2026 Roth IRA Conversions Explained: Smart Timing and Costly Mistakes

Roth conversions can be one of the most powerful tax planning tools in retirement, but they are not always beneficial. A Roth conversion involves moving money from a pre-tax account into a Roth account and paying taxes now to avoid taxes later. At Greenbush Financial Group, our analysis shows that Roth conversions are most effective when done strategically across multiple years, not as a one-time decision.

What Is a Roth Conversion and How Does It Work?

A Roth conversion moves funds from a Traditional IRA or 401(k) into a Roth IRA or 401(k).

Key Mechanics

• Converted amount is taxed as ordinary income

• No early withdrawal penalty if done correctly

• Future growth and withdrawals are tax-free

• No Required Minimum Distributions (RMDs) for Roth IRAs

Example

• Convert $50,000 from an IRA to a Roth IRA

• Pay taxes on $50,000 this year

• Future withdrawals are tax-free

At Greenbush Financial Group, we view Roth conversions as a way to “prepay taxes” at potentially lower rates.

When Roth Conversions Make Sense

There are specific scenarios where Roth conversions can significantly improve long-term outcomes.

1. Low-Income Years in Early Retirement

The period between retirement and starting Social Security or RMDs is often ideal.

• Lower taxable income

• Opportunity to fill lower tax brackets

• Reduce future tax burden

2. Before Required Minimum Distributions (RMDs)**

RMDs can force higher taxable income later in retirement.

• Converting early reduces future RMDs

• Helps avoid higher tax brackets in your 70s

3. Expecting Higher Future Tax Rates

If you believe your future tax rate will be higher:

• Paying taxes now may be beneficial

• Locks in current tax rates

4. Large Pre-Tax Account Balances

High IRA or 401(k) balances can create tax challenges later.

• Large RMDs

• Increased IRMAA surcharges

• Higher Social Security taxation

5. Leaving Assets to Heirs

Roth accounts can be more tax-efficient for beneficiaries.

• Tax-free withdrawals for heirs

• No lifetime RMDs for original owner

At Greenbush Financial Group, Roth conversions are often used as part of a broader estate and tax planning strategy.

When Roth Conversions May Not Make Sense

Roth conversions are not always the right move.

1. Already in a High Tax Bracket

If converting pushes you into a higher bracket:

• You may pay more tax than necessary

• Reduces the benefit of the conversion

2. Short Time Horizon

If you expect to use the money soon:

• Limited time for tax-free growth

• Less benefit from conversion

3. Paying Taxes From the Conversion Itself

Using IRA funds to pay taxes reduces the amount converted.

• Decreases long-term growth potential

• Less efficient overall

4. Expecting Lower Future Tax Rates

If your income will decrease later:

• You may pay more tax now than necessary

5. Impact on Medicare and Social Security

Conversions increase taxable income.

• May trigger IRMAA surcharges

• Can increase taxation of Social Security

At Greenbush Financial Group, we often see Roth conversions backfire when these factors are not considered.

The “Tax Bracket Filling” Strategy

One of the most effective ways to approach Roth conversions is by filling up lower tax brackets.

How It Works

• Identify your current tax bracket

• Convert just enough to stay within that bracket

• Avoid jumping into higher brackets

Example

• Top of 12% bracket = target income level

• Convert enough to reach that limit

• Stop before entering the 22% bracket

This strategy spreads conversions over multiple years, reducing overall tax impact.

Roth Conversions and IRMAA Considerations

Roth conversions increase your income for that year, which can affect Medicare premiums.

Key Impact

• Higher income can trigger IRMAA surcharges

• IRMAA is based on income from two years prior

Planning Tip

Balance Roth conversions with IRMAA thresholds to avoid unnecessary premium increases.

A Multi-Year Roth Conversion Strategy Example

Scenario

• Age 62, recently retired

• $800,000 in IRA

• Low income before Social Security

Strategy

• Convert $40,000–$60,000 annually

• Stay within a lower tax bracket

• Delay Social Security

Outcome

• Reduced future RMDs

• Lower lifetime taxes

• Increased tax-free income later

At Greenbush Financial Group, this type of phased approach is often more effective than a single large conversion.

Common Roth Conversion Mistakes

• Converting too much in one year

• Ignoring tax bracket thresholds

• Overlooking IRMAA impacts

• Not coordinating with Social Security timing

• Failing to plan conversions over multiple years

Final Thoughts

Roth conversions can be a powerful tool, but only when used strategically. The goal is not simply to convert assets, but to reduce lifetime taxes and create more flexibility in retirement income.

At Greenbush Financial Group, our analysis shows that the most successful strategies involve careful timing, tax bracket management, and long-term planning.

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.

1. Is it a bad idea to retire in a down market?
   Not necessarily, but it increases sequence of returns risk and requires careful planning.
2. How much cash and short-term fixed income should I have in retirement?
   Typically 1 to 3 years of living expenses.
3. Should I stop withdrawals during a downturn?
   Not entirely, but reducing withdrawals can improve long-term outcomes.
4. Can a market downturn ruin my retirement plan?
   It can if not managed properly, especially in the early years of retirement.
5. What is the best strategy during a market downturn?
   Maintain a cash reserve, adjust withdrawals, stay invested, and focus on long-term planning.

2026 Bear Market Retirement Planning: How to Avoid Running Out of Money

Retiring during a market downturn can significantly impact how long your retirement savings last due to sequence of returns risk. When withdrawals begin during a declining market, losses can compound and reduce long-term portfolio sustainability. At Greenbush Financial Group, our analysis shows that implementing the right withdrawal, allocation, and income strategies can help protect your retirement plan even in volatile markets.

Why Retiring in a Down Market Is Risky

The primary concern is not just market losses, but when those losses occur.

Sequence of Returns Risk Explained

Sequence risk refers to the timing of market returns relative to your withdrawals.

• Negative returns early in retirement can permanently reduce your portfolio

• Withdrawals during downturns lock in losses

• Recovery becomes more difficult over time

Example

Two retirees with identical portfolios and average returns can have very different outcomes depending on whether market losses occur early or later in retirement.

At Greenbush Financial Group, this is one of the most important risks we plan for when building retirement income strategies.

Strategy 1: Build a Cash Reserve Before Retirement

One of the most effective ways to protect your portfolio is to avoid selling investments during a downturn.

Recommended Approach

• Maintain 1–3 years of living expenses in cash or short-term investments

• Use this reserve instead of withdrawing from stocks during market declines

Why It Works

• Gives your portfolio time to recover

• Reduces the need to sell assets at depressed prices

• Provides psychological comfort during volatility

Strategy 2: Use a Bucket Strategy for Income

Segmenting your portfolio into different “buckets” can help manage risk.

Example Structure

Short-Term Bucket (0–3 years)

• Cash, money markets, short-term bonds

• Used for immediate income needs

Mid-Term Bucket (3–10 years)

• Bonds, conservative investments

• Provides stability and income

Long-Term Bucket (10+ years)

• Stocks and growth assets

• Designed to outpace inflation

At Greenbush Financial Group, we often use this framework to align investments with time horizons and reduce sequence risk.

Strategy 3: Reduce Withdrawals During Down Markets

Flexibility is critical when markets are volatile.

Key Adjustments

• Temporarily reduce discretionary spending

• Delay large purchases

• Pause inflation increases on withdrawals

Example

Instead of withdrawing $60,000 during a downturn, reducing withdrawals to $50,000 can significantly improve long-term sustainability.

Strategy 4: Delay Social Security If Possible

Social Security provides a guaranteed, inflation-adjusted income stream.

Why Delaying Helps

• Increases your monthly benefit

• Reduces reliance on portfolio withdrawals early

• Provides more stable income later in retirement

Planning Insight

Using portfolio assets early while delaying Social Security can sometimes improve long-term outcomes. 

Strategy 5: Rebalance and Stay Invested

Market downturns can create opportunities to rebalance your portfolio.

Key Principles

• Avoid panic selling

• Rebalance to maintain target allocation

• Take advantage of lower asset prices

At Greenbush Financial Group, maintaining discipline during downturns is often the difference between success and failure in retirement planning.

Strategy 6: Consider Part-Time Income or Flexible Retirement

Even a small amount of income can reduce pressure on your portfolio.

Benefits

• Reduces withdrawal rate

• Allows more time for investments to recover

• Provides flexibility in spending

Example

Earning $10,000–$20,000 per year can significantly extend portfolio longevity.

Strategy 7: Tax Planning During Market Downturns

Down markets can create tax planning opportunities.

Strategies

• Harvest capital losses to offset gains

• Convert IRA funds to Roth at lower market values

• Manage taxable income to stay in lower tax brackets

At Greenbush Financial Group, we often see that downturns can be an ideal time to implement tax-efficient strategies.

Common Mistakes to Avoid

• Selling investments out of fear

• Maintaining rigid withdrawal strategies

• Ignoring tax planning opportunities

• Failing to adjust spending

• Overreacting to short-term market movements

A Real-World Scenario

Scenario

• Retiree with $1,000,000 portfolio

• Market declines 20% in first year

• Withdraws $50,000 annually

Without Adjustments

• Portfolio drops significantly

• Recovery becomes difficult

With Strategic Adjustments

• Uses cash reserve instead of selling stocks

• Reduces withdrawals temporarily

• Rebalances portfolio

• Delays Social Security

Result

• Improved long-term sustainability

• Reduced sequence risk impact

Final Thoughts

Retiring during a down market does not mean your plan will fail, but it usually does require adjustments. The key is managing withdrawals, maintaining flexibility, and staying disciplined with your investment strategy.

At Greenbush Financial Group, our analysis shows that retirees who proactively adapt their strategy during downturns are far more likely to preserve their wealth and maintain sustainable income throughout retirement.

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.

1. Is it a bad idea to retire in a down market?
   Not necessarily, but it increases sequence of returns risk and requires careful planning.
2. How much cash and short-term fixed income should I have in retirement?
   Typically 1 to 3 years of living expenses.
3. Should I stop withdrawals during a downturn?
   Not entirely, but reducing withdrawals can improve long-term outcomes.
4. Can a market downturn ruin my retirement plan?
   It can if not managed properly, especially in the early years of retirement.
5. What is the best strategy during a market downturn?
   Maintain a cash reserve, adjust withdrawals, stay invested, and focus on long-term planning.

If You Retire With $1 Million, How Long Will It Last?

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

Retirement planning often circles around one big question: If I save $1 million, how long will it last once I stop working? The answer isn’t one-size-fits-all. It depends on a handful of key factors, including:

• Your annual withdrawal rate

• Inflation (the rising cost of goods and services over time)

• Your assumed investment rate of return

• Taxes (especially if most of your money is in pre-tax retirement accounts)

In this article, we’ll walk through each of these factors and then run the numbers on a few different scenarios. By the end, you’ll have a much clearer idea of how far $1 million can take you in retirement.

Step 1: Determining Your Withdrawal Rate

Your withdrawal rate is simply the amount of money you’ll need to take from your retirement accounts each year to cover living expenses. Everyone’s number looks different:

• Some retirees might only need $60,000 per year after tax.

• Others might need $90,000 per year after tax.

The key is to determine your annual expenses first. Then consider:

• Other income sources (Social Security, pensions, part-time work, rental income, etc.)

• Tax impact (if pulling from pre-tax accounts, you’ll need to withdraw more than your net spending need to cover taxes).

For example, if you need $70,000 in after-tax spending money, you might need to withdraw closer to $75,000–$90,000 per year from your 401(k) or IRA to account for taxes.

Step 2: Don’t Forget About Inflation

Inflation is the silent eroder of retirement plans. Even if you’re comfortable living on $70,000 today, that number won’t stay static. If we assume a 3% inflation rate, here’s how that changes over time:

• At age 65: $70,000

• At age 80: $109,000

• At age 90: $147,000

Expenses like healthcare, insurance, and groceries tend to rise faster than other categories, so it’s critical to build inflation adjustments into your plan.

Step 3: The Assumed Rate of Return

Once you retire, you move from accumulation mode (saving and investing) to distribution mode (spending down your assets). This shift raises important questions about asset allocation.

• During accumulation years, you weren’t withdrawing, so market dips didn’t permanently hurt your portfolio.

• In retirement, selling investments during downturns locks in losses, making it harder for your account to recover.

That’s why most retirees take at least one or two “step-downs” in portfolio risk when they stop working.

For most clients, a reasonable retirement assumption is 4%–6% annual returns, depending on risk tolerance.

Step 4: The Impact of Taxes

Taxes can make a significant difference in how long your retirement savings last.

• If most of your money is in pre-tax accounts (401k, traditional IRA), you’ll need to gross up withdrawals to cover taxes.

• Example: If you need $80,000 after tax, and your tax bill is $10,000, you’ll really need to withdraw $90,000 from your retirement accounts.

Now, if you have Social Security income or other sources, that reduces how much you need to pull from your investments.

Example:

• Annual after-tax expenses: $80,000

• Grossed-up for taxes: $90,000

• Social Security provides: $30,000

• Net needed from retirement accounts: $60,000 (indexed annually for inflation)

Scenarios: How Long Does $1 Million Last?

Now let’s put the numbers into action. Below are four scenarios that show how long a $1 million retirement portfolio lasts under different withdrawal rates. Each assumes:

• Retirement age: 65

• Beginning balance: $1,000,000

• Inflation: 3% annually

• Investment return: 5% annually

Scenario 1: Withdrawal Rate $40,000 Per Year

Assumptions:

• Annual withdrawal: $40,000 (indexed for 3% inflation)

• Rate of return: 5%

Result: Portfolio lasts 36 years (until age 100).

Why not forever? Because inflation steadily raises the withdrawal amount. At age 80, withdrawals rise to $62,000/year. By age 90, they reach $83,000/year.

Math Note: For the duration math, while age 90 minus age 65 would be 35 years.  We are also counting the first year age 65 all the way through age 90, which is technically 36 years. (Same for all scenarios below)

Scenario 2: Withdrawal Rate $50,000 Per Year

Assumptions:

• Annual withdrawal: $50,000 (indexed for 3% inflation)

• Rate of return: 5%

Result: Portfolio lasts 26 years (until age 90).

By age 80, withdrawals grow to $77,000/year. By age 90, they reach $104,000/year.

Scenario 3: Withdrawal Rate $60,000 Per Year

Assumptions:

• Annual withdrawal: $60,000 (indexed for 3% inflation)

• Rate of return: 5%

Result: Portfolio lasts 21 years (until age 85).

Scenario 4: Withdrawal Rate $80,000 Per Year

Assumptions:

• Annual withdrawal: $80,000 (indexed for 3% inflation)

• Rate of return: 5%

Result: Portfolio lasts 15 years (until age 79).

Even if you bump the return to 6%, it only extends one more year to age 80. Higher withdrawals create a significant risk of outliving your money.

Final Thoughts

If you retire with $1 million, the answer to “How long will it last?” depends heavily on your withdrawal rate, inflation, taxes, and investment returns. A $40,000 withdrawal rate can potentially last through age 100, while a more aggressive $80,000 withdrawal rate may deplete funds before age 80.

The bottom line: Everyone’s situation is unique. Your lifestyle, income sources, tax situation, and risk tolerance will shape your plan. This is why working with a financial advisor is so important — to stress-test your retirement under different scenarios and give you peace of mind that your money will last as long as you do.

For more information on our fee based financial planning services to run  your custom retirement projections, please visit our website.

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 (FAQs)

What is a safe withdrawal rate in retirement?
A commonly used guideline is the 4% rule, meaning you withdraw 4% of your starting balance each year, adjusted for inflation. However, personal factors—such as market performance, expenses, and longevity—should guide your specific rate.

How does inflation affect retirement spending?
Inflation steadily increases the cost of living, which raises how much you need to withdraw each year. At a 3% inflation rate, an annual $70,000 expense today could grow to over $100,000 within 15 years, reducing how long savings can last.

Why do investment returns matter so much in retirement?
Once you start taking withdrawals, poor market performance can have a lasting impact because you’re selling investments during downturns.

How do taxes impact retirement withdrawals?
Withdrawals from pre-tax accounts like traditional IRAs and 401(k)s are taxable, so you may need to take out more than your net spending needs. For instance, needing $80,000 after tax could require withdrawing around $90,000 or more before tax.

What can help make retirement savings last longer?
Strategies like moderating withdrawal rates, maintaining some stock exposure for growth, and factoring in Social Security or pension income can extend portfolio longevity. Regularly reviewing your plan helps ensure it stays aligned with your goals and spending needs.

The Risk of Outliving Your Retirement Savings

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

When you imagine retirement, perhaps you see time with family, travel, golf, and more time for your hobbies. What many don’t realize is how two forces—longer lifespans and rising costs—can quietly erode your nest egg while you're still enjoying those moments. Living longer is a blessing, but it means your savings must stretch further. And inflation, especially for healthcare and long-term care, can quietly chip away at your financial comfort over the years. Let’s explore how these factors shape your retirement picture—and what you can do about it.

What you’ll learn in this article:

• How life expectancy is evolving, and how it’s increasing the need for more retirement savings

• The impact of inflation on a retiree's expenses over the long term

• How inflation on specific items like healthcare and long-term care are running at much higher rates than the general rate of inflation

• How retirees can test their retirement projections to ensure that they are properly accounting for inflation and life expectancy

• How pensions can be both a blessing and a curse

1. Living Longer: A Good But Bad Thing

The Social Security life tables estimate that a 65-year-old male in 2025 is expected to live another 21.6 years (reaching about age 86.6), while a 65-year-old female can expect about 24.1 more years, extending to around 89.1 (ssa.gov).

That has consequences:

• If a retiree spends $60,000 per year, a male might need 21.6 × $60,000 = $1,296,000 in total

• A female might need 24.1 × $60,000 = $1,446,000
  These totals—before considering inflation—highlight how long-term retirement can quickly become a multi-million-dollar endeavor.

2. Inflation: The Silent Retirement Thief

Inflation steadily erodes the real value of money. Over the past 20 years, average annual inflation has held near 3%. Let’s model how inflation reshapes $60,000 in annual after-tax expenses for a 65 year-old retiree over time with a 3% annual increase:

• At age 80 (15 years after retirement):
  $60,000 × (1.03)^15 ≈ $93,068 per year

• At age 90 (25 years after retirement):
  $60,000 × (1.03)^25 ≈ $127,278 per year

In just the first 15 years, this retiree’s annual expenses increased by $33,068 per year, a 55% increase. 

3. The Hidden Risk of Relying Too Much on Pensions

One of the most common places retirees feel this pinch is with pensions. Most pensions provide a fixed monthly amount that does not rise meaningfully with inflation. That can create a false sense of security in the early years of retirement.

Example:

• A married couple has after-tax expenses of 70,000 per year.

• They receive $50,000 from pensions and $30,000 from Social Security.

• At retirement, their $80,000 of income in enough to meet their $70,000 in after-tax annual expenses.

Here’s the problem:

• The $50,000 pension payment will not increase.

• Their expenses, however, will rise with inflation. After 15 years at 3% inflation, those same expenses could total about $109,000 per year.

By then, their combined pension and Social Security will fall well short, forcing them to dip heavily into savings—or cut back their lifestyle.

This illustrates why failing to account for inflation often means retirees “feel fine” at first, only to face an unexpected shortfall 10–15 years later.

4. Healthcare & Long-term Care Expenses

While the general rise in expenses by 3% per year would seem challenging enough, there are two categories of expenses that have been rising by much more than 3% per year for the past decade: healthcare and long-term care.  Since healthcare often becomes a large expense for individuals 65 year of age and older, it’s created additional pressure on the retirement funding gap.

• Prescription drugs shot up nearly 40% over the past decade, outpacing overall inflation (~32.5%) (nypost.com).

• Overall healthcare spending jumped 7.5% from 2022 to 2023, reaching $4.9 trillion—well above historical averages (healthsystemtracker.org).

• In-home long-term care is also hefty—median rates for a home health aide have skyrocketed, with 24-hour care nearing $290,000 annually in some cases (wsj.com).

5. The Solution: Projections That Embrace Uncertainty

When retirement may stretch 20+ years, and inflation isn’t uniform across expense categories, guessing leads to risk. A projection-driven strategy helps you:

• Model life expectancy: living until age 85 – 95 (depending on family longevity)

• Incorporate general inflation (3%) on your expenses within your retirement projections

• Determine if you have enough assets to retire comfortably

Whether your plan shows a wide cushion or flags a potential shortfall, you’ll make confident decisions—about savings, investments, expense reduction, or part-time work—instead of crossing your fingers.

6. Working with a Fee-Based Financial Planner Can Help

Here’s the bottom line: Living longer is wonderful, but it demands more planning in the retirement years as inflation, taxes, life expectancy, and long-term care risks continue to create larger funding gaps for retirees. 

A fee-based financial planner can help you run personalized retirement projections, taking these variables into account—so you retire with confidence. And if the real world turns out kinder than your model, that's a bonus. If you would like to learn more about our fee-based retirement planning services, please feel free to visit our website at: Greenbush Financial Group – Financial Planning.

Learn more about our financial planning services here.

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 (FAQs)

How does longer life expectancy affect retirement planning?
People are living well into their 80s and 90s, meaning retirement savings must cover 20–30 years or more. The longer you live, the more years your portfolio must fund, increasing the importance of conservative withdrawal rates and sustainable planning.

Why is inflation such a big risk for retirees?
Inflation steadily raises the cost of living, reducing the purchasing power of fixed income sources like pensions. Even at a modest 3% inflation rate, living expenses can rise more than 50% over 15 years, requiring larger withdrawals from savings.

How does inflation impact pensions and fixed income sources?
Most pensions don’t increase with inflation, so their purchasing power declines over time. A pension that comfortably covers expenses at retirement may fall short within 10–15 years as costs rise, forcing retirees to draw more from savings.

Why are healthcare and long-term care costs such a concern in retirement?
Healthcare and long-term care expenses have been increasing faster than general inflation. Costs for prescriptions, medical services, and in-home care can grow at 5–7% annually, putting additional strain on retirement savings.

How can retirees plan for inflation and longevity risk?
Running detailed retirement projections that factor in inflation, longer life expectancy, and varying rates of return helps reveal whether savings are sufficient. This approach allows retirees to make informed decisions about spending, investing, and lifestyle adjustments.

When should retirees work with a financial planner?
Consulting a fee-based financial planner early in the retirement planning process can help test different inflation and longevity scenarios. A planner can build customized projections and ensure your plan remains flexible as costs and life circumstances evolve.

How Much Money Will You Need to Retire Comfortably?

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

As a Certified Financial Planner who runs retirement projections on a daily basis, one of the most common questions I get is: “How much money do I need to retire?”

The answer may surprise you—because there’s no universal number. The amount you’ll need depends largely on one thing: your expenses.

In this article, we’ll walk through:

• Why expenses are the biggest driver of how much you need to retire

• How inflation impacts retirement spending

• Why the type of account you own matters

• The importance of factoring in all your income sources

• A quick 60-second way to test your own retirement readiness

Expenses: The Biggest Driver

When you ask, “Can I retire comfortably?”, the first question to answer is: How much do you spend each year?

For example:

• If your expenses are $40,000 per year, then $500,000 in retirement savings could potentially be enough—especially if you’re supplementing withdrawals with Social Security or a pension.

• But if your expenses are $90,000 per year, that same $500,000 likely won’t stretch nearly as far.

Your retirement lifestyle drives your retirement savings need. Someone with modest expenses may not need millions to retire, while someone with higher spending will require significantly more.

Don’t Forget About Inflation

It’s not just today’s expenses you need to plan for—it’s tomorrow’s too. Inflation quietly eats away at your purchasing power, making your cost of living higher every single year.

Here’s an example:

• At age 65, your expenses are $60,000 per year.

• If expenses rise at 3% annually, by age 80 they’ll be roughly $93,700 per year.

That’s a 50% increase in just 15 years—and you’ll need your retirement assets to keep up.

This is one of the hardest factors for individuals to quantify without financial planning software. Inflation not only increases expenses, but it changes your withdrawal rate from investments, which can impact how long your money lasts.

The Type of Account Matters

Not all retirement accounts are created equal. The type of retirement/investment accounts you own has a big impact on whether you can retire comfortably.

• Pre-tax accounts (401k, traditional IRA): Every dollar withdrawn is taxed as ordinary income. A $1,000,000 account might really be worth closer to $700,000 after taxes.

• Roth accounts: Withdrawals are tax-free, making these extremely valuable in retirement.

• After-tax brokerage accounts: Withdrawals often receive more favorable capital gains treatment, so the tax drag can be lighter compared to pre-tax accounts.

• Cash: Offers liquidity but typically earns little return, making it best for short-term expenses.

In short: Roth and after-tax brokerage accounts often provide more after-tax value compared to pre-tax accounts.

Factor in All Your Income Sources

Getting a general idea of your retirement income picture is key. This means adding up:

• Social Security benefits

• Pensions

• Investment income (dividends, interest, etc.)

• Part-time income in retirement

• Withdrawals from retirement accounts

Once you total these income sources, you’ll need to apply the tax impact. Only then can you compare your after-tax income against your after-tax expenses (adjusted for inflation each year) to see if there’s a gap.

This is exactly how financial planners build retirement projections to determine sustainability.

Find Out If You Can Retire in 60 Seconds

Curious if you’re on track? We’ve built a 60-second retirement check-up that can help you quickly see if you have enough to retire.

Bottom line: There’s no magic retirement number. The amount you need depends on your expenses, inflation, account types, and income sources. By running the numbers—and stress-testing them with a financial planner—you can gain the confidence to know whether you’re truly ready to retire comfortably.

Partner with a Fee-Based Financial Planner to Build Your Retirement Plan

While rules of thumb and calculators can provide a helpful starting point, everyone’s retirement picture looks different. Your income needs, lifestyle goals, and unique financial situation will ultimately determine how much you need to retire comfortably.

Working with a fee-based financial planner can help take the guesswork out of retirement planning. A planner will create a customized strategy that factors in your retirement expenses, investments, Social Security, healthcare, and tax planning—so you know exactly where you stand and what adjustments to make.

If you’d like to explore your own numbers and build a retirement roadmap, we’d love to help. Learn more about our financial planning services here.

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 (FAQs)

How much money do I need to retire?
There’s no single number that fits everyone—the right amount depends primarily on your annual expenses, lifestyle, and income sources. A retiree spending $40,000 per year will need far less savings than someone spending $90,000.

Why are expenses the most important factor in retirement planning?
Your spending habits determine how much income your portfolio must generate. Knowing your annual expenses helps estimate your withdrawal needs, which directly drives how large your retirement savings must be.

How does inflation affect retirement spending?
Inflation gradually increases the cost of living, reducing the purchasing power of your money. At a 3% inflation rate, $60,000 in annual expenses today could rise to about $94,000 in 15 years, meaning your savings must grow to keep pace.

How does the type of retirement account impact how much you need to save?
Withdrawals from pre-tax accounts like 401(k)s and traditional IRAs are taxable, so you may need to save more to cover taxes. Roth IRAs and brokerage accounts often provide more after-tax value, since withdrawals may be tax-free or taxed at lower rates.

What income sources should I include when estimating retirement readiness?
Include all sources such as Social Security, pensions, dividends, part-time income, and withdrawals from savings. Comparing your total after-tax income against your inflation-adjusted expenses helps reveal whether you’re financially ready to retire.

How can I quickly estimate if I’m on track for retirement?
A simple way is to compare your projected annual expenses (adjusted for inflation) with your expected retirement income. Working with a fee-based financial planner can oftern provide a more comprehensive approach to answering the question “Do I have enough to retire?”

How to Minimize Taxes on Social Security

The IRS determines how much of your Social Security is taxable using your provisional income, which includes:

• Your adjusted gross income (AGI)

• Plus any tax-exempt interest (such as from municipal bonds)

• Plus 50% of your annual Social Security benefit

Example:

If your AGI is $20,000, you receive $5,000 in municipal bond interest, and your annual Social Security benefit is $30,000, your provisional income would be $40,000 — putting you in the 50% taxable range if you file your taxes married filing joint.

Based on this calculation, here are the income thresholds that determine how much of your benefit is taxable:

• Single filers

• $25,000 to $34,000 in provisional income: up to 50% of benefits may be taxable

• Over $34,000: up to 85% may be taxable

• Married filing jointly

• $32,000 to $44,000 in provisional income: up to 50% of benefits may be taxable

• Over $44,000: up to 85% may be taxable

Note: This doesn’t mean your benefits are taxed at 85%. Rather, it means up to 85% of your benefit amount is included in your taxable income and taxed at your ordinary income tax rate.

Strategies to Reduce or Eliminate Social Security Taxes

1.  Delay Taking Social Security

Delaying benefits until age 70 not only increases your monthly payout, but also creates an income “gap window” where you can take advantage of other planning opportunities — such as Roth conversions — before your benefit starts impacting your tax return.

2. Draw Down Pre-Tax Assets Before Claiming

In the early years of retirement, before beginning Social Security, consider withdrawing from traditional IRAs or 401(k)s. These distributions are taxable now, but doing so may reduce your future required minimum distributions (RMDs), which in turn lowers taxable income once you begin collecting Social Security.

3. Consider Roth Conversions

Similar to item 2, Roth conversions allow you to shift money from a traditional IRA to a Roth IRA, paying tax now in order to avoid higher taxes later.  By shifting money from a Traditioanl IRA to a Roth IRA prior to starting your social security benefit, it may keep you in lower tax brackets in future years especially when RMDs (requirement minimum distribution) begin at age 73 or 75. Also, once in a Roth IRA, future withdrawals are tax-free and do not count toward provisional income — helping keep more of your Social Security sheltered from taxation.

Note: Keep in mind that conversions count as income in the year they’re done — and can impact provisional income temporarily.

4. Use Qualified Charitable Distributions (QCDs)

QCDs allow individuals age 70½ or older to donate up to $100,000 per year directly from an IRA to a qualified charity. These donations count toward your RMD but are excluded from taxable income.

Clarification: The $100,000 QCD limit applies per individual IRA owner — so a married couple could potentially exclude up to $200,000 in charitable distributions if each spouse qualifies.

This is another way to reduce the size of a pre-tax retirement account balance which counts toward the RMD calculation.  Also since the QCD counts toward the RMD amount it can reduce your taxable income, potentially making less of your Social Security benefit subject to taxation at the federal level.

Example:  Sue is 78 and is required to take RMD from her traditional IRA of $10,000.  Sue decides to process a QCD from her IRA sending $10,000 to her church.  She has met the RMD requirement but the $10,000 does not represent taxable income to Sue.  Sue’s provision income as a single filer is $30,000 making her Social Security benefit 50% taxable. If she did not process the QCD, that would have raised her provisional income to $40,000 making 85% of her social security benefit subject to taxation.

5. Be Cautious With Tax-Free Interest

Although interest from municipal bonds is federally tax-exempt and potentially state income tax, it is included in the provisional income calculation. If your portfolio includes significant tax-free bond income, it could unintentionally push you into the 50% or 85% taxable Social Security range.

Final Thoughts

Social Security is a cornerstone of retirement income, but managing how it’s taxed is just as important as deciding when to claim. The key to minimizing Social Security taxes is planning around when you claim benefits and where your income is coming from. Strategies like Roth conversions, QCDs, and pre-Social Security IRA withdrawals can all work together to help you keep more of your benefits.

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 (FAQs):

How does the IRS determine how much of my Social Security is taxable?
The IRS uses your “provisional income” to determine taxation, which includes your adjusted gross income (AGI), tax-exempt interest, and 50% of your annual Social Security benefits. Depending on your filing status and total provisional income, up to 50% or 85% of your Social Security benefits may be taxable.

What are the income thresholds for Social Security taxation?
For single filers, provisional income between $25,000 and $34,000 makes up to 50% of benefits taxable, and income above $34,000 makes up to 85% taxable. For married couples filing jointly, the 50% range applies between $32,000 and $44,000, with anything above $44,000 potentially making up to 85% taxable.

Does “85% taxable” mean I pay 85% tax on my benefits?
No. It means that up to 85% of your Social Security benefit is included in your taxable income and taxed at your ordinary income tax rate. You’re not taxed at 85%; rather, that portion is subject to your regular tax bracket.

How can I reduce or avoid taxes on my Social Security benefits?
You can lower taxable income by delaying Social Security, making Roth conversions before claiming benefits, or drawing down pre-tax accounts early in retirement. Using qualified charitable distributions (QCDs) from IRAs after age 70½ can also reduce taxable income and lower how much of your benefit is taxed.

How do Qualified Charitable Distributions (QCDs) affect Social Security taxation?
QCDs let you donate up to $100,000 per year directly from an IRA to a charity, satisfying required minimum distributions (RMDs) without increasing taxable income. By lowering your income, QCDs can reduce the portion of your Social Security benefits subject to tax.

Does tax-free interest from municipal bonds affect Social Security taxation?
Yes. Although municipal bond interest is exempt from federal income tax, it is included in the provisional income formula. Large amounts of tax-free interest can unintentionally increase the taxable portion of your Social Security benefits.