or available.

An ESOP can provide another potential exit strategy by allowing the owner to sell some or all of the company to an employee stock ownership plan.  Instead of selling the company to an outside buyer, ownership can gradually transition to the employees who helped build the business.

Keeping the Company Independent

Owners may also establish an ESOP because they want the company to remain independent.  Selling to an outside buyer could result in major changes to the company's culture, workforce, management team, or location.  An ESOP can potentially provide a path for transitioning ownership while preserving the company's identity and operations.

Rewarding Employees

An ESOP also gives employees the opportunity to participate financially in the company's success.  If employees help increase sales, improve profitability, control costs, and grow the company, those improvements may ultimately increase the value of the business and, consequently, the value of the ESOP shares.  This can create a different relationship between the employee and the company.  You're not just working for the company.  You may also be an owner of the company.

Recruiting and Retaining Employees

A strong ESOP benefit can also be a valuable recruiting and retention tool.  An employee who has accumulated a substantial vested ESOP balance may have another reason to build a long-term career with the company.

How Can an ESOP Create Wealth for Employees?

For employees, this is where ESOPs get exciting.  A successful ESOP can potentially create life-changing retirement wealth, particularly for employees who spend many years working for a company whose value grows substantially.

We have a great example right here in New York's Capital Region: Stewart's Shops.  Stewart's is a privately held, family- and employee-owned convenience store company. Employees own more than 40% of the company through its ESOP, which Stewart's refers to as "Profit Sharing." The ESOP is 100% employer funded. 

The results for some longtime employees have been extraordinary.  In April 2026, Stewart's reported that more than 200 participants in its ESOP had become millionaires. The company also reported that more than 3,400 partners were participating in the plan and that its 2026 company contribution was equal to 20% of eligible employees' annual salary.

Think about what that means.  Someone could start working in a retail position, continue working for the company for many years, and gradually accumulate company stock through the ESOP. If the company continues to grow and the value of those shares appreciates, that ESOP balance can potentially become a significant retirement asset.

There is obviously no guarantee that every ESOP participant will become a millionaire. Company stock can increase or decrease in value, and benefits depend on the particular plan, years of service, compensation, vesting, company performance, and other factors.  But Stewart's provides a real-world example of how employee ownership can potentially turn an ordinary job into an extraordinary wealth-building opportunity.

How Do You Know What Your ESOP Shares Are Worth?

This is one of the biggest differences between an ESOP at a privately held company and owning publicly traded stock.  If you own 100 shares of a publicly traded company, you can pull out your phone and see approximately what those shares are worth right now.  Private company stock is different.  There isn't necessarily a buyer and seller agreeing on a price every second of the trading day.

Instead, ESOP shares of a closely held company generally need to be valued through a formal valuation process to determine their fair market value.  For many ESOP participants, this means they may receive an updated account statement and share valuation once per year, rather than watching the price change every day.

Below is a hypothetical example:

In this hypothetical example, the employee's account is growing in two ways:

1. Additional shares are being allocated to the employee.

2. The value of the existing shares is increasing.

However, the reverse is also possible. If the company experiences financial difficulties and its valuation declines, the value of the employee's ESOP account can decline as well.

How Can an ESOP Work With a 401(k)?

Another area that frequently creates confusion is the relationship between an ESOP and a 401(k).  They are not necessarily the same thing.  A company can potentially maintain an ESOP and a separate 401(k) plan. The exact arrangement is determined by the employer's plan documents.

The employee are allowed to contribute their own pay each pay period to the 401(K) plan but the employer contribution may be made to the ESOP plan in the form of additional shares of the employer’s stock.

The Risk of Having Too Much Money in Company Stock

There is an important tradeoff to ESOP ownership.  If your company performs extremely well, owning a large amount of company stock can create substantial wealth. But it also creates concentration risk.

Imagine that you're 58 years old and have:

• $100,000 in your 401(k)

• $50,000 in an IRA

• $1,200,000 in your company's ESOP

Most of your retirement wealth is tied to one company.  But there's another issue.   Your paycheck also comes from that same company.   If the company experiences financial trouble, you could potentially face two problems simultaneously: Your job may be at risk, and your largest retirement asset may decline in value.

That is one of the reasons diversification becomes an important financial planning conversation for longtime ESOP participants.

How Does the Age 55 ESOP Diversification Rule Work?

Federal tax law provides certain longtime ESOP participants with an opportunity to diversify a portion of their company stock.  People frequently refer to this as the age 55 diversification rule, but age isn't the only requirement.

Generally, a qualified participant must:

• Be at least age 55, and

• Have completed at least 10 years of participation in the ESOP

Under the applicable rules, participants generally must be allowed to diversify up to 25% of qualifying employer securities during the first five years of the election period. During the final election year, that percentage generally increases to 50%, subject to the detailed rules governing the calculation.

For example, if an employee is age 55 and worked for the company for 20 years, they would be allowed to distribute or rollover 25% of their balance in the ESOP plan in the year that they turn age 55. In the 6th year, when the employee turns age 60, the amount eligible for diversification increases from 25% to 50% of the vested account balance in the ESOP. 

Why does this rule exist?  Because someone approaching retirement may have accumulated a very large percentage of their retirement assets in one privately held company.  Diversification gives that employee an opportunity to begin reducing that concentration.

Should You Roll Your ESOP Diversification Money Into an IRA?

If your plan permits an eligible diversification distribution, one potential strategy may be a direct rollover to a Traditional IRA. Depending on the plan structure, another possibility may be moving the diversified amount into investment alternatives available through another qualified plan, such as the employer's 401(k). Why might someone do this?

Suppose you have $800,000 in company stock and become eligible to diversify $200,000.

Instead of taking $200,000 in cash and potentially creating a current tax liability, an eligible amount might be directly rolled into a Traditional IRA.  Inside the IRA, you could potentially invest across:

• U.S. stocks

• International stocks

• Bonds

• Mutual funds

• ETFs

• Other investments

You have now taken part of a concentrated position and spread it across many different investments.  A properly completed direct rollover of an eligible retirement-plan distribution to a Traditional IRA generally does not create current income tax on the amount rolled over.

However, employees should be careful about automatically moving ESOP assets into an IRA without evaluating the alternatives. Investment choices, fees, creditor protections, withdrawal rules, the age-55 penalty exception, and other factors can differ between an employer plan and an IRA.

What Happens to Your ESOP When You Leave the Company?

This is another common question.  You generally don't lose your vested ESOP balance simply because you retire or change employers.  However, leaving the company does not necessarily mean you receive a check immediately. 

Your distribution timing and available options are controlled by the ESOP's plan documents and applicable federal rules. Depending on the plan, benefits may ultimately be distributed as a lump sum, installments, or through another permitted method.  This makes the company's Summary Plan Description extremely important.

Before retiring or changing jobs, find out:

• How much of your account is vested?

• When are you eligible to begin distributions?

• Are payments made immediately or delayed?

• Is your benefit paid as a lump sum or installments?

• Can you complete a direct rollover?

• What happens to the company shares when you leave?

• Are there special provisions for retirement, disability, or death?

Don't assume your ESOP works exactly like another company's ESOP.

What Are Your ESOP Withdrawal Options?

Once you become eligible for a distribution, there are several potential paths. The availability of each option depends on your plan.

Option 1: Take the Money in Cash

You may be able to receive some or all of your vested ESOP benefit as a cash distribution. The downside is taxes.  Because an ESOP is generally a tax-qualified retirement plan, previously untaxed amounts distributed to you are generally subject to ordinary income tax unless they're rolled over or another special tax treatment applies.

If you're under age 59½, the taxable amount may also be subject to a 10% additional early-distribution tax unless an exception applies. 

For example, assume a 50-year-old leaves an ESOP company and receives a taxable $200,000 cash distribution without rolling it over.

That $200,000 could be included in taxable income, and the employee could potentially face the additional 10% early-distribution tax unless an exception applies.  That can create a very expensive tax year.

Option 2: Direct Rollover to a Traditional IRA

Another common option for an eligible distribution is a direct rollover to a Traditional IRA. 

If $200,000 moves directly from the ESOP to a Traditional IRA, there is generally no current federal income tax on that rollover.  The money remains tax-deferred.  Taxes are generally paid later when taxable distributions are taken from the Traditional IRA.  This can also provide an opportunity to diversify away from company stock and build an investment portfolio appropriate for your retirement goals.

Option 3: Roll the Money Into Another Employer Plan

If your new employer's qualified retirement plan accepts incoming rollovers, you may be able to roll an eligible ESOP distribution into that plan.  This can be attractive for someone who wants to consolidate retirement accounts.  Again, a qualifying direct rollover generally avoids current taxation.

Option 4: Take Some Cash and Roll Over the Rest

Depending on the distribution and plan rules, you may be able to roll over part of an eligible distribution and receive part in cash.

For example:

ESOP distribution: $500,000

Direct rollover to IRA: $450,000

Cash distribution: $50,000

The $450,000 direct rollover would generally continue to be tax-deferred, while the taxable $50,000 cash portion would generally be included in income and could potentially be subject to the 10% additional early-distribution tax if applicable.

Be Careful With the Age-55 Rule When Rolling an ESOP Into an IRA

There is an important tax-planning issue that is easy to overlook.  Qualified employer retirement plans have a special exception to the 10% early-distribution tax for certain employees who separate from service during or after the calendar year in which they reach age 55.  Traditional IRAs do not have that same separation-from-service-at-55 exception.

Consider someone who retires from an ESOP company at age 56 and needs $40,000 per year from the account until reaching age 59½.  If the money remains eligible for distributions under the employer's qualified plan, the age-55 separation exception could potentially allow those qualifying distributions without the additional 10% early-distribution tax.  If that employee first rolls the entire balance into a Traditional IRA, however, the IRA generally uses the age 59½ standard unless another IRA exception applies.

That doesn't mean you should never roll an ESOP into an IRA.  It means the timing of the rollover matters.  For someone retiring between ages 55 and 59½, this should be reviewed carefully before moving the entire account.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions About ESOP Plans

1. What is an ESOP and how does it work?
   An ESOP, or Employee Stock Ownership Plan, is a qualified retirement plan designed to invest primarily in the stock of the sponsoring employer. Eligible employees can accumulate an ownership interest in their company through shares or value allocated to their ESOP accounts. Employees generally receive the value of their vested benefits when they become eligible for distributions under the plan.
2. Do employees have to pay for ESOP shares?
   Frequently, employees do not directly purchase the ESOP shares with money from their paychecks. The company generally funds the ESOP, although the exact structure varies by employer. Employees should review their Summary Plan Description to understand how their particular ESOP is funded and how shares are allocated.
3. How do I know how much my ESOP is worth?
   If your employer is privately held, its stock generally doesn't have a publicly quoted daily market price. A formal valuation process is used to determine fair market value. Participants generally receive account statements showing their shares or account value, vested balance, and changes in value.
4. Can ESOP stock lose value?
   Yes. An ESOP is not guaranteed to increase in value. If the company's financial condition, profitability, growth outlook, industry, or other valuation factors deteriorate, the company's appraised share value may decline. This is one reason diversification can become important for employees with large ESOP balances.
5. What happens to my ESOP if I quit my job?
   Your vested ESOP benefit generally remains yours when you leave the company, but you may not necessarily receive the money immediately. The timing and form of your distribution depend on the terms of the ESOP and applicable law. Any unvested portion may potentially be forfeited according to the plan's vesting rules.
6. Can I roll my ESOP into an IRA?
   Eligible ESOP distributions can generally be rolled directly into a Traditional IRA, allowing the retirement assets to continue growing tax-deferred without creating current income tax on the amount properly rolled over. A rollover can also provide an opportunity to diversify away from concentrated employer stock.
7. At what age can I diversify my ESOP?
   For the special statutory ESOP diversification rules, a qualified participant generally must be at least 55 years old and have at least 10 years of participation in the plan. The diversification election period then generally extends for six plan years, with applicable diversification percentages governed by federal law and the plan's provisions.
8. Do I pay taxes when I withdraw money from an ESOP?
   Generally, previously untaxed ESOP distributions that are paid to you rather than rolled over are subject to ordinary income tax. If you receive a taxable distribution before age 59 1/2, a 10% additional early-distribution tax may also apply unless you qualify for an exception. A properly completed direct rollover to a Traditional IRA or eligible retirement plan generally defers the income tax.
9. Is an ESOP better than a 401(k)?
   Neither is automatically better. They serve different purposes and can complement each other. A 401(k) typically allows employees to make payroll contributions and invest across multiple investment options. An ESOP primarily invests in employer stock and is often funded by the employer. Having access to both can potentially provide the benefits of company ownership along with a more diversified retirement account.
10. Can an ESOP make you a millionaire?
    It can, but there are no guarantees. Employees who work for a successful ESOP company for many years may accumulate substantial retirement wealth through employer contributions, additional share allocations, and appreciation in company value. The outcome for any individual employee depends on the company's performance, plan provisions, compensation, years of participation, vesting, and other factors.

Common Backdoor Roth IRA Mistakes

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

The Backdoor Roth IRA strategy has become increasingly common among higher-income individuals who earn too much to make a direct contribution to a Roth IRA. The concept sounds relatively simple: make a nondeductible contribution to a Traditional IRA and then convert that money to a Roth IRA. Because there is no income limitation on Roth IRA conversions, this strategy can potentially allow higher-income taxpayers to continue building Roth assets even when their income prevents them from contributing directly to a Roth IRA.

However, simple does not always mean easy. We are seeing a growing number of mistakes in the execution of Backdoor Roth IRA strategies, and some of those mistakes can create unexpected taxable income, additional tax filings, and other complications.

In this article, we will cover some of the most common Backdoor Roth IRA mistakes, including:

• How the Backdoor Roth IRA strategy works for high-income earners

• How the Backdoor Roth IRA aggregation rule can create unexpected taxes

• Why Traditional IRA, Rollover IRA, SEP IRA, and SIMPLE IRA balances can affect a Roth conversion

• What investors should know about the Backdoor Roth IRA step-transaction rule

• Why a Roth 401(k) does not prevent you from completing a Backdoor Roth IRA

• Why IRS Form 8606 is critical when making nondeductible IRA contributions

• How investment gains before a Roth conversion can create taxable income

• How to avoid common Backdoor Roth IRA tax mistakes before executing the strategy

Understanding these rules before you move any money can make a significant difference. A Backdoor Roth IRA can be a powerful retirement planning strategy, but the tax treatment depends heavily on how the transaction is executed.

What Is a Backdoor Roth IRA?

A Backdoor Roth IRA is not a special type of retirement account. It is simply a strategy that generally involves making a nondeductible contribution to a Traditional IRA and then converting those assets to a Roth IRA. The strategy is primarily used by individuals whose income is too high to make a direct Roth IRA contribution.

For 2026, the Roth IRA contribution phaseout range is $153,000 to $168,000 for single filers and heads of household and $242,000 to $252,000 for married couples filing jointly. The 2026 IRA contribution limit is $7,500 for individuals under age 50 and $8,600 for individuals age 50 or older. While there are income limits that determine whether you can contribute directly to a Roth IRA, there is no similar income limitation that prevents an individual from converting Traditional IRA assets to a Roth IRA.

That difference is what makes the Backdoor Roth IRA strategy possible. Instead of contributing directly to a Roth IRA, the individual contributes after-tax money to a Traditional IRA and later converts that money to a Roth IRA. If the strategy is properly executed and the individual has no other pre-tax IRA money, the tax consequences of the conversion may be minimal or potentially zero.

Mistake #1: Ignoring the IRA Aggregation and Pro-Rata Rule

The IRA aggregation rule, also commonly called the pro-rata rule, is probably the most important Backdoor Roth IRA mistake to understand. Many investors assume that if they open a brand-new Traditional IRA, contribute after-tax money to that account, and convert only that account to a Roth IRA, the conversion will automatically be tax-free. Unfortunately, that is not always how the tax calculation works.

For purposes of determining how much of an IRA conversion is taxable versus nontaxable, the IRS generally does not allow you to isolate your nondeductible contribution from your other Traditional IRA money. Instead, applicable Traditional IRA balances are aggregated together when determining what percentage of the conversion represents pre-tax money and what percentage represents after-tax basis. This generally includes Traditional IRAs, Rollover IRAs, Traditional SEP IRAs, and Traditional SIMPLE IRAs.

A Simple $100,000 Backdoor Roth IRA Example

Assume John already has a Traditional IRA worth $95,000, and all $95,000 is pre-tax money. John then opens a separate Traditional IRA, contributes $5,000 to it, and does not take a tax deduction for that contribution. A few days later, he converts the entire $5,000 from the new Traditional IRA into his Roth IRA.

John may assume that because he contributed $5,000 of after-tax money and converted that same $5,000, the conversion should be tax-free. However, when the aggregation rule is applied, John effectively has $100,000 of total IRA money for purposes of this simplified example: $95,000 of pre-tax money and $5,000 of after-tax basis.

In this example, only 5% of John's IRA money represents after-tax basis, while 95% represents pre-tax money. Therefore, approximately 95% of the $5,000 Roth conversion would be taxable, or roughly $4,750. Only about $250 of the conversion would represent a nontaxable recovery of basis.

This is where many individuals get surprised. They believed they completed a tax-free $5,000 conversion, but because of the other pre-tax IRA assets, most of the conversion becomes taxable.

Opening a Separate IRA Does Not Avoid the Aggregation Rule

Another common misconception is that the aggregation rule can be avoided simply by opening a separate IRA at another financial institution. For example, someone may have a $500,000 Rollover IRA at one investment company and decide to open a brand-new Traditional IRA somewhere else specifically for the Backdoor Roth IRA strategy. Unfortunately, keeping the accounts physically separate does not necessarily separate them for tax purposes.

The same issue applies if one account is labeled a "Backdoor Roth IRA account." The IRS is generally looking at the applicable IRA balances collectively when determining the taxable portion of a distribution or conversion. Before executing a Backdoor Roth IRA, it is important to identify all existing Traditional, Rollover, SEP, and SIMPLE IRA balances that could potentially affect the calculation.

What About Money in a 401(k)?

A 401(k) is treated differently from an IRA for purposes of the Backdoor Roth aggregation calculation. Simply having a large balance in a current employer's 401(k) does not by itself create the same pro-rata problem. For example, an individual could have $800,000 in a pre-tax 401(k), no Traditional IRA balances, and still potentially execute a relatively clean Backdoor Roth IRA strategy.

This distinction can sometimes create planning opportunities. In certain situations, an employer's 401(k) may accept a rollover of pre-tax IRA assets, which could potentially move those assets out of the IRA aggregation calculation before year-end. However, that decision should not be made solely for tax convenience because investment choices, fees, creditor protections, withdrawal provisions, and other plan features should also be considered.

Mistake #2: Misunderstanding the Step-Transaction Concern

The second major issue surrounding Backdoor Roth IRAs involves what is commonly called the step-transaction doctrine. Very generally, this is a tax principle under which a series of formally separate transactions may, under certain circumstances, be viewed together based on their substance. Historically, this created concern that making a nondeductible Traditional IRA contribution and immediately converting it to a Roth IRA could potentially be viewed as an indirect way of making a Roth contribution that the individual was not otherwise eligible to make directly.

That concern has led to a lot of informal advice over the years suggesting that taxpayers should wait some period of time between making the nondeductible IRA contribution and completing the Roth conversion. You may hear recommendations to wait 30 days, 60 days, or 90 days. The important point is that there is no specific IRS safe harbor stating that waiting a particular number of days makes the strategy automatically protected from the step-transaction doctrine.

Current IRS guidance recognizes both nondeductible Traditional IRA contributions and Roth IRA conversions, and Roth conversions are not subject to the same income limits that apply to direct Roth IRA contributions. Therefore, we would be careful about presenting any specific waiting period as an IRS requirement. If you have concerns about how the step-transaction doctrine could apply to your specific situation, that is an issue to discuss with your CPA or tax attorney.

Waiting Can Create Another Backdoor Roth IRA Issue

There is another reason why blindly waiting 60 or 90 days is not necessarily the perfect solution. If the money inside the Traditional IRA is invested during that waiting period, the account could increase in value before the Roth conversion occurs. Those investment gains may create taxable income when the money is eventually converted.

For example, assume you make a $7,500 nondeductible contribution to a Traditional IRA and invest the money immediately. Over the next 90 days, the account grows to $7,900. If you then convert the entire $7,900 to the Roth IRA and you have no other IRA balances or basis, you generally have only $7,500 of after-tax basis, meaning the additional $400 of investment growth may be taxable.

This does not necessarily make the Backdoor Roth IRA strategy unsuccessful. Paying tax on a few hundred dollars of gains may be relatively minor. However, it is another reason why the timing of the contribution, investment, and conversion should be intentional rather than based on an assumed 60- or 90-day IRS requirement.

Mistake #3: Thinking a Roth 401(k) Prevents a Backdoor Roth IRA

Another common misconception is that someone who is already contributing to a Roth 401(k) cannot also execute a Backdoor Roth IRA strategy. That is not the case. Roth 401(k) contributions and IRA contributions are governed by separate annual contribution limits.

For example, assume a 45-year-old high-income employee is maxing out their Roth 401(k). For 2026, that individual could potentially contribute $24,500 to the Roth 401(k) and separately make a $7,500 nondeductible contribution to a Traditional IRA, followed by a Roth conversion, assuming the strategy is otherwise appropriate. The fact that both strategies involve Roth accounts does not cause the limits to overlap.

This can be especially valuable for higher-income households that are trying to accumulate more tax-free retirement assets. Someone who is already maximizing Roth 401(k) contributions may still have the opportunity to add additional money to a Roth IRA through the Backdoor Roth IRA strategy.

Mistake #4: Forgetting to File Form 8606

Form 8606 is one of the most important pieces of paperwork associated with a Backdoor Roth IRA. When you make a nondeductible contribution to a Traditional IRA, you need a tax record establishing that you did not take a deduction for that contribution and that the money represents after-tax basis. Without proper documentation, it may become much more difficult to prove years later how much of your IRA has already been taxed.

The IRS uses Form 8606 to report nondeductible Traditional IRA contributions, certain IRA distributions when basis exists, and conversions from Traditional IRAs to Roth IRAs. In practical terms, Form 8606 helps prevent you from potentially paying tax twice on the same money. If you contribute $7,500 to a Traditional IRA and do not claim a deduction, you do not want that same $7,500 to be treated as fully taxable when it is later converted or distributed.

This is why properly filing Form 8606 is not simply a minor administrative step. It is part of keeping an accurate tax record of your after-tax IRA basis. Individuals who execute Backdoor Roth IRA strategies year after year should pay close attention to making sure Form 8606 is prepared correctly each year.

Mistake #5: Forgetting About an Old SEP IRA or SIMPLE IRA

One of the easiest mistakes to make is forgetting about an old retirement account from years ago. Someone may currently be a W-2 employee with no obvious Traditional IRA or Rollover IRA and assume that their Backdoor Roth IRA will be straightforward. However, they may have opened a SEP IRA or SIMPLE IRA years earlier when they were self-employed or worked for a different company.

If that account still contains pre-tax money, it may affect the pro-rata calculation. For example, an old $80,000 SEP IRA sitting at another custodian may suddenly become very relevant when determining how much of a current Roth conversion is taxable.

This is why we recommend completing a retirement-account inventory before implementing the strategy. Do not simply ask whether you have a Traditional IRA. Ask whether you have any Traditional, Rollover, SEP, or SIMPLE IRA balances that could impact the calculation.

Mistake #6: Confusing the IRA Contribution Limit With the Roth Conversion Limit

Another common misunderstanding is assuming that if the annual IRA contribution limit is $7,500, then the maximum Roth conversion is also $7,500. Those are two completely different rules. The annual contribution limit determines how much new money can be contributed to an IRA, while a Roth conversion involves moving existing Traditional IRA assets into a Roth IRA.

For example, someone could make a $7,500 nondeductible Traditional IRA contribution and separately decide to convert $100,000 of existing pre-tax IRA assets to a Roth IRA. There is no general $7,500 annual limit on Roth conversions. However, converting pre-tax retirement assets to a Roth IRA generally creates taxable income, which means large conversions require careful tax planning.

This distinction is important because the Backdoor Roth IRA strategy involves both a contribution and a conversion. The contribution limit applies to the first step. The tax consequences of the conversion depend on the character of the money being converted and the individual's overall IRA situation.

A Backdoor Roth IRA Pre-Flight Checklist

Before executing a Backdoor Roth IRA, it can help to work through a short checklist. A few minutes spent reviewing your accounts before making the contribution or conversion can potentially prevent an unpleasant surprise when your tax return is prepared.

• Am I above the income limit for making a direct Roth IRA contribution?

• How much am I eligible to contribute to an IRA this year?

• Do I have any Traditional IRAs or Rollover IRAs?

• Do I have a SEP IRA or SIMPLE IRA?

• Do I have existing nondeductible IRA basis from prior years?

• Have I reviewed the Backdoor Roth IRA pro-rata calculation before converting?

• Could investment gains occur before the Roth conversion?

• Will IRS Form 8606 be properly prepared with my tax return?

• Does my employer's 401(k) accept incoming IRA rollovers?

• Should I review the strategy with my CPA before completing the transaction?

The more complicated your retirement-account history is, the more important this review becomes. A forgotten Rollover IRA or old SEP IRA can materially change the tax result of a Backdoor Roth IRA conversion.

The Backdoor Roth IRA Can Still Be a Powerful Strategy

None of these potential mistakes mean that investors should avoid Backdoor Roth IRAs. For the right individual, the strategy can be an excellent way to accumulate Roth assets when income prevents a direct Roth IRA contribution. Once assets are successfully inside a Roth IRA, they have the potential to grow tax-deferred, and qualified Roth IRA distributions can ultimately be tax-free.

The biggest issue is not necessarily choosing the wrong investment. It is assuming the transaction is simpler than it actually is. Before making the contribution, understand the aggregation rule; before making the conversion, understand what portion may be taxable; and after completing the transaction, make sure the tax reporting is handled properly.

The Backdoor Roth IRA strategy is often described as a simple two-step process: make a nondeductible Traditional IRA contribution and then convert it to a Roth IRA. In reality, several important tax rules sit underneath those two steps. The goal is not simply to get money into the Roth IRA—it is to get the money into the Roth IRA correctly.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions About Backdoor Roth IRAs

1. 1. What is a Backdoor Roth IRA?
   A Backdoor Roth IRA is a strategy commonly used by higher-income individuals who are not eligible to contribute directly to a Roth IRA. The strategy generally involves making a nondeductible contribution to a Traditional IRA and then converting those assets to a Roth IRA. It is not a separate type of retirement account; it is simply a series of transactions using existing IRA rules.
2. 2. Is a Backdoor Roth IRA legal?
   Backdoor Roth IRA strategies use existing rules that allow nondeductible Traditional IRA contributions and Roth IRA conversions. There is no income limit on Roth conversions, even though income limits apply to direct Roth IRA contributions. However, the tax consequences can become complicated when an individual has other pre-tax IRA assets, so proper execution and reporting are important.
3. 3. What is the Backdoor Roth IRA pro-rata rule?
   The Backdoor Roth IRA pro-rata rule determines how much of a Roth conversion is taxable when you have both pre-tax and after-tax money in your applicable IRAs. You generally cannot choose to convert only the after-tax dollars while leaving all of the pre-tax money untouched for tax purposes. Instead, the taxable and nontaxable portions are determined proportionately based on your overall IRA balances and basis.
4. 4. Which IRA accounts are included in the Backdoor Roth IRA aggregation rule?
   Traditional IRAs, Rollover IRAs, Traditional SEP IRAs, and Traditional SIMPLE IRAs generally need to be considered when calculating the taxable portion of an IRA distribution or Roth conversion. Keeping these accounts at different financial institutions does not necessarily allow you to avoid the aggregation rule. This is why identifying all of your IRA balances before executing a Backdoor Roth IRA is so important.
5. 5. Does a 401(k) count toward the Backdoor Roth IRA pro-rata rule?
   Generally, assets held inside a 401(k) are not included in the IRA aggregation calculation simply because they are pre-tax retirement assets. This can be an important distinction for individuals with large 401(k) balances but no pre-tax Traditional, Rollover, SEP, or SIMPLE IRA assets. In some situations, rolling eligible IRA assets into an employer 401(k) that accepts incoming rollovers may also help with future Backdoor Roth IRA planning.
6. 6. How long should I wait between a Traditional IRA contribution and Roth conversion?
   There is no specific IRS rule establishing a required 30-day, 60-day, or 90-day waiting period between a nondeductible Traditional IRA contribution and a Roth conversion. Although the step-transaction doctrine has historically generated discussion around Backdoor Roth IRA timing, no specific waiting period creates an automatic safe harbor. Individuals concerned about how the doctrine may apply to their situation should consult a tax professional.
7. 7. Can I do a Backdoor Roth IRA if I already contribute to a Roth 401(k)?
   Yes. Roth 401(k) contributions and IRA contributions are subject to separate annual contribution limits. An individual may potentially maximize Roth 401(k) salary deferrals and separately make a nondeductible Traditional IRA contribution followed by a Roth conversion, assuming the individual otherwise qualifies and the strategy is appropriate.
8. 8. Do I need to file Form 8606 for a Backdoor Roth IRA?
   Form 8606 is generally an important part of reporting a Backdoor Roth IRA because it tracks nondeductible Traditional IRA contributions and after-tax IRA basis. It is also used in reporting Roth conversions. Properly tracking basis helps prevent after-tax IRA money from potentially being taxed again when it is converted or later distributed.
9. 9. Do I owe taxes on a Backdoor Roth IRA conversion?
   You may owe taxes on a Backdoor Roth IRA conversion depending on your other IRA balances and whether the contribution generated earnings before the conversion. If you have no other pre-tax IRA assets and convert a nondeductible contribution before significant gains occur, the taxable amount may be small or potentially zero. If you have substantial pre-tax Traditional, Rollover, SEP, or SIMPLE IRA balances, however, the pro-rata rule can cause a large portion of the conversion to become taxable.
10. 10. Can I do a Backdoor Roth IRA every year?
    Potentially, yes. Individuals who continue to meet the requirements for making an IRA contribution may be able to repeat the Backdoor Roth IRA strategy in multiple years. However, the pro-rata rule, IRA balances, contribution limits, tax laws, and reporting requirements should be reviewed each year because a strategy that worked cleanly one year may have different tax consequences in a later year.

How Long Does It Take to Build a $1 Million Roth IRA?

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

The Roth IRA may be one of the most powerful retirement savings vehicles available. Why? Because it combines the power of compound investment returns with the potential for tax-free retirement income.

With a Roth IRA, you contribute money that has already been taxed. Once the money is inside the account, your investments can grow without annual taxation on interest, dividends, or capital gains. Even better, qualified withdrawals can be completely tax-free in retirement. Generally, for earnings to be withdrawn tax-free, the Roth IRA must satisfy the five-year requirement and the distribution must occur after age 59½ or meet another qualifying condition.

That combination can make a Roth IRA doubly powerful: your investment returns compound over time, and those compounded returns may ultimately be withdrawn tax-free.

In this article, we will look at:

• How long it could take a 22-year-old to build a $1 million Roth IRA

• How much of that $1 million comes from contributions versus investment growth

• Why reaching your first $1 million can be such an important milestone

• How the Rule of 72 demonstrates the power of additional compounding cycles

• Why starting early can have such a dramatic impact on your long-term wealth

How Does a Roth IRA Grow?

A Roth IRA is an account, not an investment itself. Within the Roth IRA, you can typically invest in stocks, bonds, mutual funds, ETFs, and other investments.

The investments you select will determine how quickly the account grows.

Unlike a taxable investment account, however, you generally do not have to pay taxes each year on investment activity occurring inside the Roth IRA. That allows the entire account balance to remain invested and continue compounding.

How Long Does It Take to Build a $1 Million Roth IRA?

Let's look at a hypothetical 22-year-old investor.

For 2026, the IRA contribution limit is $7,500 for an individual under age 50, assuming the individual has sufficient eligible compensation and qualifies to make the Roth IRA contribution. Roth IRA eligibility is also subject to income limitations.

For our example, let's assume:

Even though IRA contribution limits may increase in future years, we will assume the investor contributes exactly $7,500 every year to keep the example simple.  At an 8% annual rate of return, it would take approximately 32 years for the Roth IRA to cross the $1 million mark.  That means someone starting at age 22 could potentially become a Roth IRA millionaire around age 54.

But here's where the numbers become particularly interesting.  Over those 32 years, the investor would have personally contributed only:

$7,500 × 32 = $240,000

Yet the account would be worth approximately $1.02 million.  That means roughly $778,000 of the account value would be attributable to compounded investment growth, based on our hypothetical assumptions.  In other words, the investor contributed $240,000, but compounding did much of the heavy lifting.   And because the money is inside a Roth IRA, qualified distributions of those earnings could eventually be received tax-free.

Becoming a Roth IRA Millionaire Isn't the End of the Story

Reaching $1 million may sound like the finish line.  From a compounding standpoint, however, it may be closer to the beginning of the most powerful stage. Why?

Because once you've accumulated a large investment balance, you have a much larger amount of money generating potential investment returns.

An 8% return on a $50,000 portfolio is $4,000.

An 8% return on a $500,000 portfolio is $40,000.

An 8% return on a $1 million portfolio is $80,000.

The rate of return hasn't changed. What has changed is the amount of money working for you.  This is why building your first $1 million can be such an important milestone. Once you have accumulated that larger base, future compounding can potentially accelerate dramatically.

The Rule of 72: How Quickly Could $1 Million Become $2 Million?

There is a simple financial concept called the Rule of 72 that can help investors estimate how long it will take an investment to double. 

Take 72 and divide it by your assumed annual rate of return.

At an 8% annual return:

72 ÷ 8 = 9 years

So, according to the Rule of 72, an investment earning approximately 8% per year would double about every nine years. Now apply that concept to our Roth IRA millionaire.

Suppose our hypothetical investor reaches approximately $1 million around age 54. From that point forward, let's assume they never contribute another dollar and the account continues earning a hypothetical average return of 8%.

The potential growth looks something like this:

Notice what's happening.

It took roughly 32 years of annual contributions to accumulate the first $1 million.

But the next $1 million could potentially be created in only about nine additional years—with no additional contributions at all. Then $2 million could become $4 million approximately nine years later.  That's the power of compounding cycles.

Most of the Potential Wealth Can Be Created Later

One of the hardest concepts for younger investors to appreciate is that the early years of investing can sometimes feel painfully slow.

You contribute $7,500.  Then another $7,500.  Then another.  You may look at your account after several years and wonder why the balance isn't growing faster.  But those early contributions are building the foundation that allows compounding to become much more powerful later.

Consider our hypothetical doubling cycle:

$1 million → $2 million: $1 million of additional growth

$2 million → $4 million: $2 million of additional growth

$4 million → $8 million: $4 million of additional growth

The percentage return didn't change. We continued to assume 8%.  But the dollar amount of growth became substantially larger with each doubling cycle.  This illustrates an important wealth-building principle:

The sooner you can accumulate your first meaningful pool of investment assets, the more potential compounding cycles you may have available later in life.

Why Starting at Age 22 Can Be So Powerful

Young investors often believe they don't have enough money for investing to make a meaningful difference.  But when you're young, you have an asset that someone approaching retirement cannot buy: Time

A dollar invested at age 22 potentially has decades to compound.  A dollar invested at age 52 simply doesn't have the same runway before retirement.  This doesn't mean someone who didn't start investing in their 20s has missed their opportunity. The best strategy is generally to begin when you are financially able to do so and build from there. 

But for younger investors, understanding the value of starting early can be incredibly important.  Your first few Roth IRA contributions may not seem life-changing when you make them.  Thirty or forty years of compounding may tell a very different story.

The Tax-Free Compounding Advantage of a Roth IRA

There is another important piece to this example.

If you accumulate $1 million in a traditional pre-tax retirement account, that $1 million isn't necessarily the same as having $1 million available to spend. Withdrawals from traditional retirement accounts are generally subject to ordinary income tax.

A Roth IRA works differently.  Contributions are made with after-tax dollars, so you don't receive an upfront tax deduction. In exchange, qualified Roth IRA withdrawals can be tax-free.  That means if our hypothetical Roth IRA eventually grows to $1 million, $2 million, or more, qualified distributions could potentially be received without federal income tax.

This is why we often think of Roth accounts as having two layers of compounding power:

1. Your investments have the opportunity to compound over time.

2. That compounded growth has the potential to ultimately be distributed tax-free.

For an investor with several decades before retirement, that combination can be extremely valuable.

Don't Forget About Roth IRA Income Limits

Before automatically contributing $7,500 to a Roth IRA, it is important to determine whether you are eligible.

Roth IRAs have income limitations.

For 2026, the Roth IRA contribution phase-out range is $153,000 to $168,000 for single filers and heads of household and $242,000 to $252,000 for married couples filing jointly.

Individuals above the applicable income limits may not be able to make a direct Roth IRA contribution. Depending on the individual's circumstances, other Roth strategies may be available, but those strategies have their own tax and planning considerations.

Key Takeaway

When you're young, your Roth IRA balance may seem small and the finish line may seem far away.  Don't underestimate what decades of consistent investing and compounding can potentially accomplish.  The goal isn't necessarily to get rich quickly.  The goal is to start the compounding clock as early as possible—and give it as much time as possible to work.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

The Never Retirement Plan: The Benefits of Continuing to Work by Choice

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

As a financial planner, I spend a large part of my day helping people answer the question, “When can I retire?” Ironically, every once in a while a client turns that question around and asks me, “Mike, when do you plan to retire?”

To their surprise, my answer is always the same: “Never.”

That response tends to catch people off guard because you would think that, as a financial planner, my ultimate goal, like everyone else, would be to accumulate enough money to become financially independent and spend most of my day spending time with friends, family, travel, golfing, pickleball, in general, non-work stuff.

While I agree with the financial independence goal, I do not necessarily tie that too the common goal of full retirement. This place me in the unique Never Retirement Plan, which is the opposite of the new FIRE (Financial Independent Retire Early) movement.

However, “never retire” does not mean you have to continue to work 40 or 60 hours per week into your 70’s, 80’s, and 90’s. You may only be working 15, 20, or 30 hours per week and spend more time traveling, social activities, or hobbies.  Or maybe you completely change industries, start a small business, or join a not-for-profit organization.

Continuing to work offers benefits that extend well beyond a paycheck. In this article, we will review the potential health benefits of working later in life, the importance of the social interaction that work creates, the financial advantages of continuing to earn income, how working longer can benefit your family, and how financial independence may allow you to pursue projects or careers that you always wanted to explore.

We will also look at how artificial intelligence could make experienced workers even more valuable, the impact of additional compounding years on your investment accounts, and how continuing to work can become part of the legacy that you leave behind.

The Health Benefits Of Working By Choice

A friend of mine told me a story that I have always remembered. He was down in Florida, and he went to visit his doctor, who was 87 years old, and still practicing medicine.  My friend asked his 87-year-old doctor the obvious question, “What is the key to longevity?” The doctor's answer was simple: “Don’t retire.”

Obviously, one 87-year-old doctor is not a scientific study, but there is research showing an association between working later in life and longevity.

Researchers at Oregon State University studied 2,956 individuals who retired in the U.S.  Among the individuals classified as healthy retirees, retiring one year beyond age 65 was associated with an 11% lower risk of death from all causes. Even among participants who were classified as unhealthy retirees, working an additional year was associated with a 9% lower mortality risk.

There are a lot of possible reasons why work may have health benefits. Work keeps us mentally challenged. Work creates challenges that need to be solved, decisions that need to be made, and puts us in an environment of continuous learning. Work also brings social interaction with coworkers, clients, customers, and the general public.

There is also an important difference between working because you have to and working because you want to. If someone is 70 years old, financially independent, and absolutely miserable at their job, I am not suggesting that they keep working simply because there may be health benefits associated with staying employed.

The Never Retirement Plan is really about reaching the point where work becomes optional and then deciding whether some form of work still adds value to your life. Maybe you work three days per week instead of five. Maybe you stop managing employees and transition into a consulting role. Maybe you only work six months out of the year and spend the other six months traveling. Financial independence gives you the ability to redesign work around your life instead of constantly designing your life around work.

The Social Benefits Of Continuing To Work

One benefit of work that many retirees dramatically underestimate is the social interaction it creates.

Think about how many conversations you have during a normal workday. You talk to coworkers. You interact with clients. Someone asks how your weekend was. You hear about someone's kids, grandchildren, vacation, or new house. People check in with you when they know something is going on in your life. Those may seem like small interactions, but over a 30- or 40-year career, they become a major part of your social network.

Then one day you retire, and depending on what your retirement looks like, a large portion of that daily interaction can disappear almost immediately.

This matters because social relationships are strongly connected to health. A large meta-analysis published in PLOS Medicine reviewed 148 studies involving 308,849 participants. The researchers found that individuals with stronger social relationships had a 50% greater likelihood of survival during the study periods compared with people with weaker social relationships.

That certainly does not mean you have to keep working in order to maintain strong social relationships. Many retirees have very active social lives through family, friends, golf, pickleball, volunteering, religious organizations, clubs, travel, or community involvement. But work automatically creates a social network that many people do not fully appreciate until it is gone.

As financial planners, we spend a tremendous amount of time helping people determine how they are going to replace their paycheck in retirement. But it can be equally important for retirees to ask themselves how they are going to replace the social interaction that came with that paycheck.

If you already have a full calendar outside of work, that may not be an issue. But if most of your daily interaction currently comes from coworkers and clients, maintaining some type of work schedule after reaching financial independence may provide benefits that have nothing to do with money.

The Monetary Benefits Of Not Retiring

The most obvious benefit of continuing to work is that you continue to receive a paycheck. However, the purpose of that paycheck may change dramatically once you have accumulated enough assets to retire.

Before you reach financial independence, your paycheck is paying the mortgage, groceries, utilities, insurance premiums, college costs, and retirement plan contributions. Once you have accumulated enough money to support your lifestyle without working, the income from your job can become much more discretionary.

Maybe continuing to work allows you to take two large trips each year that you otherwise would not have taken. Maybe it allows you to buy a second home. Maybe you give more money to charity. Maybe you make larger gifts to your children or grandchildren. Or perhaps you simply continue saving and investing the additional income.

There is also a psychological benefit of continuing to receive income that I have observed many times as a financial planner.  No matter how much money some individuals have accumulated, there can be a tremendous amount of anxiety when the paycheck stops. 

Someone may have spent the last 35 years watching money go into their retirement accounts every month. Then they retire, and suddenly they have to reverse the process. Instead of money going into investment accounts, they now withdraw money from those accounts to pay monthly expenses.  Mathematically, their retirement projection may show that they are in excellent shape. They could have several million dollars saved and very little risk of running out of money. But psychologically, it can still be uncomfortable to watch those account balances fund their lifestyle.

We see this all the time when preparing retirement projections for clients. There is a difference between knowing that you can afford to withdraw money from your retirement accounts and actually feeling comfortable doing it.  If earned income continues, even on a part-time basis, it may reduce the amount that needs to be withdrawn from the portfolio and can make that transition into retirement much easier emotionally.

Financial Support For Your Family

This benefit is closely related to the monetary advantage of continuing to work, but I think it deserves its own section.

Let's assume you're 67 years old and your financial plan shows that you have enough money to retire comfortably. You don't need another paycheck to support yourself, but you still enjoy what you're doing and decide to continue working for another five years.

Those additional five years of income can create opportunities for your family that might not exist otherwise.

Maybe you help pay for your grandchildren's college education. Maybe one of your children wants to put an addition on their house because their family is growing and you're able to help fund the project. You may be able to assist a child with a down payment on their first house, help a family member start a business, or make annual cash gifts that remove some financial stress from their household.

This is where the financial planning question begins to change. Instead of asking, “Do I have enough money to retire?” you begin asking, “If I continue working, what additional opportunities can I create for the people that I care about?”

Obviously, you want to make sure your own retirement is secure before you start making significant gifts to family members. We never want someone jeopardizing their own financial independence in an effort to help the next generation. But once your own retirement is well funded, continuing to earn income can expand the number of people that benefit from your financial success.

The Freedom To Pursue Your Passions

This may be one of the most exciting aspects of the Never Retirement Plan.

Once you have accumulated enough money to retire, you don't necessarily have to retire from work altogether. Instead, you may have the ability to retire from the work that you had to do and begin doing the work that you want to do.

Let's say you've spent the last 30 years working in corporate America, but you've always wanted to open a Pilates studio. Maybe you're passionate about pickleball and you would enjoy teaching people the sport as a teaching pro at your local pickleball club.  Starting your own business take time, time that you may have never had before but now that you are not reliant on that small business to meet you expense needs, building a business can actually be fun instead of stressful.

If your retirement assets are already sufficient to support your lifestyle, your next career does not necessarily have to replace the income from your previous career. That can give you the freedom to focus more heavily on whether you enjoy the work and less on whether it produces the maximum possible paycheck.

There is one important warning that comes with this strategy. Financial independence does not mean you should put your entire retirement nest egg at risk trying to turn a passion project into a successful business.

If you have accumulated $2 million for retirement, that does not mean you should invest $1.5 million of it into a new pickleball facility. Before starting a business or funding a passion project, determine how much capital you are willing to commit and, more importantly, how much you could afford to lose without jeopardizing your retirement.  The goal is to use financial independence to create new opportunities, not put your financial independence at risk.

Why Retire When You're At Your Peak?

There is another unusual aspect of retirement that I think deserves more attention. Many people retire at the exact point when they may be the most valuable they have ever been in their profession.

Think about someone who has worked in the same industry for 30 or 40 years. They have experienced recessions, industry changes, technology shifts, difficult clients, failed projects, successful projects, and managing teams of people where trust has been built over decades of working together. 

Because they are so valuable to the company that they work for, in many cases, they are also earning the highest income of their career. Then they turn 65 and because many of their friends have begun to retire, they feel like that is naturally the next thing to do.

If you still enjoy the work, there is no rule that says age 62, or 65, or 67 has to be the finish line. Adding another five, ten, or fifteen years during what may be your peak earning years can have a tremendous financial impact.

But something else often happens later in a successful career. Your role begins to change. You may spend less time trying to advance your own career and more time helping the next generation advance theirs.  You become the go-to person for your team to assist in the knowledge transfer from one generation to the next. At this point, continuing to work is no longer just about the money that you're earning or what you are personally accomplishing. It becomes part of your legacy.

AI Supports The Never Retirement Plan

Artificial intelligence could make the Never Retirement Plan even more attractive over the next decade.

There is a common assumption that younger workers will have an advantage with AI because they tend to adopt new technology quickly. That may be true in certain areas, but I think there is another side to the equation.

AI can produce an enormous amount of work, but someone still has to know how to prompt the AI bot and be able to review the results being produced by AI for accuracy.

Take two people using the same large language model. One person has three years of experience in an industry and the other has 35 years of experience. The younger employee may be very efficient at using the technology, but the person with 35 years of experience understands where projects typically go wrong, which questions clients are going to ask, what assumptions need to be challenged, what risks need to be addressed, the logistics of implementing the solution, and whether there are errors in the results being produced by the AI model.

AI can help with research, first drafts, data organization, coding, presentations, analysis, and routine administrative tasks. The experienced professional can spend more of their time reviewing the output, asking better questions, making decisions, mentoring employees, solving higher-level problems, and maintaining client relationships. This could completely change what working later in life looks like.

Maybe someone who is 72 years old has no interest in working 50 hours per week anymore. But what if artificial intelligence allows that person to accomplish in 15 or 20 hours what previously required 50 hours?  Now you have an individual with 30 or 40 years of experience combined with technology that allows them to produce a tremendous amount of output without maintaining the same workload that they carried earlier in their career.  It could make highly experienced workers some of the most valuable people in the workforce.

More Compounding Interest

Now we get to one of the most powerful financial benefits of continuing to work.  Assume that you reach age 65 with $1 million in your retirement investment accounts. Your financial plan shows that you have enough money to retire, but retiring would require you to begin taking withdrawals from that $1 million to supplement your Social Security, pension, or other income sources.  What happens if you decide to continue working and your paycheck is sufficient to cover most or all of your living expenses?

Your $1 million gets more time to compound.

Using a hypothetical 8% annual rate of return, the Rule of 72 tells us that an investment would approximately double every nine years. In a simplified example, $1 million at age 65 could potentially grow to approximately $2 million by age 74 and approximately $4 million by age 83 if there were no withdrawals.

It may have taken you your entire working career to accumulate the first $1 million. But once you have accumulated a large asset base, each additional doubling cycle represents a much larger dollar amount.  The move from $1 million to $2 million creates another $1 million of wealth. The next doubling from $2 million to $4 million creates another $2 million of wealth. The approximate amount of time is the same, but the dollar amount created by the second doubling is twice as large.

There may also be an investment allocation benefit if you do not need to take withdrawals from your portfolio. Someone who is relying heavily on their investment accounts to support their lifestyle may need to keep more money in cash or bonds to protect against a major market downturn early in retirement. If your paycheck continues to cover a large portion of your expenses, you may be able to maintain a higher level of stocks in your investment portfolio, which may result in higher rates of return.

That does not mean everyone who continues working should invest aggressively. Your investment allocation should always be based on your risk tolerance, financial goals, time horizon, income needs, and overall retirement plan. But continuing to receive a paycheck can materially change the investment planning conversation.

Building A Legacy

Legacy does not necessarily mean creating a billion-dollar company or having your name on a building. Legacy is really about the lasting impact that you have on other people and the world around you.

Maybe you spend ten years helping a nonprofit organization grow and use the business relationships that you developed over your career to connect the organization with donors. Maybe you continue advancing your industry. Maybe you develop a product or piece of software that solves a problem, or you build a company that provides jobs for other families.

If you're 70 years old and you've accumulated 50 years of experience, there is an enormous amount of knowledge that you can pass on to someone who is 30 years old and just beginning their career. That person may eventually become a leader themselves and go on to mentor ten more people, and when later in life people ask them how they got where they are, they will often give credit to their mentors within the industry.

Continuing to work gives you more time to contribute your experience, relationships, knowledge, financial resources, and perspective to the people around you. For some individuals, that becomes much more important than accumulating another dollar.

None of this means that everyone should work forever. Some people cannot wait to retire. They want to travel, play golf, spend time with grandchildren, volunteer, or simply have complete control over their calendar. If that's your dream, that's a perfectly good retirement plan.  But other people reach financial independence and discover that they really do not want to stop working. They may want to work less. They may want more flexibility and control. They may want to eliminate the parts of their job that they no longer enjoy. But they still enjoy solving problems, helping people, building things, learning, and contributing.

For those individuals, retirement may never really be the goal.

A parting note….

The traditional retirement plan follows a fairly predictable path. You work for 30 or 40 years, save money, invest, reach retirement age, stop working, and then begin drawing down the assets that you accumulated during your career.  There is absolutely nothing wrong with that plan.

But financial independence gives you the ability to write a different one.  The goal of financial planning does not necessarily have to be getting you to the point where you never work again. The goal can simply be getting you to the point where work becomes optional.

Once you reach that point, you get to decide what comes next. You may continue working full-time because you enjoy what you do. You may cut your schedule in half. You may become a consultant, start a business, pursue a passion project, mentor the next generation, volunteer, or combine several of those things together.  Continuing to work can provide additional income, mental stimulation, social interaction, more opportunities to financially help your family, additional years of compounding for your investments, and more time to build a meaningful legacy.

If this sounds like your cup of tea, the next time a friend or co-working ask you, “when do you plan to retire?”, respond with a smile………Never.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions About Working in Retirement

1. What are the benefits of continuing to work after retirement age?
   Continuing to work after traditional retirement age can provide additional income, social interaction, mental stimulation, and a continued sense of purpose. It may also allow your retirement investments to remain invested longer rather than immediately relying on them for living expenses.
2. Is it better financially to keep working instead of retiring at 65?
   It can be. If employment income covers some or all of your living expenses, you may be able to delay withdrawals from retirement accounts and give your investments additional time to compound. However, the best decision depends on your income needs, investments, taxes, Social Security strategy, and overall retirement plan.
3. What is a "Never Retirement Plan"?
   A Never Retirement Plan is the idea of reaching financial independence without necessarily stopping work altogether. Instead, financial independence makes work optional, allowing you to continue working full-time, reduce your hours, consult, start a business, volunteer, or pursue work you find meaningful.
4. Can working part-time in retirement help my retirement savings last longer?
   Potentially. Part-time income can reduce how much you need to withdraw from retirement accounts each year. This may give your investments more time to grow and reduce your reliance on your portfolio during periods of market volatility.
5. Are there health and social benefits to working later in life?
   Work can provide mental stimulation, problem-solving, routine, and regular interaction with coworkers, clients, and customers. However, the article emphasizes an important distinction between continuing to work because you want to and continuing because you financially have to.
6. How does working longer affect investment growth in retirement?
   If your paycheck allows you to postpone or reduce portfolio withdrawals, your investments may have additional years to compound. For example, the article illustrates how $1 million invested at a hypothetical 8% annual return could approximately double every nine years under the Rule of 72, assuming no withdrawals.
7. What can I do instead of fully retiring?
   Retirement does not have to mean going directly from full-time work to no work. You could transition to part-time employment, consulting, seasonal work, volunteering, mentoring, starting a small business, or pursuing a passion project. The goal can be to design work around your life once you no longer depend on a paycheck.
8. How do I know if continuing to work in retirement is right for me?
   Start by determining whether you are financially independent and what role you want work to play in the next stage of your life. Consider your finances, health, family, social life, personal interests, and whether your current work still gives you purpose or enjoyment. For some people, the goal of retirement planning may not be to stop working-it may simply be to reach the point where working becomes a choice.

Long-Term Care Costs in Retirement: How to Prepare

Long-term care can easily cost $75,000 to more than $125,000 per year, depending on the type of care and where you live. For retirees, the bigger question is whether those expenses could jeopardize a spouse's retirement security or significantly reduce the estate. Greenbush Financial Group recommends evaluating long-term care as part of the overall retirement income, tax, and estate plan rather than as a stand-alone insurance decision.

How Much Will Long-Term Care Actually Cost My Family?

Long-term care is one of the hardest retirement expenses to plan for because you do not know whether you will need it, when you will need it, or how long you will need care.

But ignoring the possibility can create a significant hole in a retirement plan.

The 2025 CareScout Cost of Care Survey reported national median costs of approximately:

• Assisted living: $6,200 per month

• Nursing home, semi-private room: $9,581 per month

• Nursing home, private room: $10,798 per month

• Non-medical in-home caregiver: $35 per hour

A private nursing-home room therefore costs roughly $130,000 per year at today's national median.

For a married couple, however, the most important question usually is not, "Can we afford $130,000?"

It is:

What happens to my spouse if we have to spend that amount for several years?

What Does Assisted Living Really Cost?

At a national median of $6,200 per month, assisted living costs approximately $74,400 per year.

Three years at that cost would total more than $223,000, even before considering future increases.

Nursing-home care can be substantially more expensive. At roughly $10,800 per month for a private room, three years of care could approach $390,000.

And Medicare should not be viewed as the solution. Medicare can cover qualifying short-term skilled nursing care, but it generally does not cover ongoing custodial long-term care.

Key Insight: If you are 60 today, today's cost may not be the number that matters. If care is not needed for another 15 or 20 years, the future cost could be considerably higher.

Should I Self-Insure for Long-Term Care?

For households with significant retirement assets, self-insuring can make sense.

But "we have enough money to pay for it" is not a complete analysis.

Consider a married couple with $1.5 million invested. If one spouse requires four years of nursing-home care at approximately $130,000 per year, the cost could approach $520,000 at today's prices.

The question is not simply whether they have $520,000.

They do.

The question is whether the other spouse would still have enough money to maintain their lifestyle for the rest of retirement after those care costs are paid.

Self-insuring tends to be more practical when you have:

• Significant liquid assets

• Reliable Social Security or pension income

• Spending comfortably below available resources

• A strong margin for unexpected expenses

• Enough assets that a prolonged care event would not jeopardize the other spouse

This should be tested through a retirement projection rather than determined by an arbitrary portfolio value.

When Does Long-Term-Care Insurance Make Sense?

Long-term-care insurance is essentially a risk-transfer decision.

You are paying an insurance company to absorb some of a financial risk that could otherwise fall entirely on your portfolio.

Insurance may deserve a closer look when:

• You could afford some long-term-care expenses but not a prolonged event

• Protecting your spouse's retirement is a major concern

• Leaving assets to children or other beneficiaries is important

• The premiums fit comfortably within your retirement budget

• You want to reduce the amount your portfolio would need to provide during a care event

You also do not necessarily need enough insurance to cover 100% of the cost.

Example

Suppose nursing care costs $10,000 per month, but your retirement income and portfolio could comfortably provide $4,000 per month toward care.

You may be more interested in insuring the remaining $6,000 than trying to insure the entire $10,000 expense.

That is why the insurance decision should start with the retirement plan.

How Would a Nursing-Home Stay Affect My Spouse?

This is often the biggest financial risk for married retirees.

When one spouse enters a nursing home, the other spouse does not stop having expenses.

They may still have:

• Housing costs

• Property taxes

• Utilities

• Medicare premiums

• Food

• Transportation

• Home maintenance

• Normal discretionary spending

The household is effectively supporting two different living arrangements.

There can also be tax consequences.

If most retirement savings are held in traditional IRAs, taking an additional $100,000 out of the portfolio to pay for care may create $100,000 of additional taxable income.

That could affect the household's tax bracket and potentially Medicare IRMAA premiums in a future year.

Planning Opportunity: Long-term-care planning should be coordinated with retirement income and Roth conversion strategies. Having money spread across traditional IRAs, Roth accounts, taxable investments, and cash can provide more flexibility if a large care expense suddenly appears.

How Much of My Estate Could Disappear?

Potentially, a meaningful amount.

Assume someone enters retirement with:

• $1.2 million in investments

• A $400,000 home

• $1.6 million total estate

If that person eventually incurs $500,000 of long-term-care expenses, those expenses alone represent more than 30% of the original estate, before considering taxes, normal retirement spending, or investment results.

For some families, that is acceptable. Their primary objective is ensuring they have enough money for their own lifetime.

For others, leaving assets to children, grandchildren, or charities is an important goal. In those situations, insurance may play a larger role.

The important point is that estate preservation comes after retirement security. For married couples, protecting the financial position of the spouse who remains at home is generally the first concern.

A Better Way to Prepare for Long-Term Care

Instead of trying to predict whether you will need care, stress-test your retirement plan.

At Greenbush Financial Group, we believe households should consider at least three scenarios:

1. No major long-term-care event

2. Two to three years of assisted living or home care

3. Several years of nursing-home care for one spouse

Then look at what happens to:

• The investment portfolio

• The healthy spouse's retirement income

• Taxes

• Required minimum distributions

• Estate value

• Insurance needs

If the retirement plan remains strong even after a significant care event, self-insuring may be reasonable.

If the care scenario creates a major financial problem for the surviving spouse, transferring some of that risk through insurance may deserve consideration.

Common Long-Term-Care Planning Mistakes

Some of the most common mistakes we see are:

• Assuming Medicare will pay for long-term custodial care

• Looking at today's care costs without considering future increases

• Assuming a large portfolio automatically means you can self-insure

• Focusing on the person receiving care instead of the financial security of both spouses

• Buying insurance without first determining how much risk actually needs to be insured

• Ignoring the tax impact of large IRA withdrawals

• Waiting until health problems arise to investigate insurance options

Final Thoughts

Long-term-care planning does not require predicting exactly what will happen.

The goal is to determine how much of the risk your family can comfortably absorb and how much risk you may want to transfer.

For some retirees, self-insuring makes sense. For others, insurance can protect a spouse and preserve part of the estate. Many households may benefit from a combination of the two.

At Greenbush Financial Group, we believe the decision should be coordinated with your retirement income, investments, taxes, Roth conversion strategy, and estate plan.

The most useful question is not simply, "Can I afford long-term care?"

It is:

"If one of us needs long-term care for several years, is the other spouse still financially secure?"

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.

Frequently Asked Questions

1. How much does assisted living cost?
   The 2025 national median cost of assisted living was approximately $6,200 per month, or $74,400 per year. Actual costs vary significantly by location and level of care.
2. How much does a nursing home cost?
   The 2025 national median cost for a private nursing-home room was approximately $10,798 per month, or about $130,000 per year.
3. Does Medicare pay for long-term care?
   Medicare generally does not pay for ongoing custodial long-term care. It can cover qualifying short-term skilled nursing care under specific circumstances.
4. How much money do I need to self-insure?
   There is no universal portfolio amount. The answer depends on your spending, guaranteed income, taxes, marital status, expected care costs, and how much money your spouse would need for the remainder of retirement.
5. Is long-term-care insurance worth it?
   It can be when a prolonged care event would materially affect your spouse's financial security or your estate. The appropriate amount of coverage should be determined in the context of your overall retirement plan.
6. Can long-term care wipe out an estate?
   A prolonged care event can consume hundreds of thousands of dollars. The impact depends on the length and type of care, available insurance, taxes, investment assets, and other sources of retirement income.

What Financial Information Should Your Adult Children Know?

Adult children often become involved in their parents' finances during a health event, cognitive decline, or after a death, sometimes with little preparation. Parents can make that responsibility easier by organizing accounts, establishing appropriate legal documents, discussing the estate plan, and clearly defining who is responsible for what. Greenbush Financial Group encourages families to have these conversations before help is actually needed.

The Hidden Financial Responsibilities Adult Children May Face

Most parents don't plan on becoming financially dependent on their children.

But there is another issue that is easy to overlook: Even if your children never have to financially support you, they may eventually have to help manage your financial life.

They may need to:

• Find your bank and investment accounts

• Pay bills

• Contact insurance companies

• Work with your financial advisor and CPA

• Manage property

• Locate estate documents

• Handle finances if you become incapacitated

• Settle your estate after your death

The objective isn't to give your children control of your finances today.

It's to make sure the right people can step in if necessary without having to reconstruct your entire financial life during an already difficult time.

How Do I Avoid Becoming Financially Dependent on My Children?

This concern comes up frequently in retirement planning.

Parents generally don't want their children paying for their living expenses, healthcare, or long-term care later in life.

The first step is determining whether your retirement plan can reasonably support your needs over a potentially long retirement.

That means looking beyond your current monthly expenses.

A retirement plan should consider:

• Social Security and pension income

• Investment withdrawals

• Inflation

• Healthcare and Medicare costs

• Long-term care

• Housing

• Taxes

• Major home repairs

• Potential longevity

• How the surviving spouse would manage financially

Example

Assume a couple is financially comfortable while both spouses are alive. They receive two Social Security benefits, have manageable healthcare costs, and share household expenses. When one spouse dies, the household may lose one Social Security benefit while many expenses remain.

The surviving spouse may also eventually need more help managing the home or paying for care. The question isn't only whether the couple has enough money today. It's whether their financial plan can continue working through the later stages of retirement.

Key Insight

One of the best ways to reduce the financial burden on adult children is to plan for the expensive and less predictable years of retirement before they arrive.

Should My Kids Know Where All of Our Accounts Are?

In most cases, someone should.

That doesn't necessarily mean every child needs account balances, passwords, or access to your money.

But at least one trusted person should know how to locate your financial information if something happens.

Consider maintaining a simple financial inventory containing:

• Banks where accounts are held

• Investment and retirement accounts

• Employer retirement plans

• Life insurance policies

• Annuities

• Real estate

• Mortgages and other debts

• Credit cards

• Social Security and pension information

• CPA contact information

• Attorney contact information

• Financial advisor contact information

The inventory does not necessarily need to contain account passwords.

Its primary purpose is to provide a roadmap.

Without one, adult children may find themselves searching through old tax returns, mail, email accounts, and filing cabinets trying to determine what their parents owned.

Should My Children Have My Financial Passwords?

Giving children a list of passwords is not necessarily the best solution.

Passwords change, and sharing credentials can create security and authorization issues.

A better approach may include:

• Using a password manager with an emergency-access plan

• Keeping important instructions in a secure location

• Making sure your executor or agent knows where that information is stored

• Establishing the appropriate legal authority for someone who may need to act on your behalf

Access to information and legal authority to act are two different things.

Knowing that Mom has an IRA at a particular financial institution doesn't automatically give a child the right to make transactions in that account.

That is why proper estate and incapacity documents are so important.

What Documents Should Adult Children Know About?

The exact documents depend on your situation and state law, but several are particularly important.

Will

Your will provides instructions for property that passes through the probate process and generally identifies who will serve as executor.

Your future executor should at least know that the document exists and where the current signed version can be located.

Durable Financial Power of Attorney

A financial power of attorney allows someone to act on your behalf under the circumstances described in the document.

This can become extremely important if illness or incapacity prevents you from managing your finances.

Without advance planning, family members may potentially have to pursue a court process to obtain authority to manage someone's financial affairs. The Consumer Financial Protection Bureau recommends planning ahead and choosing a trusted person carefully when establishing a power of attorney.

Healthcare Documents

Depending on your state and estate plan, these may include documents such as:

• Healthcare power of attorney

• Advance healthcare directive

• Living will

• HIPAA authorization

Your estate planning attorney can help determine which documents are appropriate and who should receive copies.

Trust Documents

If you have a revocable living trust or another trust arrangement, the successor trustee should understand that they have been named and know where the relevant documents are located.

Beneficiary Information

Retirement accounts and life insurance policies generally pass according to beneficiary designations rather than instructions in a will.

That makes periodically reviewing beneficiaries particularly important.

Your children do not necessarily need a detailed list of what they will inherit, but the people responsible for settling your affairs should understand that beneficiary-designated assets exist.

Consider Adding a Trusted Contact to Investment Accounts

A trusted contact is another useful planning tool, but it is often misunderstood.

Brokerage firms generally ask customers to provide a trusted contact. That person can potentially be contacted in limited situations, such as when the firm cannot reach you or has concerns about possible financial exploitation.

Importantly, a trusted contact does not have authority to trade in the account or make financial decisions for you simply because they are listed as the trusted contact.

Think of this more like an emergency contact for your investment account.

It can be a useful additional layer of protection, especially as you get older.

How Much Should You Tell Your Children About Your Estate Plan?

This is where many parents become uncomfortable.

Do you tell your children exactly how much money you have?

Do you tell them what they will inherit?

Do you show them the entire estate plan?

There is no requirement that every family handle this the same way.

But complete secrecy can create its own problems.

At minimum, the people who will have responsibilities should generally understand their roles.

For example:

• Who is the executor?

• Who has financial power of attorney?

• Who makes healthcare decisions?

• Who is successor trustee?

• Where are the original documents?

• Who should contact the attorney?

• Who should contact the financial advisor?

• Who should contact the CPA?

You can provide this information without giving every family member a detailed personal balance sheet.

Example

A couple has three adult children.

Their oldest daughter is named financial power of attorney and executor. Their son is the backup. The third child has no administrative role.

All three children may know that an estate plan exists, but the daughter needs considerably more information because she may eventually be responsible for carrying it out.

Information should follow responsibility.

How Can Parents Avoid Family Conflict?

Money can create tension even in families that normally get along well.

Problems often arise when children don't understand why decisions were made.

For example:

• One child is named executor and another isn't

• One child receives a particular property

• One child has financial power of attorney

• An inheritance is divided unequally

• One child has already received significant financial help

• One sibling becomes the primary caregiver

• Family members disagree about whether a parent should remain at home

Not every estate planning decision needs to be equal.

But important differences may be easier to handle when they aren't a complete surprise.

Important Note

Fair and equal are not always the same thing.

If your estate plan treats children differently, consider whether explaining the reasoning while you are alive could reduce confusion later.

The goal isn't to negotiate your estate plan with your children. It is to reduce the possibility that uncertainty turns into resentment.

Don't Make One Child Figure Everything Out Alone

Another common problem occurs when one adult child quietly becomes responsible for everything.

They may coordinate:

• Medical appointments

• Bills

• Investment accounts

• Insurance

• Taxes

• Home maintenance

• Long-term care

• Communication with siblings

That can become a substantial responsibility.

If one child will likely serve as the primary financial decision-maker, consider involving them in planning conversations before a crisis occurs.

It may also make sense to introduce them to your:

• Financial advisor

• Estate planning attorney

• CPA

They don't necessarily need to participate in every meeting.

But knowing who to call can make a significant difference when the time comes.

Create a Financial Roadmap for Your Children

You don't need a 50-page binder.

A simple one or two-page roadmap can be extremely helpful.

Consider including:

1. Where major accounts are held

2. Where estate documents are located

3. Names and contact information for key professionals

4. Insurance company information

5. Important property information

6. Who has financial and healthcare authority

7. Where secure digital information can be accessed

8. Any important instructions your family should know

Review the document periodically.

Accounts close. Advisors change. Insurance policies change. Estate plans are updated.

An outdated roadmap can create almost as much confusion as not having one.

The Financial Planning Piece Matters Too

Organizing documents is important, but it does not replace retirement planning.

Parents should also ask:

If I live into my 90s, does my retirement plan still work?

What happens financially if my spouse dies first?

How would we pay for long-term care?

Who could manage our finances if one of us experiences cognitive decline?

Are our beneficiary designations coordinated with our estate plan?

Will our children know who to call?

This is where retirement planning, investment management, tax planning, and estate planning begin to overlap.

At Greenbush Financial Group, we often encourage families to think about the transition from managing your own financial life to eventually having someone help you manage it.

Planning that transition in advance can make it much easier for everyone involved.

Common Mistakes Parents Make

1. Keeping Everything Secret

Privacy is understandable. But if nobody knows where anything is located, children may have difficulty helping when assistance is actually needed.

2. Giving Children Access Without Proper Legal Documents

Knowing a password or having a copy of a statement is not the same as having legal authority to act.

3. Creating an Estate Plan and Never Updating It

Executors, powers of attorney, trustees, beneficiaries, and family circumstances can change.

4. Naming Someone Without Telling Them

Being named executor, trustee, or power of attorney can involve significant responsibility. The person should generally know that they have been selected.

5. Waiting for a Health Crisis

It is much easier to organize accounts, documents, and family responsibilities while everyone is healthy and able to participate.

Final Thoughts

One of the best financial gifts you can give your adult children may have nothing to do with the size of their inheritance.

It may simply be making your financial life easier to understand when they eventually need to help.

You don't have to disclose every account balance or every detail of your estate.

But the right people should know:

• What exists

• Where it is

• Who is responsible

• Who they should call

• What you want them to do

The CFPB's guidance for people who eventually manage someone else's money emphasizes responsibilities such as acting in the person's best interest, carefully managing assets, keeping funds separate, and maintaining good records.

Preparing your children for those responsibilities before they arise can reduce administrative stress and potentially reduce family conflict.

At Greenbush Financial Group, we believe this is an important part of retirement planning. A good plan should not only work while you are fully capable of managing it yourself. It should also have a clear process for the day when someone you trust may need to help.

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.

Frequently Asked Questions

1. Should my adult children know how much money I have?
   Not necessarily. Your children can understand where accounts are held, where estate documents are located, and who is responsible for financial decisions without knowing every account balance.
2. Should my children have access to my bank accounts?
   Not automatically. Access should be coordinated with your attorney and financial institutions so the appropriate person has proper legal authority if assistance becomes necessary.
3. What financial documents should my children know about?
   At minimum, the appropriate family members should know where to locate your will, financial power of attorney, healthcare documents, trust documents if applicable, insurance information, and a list of major financial accounts.
4. Should I tell my children what they will inherit?
   That is a personal decision. However, communicating unusual or unequal estate decisions in advance may help family members understand your intentions and reduce surprises later.
5. What is a trusted contact on an investment account?
   A trusted contact is someone a brokerage firm may contact in certain circumstances, such as difficulty reaching you or concerns about possible financial exploitation. A trusted contact does not automatically have authority to trade or withdraw money from your account.
6. How often should we review our estate and financial information?
   Reviewing it periodically and after major life events is a good practice. Changes in health, family relationships, beneficiaries, accounts, advisors, or estate planning documents may require updates.

What Financial Decisions Should You Make Before Age 75?

Age 75 is not a financial deadline, but some decisions can become more difficult as health, taxes, housing needs, and family circumstances change. Simplifying accounts, evaluating your home, completing tax planning, and deciding who can help with your finances are often easier while you are healthy. Greenbush Financial Group encourages retirees to use their earlier retirement years to make their financial lives easier to manage later.

What Financial Decisions Become Harder After Age 75?

There is nothing magical about turning 75. Many people remain healthy, active, and fully engaged with their finances well beyond that age.

But financial flexibility can decrease as we get older.

Health can change. A spouse may die. Managing multiple accounts can become burdensome. Required minimum distributions can affect taxes. Moving out of a longtime home can become more difficult.

That makes your healthy retirement years an important time to ask:

Which decisions would I rather make now than be forced to make later?

1. Simplifying and Consolidating Your Accounts

Many retirees have accounts accumulated over decades:

• Old 401(k)s

• Multiple IRAs

• Bank accounts

• Brokerage accounts

• Individual stocks

• CDs

• Insurance policies

There may be a legitimate reason to keep certain accounts separate. But unnecessary complexity can make your financial life harder to manage.

Ask yourself:

If my spouse or child had to take over our finances tomorrow, would they understand how everything works?

Consolidating accounts, when appropriate, can make it easier to:

• Manage investments and withdrawals

• Track beneficiaries

• Handle required distributions

• Prepare taxes

• Help a surviving spouse

• Eventually settle the estate

Key Insight

The goal isn't to have the fewest accounts possible. It is to make sure every account has a purpose and your financial life can be understood by someone other than you.

2. Deciding Whether and When to Downsize

Housing decisions can become considerably harder later in retirement.

You may be perfectly comfortable in your home today. But consider how it would work if your circumstances changed.

Ask:

• Could one spouse manage the house alone?

• Are stairs likely to become an issue?

• Who handles maintenance?

• How close are healthcare and family?

• Could the home accommodate mobility limitations?

• What would cause us to move?

There is no correct age to downsize.

The advantage of thinking about it earlier is choice.

Moving at 70 because you found a home or community you prefer is different from moving at 85 because a health event suddenly makes your existing home impractical.

Downsizing can also affect taxes, housing costs, investments, and your estate plan, so it should be considered as part of the overall retirement strategy.

3. Using Tax-Planning Opportunities While You Have Them

Some of the most valuable tax-planning years can occur early in retirement.

For example, a retiree may stop working several years before required minimum distributions begin. Depending on the household's circumstances, those lower-income years can create opportunities for strategies such as Roth conversions.

Once RMDs begin, you have another source of taxable income that generally must be taken each year.

Example

Assume a couple retires with a large amount in traditional IRAs.

During their first several retirement years, they may have relatively low taxable income. Converting portions of the IRA to a Roth during those years could potentially reduce future traditional IRA balances and RMDs.

Waiting until later may mean completing conversions on top of RMD income, Social Security, pensions, and other taxable income.

That doesn't mean everyone should convert to a Roth.

It means timing matters.

Tax planning in retirement should coordinate:

• Roth conversions

• Social Security

• RMDs

• Medicare IRMAA

• Capital gains

• Charitable giving

• The tax situation of a surviving spouse

Some opportunities become less attractive when delayed.

4. Deciding Who Can Step In and Help

Another decision that should not wait for a health crisis is determining who could manage your finances if you could not.

Review:

• Financial power of attorney

• Healthcare directives

• Executor appointments

• Successor trustees

• Beneficiary designations

• Trusted contacts on financial accounts

The person you select should also know that they have been selected.

They don't necessarily need access to your accounts today, but they should know where important documents are located and who to contact.

Important Note

A trusted contact on an investment account is not the same as a power of attorney.

A brokerage firm may contact a trusted contact in certain circumstances, but naming someone as a trusted contact does not automatically give that person authority to trade or withdraw money.

Work with your estate planning attorney to establish the appropriate legal documents for someone who may eventually need to act on your behalf.

5. Making Your Investments Easier to Manage

Investment portfolios can become more complicated over time.

You may have individual stocks, mutual funds, ETFs, bonds, CDs, annuities, and accounts at several institutions.

Ask yourself:

Does this complexity still provide a benefit?

A portfolio that is easy for you to manage at 65 may be overwhelming for a surviving spouse at 80.

Simplifying might involve:

• Eliminating redundant investments

• Consolidating appropriate accounts

• Establishing a clear withdrawal strategy

• Maintaining an appropriate cash reserve

• Automating routine distributions

Simplification does not mean becoming overly conservative.

The objective is to create an investment strategy that remains manageable even if someone else eventually needs to oversee it.

What Planning Opportunities Can Become Harder With Age?

Some opportunities do not disappear at a particular birthday. They simply become more difficult or less flexible.

Roth conversions: Once RMDs and other income begin, there may be less room to intentionally recognize additional taxable income.

Long-term care planning: Insurance options can become more expensive or unavailable as age and health change. Even without insurance, it is important to decide how potential care would be funded.

Housing: A voluntary move provides more choices than a move caused by a health crisis.

Estate planning: Powers of attorney and other documents are easier to establish and update while you have the legal capacity to make those decisions.

Preparing your spouse: If one spouse handles nearly all the finances, involving the other spouse now can make a future transition much easier.

Could Someone Else Manage Your Financial Life?

This is one of the most useful tests for retirees.

If your spouse or adult child had to manage everything tomorrow, would they know:

• Where your accounts are?

• How bills are paid?

• Where retirement income comes from?

• Who your CPA, attorney, and financial advisor are?

• Where your estate documents are?

• How your investment withdrawals work?

They do not need to know every detail today.

But they should have a roadmap.

At Greenbush Financial Group, we often encourage retirees to think about simplification from this perspective. A financial plan should not depend entirely on one person being able to manage a complicated system forever.

Common Mistakes

Waiting for a Health Event

Financial decisions are easier when there is no immediate deadline.

Assuming Your Spouse Knows Everything

If one person manages the household finances, make sure the other understands the basic structure.

Keeping Accounts Without a Purpose

Old accounts can accumulate over decades. Periodically ask whether each still serves a financial or planning purpose.

Delaying Housing Conversations

You don't have to move today. But deciding what circumstances would cause you to move can make a future decision much easier.

Waiting Too Long on Tax Planning

Tax planning is often about using windows of opportunity. Review potential strategies before RMDs and other income reduce your flexibility.

Final Thoughts

Age 75 is not a deadline.

The bigger issue is that some financial decisions are easier when you have more time, better health, and more choices.

Your earlier retirement years can be a good time to:

• Simplify accounts

• Evaluate your housing plan

• Review tax opportunities

• Update estate documents

• Decide who can help

• Make investments easier to manage

At Greenbush Financial Group, we believe a good retirement plan should become simpler as you age, not more complicated.

The goal is to create a financial structure that works today and can continue working if your health, family situation, or ability to manage the finances changes.

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.

Frequently Asked Questions

1. Should I consolidate my accounts as I get older?
   Consolidation can make finances easier to manage, but it should be evaluated carefully. Taxes, investment options, fees, beneficiaries, and estate planning should be considered before moving accounts.
2. At what age should I downsize my home?
   There is no ideal age. The important consideration is whether you can make the decision voluntarily while you still have time, health, and flexibility.
3. What financial decisions should I make while I'm healthy?
   Consider account simplification, housing, tax planning, estate documents, powers of attorney, long-term care planning, and who could manage your finances if necessary.
4. Why can tax planning become harder later in retirement?
   RMDs, Social Security, pensions, and other income can reduce your ability to control taxable income. Earlier retirement years may provide more flexibility for strategies such as Roth conversions.
5. How can I make my finances easier for my spouse or children?
   Keep a current list of accounts and professional contacts, organize estate documents, simplify unnecessary accounts, and make sure someone you trust understands the basic structure of your financial life.