We talk about net worth like it’s the ultimate scoreboard.

Hit a certain number and you’ve “made it.” Track it long enough, and you’ll feel secure. Watch it grow, and everything should fall into place.

But here’s what I see in real life, especially with high-earning professionals and business owners:

You can have an impressive net worth on paper and still feel financially constrained.

That disconnect matters.

Because the goal isn’t to look wealthy. The goal is to have control, flexibility, and options in your life. The number you should be tracking is liquid net worth.

What Net Worth Leaves Out

You can build a strong net worth through a combination of:

• Home equity

• Retirement accounts

• Business value

• Investment accounts

All of those are valuable. All of them play a role in building long-term wealth.

But they don’t all function the same way.

Some assets are designed for long-term growth. Some are designed to generate income. Some are easier to access than others. And some come with tax considerations that influence when and how you use them.

I work with women who have built incredible careers, successful businesses, and substantial assets. On paper, everything looks exactly how it “should.”

But when we dig deeper, a lot of their wealth is tied up in places that are not easily accessible.

So when life happens, or opportunities come up, or they simply want more flexibility, they feel stuck.

So while your net worth might look healthy, the real question is:

How flexible is your wealth?

Where This Shows Up: Your Home

Home ownership is one of the most common places this imbalance happens.

Over time, it’s natural to invest more into your home. You upgrade, renovate, and build equity. You may even prioritize paying down the mortgage faster.

And again, none of that is inherently wrong.

But your home is an illiquid asset.

It contributes to your net worth, but it doesn’t easily convert into usable dollars without a sale, a loan, or a strategic plan. That process takes time, comes with costs, and isn’t something you want to rely on for day-to-day flexibility or retirement income.

If too much of your wealth ends up concentrated in your home, you may find yourself in a position where your balance sheet looks strong, but your options feel limited.

You can’t sell off half your kitchen to fund retirement.
You can’t tap your roof to cover a gap in income.
You can’t quickly convert your backyard into cash without a process, costs, and time.

You need your wealth working in ways that are more adaptable than that.

The Hidden Risk

When too much of your wealth is concentrated in illiquid assets like real estate or a business, you create a different kind of risk.

Not market risk.

Lifestyle risk.

You may find yourself:

• Delaying retirement because your money isn’t accessible

• Passing on opportunities because cash is tight

• Feeling pressure to keep earning at a high level just to maintain your lifestyle

That’s not the outcome you’re working this hard for.

Retirement Doesn’t Care About Your Zestimate

This is where the conversation becomes even more important.

I often see women who have:

• Significant home equity

• Strong retirement accounts

• Valuable businesses

But very little in liquid, flexible assets outside of those buckets.

And then the question becomes:

“How do I actually use this wealth?”

Because retirement isn’t funded by your net worth.

It’s funded by cash flow and accessible assets.

If all of your money is tied up in your home or locked away in accounts you can’t easily access, you don’t have a true retirement strategy. You have a collection of assets that may or may not work together when you need them to.

Retirement Accounts Are Part of the Solution

This is where it’s important to be clear: retirement accounts are not the problem. They are a critical part of building long-term, tax-efficient wealth.

Accounts like 401(k)s and IRAs provide:

• Tax advantages

• Long-term growth potential

• A structured way to build for the future

They are absolutely part of your liquid wealth strategy.

But they are one piece of a broader picture.

Because while retirement accounts are accessible with planning, they are designed with specific time horizons and tax rules in mind. That’s a benefit, not a limitation, but it does mean you don’t want all of your flexibility tied to one type of account.

What Liquid Wealth Really Means

Liquid wealth isn’t just cash sitting in a bank account.

It includes:

• Retirement accounts such as 401(k)s, Roth IRAs, SIMPLE IRAs, SEP IRAs, etc.

• Taxable investment accounts in an Individual, Joint, or Trust name

• Other investments that can be accessed or repositioned with a strategy

The key is that these assets can be used to support your life over time, whether that’s through withdrawals, income, or strategic reallocation.

What matters most is not just having these assets, but how they work together.

Flexibility Is the Real Goal

When I talk about flexibility, I’m talking about two things.

1. Access to Funds When You Need Them

This is where taxable investment accounts play a powerful role. They allow you to:

• Make decisions without urgency or pressure

• Take advantage of opportunities when they arise

• Navigate transitions in your business or career

• Create income when you need it

They act as a bridge between your day-to-day life and your long-term investments.

2. Tax Flexibility Over Time

This is where true planning comes in.

A well-structured portfolio doesn’t just grow wealth. It gives you options in how you use it.

That means building assets across:

• Pre-tax accounts

• Roth accounts

• Taxable accounts

Each one is taxed differently. Each one gives you different levers to pull in retirement or during high-income years.

When you have all three, you’re not locked into one strategy. You can make decisions based on what’s most efficient in the moment.

That’s where real control comes from.

Bringing It All Together

A strong financial life isn’t built by maximizing one category of assets.

It’s built by creating balance across:

• Illiquid assets like your home or business

• Tax-advantaged retirement accounts

• Taxable investment accounts that provide flexibility

Each one serves a purpose.

Your home provides stability and long-term value.
Your retirement accounts provide tax-efficient growth.
Your taxable investments provide access and adaptability.

When all three are working together, your wealth becomes more than a number. It becomes a tool you can actually use.

A Better Way to Think About Wealth

Instead of focusing only on your net worth, start thinking in terms of structure.

Ask yourself:

• Do I have access to funds if I need them?

• Am I building flexibility into my plan?

• Do I have options when it comes to taxes in the future?

Because ultimately:

Wealth isn’t just about accumulation. It’s about coordination.

Final Thought

You’ve worked too hard to build something meaningful to have it tied up in places that limit your freedom.

Yes, grow your net worth.

But don’t stop there.

Build liquidity alongside it. Build flexibility into your plan. Build a financial life that gives you options, not just a number on a statement.

Because you can’t retire on a spreadsheet.

But you can retire on a strategy that gives you access to liquidity and flexibility.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

In 2025, it was one of the best-performing assets, up nearly 65%, its strongest run in decades. And yes, that kind of return gets attention, especially when it wasn’t driven by the usual tech darlings.

But strong performance doesn’t automatically make something a great investment. And gold, in my view, still isn’t special.

Here’s why.

Unlike stocks, bonds, or real estate, gold doesn’t do anything. It doesn’t produce income, it doesn’t grow earnings, and it doesn’t generate cash flow. Its value depends almost entirely on what someone else is willing to pay for it in the future. Warren Buffett famously summed this up by saying you could own all the gold in the world, and what would you do… “climb up on top of it…polish it…stare at it,” but it still wouldn’t produce anything.

That lack of intrinsic value makes pricing gold tricky and unpredictable. There’s no earnings report to analyze, no yield to compare, no fundamental way to decide whether it’s cheap or expensive. You’re relying on sentiment, fear, and momentum.

“All you are doing when you buy [gold] is that you’re hoping that somebody else a year from now, or five years from now, will pay you more to own something that, again, can’t do anything,” Buffett added.

Inflation Hedge. Not so much.

Gold is also often described as an inflation hedge, but history doesn’t consistently back that up. Yes, it worked well in the 1970s. But for decades after, gold went nowhere. Even more recently, during the inflation spike of 2022, gold finished the year roughly flat. In one of the worst inflation years in a generation, it didn’t meaningfully protect purchasing power.

So why did gold do so well in 2025?

A handful of things lined up at the same time. Interest rates fell, making income-producing assets less attractive relative to gold. Global uncertainty pushed investors toward perceived “safe havens.” Central banks increased gold reserves. Concerns about government spending and currency debasement resurfaced. And once gold started rising, momentum pulled more investors in.

That combination created a near-perfect environment. But those conditions aren’t guaranteed to stick around.

The bigger risk now is behavioral. Chasing an asset after a massive run can be dangerous, especially one without cash flow or fundamentals to support its price. Past performance feels comforting, but it doesn’t protect future returns.

The good news?

You don’t need gold to build wealth. Diversified portfolios built around productive assets have done that job well for decades. There are many ways to invest thoughtfully without jumping into what’s already had its moment.

As with any single investment, we don’t want it to become a concentrated asset that increases your risk and reliance on its continued performance. Gold had a great year. That doesn’t mean it deserves a starring role in your long-term plan.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

Unlike a traditional employer-sponsored 401(k), a Solo 401(k) is designed specifically for self-employed individuals and business owners with no full-time employees (other than a spouse). That means you get to tap into both employer and employee contribution limits, and — in many cases — save far more for retirement than you would as a W-2 employee alone.

Let’s walk through the basics in plain English, including the 2026 numbers and a simple example to show how it all works.

2026 Solo 401(k) Contribution Limits

For 2026, the IRS allows you to make contributions to a Solo 401(k) in four ways:

1. Employee Elective Deferral

• Up to $24,500 in either pre-tax or Roth 401(k) accounts.

• This is the same contribution limit that employees get in a standard 401(k).

2. Employer Profit-Sharing Contribution

• Sole Proprietor/Partnership: equal to 20% of net income (after deducting half of the self-employment tax)

• S-Corporation or C-Corporation: up to 25% of W-2 wages

• Total combined (employee + employer) cannot exceed $72,000 (before catch-up)

3. Catch-Up Contribution (Age 50+)

• If age 50 or older, you can add an extra $8,000

• Or $11,250 “Super” catch-up if ages 60-63

What this means in practice is that a Solo 401(k) lets you contribute significantly more than the typical employee plan, especially when you combine all components.

New Rule for Mandatory Roth Solo 401k Catch-Up Contributions

Starting in 2026, participants in solo 401(k) plans who wish to make catch-up contributions must make them to the Roth accounts within the 401(k) plan if wages on 2025 W-2 (Box 3) exceeded $150,000.

4. Voluntary After-Tax Contributions

• Additional contributions are allowed up to 100% of your self-employment compensation, reduced by any pre-tax or Roth employee contributions or salary deferrals you have already made into the plan (#1 + #2 above)

Total potential for 2026:
✔ $72,000 in combined employee + employer + voluntary after tax contributions, or

✔ $80,000 (age 50+), or

✔ $83,250 (age 60-63)

That’s up to $72,000 - $83,250 in total tax-advantaged savings in a single year; much more than a typical employee can contribute on their own through salary deferrals alone.

Note that if you also contribute to another employer’s 401(k) through a W-2 job, the employee portion of the contributions are aggregated across all defined contribution retirement plans.

The Mega Backdoor Roth Strategy (Voluntary After-Tax Contributions)

Here’s where the Solo 401(k) gets really interesting.

Because a Solo 401(k) is flexible, your plan may allow for voluntary after-tax contributions, meaning you can contribute beyond the standard limits employee contributions described above, up to the overall annual limit ($72,000 or $80,000/$83,250 with catch-up). These after-tax dollars can then be converted to a Roth account inside the Solo 401(k) or rolled to a Roth IRA.

This is often called the mega backdoor Roth.

Why is this a big deal?

• It lets you put far more money into tax-free (Roth) space than the Roth IRA limit allows ($7,500 or $8,600 catch-up in 2026).

• You’re effectively supercharging your Roth savings using your business plan.

• Once the money is in a Roth, it continues to grow tax-free.

• It can then be withdrawn tax-free in retirement (as long as IRS rules are followed).

That beats trying to save more in a taxable account with less tax efficiency.

Solo 401(k) Contribution Example — Simple Math

Let’s say you’re a solo business owner taxed as an S-Corp under age 50 and you earn $150,000 of W-2 income in 2026.

Here’s how much you could contribute:

Employee Salary Deferral

Max out: $24,500

Employer Profit-Sharing

Up to 25% of W-2 compensation:
25% × $150,000 = $37,500

Total so far:
$24,500 + $37,500 = $62,000

Now, suppose your plan also allows after-tax voluntary contributions up to the total annual limit ($72,000). You could add:

After-Tax Contribution

$72,000 – $62,000 = $10,000

Then, you convert that $10,000 to Roth (mega backdoor Roth). Now your Roth bucket increases significantly beyond the normal Roth IRA limit and grows tax-free.

If you’re age 50 or older, you could also add the $8,000 catch-up, or $11,250 “Super” catch-up if ages 60-63, to this number, pushing your total contribution even higher.

This kind of strategic planning allows:

• Huge tax-advantaged savings

• Significant Roth accumulation

• Faster growth with tax flexibility in retirement

Investing Your Solo 401(k) Contributions

A Solo 401(k) isn’t just about the contribution limits — it’s also about how those dollars grow.

Once contributions are made (whether pre-tax or Roth), you typically invest them in:

• Low-cost index funds

• Diversified ETFs

• Stocks, bonds, or other instruments your plan allows

The key is this: you should invest, not let it sit in cash. Time in the market beats timing the market. Compounding growth over years is what turns contributions into retirement security, and becomes a very tax-efficient way to transition business wealth into personal wealth.

Remember, with a Roth or mega backdoor Roth component, future earnings grow tax-free, which is a huge advantage.

Contribution Dates and Deadlines for a Solo 401(k)

• Sole Proprietorship: the annual solo 401k contribution deadline is April 15, or October 15 if tax return by extension

• LLC taxed as an S-Corporation: the annual solo 401k contribution deadline is March 15, or September 16 by extension

• LLC taxed as a Partnership: the annual solo401k contribution deadline is March 15, or September 15 by extension

• Partnership: the annual solo 401k contribution deadline is March 15, or September 15 by extension

• S-Corporation: the annual solo 401k contribution deadline is March 15, or September 15 by extension

• C-Corporation: the annual solo 401k contribution deadline is April 15, or October 15 by extension

Why a Solo 401(k) Is Such a Smart Option

Solo 401(k) plans are ideal for:

• Sole proprietors

• Single-member LLCs

• Independent contractors

• LLC taxed as an S-Corp

• LLC taxed as a Partnership

• Business owners with no full-time employees (other than a spouse)

They offer:

• High contribution limits

• Significant flexibility (including Roth and after-tax options)

• Funding flexibility that can change based on your profitability

• Ability to save more than traditional employee plans

• Powerful tax planning opportunities that allow you to build pre-tax or Roth and after-tax buckets based on your personal retirement planning goals and needs

By combining employee deferrals, employer contributions, and after-tax contributions that convert to Roth, you can accelerate wealth building far beyond what many traditional plans allow.

How a Fiduciary Financial Advisor Can Help

Figuring out all these numbers, choosing investments, and coordinating tax strategy can get complex — especially if you want to maximize every advantage.

A fiduciary financial advisor:

• Helps ensure you’re using the right contributions and tax strategies

• Calculates how much to contribute while minimizing tax now and later

• Coordinates with your tax professional and retirement goals

• Helps optimize growth over decades, not just for the current year

The difference between saving and strategically saving can be hundreds of thousands, or even millions, over a lifetime.

Bottom Line

A Solo 401(k) is more than just a retirement account.
It’s one of the most flexible, high-yield retirement tools available to business owners.

With proper planning and execution, especially using strategies like the mega backdoor Roth, it can supercharge your savings, reduce lifetime taxes, and give you confidence that your retirement plan is working as hard as you are.

If you’re self-employed and haven’t looked at Solo 401(k) options yet, this may be one of the most impactful financial moves you make. And if you want help figuring out how it fits into your larger financial picture, that’s exactly what I’m here for.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

Let’s unpack what makes HSAs so powerful, and how you can take full advantage of them.

1. The Triple Tax Advantage

HSAs are the only account that offers three tax benefits at once:

✔️ Tax-free contributions
When you put money into an HSA, you reduce your taxable income right away — in the same way a traditional 401(k) contribution does.

✔️ Tax-free growth
Once in the account, your money grows just like an investment account — dividends, interest, and capital gains are never taxed.

✔️ Tax-free withdrawals
If you use the money for qualified medical expenses, you don’t pay tax at all when you take it out.

This three-way tax benefit is rare and incredibly valuable. Some financial planners call HSAs the “Swiss Army knife” of tax-advantaged accounts, because they can be used in multiple ways over a lifetime.

2. Updated 2026 Contribution Limits

Every year, the IRS adjusts HSA contribution limits based on inflation. For 2026:

• ⚕️ $4,400 — Individual coverage

• 👨‍👩‍👧 $8,750 — Family coverage

• 🎉 +$1,000 catch-up for age 55 and older

That catch-up amount is in addition to the standard limit, so someone 55+ with family coverage could contribute up to $9,750 total.

To be eligible to contribute, you must be enrolled in a qualified high-deductible health plan (HDHP), typically meaning higher out-of-pocket costs but lower premiums. That’s the trade-off that opens the door to these tax advantages.

3. Investing vs Saving: The Math Behind Growth

Too many people keep their HSA cash parked in a savings account earning almost nothing. This defeats the HSA’s real power: long-term growth.

Think of your HSA like a retirement account with an extra tax edge:

• If you contribute $4,400 this year and leave it in cash, you might earn minimal interest.

• If you invest it in low-cost diversified funds, that same $4,400 could grow significantly over decades, just like a 401(k) or IRA, but never be taxed on the growth if spent on qualified medical expenses.

Since medical costs tend to rise faster than inflation, that invested balance becomes more valuable over time. Treating your HSA like a true investment account instead of a short-term bucket can dramatically boost your long-term wealth.

4. The Reimbursement Strategy: How to Create Tax-Free Income Later

Here’s where HSAs get really clever.

You can pay medical expenses out-of-pocket today and reimburse yourself from your HSA years later as long as you keep your receipts. There’s no deadline on reimbursement.

For example:

• Pay a qualified medical bill with your personal checking account in age 40.

• Keep the receipt.

• In age 60, after your HSA has grown significantly, reimburse yourself from the HSA tax-free.

This lets the HSA serve as a tax-free retirement account for healthcare or, used strategically, as tax-free income in retirement. That’s powerful planning most people overlook.

5. Retirement Rules After Age 65

Once you hit age 65, HSAs start looking even more like a retirement account.

• You can use HSA funds for non-medical expenses without the 20% penalty.

• You’ll pay income tax if the expense isn’t qualified, just like a traditional IRA.

This means your HSA becomes a flexible tool:

• Use it tax-free for medical expenses

• Use it taxed (but penalty-free) for other retirement expenses

That flexibility makes HSAs one of the most versatile building blocks in a long-term financial plan.

6. How to Select a Good HSA Provider

If you get to choose where to open your HSA, treat it like any other investment decision: look beyond brand names and ask:

✔️ Investment Options

Not all HSA custodians offer investment choices. Look for one with low-cost funds or ETFs that let your balance grow. Better yet, if you don’t plan to use it in the short term, find a provider that doesn’t require you to keep a minimum cash balance.

✔️ Fees

Monthly maintenance, investment fees, transaction fees, they add up. Seek providers with minimal fee drag.

✔️ Ease of Use

Online interfaces, mobile apps, clear reporting, and simple reimbursement tools make HSAs easier to manage, and more likely to be used fully.

✔️ Integration with Your Planning

The best HSAs play nicely with the rest of your financial picture: retirement accounts, taxable accounts, and your tax strategy.

Final Thoughts: Don’t Miss This Opportunity

HSAs are one of those tools that sound simple but can transform your financial life when used strategically. They give you:

• Immediate tax savings

• Decades of tax-free growth

• Tax-free withdrawals for healthcare

• Flexible retirement income options

And with 2026 limits rising slightly, there’s more opportunity than ever to build long-term tax-efficient wealth.

If you’re not currently contributing the maximum, or haven’t explored investing your HSA balance, consider talking with a planner. The difference between saving and strategically growing your HSA can add up in a meaningful way over time.

Want help evaluating your HSA strategy as part of your overall retirement plan? I’m here to help you make it work smarter, not harder.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

Most people think retirement planning is about one big question:
“How do I pay the least in taxes right now?”

That’s a good question… but it’s not the right one.

The better question is:
“How do I give my future self the most flexibility?”

Because retirement isn’t a single year or a single tax return. It’s a long season of life, full of unknowns, curve balls, and changing rules. And the people who feel the most confident in retirement aren’t the ones who guessed the tax code perfectly; they’re the ones who built options.

Think of tax flexibility like packing for a long trip. If you only bring flip flops because the forecast looks warm today, you’re in trouble when the weather changes. A smart plan brings layers.

The Four Tax Buckets (Your Retirement Wardrobe)

When we talk about tax flexibility, we’re really talking about where your money lives. There are four main “tax buckets,” and each one behaves differently when it’s time to spend.

1. Pre-Tax Accounts (Traditional 401(k), Traditional IRA)

This is the “I’ll deal with taxes later” bucket.

You get a tax break today when you contribute, which can feel great during your high-income years. The tradeoff is that every dollar you take out in retirement is taxed as ordinary income.

This is like deferring the check at a restaurant and paying with cards. You enjoyed the meal, but eventually the bill comes, and it comes with tax.

Why it matters:

• These accounts often grow the largest because of years of contributions and compounding

• Required Minimum Distributions (RMDs) later in life can force income you may not need

• Large balances can push you into higher tax brackets at the worst possible time

Pre-tax accounts are powerful, but too much of your wealth here can limit your flexibility later.

2. Roth Accounts (Roth IRA, Roth 401(k))

This is the “pay taxes now, enjoy later” bucket.

You pay the tax upfront, but future growth and withdrawals (if rules are followed) are tax-free.

This is buying a lifetime pass. You pay once, and then you walk through the gate without pulling out your wallet again.

Why it matters:

• Tax-free income in retirement is incredibly valuable

• Roth accounts can help manage tax brackets year by year

• They don’t have RMDs during your lifetime

Roth money gives you control. And control is priceless when tax laws change or surprises show up.

3. Taxable Brokerage Accounts

This is the most misunderstood and most powerful bucket.

Yes, it’s taxable. But it’s also flexible, accessible, and often underutilized.

This is your financial Swiss Army knife. It’s not perfect at everything, but it works in almost any situation.

Why it matters:

• No age or income restrictions on access

• Favorable long-term capital gains tax rates

• Can fund early retirement, sabbaticals, or career changes

• Helps bridge the gap before traditional retirement ages

And no, this money does not need to sit in cash earning next to nothing. After emergency funds and short-term needs are covered, taxable money should usually be invested for long-term growth.

This is the bucket that creates additional freedom before age 59½.

4. Health Savings Accounts (HSAs)

The triple tax advantage unicorn of the tax world.

Contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.

This is the secret bonus level most people forget to play.

Why it matters:

• Healthcare is one of the largest expenses in retirement

• HSAs can function like a stealth retirement account

• After age 65, withdrawals for non-medical expenses are taxed like a traditional IRA

Used correctly, HSAs can be one of the most efficient tools in your entire plan.

Why “What Makes Sense Today” Isn’t Enough

Tax planning isn’t static. What works at 40 may not work at 60. And what works while married may look very different if life throws a curve ball.

Some common surprises:

• Income drops or spikes unexpectedly

• One spouse passes away and the survivor files as a single taxpayer

• RMDs push you into higher brackets than expected

• Medicare IRMAA surcharges sneak in and increase healthcare costs

• Tax laws change (because they always do)

If all your money is in one tax bucket, you’re stuck reacting instead of choosing.

Flexibility Means Playing the Long Game

The real goal isn’t avoiding taxes this year. It’s minimizing taxes over your lifetime.

That means:

• Thinking about how accounts will grow over decades

• Understanding future tax liability, not just today’s deduction

• Building wealth across multiple tax buckets

• Adjusting strategies as your income, family, and goals evolve

Tax flexibility gives you levers to pull. And the more levers you have, the more control you keep over how much you send to the IRS and how much stays in your pocket.

The Bottom Line

Retirement planning isn’t about finding the one “best” account. It’s about creating balance.

When you spread your savings across pre-tax, Roth, taxable, and HSA accounts, you give yourself options. And options are what allow you to adapt, pivot, and stay confident no matter what life throws your way.

The goal isn’t perfection. The goal is flexibility.

And flexibility is what turns a good retirement plan into a great one.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

Millennials also tend to be more intentional about setting retirement goals and contributing regularly. A J.D. Power study showed that a higher percentage of Millennials have specific retirement goals and believe they are on track to meet them compared with Generation X and Baby Boomers at similar stages in their careers. Millennials are more likely to have some level of retirement savings and to contribute consistently to employer plans.

It’s not just that Millennials started earlier. It’s also that we save at higher rates. According to a NerdWallet analysis, a significant portion of Millennials contribute more than 10 percent of their income to retirement savings, and many put away more than 15 percent, higher than Gen X and Boomers did at the same relative age. These aren’t small numbers. Saving aggressively year after year can translate into hundreds of thousands, or even millions, more in retirement assets over a lifetime.

Millennials have also leaned into financial tools and technology that previous generations simply didn’t have. Automatic enrollment, digital investing platforms, online financial education, and social accessibility to planners and resources make it easier for Millennials to engage with retirement planning and investing earlier and more confidently than past generations. While the internet certainly contains its fair share of misinformation, it has also democratized access to retirement planning tools and empowered younger savers to take control of their financial future.

All of this adds up to one clear point: despite prevailing stereotypes about our generation’s financial habits, Millennials are more proactive and more likely to be on track for a secure retirement than many of our parents were at a similar age. That doesn’t mean the journey is without challenges, student debt, rising housing costs, and economic headwinds exist, but it does mean that Millennials have both the will and the tools to build meaningful wealth if we continue to plan intentionally and invest wisely.

What Millennials Are Doing Differently (and Better)

From my perspective working with Millennials every day, their approach to money feels fundamentally different than previous generations. It’s not flashy. It’s intentional. And it works.

Here’s what I see consistently:

• They don’t assume Social Security will be enough.
  Millennials plan as if Social Security may be reduced or delayed, and treat it as a bonus, not the foundation.

• They save earlier, even if it’s uncomfortable at first.
  Many start contributing to a 401(k) or IRA with their very first paycheck, even if it’s only 5 percent. And they auto-escalate it. That habit compounds into real wealth.

• They automate everything.
  Retirement contributions, brokerage investing, emergency fund savings… once it’s set up, it happens quietly in the background without constant decision-making.

• They care more about flexibility than “stuff.”
  Experiences, freedom, health, and time matter more than new cars or keeping up appearances.

• They aren’t afraid to ask for help.
  Millennials regularly seek guidance from financial planners, therapists, accountants, and attorneys because they don’t want to waste time or money learning the hard way.

A Real-Life Story I See All the Time

I often think of a client in her early 30s who came to me saying, “I feel like I’m behind… but I’ve been saving since my first job and I just want to make sure I’m doing this right.”

She didn’t have a huge salary. She didn’t inherit money. She wasn’t chasing the latest investment trend.

What she did have:

• A consistent 401(k) contribution she started at 23

• A Roth IRA she funded every year, even when money felt tight

• No high-interest debt

• A clear desire to understand her finances instead of avoiding them

When we ran the numbers, she was shocked. She was already ahead of where many Gen Xers were at the same age, simply because she started early and stayed consistent.

That’s the Millennial advantage in action.

Why This Matters More Than Ever

Millennials don’t have pensions. They don’t expect company loyalty to last forever. And they’ve lived through enough economic uncertainty to know that hope is not a strategy.

Instead, they’ve learned to:

• Build retirement savings across multiple accounts

• Prioritize tax efficiency early

• Invest consistently rather than trying to time the market

• Focus on long-term outcomes, not short-term noise

While previous generations often relied on a single employer, a pension, or rising home values, Millennials have learned that diversification, discipline, and planning are non-negotiable.

The Bottom Line

Millennials aren’t behind.

They’re aware.
They’re engaged.
And they’re taking responsibility for their future.

That mindset, more than any single investment, is what truly sets them up for long-term success.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

But in reality, many millionaires don’t look anything like that.

In fact, some of the wealthiest people quietly lived right next door, drove older cars, wore unremarkable clothes, and never once talked about money. Often, it wasn’t until they passed away that friends and family discovered just how much they had accumulated.

Real-Life “Millionaire Next Door” Stories

Over the years, there have been countless stories of people who lived modestly and left behind substantial wealth.

One of the most well-known examples is Ronald Read, a janitor and gas station attendant from Vermont. He lived in a modest home, drove a used car, and clipped coupons. When he passed away in 2014, it was revealed he had amassed over $8 million, most of which he donated to his local library and hospital.

Anne Scheiber, a retired IRS auditor, lived in a small rent-controlled apartment in New York City. She dressed simply, avoided extravagance, and invested steadily over decades. When she died, her estate was worth over $22 million, much of it donated to charity.

There are countless versions of this story. Teachers. Nurses. People who lived ordinary lives, quietly made smart decisions, and never felt the need to prove their success to anyone else.

One of the more surprising truths about wealth building is how often it shows up in everyday, hardworking people, not just high-power CEOs or lottery winners. When I look at many of my multi-millionaire clients, the pattern looks a lot more like the findings in The National Study of Millionaires than you might expect.

In the survey of over 10,000 U.S. millionaires, the most common factors weren’t inheritance or high-paying jobs, but consistent investing and smart, intentional spending, and many of the millionaires came from middle-income backgrounds. In fact, 79% did not receive any inheritance whatsoever. Their wealth was built, not handed down.

That mirrors the people I see in my practice. Some are teachers, nurses, small business owners, or public servants. Some drive older Toyotas or Hondas and carry cars long past the point where most influencers tell you to trade up. They lived modestly, sometimes quietly, and no one around them would guess they had seven-figure net worth.

The Ramsey study found teachers among the top five professions for millionaires, alongside engineers and accountants — a reminder that income level isn’t the primary driver of wealth. Many millionaires surveyed never averaged $100,000 in annual income, and a third never made six figures in a single year.

The Common Thread Isn’t Income. It’s Behavior.

What separates these millionaires from the stereotype is not how much money they made. It was behavior. Eight out of ten millionaires surveyed invested consistently in their company’s retirement plan. This is exactly what I see with everyday millionaires: they treat savings like a fixed expense, pay themselves first, and keep lifestyle inflation in check. They don’t chase trends or feel pressured to broadcast wealth on social media. Instead, they focus on building real, enduring financial security that reflects their values and goals. What made these individuals wealthy wasn’t luck, inheritance, or extreme salaries.

They:

• Lived below their means

• Saved consistently

• Invested patiently

• Avoided lifestyle inflation

• Ignored trends and noise

• Focused on what actually mattered to them

Wealth was built quietly, over time.

How to Become the Millionaire Next Door

Becoming the millionaire next door isn’t about deprivation. It’s about intention.

Here are the habits that matter most.

Live Within Your Means, Even When You Can Afford More

Many people increase their spending the moment their income rises. The millionaire next door often does the opposite.

They choose:

• Homes that fit their needs, not their maximum approval

• Cars that are reliable, not status symbols

• Lifestyles that leave room to save and invest

This margin is where wealth is built.

Save and Invest Consistently

Consistency beats intensity every time.

Regular contributions to retirement accounts, brokerage accounts, and savings plans matter far more than timing the market or chasing the next big thing.

The millionaire next door invests:

• Through good markets and bad

• Without trying to predict headlines

• With a long-term perspective

Then they let time do the heavy lifting.

Avoid Trends, Fads, and “Hot” Investments

FOMO is expensive.

Chasing what’s popular often means buying high, selling low, paying unnecessary taxes, and taking risks that don’t align with long-term goals.

Quiet wealth is built by:

• Boring, repeatable strategies

• Diversification

• Discipline

• Patience

It’s not exciting, but it works.

Spend in Ways That Align With Your Values

The millionaire next door isn’t cheap. They’re intentional.

They spend freely on things that matter to them and cut ruthlessly on what doesn’t.

That might mean:

• Travel over luxury goods

• Time flexibility over status

• Experiences over possessions

When spending aligns with values, contentment increases, and regret decreases.

Ignore the Pressure to Keep Up With the Joneses

Social media has made comparison unavoidable and often misleading.

What you see online is curated, filtered, and rarely funded the way you think it is.

The millionaire next door doesn’t compete with others. They define success on their own terms.

Contentment is one of the most underrated financial strategies.

Seek Professional Guidance to Accelerate the Path

Quiet wealth doesn’t mean doing it alone.

Many millionaires work with:

• Financial planners

• Tax professionals

• Estate planning attorneys

Not because they can’t manage money, but because good advice helps avoid costly mistakes, reduces taxes, and creates clarity.

Smart guidance can shorten the learning curve significantly.

Invest, Then Leave It Alone

One of the simplest and most powerful habits of a millionaire next door is restraint.

They don’t:

• Panic during market downturns

• Tinker constantly with their portfolio

• React emotionally to headlines

They trust their plan and stay invested.

Wealth Isn’t Loud

One of the most striking things about a millionaire next door is how unremarkable their lives appear from the outside.

And that’s the point.

Wealth doesn’t need to be broadcast to be meaningful. Financial independence is deeply personal. It’s about freedom, security, and peace of mind, not applause.

In the end, many of the happiest and wealthiest people are those who:

• Lived well within their means

• Loved deeply

• Spent time with the people who mattered

• Built wealth quietly

• And never felt the need to prove anything to anyone

Chances are, a millionaire next door isn’t trying to impress you. They’re just living their life.

And one day, if you’re lucky enough to learn their full story, they might just surprise you.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

The core idea of FIRE is simple:
Save aggressively, invest intelligently, and reach a point where your investment income supports your lifestyle, so you don’t have to work unless you choose to.

But within the FIRE community, there are different flavors, and one common goal I hear is: FAT FIRE.

FIRE vs. Lean FIRE vs. FAT FIRE: What’s the Difference?

When people talk about FIRE, they often mean one of a few distinct paths:

Lean FIRE

This approach aims for financial independence by maintaining a minimalist budget and very frugal lifestyle. Retire early by keeping expenses low, often below $40,000 per year. In essence, you are building a nest egg that is typically 25 times your lean annual expenses.

Traditional/Classic FIRE

You build enough savings to generate enough passive income to cover a moderate but comfortable lifestyle. Many classic FIRE targets assume a $1 – $2 million portfolio, based on the 4% rule. The goal is to save aggressively and live more frugally to retire decades sooner than traditional retirement ages, often in one’s 30s and 40s.

FAT FIRE

FAT FIRE takes it to the next level. This is not about scrimping and cutting costs. It’s about reaching a level of wealth that supports a luxury lifestyle, including travel, high-end experiences, premium healthcare, private education, and more, without worry. The goal is to retire early while maintaining or exceeding a middle-class standard of living.

In short:

• Lean FIRE = minimalist freedom

• Classic FIRE = comfortable freedom

• FAT FIRE = affluent freedom

FAT FIRE is less about “Can I retire early?” and more about “Can I retire well — and live exceptionally?”

What Does FAT FIRE Look Like in Real Numbers?

There’s no hard rule, but most people who talk seriously about FAT FIRE target annual spending of $100,000-$300,000+ in today’s dollars.

Using a common planning rule like the 4% safe withdrawal rate, that translates roughly to $2.5 million to $10 million to sustain it indefinitely.

This gives a sense of scale: FAT FIRE is often a multi-million dollar goal.

It’s not out of reach, especially for high-earning professionals, business owners, and dual-income households, but it does require intentional planning, disciplined saving, strategic investing, and thoughtful tax management.

How FAT FIRE Became Popular

FAT FIRE didn’t come from mainstream financial planning, it came from people talking about their dreams online.

Social media has played a huge role:

• People began sharing not just how to retire early, but how to live fully while doing it.

• Influencers popularized aspirational visions of retirements filled with travel, hobbies, second homes, and luxury experiences.

• Podcasts, blogs, and forums spread these ideas and helped them evolve from niche to widely discussed.

That’s not inherently bad, but it can give the impression that FAT FIRE is easy or that you can achieve it quickly with the right hack. Spoiler: there’s no magic hack, only thoughtful planning and disciplined execution.

How to Know If You’re On Track for FAT FIRE

If you’re asking yourself, “How do I know if I’m on track?” here are the key checkpoints:

1. You have clear goals — not vague dreams

What does FAT FIRE mean for you?

• $150,000 per year?

• $250,000?

• Travel, legacy gifts, second homes, philanthropy?

Define it in real numbers.

2. You’re maximizing tax-advantaged savings

Maxing out a 401(k), IRA/Roth IRA, HSA, and taking advantage of catch-up contributions where applicable is step one. These accounts grow tax-efficiently and keep more of your money invested.

3. You have diversified investment accounts

Different tax buckets (pre-tax, Roth, taxable, HSA) give you flexibility later, especially when you want to manage your tax bracket strategically in retirement.

4. A financial plan projects your income needs into the future

Plug real numbers into future scenarios: inflation, market returns, healthcare costs, homes, travel, legacy plans, not just rough back-of-envelope math.

5. You’re tracking progress, not just hoping for it

Annual or semi-annual check-ins help ensure you’re not just saving, but saving enough at a pace that gets you closer to your personal number.

How to Achieve FAT FIRE Sooner

There’s no one-size-fits-all path, but the strategies that most consistently help people accelerate toward FAT FIRE include:

1. Maximize retirement contributions early and often
Start with 401(k), IRA, HSA, and any catch-up contributions available.

2. Build taxable investment accounts
These offer flexibility before retirement and powerful tax planning options later.

3. Diversify income sources
Salary, business income, dividends, rental (if chosen wisely), passive income streams.

4. Strategize on taxes
Plan Roth conversions, time capital gains, and manage RMDs to keep your tax bracket under control.

5. Track regularly and adjust
Life changes. Markets change. A plan that stays static often falls behind.

SAVINGS EXAMPLE:

Assuming expenses equal income minus savings, and ignoring the effects of investment returns, the calculation can be expressed as:

Years of work = (1 − savings rate) / savings rate

For example:

• At a savings rate of 10%, it will take (1-0.1)/0.1 = 9 years of work to save for 1 year of living expenses.

• At a savings rate of 25%, it will take (1-0.25)/0.25 = 3 years of work to save for 1 year of living expenses.

• At a savings rate of 50%, it will take (1-0.5)/0.5 = 1 year of work to save for 1 year of living expenses.

• At a savings rate of 75%, it will take (1-0.75)/0.75 = 4 months of work to save for 1 year of living expenses.

This formula is often used within the FIRE community to explain how a higher savings rate can reduce the time needed to reach financial independence.

Based on this reasoning, advocates often encourage savings rates of 50% or more of income.

At a 75% savings rate, ignoring the effects of investment growth, it would take fewer than 10 years to accumulate 25 times annual living expenses, or commonly known as the “4% rule” for sustainable withdrawals.

The Risks Most People Miss When Planning for FAT FIRE

FAT FIRE sounds glamorous, and it can absolutely be achievable. But most people underestimate how many variables change over a multi-decade retirement. The biggest risk isn’t failing to save enough early on. It’s assuming today’s number will still work tomorrow.

Here are some of the most common gaps I see when people set a FAT FIRE target.

A $200,000 Lifestyle Today Is Not a $200,000 Lifestyle Tomorrow

One of the most common mistakes in FAT FIRE planning is assuming a static income need.

If $200,000 supports a great lifestyle at age 40, that same lifestyle could easily require:

• $300,000–$350,000 by age 60

• $400,000+ later in retirement, especially in your 70s and 80s

Inflation doesn’t move in a straight line, but over long periods, it compounds quickly. Even at a modest 3 percent inflation rate, purchasing power is cut roughly in half every 20–25 years.

This means FAT FIRE planning isn’t about hitting a number once. It’s about maintaining purchasing power for decades.

A plan that works at 55 but falls apart at 75 isn’t a successful plan.

Inflation Isn’t Linear… and It Doesn’t Ask for Permission

Inflation doesn’t announce itself politely. It shows up quietly and then all at once.

We tend to notice it most in:

• Travel

• Dining

• Housing

• Insurance

• Healthcare

These are also the categories that tend to expand in FAT FIRE lifestyles, not shrink.

Ignoring inflation or underestimating its impact is one of the fastest ways to turn a FAT FIRE plan into a stressful one.

Kids, Activities, and College Can Blow Up a Perfect Spreadsheet

If there are kids at home, FAT FIRE planning becomes more complex.

Many families underestimate:

• The true cost of activities, travel sports, tutoring, and enrichment

• How fast those costs rise during middle school and high school years

• The future impact of college expenses, even when partially funded

College planning alone can easily add six figures per child to long-term cash flow needs.

If those expenses aren’t modeled realistically, they can compete directly with retirement savings or force difficult trade-offs later.

Health Insurance Is One of the Largest Expenses Before Medicare

Healthcare is often underestimated or oversimplified in early retirement planning.

Before Medicare eligibility, health insurance can be:

• One of the largest line items in a family budget

• Highly variable depending on income, subsidies, and plan design

• A major driver of how much taxable income you can afford to generate

For FAT FIRE households, early retirement often means paying full freight for healthcare for years or even decades.

If this isn’t explicitly modeled into the plan, spending expectations can be significantly off.

Tax Flexibility Matters More Than the Total Balance

Many people chasing FAT FIRE focus almost exclusively on net worth.

But where the money is held matters just as much as how much there is.

Tax flexibility becomes critical when:

• Income needs change

• Tax laws change

• One spouse passes away and filing status shifts

• Required Minimum Distributions begin

• Medicare IRMAA surcharges kick in

Having money spread intentionally across:

• Pre-tax accounts

• Roth accounts

• Taxable accounts

• HSAs

…allows for far more control over taxes across different phases of life.

Without that flexibility, retirees are often forced into higher tax brackets at the worst possible time.

Retirement Happens in Phases, Not All at Once

Another overlooked risk is assuming retirement is one long, steady chapter.

In reality, retirement often has phases. I call these the “Go-Go,” “Slow-Go,” and “No-Go” years.

• Go-Go: Active early retirement with higher spending, more frequent travel, more lifestyle spending, and checking items off the so-called 'bucket list.’

• Slow-Go: A slower middle phase where travel slows and trips are closer to home.

• No-Go: Later years where healthcare, support, and stability matter more.

Each phase can have very different tax, spending, and income needs.

FAT FIRE planning works best when it adapts to these phases instead of treating retirement as one static scenario.

The Real Goal of FAT FIRE Is Control, Not Just Comfort

At its core, FAT FIRE isn’t about excess. It’s about choice, resilience, and control.

Control over:

• How much you withdraw

• When you pay taxes

• How inflation impacts your lifestyle

• How unexpected expenses are handled

• How your plan works for both spouses, together and independently

When these risks are ignored, people often hit their FAT FIRE number but still feel financially constrained.

When they’re addressed intentionally, FAT FIRE becomes sustainable, flexible, and empowering.

Tax Efficiency and Why a Fiduciary Advisor Helps

If FAT FIRE is a serious goal, this is where a fiduciary financial advisor adds real value:

Tax Efficiency

How and when you pay tax matters:

• Strategically converting pre-tax retirement savings to Roth at the right time can save money over your lifetime

• Understanding Required Minimum Distributions (RMDs) and how they affect your tax bracket

• Coordinating taxable accounts and asset sales to smooth taxable income

A fiduciary advisor looks at your entire picture and provides recommendations that are in your best interest, not based on product sales or commissions.

Longer Time Horizons

FAT FIRE isn’t about quick wins. It’s about decades of planning:

• Investment allocation

• Risk management

• Downside protection

• Tax brackets

• Legacy considerations

An advisor helps you model all of this so your plan is robust enough to withstand life’s curveballs.

Personalization

Everyone’s “fat” is different. An advisor doesn’t just chase arbitrary dollar goals; they help you build a plan that aligns with your lifestyle, values, and timeline.

Final Thoughts: It’s Not Just About the Number

FAT FIRE is as much a lifestyle goal as a financial one. It’s about the quality of the life you visualize for yourself in retirement, not just crossing a net worth threshold.

When you approach it with intentional planning, diversification across accounts, and professional advice that serves your best interests, you’re no longer chasing a trend, you’re building real, sustainable financial freedom.

If you’d like help defining your version of FAT FIRE and building a roadmap to get there, that’s exactly what I help people do, with clarity, confidence, and control over the tax dollars you keep in your pocket.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

“Real estate is passive income and the best way to build wealth.” Or a new investor will say, “I want to build a real estate portfolio so I can have passive income.”

I understand why it’s so popular. Social media makes it look easy. Buy a property, collect rent, let tenants pay the mortgage, repeat. Add in a few screenshots of bank deposits, and suddenly, real estate feels like a guaranteed path to wealth with very little effort.

The problem is this.
Most people dramatically underestimate the work, risk, and friction that come with owning real estate, and overestimate how “passive” it really is.

Let’s talk honestly about what gets glossed over.

The Myth of Passive Real Estate Income

Real estate can absolutely build wealth. But passive? Not in the way most people think.

Even if you outsource parts of it, someone still has to:

• Manage tenants

• Track income and expenses

• Handle maintenance and emergencies

• File complex tax returns

• Make capital decisions under stress

If you own property, you are running a business, whether you want to admit it or not.

The Hidden Costs No One Talks About

The purchase price is just the beginning.

Ongoing Expenses Add Up Fast

• Property taxes that increase over time

• Insurance, often higher than expected

• Repairs and maintenance that never happen on a schedule

• HOA fees, if applicable

• Property management fees if you want “less involvement”

Every one of these eats into the headline return people love to quote.

Vacancy Risk Is Real

Rent checks feel great when the unit is occupied. Vacancies feel brutal when they aren’t.

A few months without a tenant can wipe out an entire year of profit. And that’s assuming:

• You can re-rent quickly

• You don’t need to renovate

• The market hasn’t softened

Cash flow is rarely as smooth as the spreadsheets suggest.

Remodeling and Capital Expenditures

Roofs fail. HVAC systems die. Kitchens and bathrooms become outdated.

These aren’t optional expenses, they’re inevitable. And they often arrive at the worst possible time.

You don’t get to dollar-cost average a $20,000 repair.

Tenant Hassles Are Not Passive

Even with a property manager, you’re still the owner.

You’ll deal with:

• Late payments

• Damage beyond normal wear and tear

• Disputes

• Turnover stress

• Legal issues if things go sideways

Someone always has to make the final call, and that someone is you.

Tax Complexity and Record Keeping

Real estate taxes are not “set it and forget it.”

You’re responsible for:

• Detailed record keeping

• Tracking depreciation

• Filing Schedule E

• Understanding passive activity rules

• Navigating state and local tax issues

And yes, depreciation helps in the early years. But that benefit comes with a future cost.

Depreciation Recapture: The Bill Comes Due

Depreciation feels like free money. Until you sell.

When you eventually want out, depreciation recapture can trigger a significant tax bill, even if you didn’t actually pocket that cash along the way.

Many investors are shocked when they realize:

• The IRS wants its share back

• The tax bill reduces the net proceeds

• Liquidity isn’t as clean as expected

It’s one of the most misunderstood parts of real estate investing.

Concentration Risk Is Often Ignored

Owning one or two properties means a huge portion of your net worth is tied to:

• One geographic area

• One local economy

• One asset type

If something goes wrong, you don’t have diversification working in your favor.

Compare that to owning thousands of companies across industries and countries with a single portfolio.

Turning Real Estate Into Retirement Income Is Harder Than It Sounds

At some point, the goal is to live on your wealth, not manage it.

That usually means:

• Selling properties

• Managing timing risk

• Paying taxes

• Finding buyers in the right market

Real estate is illiquid. You can’t sell “just a little” when you need income. It’s all or nothing, and the timing may not be in your favor.

Why the Stock Market Is Truly Passive

This is where investing gets simpler. Stock market investing, done properly, is:

• Diversified

• Liquid

• Scalable

• Low-maintenance

There are no tenants.
No toilets.
No 2 a.m. phone calls.

Dividends are paid automatically. Rebalancing can be automated. Taxes are simpler. You can turn investments into income without selling everything at once.

From a workload standpoint, there is no comparison.

The Real Issue With Influencer Real Estate

Many influencers sell real estate as passive because:

• It sounds attractive

• It drives engagement

• It sells courses

What they don’t show is:

• The stress

• The leverage risk

• The time cost

• The opportunity cost

Real estate isn’t bad. It just isn’t magic.

A Balanced Perspective

Real estate can play a role in a diversified plan. For the right person, at the right scale, with clear expectations, it can be effective.

One of the biggest mistakes I see new investors make is believing that real estate should be the very first place their savings go. In reality, piling into illiquid assets too early can create more stress than stability. Real estate works best as a layer, not a foundation.

Before buying property, smart investors focus on building liquid wealth. Cash and marketable investments act as shock absorbers. They cover emergencies without panic, smooth out income disruptions, and provide flexibility when life inevitably throws a curveball. Liquidity is what allows you to make decisions from a place of confidence rather than urgency.

This is especially important in real estate. Vacancies happen. Repairs pop up at the worst times. Tenants move out unexpectedly. When all excess cash is tied up in a property, those normal bumps quickly turn into financial stress. Having liquid reserves means you are not forced to sell at the wrong time, borrow at unfavorable rates, or sacrifice long-term goals just to plug a short-term hole.

Equally important is getting retirement savings on track first. Retirement accounts offer tax advantages, diversification, and compounding that are incredibly hard to replicate elsewhere. Funding these accounts consistently builds a strong financial base that grows quietly in the background while you focus on your career, family, and life. Real estate should complement that foundation, not replace it.

Once liquid wealth is established, high-interest debt is under control, and retirement savings are moving in the right direction, then real estate investments can make a lot more sense. At that point, you have margin. You have flexibility. You can handle the illiquidity, complexity, and unpredictability without it disrupting your overall financial plan.

The strongest investors don’t rush into complexity. They earn the right to take it on. Liquid wealth first. A solid retirement plan second. Real estate, and other illiquid investments, come later when they can enhance the plan rather than strain it.

But for many investors, the simplest path to building real wealth with the least stress is boring, disciplined, long-term investing in the stock market.

No hype.
No hustle.
No hidden headaches.

Sometimes the most powerful strategy is the one that lets you live your life while your money quietly does its job.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

Thanks to the SECURE 2.0 Act, a new “Super Catch-Up” contribution becomes available starting in 2026, specifically designed for people in the final stretch before retirement. This could be one of your best saving years yet thanks to the expanded catch-up contribution rules. The change gives high earners and late savers a powerful opportunity to accelerate retirement savings during what are often peak earning years.

What Is the Super Catch-Up Contribution?

Currently, once you turn 50, you can make catch-up contributions to your 401(k) or similar employer plan. The standard catch-up for those age 50-59 and 64+ is $8,000. In 2026, that rule gets better for a specific age group.

Who qualifies?

• Individuals ages 60, 61, 62, and 63

What changes?

• Instead of the standard catch-up amount, eligible savers can contribute $11,250 on top of the regular limit in plans like 401(k), 403(b), or 457(b)

• This amount will be indexed for inflation going forward.

That means significantly more money can be funneled into tax-advantaged retirement accounts during a critical window right before retirement.

Why This Matters So Much

For many people, ages 60–63 are:

• Peak earning years

• Years when kids are off the payroll

• Mortgage balances are lower or gone

• Cash flow is finally more flexible

This rule recognizes that reality and gives savers a second wind to close retirement gaps.

A Simple Compounding Example

Let’s look at the math without getting fancy.

Example:

• Age: 60

• Additional Super Catch-Up contribution: $11,250 per year

• 401(k) maximum: $24,500

• Time invested: 15 years (age 60–75)

• Average annual return: 8%

Total contributions:
($11,250 + $24,500) X 4 years with Super Catch-Ups = $143,000 (assumes the contribution limit stays the same)

Value at age 75 when Required Minimum Distributions begin:
Approximately $406,000

That’s almost triple the growth, of just the contributions, even in a relatively short time frame.

Now imagine this money stays invested through retirement and continues compounding, or better yet, you begin investing sooner. The real power isn’t just the contribution, it’s giving that money time to grow tax-deferred.

Why Tax-Deferred Accounts Are So Powerful

When money goes into a traditional 401(k) or similar plan:

• Contributions reduce taxable income today

• Investments grow without annual tax drag

• Taxes are paid later, often in lower-income years

That tax deferral allows every dollar to stay invested and working for you longer.

Compare that to investing in a taxable account, where dividends, interest, and capital gains can chip away at growth every single year.

Why This Window Is Especially Important

The Super Catch-Up years sit right before key retirement decisions:

• When to stop working

• When to claim Social Security

• How much income investments need to generate

Extra savings during this period can:

• Reduce pressure on investment portfolios

• Increase your saved dollars when time is most valuable

• Increase flexibility around retirement timing

• Create more confidence and optionality

In other words, it buys choices.

One Important Planning Note

Beginning in 2026, catch-up contributions for high earners (generally those earning over $150,000, indexed for inflation) must be made as Roth contributions, not pre-tax.

This is not a bad thing. It simply shifts the tax benefit:

• Taxes are paid now

• Growth and withdrawals can be tax-free later

• Helps to increase your tax flexibility in retirement

This makes planning even more important, especially when coordinating tax brackets, Roth strategies, and retirement income planning.

The Bottom Line

The Super Catch-Up contribution is one of the most meaningful retirement planning changes in years, especially for people who feel slightly behind or want to strengthen their plan heading into retirement.

It’s not about perfection. It’s about using the tools available when they matter most.

If ages 60–63 are on the horizon, now is the time to:

• Review contribution strategies

• Understand tax implications

• Make sure retirement accounts are working as hard as possible

Sometimes, the most powerful moves happen late in the game.

Do you want to work with a financial planner who can help you evaluate your biggest financial decisions from the perspective of what has the best chance of funding your best life? Reach out and schedule a free consultation.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

But once that box is checked, the next question almost always follows:
“Where should the next dollar go?”

The good news is that you have options. And the best choice depends on your income, family situation, tax picture, and what kind of flexibility you want down the road. Below are smart, common next steps I walk clients through once their 401(k) is fully funded.

1. Contribute to a Traditional or Roth IRA

Even after maxing out a 401(k), many people can still contribute to an IRA.

A Traditional IRA may offer a tax deduction, depending on income and whether a workplace plan is in place. A Roth IRA, on the other hand, is funded with after-tax dollars, but grows tax-free and can be withdrawn tax-free in retirement.

The big benefit here is tax diversification. Having money in both pre-tax and tax-free accounts gives more control over taxes later, especially in retirement when income sources can vary year to year.

If income limits prevent direct Roth contributions, this doesn’t necessarily mean the door is closed. More on that below.

2. Maximize a Spousal IRA

If one spouse earns little or no income, this is often an overlooked opportunity.

A Spousal IRA allows a working spouse to fund an IRA for a non-working or lower-earning spouse, as long as you file a joint tax return. This effectively doubles the household’s IRA savings and builds retirement assets in both names.

This can be especially powerful for long-term planning, tax flexibility, and making sure both partners have assets in their own name.

3. Invest in a Brokerage Account for Flexibility

Once tax-advantaged accounts are maxed, a taxable brokerage account becomes incredibly valuable.

While it doesn’t come with upfront tax deductions, it offers something equally important: flexibility.

Brokerage accounts:

• Have no contribution limits

• Allow access to funds at any age

• Are taxed at capital gains rates when investments are sold

• Can be strategically used to manage taxes in retirement

In retirement planning, this helps build assets across multiple tax buckets: pre-tax, tax-free, and taxable. That flexibility can reduce lifetime taxes and give more control over cash flow.

4. Rebuild or Boost Your Emergency Fund and Maximize Your HSA

Before investing aggressively, it’s worth checking two foundational pieces.

Emergency Fund:
Make sure short-term cash needs are covered. Having 3–6 months of expenses set aside helps avoid pulling from investments or retirement accounts when life happens.

Health Savings Account (HSA):
If eligible, this is one of the most powerful savings tools available. HSAs offer:

• Tax-deductible contributions

• Tax-free growth

• Tax-free withdrawals for qualified medical expenses

When invested and left to grow, an HSA can act like a “stealth retirement account” for future healthcare costs.

5. Invest in Kids’ or Grandkids’ Education

If education funding is a goal, a 529 college savings plan can be a smart next step.

Contributions grow tax-free when used for qualified education expenses, and many states offer tax deductions or credits for contributions. These accounts can also be flexible across beneficiaries if plans change.

This is often a way to help future generations while staying aligned with long-term family goals.

6. Explore Backdoor or Mega Backdoor Roth Strategies

High earners are often phased out of direct Roth IRA contributions, but there may still be workarounds.

Backdoor Roth IRA:
Involves contributing to a non-deductible Traditional IRA and then converting it to a Roth IRA. This can be an effective way to build tax-free assets, but it requires careful planning to avoid unintended taxes.

Mega Backdoor Roth:
If an employer plan allows after-tax contributions and in-plan Roth conversions or rollovers, this strategy can allow significantly larger Roth contributions through the 401(k).

These strategies are powerful, but they’re not “set it and forget it.” Coordination with a tax professional or financial planner is important.

7. Pay Down or Pay Off Debt

Once retirement savings are on track, debt often becomes the next lever.

High-interest debt is usually a clear priority. For low-interest debt, the decision becomes more personal. Some people prefer investing while carrying low-rate loans, while others value the peace of mind that comes with being debt-free.

There’s no one-size-fits-all answer here. The key is making the choice intentionally rather than by default.

8. Use Donor Advised Funds for Charitable Giving

For those who give regularly to charity, a Donor Advised Fund (DAF) can be a powerful planning tool.

DAFs allow:

• An upfront tax deduction in a high-income year

• Investments to grow tax-free inside the account

• Grants to charities over time

They’re especially useful when donating appreciated stock, helping reduce capital gains taxes while maximizing impact.

9. Make Annual Gifts to Family Members

Sometimes the most meaningful “investment” is helping someone else get started.

Annual gifts under the gift tax exclusion can be used to:

• Help a child or family member fund a Roth IRA

• Assist with education or first-home savings

• Reduce the size of a future taxable estate

This strategy blends financial planning with family values and legacy goals.

The Big Picture

Maxing out a 401(k) is a milestone, not the finish line. What comes next should support both your financial goals and your life goals.

The best strategy usually involves a mix of tax efficiency, flexibility, risk management, and values-based decisions. And most importantly, it should evolve as life does.

If you’ve hit this point and are wondering how to prioritize the next step, that’s often the perfect time for a more intentional plan.

Do you want to work with a financial planner who can help you evaluate your biggest financial decisions from the perspective of what has the best chance of funding your best life? Reach out and schedule a free consultation.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

A SEP IRA (Simplified Employee Pension Individual Retirement Account) is built for people who own their own business and want both tax savings today and tax-deferred growth for the future. Let’s look at why it might be a great fit for you.

What Is a SEP IRA, Really?

At its core, a SEP IRA is a retirement account funded entirely by your business.

Unlike a personal IRA where you make contributions with after-tax dollars, a SEP IRA is funded by employer contributions: your business makes contributions on behalf of eligible employees (including yourself if you’re self-employed). Every dollar the business puts in is tax-deductible, and the money grows tax-deferred until you withdraw it in retirement.

Here’s the part many people love most:
There’s no requirement to contribute every year. You decide how much to contribute based on profits and cash flow. That makes it flexible for business owners who see fluctuating income.

The Big Benefit: Generous Contribution Limits

SEP IRAs allow much higher contributions than traditional IRAs.

For the 2026 tax year, the contribution limit is:
✔ Up to 25% of compensation, or
✔ $72,000, whichever is less ﹘ this is the top amount you could save in one year.

By comparison, traditional and Roth IRAs are capped around $7,500 (under age 50) or $8,600 (age 50+) in 2026.

Because SEP IRA contributions come from your business, they don’t count against the personal IRA limit, meaning you could also be contributing to other retirement accounts at the same time.

Who Looks Like the Perfect SEP IRA Candidate?

Let’s make this real with an example:

Meet Riley, a solo business owner who runs her own marketing consulting firm.

• She earns $150,000 in net income from the business

• She has no employees

• Her business is profitable, and she wants to save aggressively for retirement

With a SEP IRA in place, Riley could contribute up to 25% of her eligible net earnings, up to the 2026 limit of $72,000, into her SEP IRA. Based on Riley’s profit, she could contribute up to $37,500. Every dollar she contributes reduces her business taxable income this year, saving her taxes today while growing her nest egg for tomorrow.

Additionally, those contributions in her SEP IRA will be tax-sheltered while they grow until retirement. That means no taxable income and no capital gains taxes on any growth inside the account.

Over time, those tax deductions combined with tax-deferred growth can make a meaningful difference in her long-term retirement security.

How SEP IRA Contributions Work for Business Owners

A few key rules that every business owner should know:

1. Contributions are employer-funded.
As the business owner, you decide each year whether to contribute and how much (up to the limits). Since employees can only receive contributions at the same percentage as your own, this matters if you have staff.

2. Everyone eligible must be treated fairly.
If you do contribute, you must contribute the same percentage of compensation for all eligible employees. Eligibility generally means someone who:

• Is 21 or older

• Has worked with the company for at least 3 of the last 5 years

• Earns at least a minimum amount set by the IRS ($800 in 2026)

3. You can contribute late.
One of the nicest features of a SEP IRA is that you can open the plan and make contributions up until your business tax filing deadline, including extensions. This can give you time to assess profits before deciding how much to save.

Why Self-Employed Business Owners Love SEP IRAs

There are several reasons SEP IRAs are a go-to option for solo business owners:

✔ Big Tax Deduction Today
Contributions reduce your taxable business income, often meaning you pay less in taxes now while building your retirement fund.

✔ Flexible Contributions
Unlike some retirement accounts, you don’t need to contribute every year. If cash flow is tight in a given year, you can choose to contribute less, or skip it altogether.

✔ Simple Administration and Low Cost
SEP IRAs are easier to set up and maintain than other business retirement plans like 401(k)s and often have no or minimal costs to maintain.

✔ Immediate Vesting
As soon as contributions are made, they’re fully vested,; meaning the money belongs to the SEP IRA owner outright right away, with no waiting period.

What to Watch Out For

While SEP IRAs are powerful, there are a few things to consider:

Not Great for Lots of Employees
If your business has many eligible employees, matching the same percentage of contributions for everyone can become expensive.

No Catch-Up Contributions
Unlike other plans, SEP IRAs don’t allow separate catch-up contributions for owners over age 50. And no “super” catch-up contributions like 401k plans offer for those age 60-63.

Early Withdrawals Still Penalty-Prone
If you take money out before age 59½, expect taxes and potential penalties just like other traditional retirement accounts.

SEP IRA vs Other Small-Business Plans

A quick comparison:

• Solo 401(k): Allows higher contributions for some business structures and includes employee salary deferrals.

• Simple IRA: Easier for small businesses with employees, but lower contribution limits.

• SEP IRA: Simpler, especially if you have no or few employees.

Each has its place, but SEP IRAs are often a great balance of simplicity + power for self-employed owners.

Final Takeaway

A SEP IRA isn’t just another retirement account. For business owners who want to save aggressively, reduce their tax bill, and keep things simple, it’s one of the smartest tools available.

If you’re making consistent profit from your business and want a retirement savings strategy that grows with you, a SEP IRA deserves serious consideration.

Do you want to work with a financial planner who can help you evaluate your biggest financial decisions from the perspective of what has the best chance of funding your best life? Reach out and schedule a free consultation.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

What Are Google Stock Units (GSUs)?

GSUs are Google’s version of Restricted Stock Units (RSUs). Think of them as a bonus paid in company stock instead of cash.

You are granted a certain number of GSUs, but you do not actually own the shares until they vest. Vesting typically happens over time and is often tied to continued employment and performance. Once the restriction is satisfied, the shares are yours.

Unlike stock options, GSUs always have value once they vest. You do not have to pay anything to receive them. That’s a big deal.

Google intentionally moved away from traditional stock options years ago because options can expire worthless if the stock price falls. GSUs, on the other hand, are full shares. Even if the stock price drops, vested shares still hold value.

This structure was designed to reward long-term commitment and performance, while also reducing some of the risk employees experienced with stock options.

Why Google’s Equity Program Is So Unique

Google has spent years refining its equity compensation program. After the IPO, leadership recognized that attracting and retaining top talent required something more thoughtful than traditional stock options.

Here’s what Google did differently:

• Shifted from stock options to RSUs so equity always had value

• Created tiered vesting schedules so employees could access shares sooner

• Built internal tools allowing employees to model future equity value alongside salary and bonuses

• Clearly communicated how equity decisions impacted individuals, not just in theory but in real dollars

Over time, GSUs evolved from standard RSUs into something more dynamic. The number of shares that ultimately vest can scale based on performance, meaning higher performance can result in more shares than originally granted. In simple terms, GSUs function a lot like a performance-based bonus system, paid in stock.

This thoughtful design is one of the reasons equity remains such a meaningful part of compensation for Googlers.

How GSUs Are Taxed

Taxes are where most people get tripped up.

Taxes at Vesting

When your GSUs vest, the fair market value of the shares is treated as ordinary income. This amount shows up on your W-2, just like your salary or cash bonus.

Google will automatically withhold some shares to cover taxes, but the default withholding rate is often not enough for higher earners. This is one of the most common surprises I see.

Taxes When You Sell

After vesting, any future change in value is taxed as capital gains or losses:

• Sell within one year of vesting and gains are short-term

• Sell after one year and gains may qualify for long-term capital gains rates

Your cost basis is the stock price on the vesting date, not the grant date.

The Most Important Question to Ask Yourself

Every time GSUs vest, ask this one question:

If this amount showed up in my checking account as cash, would I immediately use it to buy my company’s stock?

• If the answer is yes, holding may make sense

• If the answer is no, selling when they vest is often the cleaner, lower-risk choice

This mindset removes emotion and helps you treat GSUs like the income they truly are.

The Employee Trading Plan (ETP): What to Know

If you are subject to trading restrictions, Google’s Employee Trading Plan (ETP) is especially important.

The ETP allows eligible employees to set up pre-scheduled trading instructions during open trading windows. Once enrolled, trades can automatically occur during future blackout periods, as long as the plan was established properly in advance.

Why this matters:

• It reduces the risk of accidentally violating insider trading rules

• It removes emotion from selling decisions

• It allows for consistent diversification over time

ETPs are often used to sell shares shortly after vesting or on a scheduled cadence, which can be helpful for tax planning, cash flow, and reducing stock concentration.

The key is that ETPs must be set up before blackout periods begin, and once in place, changes are limited. This is an area where coordination matters.

Concentration Risk: The Quiet Risk No One Talks About

GSUs can quietly create risk because:

• Your paycheck comes from Google

• Your benefits come from Google

• Your equity value is tied to Google

That’s a lot riding on one company, no matter how strong it is.

Many people feel loyal to their employer’s stock, which is completely understandable. But diversification is not about pessimism, it is about resilience. Selling some shares does not mean you lack confidence in the company. It means you are protecting your broader financial life.

Putting It All Together

GSUs are a generous and well-designed benefit, but they are not a financial plan by themselves.

Managing them well means:

• Understanding the tax impact at vesting

• Making intentional decisions about selling versus holding

• Planning for tax payments beyond default withholding

• Using tools like the ETP to stay compliant and disciplined

• Aligning equity decisions with your bigger goals

Handled thoughtfully, GSUs can support long-term wealth and flexibility. Ignored, they can create unnecessary tax bills, tax penalties, and risk.

The goal is not to guess the future of Google’s stock. The goal is to make smart, repeatable decisions that support the life you want to build.

Do you want to work with a financial planner who can help you evaluate your biggest financial decisions from the perspective of what has the best chance of funding your best life? Reach out and schedule a free consultation.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

At a high level, RSUs are simple. They are company stock awarded to you as part of your compensation, usually tied to a vesting schedule or performance requirement. But the decision of what to do when those shares vest is where things get interesting.

The easiest way to think about RSUs is this:

RSUs are very similar to a cash bonus. They’re just paid in company stock instead of dollars.

That framing alone can completely change how you approach them.

What RSUs Really Are

When your company grants RSUs, you don’t actually own the stock yet. You own a promise of stock. Once you satisfy the restriction, typically time or performance, the shares vest and become yours.

At vesting:

• The shares are deposited into your brokerage account

• The value is based on the stock price on that day

• The value is treated as ordinary income and reported on your W-2

From the IRS’s perspective, that vesting event is the same as your employer handing you a bonus check equal to the value of the shares.

The only difference is what form the bonus arrives in.

The One Question That Should Guide Your Decision

When RSUs vest, most people ask, “Should I sell or hold?”

I prefer a simpler question:

If my company paid me this amount in cash, would I turn around and use it to buy my company’s stock?

• If the answer is yes, holding your RSUs may make sense.

• If the answer is no, selling your RSUs when they vest is usually the more logical move.

This removes emotion and loyalty from the decision and reframes it as an investment choice.

A Simple Example

Let’s say you receive 8,000 RSUs on a four-year vesting schedule, with 2,000 shares vesting each year.

The grant price doesn’t matter. What matters is the stock price on vesting day.

Year one:

• 2,000 shares vest

• Stock price is $10

• You receive a $20,000 bonus paid in company stock

Your employer automatically sells some shares to cover taxes. Let’s say:

• 500 shares are sold to cover withholding

• You now own 1,500 shares worth $15,000

Now pause and ask the key question:

Would you write a $15,000 check today to buy your company’s stock?

If the answer is no, selling those shares immediately may be the right choice. By selling right away, you avoid market risk, and no additional taxes are owed beyond what was already withheld.

If you hold the shares and sell later, any change in value is treated as a capital gain or loss.

Understanding the Tax Side of RSUs

RSUs are taxed in two phases:

At Vesting

• Taxed as ordinary income

• Included on your W-2

• Subject to federal, state, Social Security, and Medicare taxes

• Cost basis is the fair market value on vesting day

Many companies withhold taxes by selling a portion of the shares automatically. This is convenient, but it leads to one of the most common RSU mistakes.

The RSU Tax “Gotcha”

Default withholding is often not enough.

Federal supplemental withholding is typically 22 percent. In high-income households, your actual marginal tax rate may be significantly higher. State taxes, especially in states like California, can add another layer.

This can result in an unexpected tax bill if you don’t plan ahead.

Estimated tax payments or additional paycheck withholding may be necessary to avoid penalties and surprises.

Holding RSUs and Concentration Risk

Another factor many people overlook is concentration risk.

Your paycheck comes from your company. Your benefits come from your company. And now a growing portion of your net worth may also be tied to your company’s stock.

That’s a lot of exposure to a single source of risk.

Selling RSUs and reinvesting elsewhere can help diversify your financial life without changing how committed you are to your role or your employer.

What About Future RSUs?

It’s also important to understand the value of your unvested RSUs.

Future RSU income represents pre-tax compensation you have not yet received. If you’re considering a job change, this is part of what you may be walking away from.

Knowing that number gives you leverage when negotiating:

• A signing bonus

• Replacement equity

• Higher base pay or annual bonuses

RSUs are part of your compensation package, even if they haven’t vested yet.

The Bottom Line

RSUs are not complicated, but they are often emotional.

By treating them like a cash bonus paid in stock and asking the right question at vesting, you can make clearer, more confident decisions.

Holding can make sense. Selling can make sense. What matters is that the choice aligns with your goals, your cash flow, and your overall investment strategy.

If you’re unsure, that’s usually a sign it’s time to slow down, run the numbers, and make the decision intentionally.

Do you want to work with a financial planner who can help you evaluate your biggest financial decisions from the perspective of what has the best chance of funding your best life? Reach out and schedule a free consultation.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

Let’s break ISOs down in plain English and walk through how they actually work, where people get tripped up, and how to think strategically about them.

What Are Incentive Stock Options (ISOs)?

Incentive Stock Options are a type of equity compensation that gives you the right to buy shares of your company at a fixed price in the future, regardless of how high the stock price goes later.

There are three key components to every ISO:

1. Grant price (also called the strike or exercise price)
   This is the price you’re allowed to buy the shares for.

2. Exercise
   This is when you actually purchase the shares at the strike price.

3. Sale
   This is when you sell the shares and (hopefully) turn that equity into real money.

ISOs are attractive because, when handled correctly, they can be taxed more favorably than other forms of compensation. But the timing rules matter a lot.

Vesting, Holding Periods, and the Clock You Can’t Ignore

ISOs come with two different clocks, and both must be respected to receive favorable tax treatment.

• Vesting period:
ISOs must vest before they can be exercised. Companies often use multi-year vesting schedules.

• Holding requirements for favorable tax treatment:
To qualify for long-term capital gains treatment:

• Shares must be held at least two years from the grant date, and

• At least one year from the exercise date

Miss either of these, and the tax treatment changes.

There’s also a hard deadline most people overlook:

• ISOs must be exercised within 10 years of grant

• If you leave your employer, ISOs usually must be exercised within 90 days of termination, or they expire

This is one reason ISOs carry more risk than NSOs. You may be forced to make a large financial decision quickly, often without liquidity.

How ISOs Are Taxed (And Why Planning Matters)

Grant

There are no tax implications when ISOs are granted.

Exercise

When you exercise, you buy the shares at the strike price.

The difference between the strike price and the fair market value is called the bargain element.

Unlike Non-Qualified Stock Options, this bargain element:

• Is not taxed as ordinary income at exercise

• Is not subject to Social Security or Medicare taxes

• Is not withheld by your employer

However, there’s a catch…

The AMT Surprise

If you exercise ISOs and hold the shares, the bargain element becomes a preference item for the Alternative Minimum Tax (AMT).

That means:

• You may owe additional taxes in the year of exercise

• Even though you haven’t sold the stock

• And even though no cash came in

This tax bill must be paid out of pocket.

The good news is that AMT paid due to ISOs can often be recovered in future years through AMT credits, but that doesn’t help with cash flow today. This is one of the biggest planning gaps I see.

Selling ISOs: Qualifying vs. Disqualifying Dispositions

Qualifying Disposition

If you sell:

• More than two years after grant, and

• More than one year after exercise

Then the gain above your strike price is taxed as long-term capital gains, which is typically much lower than ordinary income tax rates.

Disqualifying Disposition

If you sell before meeting either holding requirement:

• The bargain element is taxed as ordinary income

• Any additional gain or loss is taxed as short- or long-term capital gains depending on timing

Sometimes selling early is still the right move. The key is understanding the tradeoffs before pulling the trigger.

A Simple ISO Example

Let’s say:

• You’re granted 1,000 ISOs

• Strike price is $10

• After vesting, the stock is worth $20

To exercise, you pay:

• $10,000 (1,000 × $10)

The shares are now worth:

• $20,000

Your paper gain (the bargain element) is $10,000.

If you sell immediately:

• That $10,000 is taxed as ordinary income

If you hold for one year after exercise and two years after grant:

• That $10,000 is taxed as long-term capital gains

But if you hold the shares, the $10,000 may trigger AMT in the year of exercise, even though you haven’t sold yet.

Other Important ISO Rules People Miss

• ISOs cannot be transferred to another individual
• Companies do not withhold taxes, so estimated payments may be required
• There’s a $100,000 annual limit on ISOs that can vest each year (based on grant value at strike price)
• Exercising without a plan can unintentionally create a large tax bill
• Concentration risk increases when personal wealth becomes tied to employer stock

Strategy Matters More Than the Option Itself

ISOs aren’t just about taxes. They affect:

• Cash flow

• Investment diversification

• Risk exposure

• Long-term planning decisions

Sometimes exercising early makes sense. Sometimes waiting is better. Sometimes, selling immediately is the most prudent choice, even if it means higher taxes.

The right strategy depends on:

• Income level

• AMT exposure

• Liquidity

• Career stability

• Concentration risk

• Overall financial goals

ISOs can be a powerful wealth accelerator, but only when they’re integrated into a broader financial and tax strategy.

Final Thought

Stock options feel exciting, but they are not free money. They are a planning decision, not just a compensation perk. Determining how to best handle your ISOs depends on much more than understanding the vocabulary. It means doing the internal work to think more deeply about your life goals and how to handle a life-changing money event.

If ISOs are part of your compensation, it’s worth slowing down, modeling scenarios, and making intentional choices rather than reactive ones. That’s how equity compensation turns into real, sustainable wealth instead of an expensive lesson.

Do you want to work with a financial planner who can help you evaluate your biggest financial decisions from the perspective of what has the best chance of funding a meaningful life? Reach out and schedule a free consultation.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

If you're a high earner or a super saver looking for ways to build wealth more efficiently, let me introduce you to one of the most under-the-radar—but incredibly powerful strategies in retirement planning: the Mega Backdoor Roth.

Here's everything you need to know in plain English.

First, Let’s Break Down Roth vs. Traditional

Before we jump into the mega part, here’s a quick refresher:

• Traditional 401(k)/IRA: You contribute pre-tax dollars now, get a tax break today, and pay ordinary income taxes when you take the money out in retirement.

• Roth 401(k)/IRA: You pay taxes on your contributions up front, but your investments grow tax-free and you won’t owe anything on withdrawals in retirement if you meet the rules.

Both have their benefits. But what if you could combine the best of both worlds and contribute way more than the Roth IRA normally allows?

What Makes the Mega Backdoor Roth So “Mega”?

The Mega Backdoor Roth is a way to contribute significantly more to Roth retirement savings than you're typically allowed. It works through your employer's 401(k) plan and can unlock tens of thousands of dollars in additional tax-free retirement growth each year.

This isn’t your average Roth IRA. In 2025, the regular Roth IRA contribution limit is $7,000 (or $8,000 if you’re 50+). But with a Mega Backdoor Roth, you could potentially stash away up to $70,000 (or up to $77,500–$81,250 per year if over age 50), per year in your 401(k), convert a portion of that to Roth, and watch it grow tax-free.

Let’s break it down.

2025 401(k) Contribution Limits

• Standard employee deferral limit: $23,500

• Catch-up (age 50-59): +$7,500 → Total of $31,000

• Catch-up (age 60-63): +$11,250 → Total of $34,750

Now let’s talk about the total 401(k) contribution limit (which includes your contributions, employer match, AND any after-tax contributions):

• Under 50: $70,000 total

• Age 50-59: $77,500 total

• Age 60-63: $81,250 total

⚠️ Keep in mind: Catch-up contributions must be your own money (not your employer’s) and are not eligible for employer matching.

How the Mega Backdoor Roth Works

1. Max out your regular 401(k) contributions—either pre-tax or Roth.

2. See if your 401(k) plan allows after-tax contributions beyond the regular limit. This is where the "mega" power comes in.

3. Move that after-tax money into a Roth IRA or Roth 401(k) via an in-plan conversion or rollover.

Once that money is in the Roth, it grows tax-free forever. Seriously—no taxes on the gains, no taxes on qualified withdrawals.

That’s it. You’ve now turned dollars that normally wouldn’t get Roth treatment into tax-free retirement wealth.

Who’s the Mega Backdoor Roth For?

This strategy is ideal for:

• High-income earners who make too much and can’t contribute directly to a Roth IRA. Income limits for Roth IRAs phase out at $150,000 for single filers and $236,000 for joint filers in 2025.

• Savers who have already maxed out their traditional 401(k) and want to save even more.

• Investors who expect to be in the same or a higher tax bracket later (and prefer to pay taxes now instead of later).

• Those who want more dollars in tax-sheltered and tax-free retirement accounts.

A Quick Example

Let’s say you are 55, earning well, and your employer contributes $10,000 to your 401(k).

• You put in the max employee contribution: $31,000 (thanks to the age 50+ catch-up).

• Add the employer contribution: $10,000

• That brings you to $41,000 total

• That means you still have $36,500 of space to make after-tax contributions, which you can roll into a Roth account.

Over 10 years, that could add up to over $365,000 in Roth dollars—plus any growth, which is all tax-free.

Why Haven’t I Heard of This?

Most people don’t know about this strategy because:

• Not all employers offer after-tax contribution options

• You often have to ask to know if this option exists.

• It requires some know-how to execute correctly.

• Not every advisor talks about it, unfortunately.

But if your plan supports it, and you want to maximize every dollar you can put away tax-efficiently, the Mega Backdoor Roth is worth exploring.

Final Thoughts: More Roth = More Freedom

Is your 401(k) hiding a mega opportunity? The Mega Backdoor Roth isn’t just a "nice-to-have." For many high-income professionals and business owners, it could be the most valuable wealth-building move you make.

And in a world where tax laws and retirement rules constantly evolve, having more money growing tax-free gives you flexibility, freedom, and long-term peace of mind. And here’s the thing: the earlier you start using this strategy, the more your future self will thank you.

Building wealth doesn’t have to be complicated. It just takes strategy—and the right support.

If you’re ready to make your money work as hard as you do, let’s talk.

This article is for educational purposes and does not constitute personalized financial advice. Always consult a qualified financial advisor before implementing complex financial strategies.

Exit planning is a strategy to leave your business when you want, in the way you want, for the amount you want. 

With a solid exit plan, you’re more likely to maximize the value of your business and meet both your personal and professional goals down the road. A well-thought-out exit plan can also allow you to reduce or delay the total taxes you owe and keep more money in your wallet. 

And depending upon your circumstances, an experienced small business financial advisor may be able to help you avoid taxes altogether if you qualify for the Qualified Small Business Stock (QSBS) exemption permitted by Section 1202 of the Internal Revenue Code.

Who is Exit Planning For?

If you own a business, an exit plan is a necessity rather than an option. This holds true even if you don’t plan to leave it in the next 5, 10, 15, or even 20 years. 

By planning for an exit well in advance, you won’t have to adjust your business operations at the last minute or scramble to gain control of the situation. Most importantly, you’ll increase your chances of parting with your organization on good terms and at a fair price. 

No matter how full your plate is today, don’t let these common excuses and misconceptions keep you from starting your exit plan right away:

• You’re Too Busy: With daily business demands, it can be easy to ignore an issue that you believe is years down the road.

• Exit Planning is Complex: If your business is your primary or sole source of income and wealth, you might assume exit planning can be costly and challenging. 

• You Don’t Have the Support: While you know of many resources to help you start and grow a business, you might not be aware of financial advisors and other professionals who specialize in exit planning. 

• You Want to Wait: You may believe that it’s safe to wait until a few years before you are ready to exit. 

Understand that the earlier you plan your exit, the greater control you’ll have over its outcome. Therefore, you don’t want to prolong the process and later find yourself in a scenario where your exit is very different from what you envisioned. 

Ideally, you’d pursue exit planning at least three to five years before you hope to leave your organization. 

Succession Planning vs. Exit Planning

While the terms succession planning and exit planning often get used interchangeably, there are noteworthy differences between them. 

According to the Exit Planning Institute (EPI),  an exit plan focuses on all of the business, personal, financial, legal, and tax aspects that come with the transition of a private business. Its main goals are to increase the value of the business at the time of exit, reduce taxes and ensure the owner(s) can achieve their goals in the process. 

Succession planning, however, is a specific type of exit strategy. Its purpose is to ensure a business continues once the owner moves on. Generally speaking, succession plans are created for family businesses that involve multiple generations or those that plan to transfer ownership to employees. 

Types of Exit Strategies

There are a number of exit strategies you can pursue. Your ideal exit strategy will depend on a number of factors such as your business size and future goals. Here’s an overview of the most common types you may encounter. 

Merger

A merger occurs when two businesses combine into a single entity. If you go this route, you’ll often retain an executive role as the owner, co-owner or manager of the combined business for at least a pre-defined period of time to ensure a smooth transition. Therefore, a merger often isn’t your ideal exit if you hope to completely cut ties with your business upon the consummation of the deal. The five types of mergers include:

• Horizontal: The two businesses are in the same industry.

• Vertical: Both businesses involve the same supply chain.

• Conglomerate: The two businesses are unrelated. 

• Product Extension: Both businesses sell compatible products.

• Market Extension: The two businesses sell related products in different markets. 

Acquisition

In an acquisition, one business buys another. If your business gets acquired, you essentially give up ownership of it. The upside is you may be able to maximize your sales price if multiple competitors show interest and try to outbid each other. 

Ideally, you’ll want a friendly acquisition where you agree to be acquired by the business. Sometimes, however, a hostile acquisition could arise if you don’t have voting control of your business or points of contention emerge among your board, investors or lenders.

A Sale to Someone You Know

There are a number of individuals you may want to sell your business to. Friends, family members, and employees are just a few examples. 

If you pursue this option, be careful as it can take a toll on your relationship. To keep your relationship in good standing, don’t hide anything and make sure the individual is aware of and signs off on your liabilities, profits, and other important metrics. 

Initial Public Offering 

The first sale of a privately held company’s stock to the public is known as an initial public offering or IPO. With an IPO, you’ll need to find investors, gather important financial documents, register with the Securities and Exchange Commission (SEC), and determine a stock price and value for your business.

Very few privately-held companies will ever have an IPO and become publicly traded, so it’s unlikely you’ll experience this type of an exit, but it’s certainly exciting if you do! 

Of course, just because your company goes public, doesn’t mean you won’t be expected to show up to work the next day. In fact, you may find yourself working longer hours to represent the organization with the media and investors, in addition to maintaining executive responsibilities.

Liquidation

Liquidation is when you sell all of your assets to close your business for good. If other strategies don’t work for you, this may be the path to take. You won’t need to negotiate or merge your business because all of your assets will be distributed to your creditors and investors. 

The caveat with liquidation is that it could cause you to lose the intellectual property and value created by the business, not to mention potential risks to your reputation and tension with your customers. 

How to Develop an Exit Plan

Before you develop an exit plan, consider how long you’d like to remain involved with your business as well as thinking about your own personal and financial goals. Then, follow these steps.

Prepare Financial Documents

You won’t be able to exit your business properly until you have an accurate account of your personal finances. So you’ll want to gather and verify a number of financial documents. These may include but are not limited to cash flow statements, balance sheets, bank statements, and tax returns.

Discover the Type of Business Owner You Are

Once you know what type of business owner you are, you’ll find it easier to choose the right business exit strategy. Chances are you’ll fall into one of these four categories: 

• Rich and Ready to Go: Your finances are in good shape and you look forward to the next chapter in your life. You have minimal to no concerns about your financial situation once you leave your business.

• Wealthy, But Love to Work: You are financially secure. However, you enjoy work and don’t see yourself fully retiring. Working, at least on a part-time or occasional basis, will bring you the most satisfaction.

• Stay and Grow: You know you’re not financially ready to leave your business. You’re prepared to continue to work and increase the value of your organization as well as your net worth.

• Get Me Out Now: While you know your business requires more work to do before you can leave with confidence and security, you’re mentally exhausted and ready to move on anyway. 

Evaluate Exit Strategies

Review all of the exit strategies at your disposal to figure out the ideal options for your unique business and future goals. Be sure to weigh the pros and cons of each strategy and collaborate with a professional so that you can make the most informed decision for your situation. 

Communicate with Investors

Keep your investors in the loop about your exit plan. Let them know that you will design a strategy that explains how your exit will affect them as well as how they’ll be repaid. Answer any questions or address any concerns they may have.

Decide on the New Leadership Team

Depending on the exit strategy you select, you’ll need to pick a new leadership team. It’s a good idea to begin to transfer some of your duties while you work on your plan. This way you can guide the leaders with their transition and ensure they’re confident enough to take cover. 

Educate Employees

Once you finalize your exit plan, inform your employees. Be transparent about why you plan to exit the business and what they can expect going forward. Anticipate many questions and answer each of them thoroughly. Do this far in advance so that your employees have time to figure out where their careers will take them next. 

Tell Customers

Last but not least, share the news with your customers via email, phone, and/or social media. Introduce the new owner to your customers. In the event you plan to close, provide your customers with alternative solutions.

Business Exit Strategy Tips

Not every business exit strategy is created equal. To ensure yours leads to a seamless and lucrative exit, be sure to follow these tips.

Have a Clear Vision

While you may know that you want to move on from your business, your future plans might be up in the air. Take the time to figure out why you’re ready to go a different direction. Maybe you’d like to take care of family or health issues. Or perhaps you feel burnt out and would like to retire. 

A clear vision of why you’d like to leave your business will motivate you to focus on the most important parts of your exit strategy and implement it effectively. 

Create a Financial Plan

Chances are you’d like to exit your business without worrying about finances. If this is the case, determine the type of lifestyle you hope to lead. Then, do the math and figure out the numbers that will allow you to not only create it but sustain it as well. 

It’s in your best interest to work with financial advisors and professionals who specialize in exit planning. Once you have a financial plan in place, you’ll need to ensure your exit plan caters to it. 

Maximize Your Business Value

In a perfect world, you’d sell your business for as much as possible. The reality, however, is that this is easier said than done. You don’t want to overestimate the value of your business but you also don’t want to underestimate its growth potential. 

Fortunately, you can maximize your business value through several strategies. You may consider adding new products or services to your lineup, for example. Or perhaps you’re able to expand your target audience, strengthen your brand and increase your revenue.

Consequences of No Exit Plan

If you don’t develop an exit plan, you’ll likely put yourself in a difficult situation when you’re ready to move on from your business. Several of the most common consequences of not having an exit plan include:

• Low Sale Price: You may sell your business for far less than its worth or less than you need to have a financially comfortable post-exit life. 

• Personal and Family Hardship: Your family may suffer, especially if you are the sole or primary breadwinner and you’re unable to provide them with the lifestyle they’re used to. 

• Hefty Tax Bill: You may be on the hook for a tax bill that significantly reduces the amount of money you actually end with. 

• Lack of Control: You may have to pursue an exit strategy that isn’t necessarily ideal for your personal and financial goals.

• Poor Culture: If you’ve worked hard to build a positive business culture, a sudden or poorly thought-out exit plan can destroy it. 

• Employee Departure: Your most valuable employees may leave your organization if your exit plan impairs their position or career aspirations. 

• Forced Liquidation: You may have no other option but to liquidate your business for the value of your assets. 

The Bottom Line

With a strategic exit plan for your business, you’ll reduce your risks and increase the likelihood you’ll be able to leave on your own terms and conditions, financially content and proud of all you’ve accomplished. You’ll also leave your business behind in a way that benefits your employees, investors, and customers. 

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. Before making major financial decisions, please speak with us or another qualified professional for guidance. The original version of this article first appeared on Wealthtender written by Anna Baluch. 

When I first met him, a friend was diffidently responding when I asked what he does – he’s an IRS attorney.… Needless to say, I don’t hold that against him. As I told him, I know taxes fund everything the government does, from highways and bridges to national defense, etc. He was visibly relieved.

However, as much as I understand and accept that taxes are necessary, that doesn’t mean I like paying more than I need to.

Should We Pay More Taxes than the Minimum Required?

Some people think that everyone (who makes more than they do) should pay as much as possible in taxes.

Everyone is eager to do away with tax breaks that don’t help them personally.

• We should abolish the mortgage interest deduction, say people who don’t have a mortgage

• We should tax investment income more than wage income rather than far less, say people whose income is mostly from work

• We should increase tax rates on high earners, say people who earn less

• We should have a special tax on the wealth of multi-millionaires and billionaires, say people who aren’t either

• We should have a flat tax, say people whose taxes would drop as a result of such a change

You get the idea, right?

However you feel about any of these points (or any number of others) about how the tax code should be changed, there’s one thing few would disagree with. Judge Learned Hand said it best 88 years ago:

“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934)

The US Tax Code Is Complicated!

The US tax code is famously long and complicated.

While in 1913 it could be printed on a single page (!), by 2005 it comprised over 2 million words, and in 2021 it spanned over 10,000 sections, according to efile.com.

The Tax Foundation estimated in 2014 that the code, along with IRS regulations and case law came to a staggering 70,000 pages! They also quoted the National Taxpayer Advocate as having stated the tax code changed on average about once a day from 2001 to 2012.

This complexity makes filing a tax return an annual ordeal for most, even for those of us who hire accountants to prepare their tax returns.

But in one aspect, this complexity can be a good thing.

If you’re creative enough, you can find wording in the tax code that lets you arrange your affairs such that your taxes are lower, to paraphrase Judge Learned Hand.

The Dreaded Required Minimum Distribution (RMD)

To encourage us to save for retirement, Congress put into the tax code many options for deferring taxes on such savings.

IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, etc. all let you take money from your current wage income and set it aside before taxes, reducing your current tax liability. Instead, you pay taxes on withdrawals in retirement, when you actually want to use the money.

The problem Congress then faced was that the wealthy could set aside the most money, and usually don’t need to ever withdraw it. They can simply live off their taxable investment income. Then, they can leave the full, untaxed amounts in the plans to their kids who may also not need it, potentially deferring taxes for generations (at least until the SECURE Act required heirs to drain inherited accounts within 10 years of the bequest).

To make sure Uncle Sam gets his bite sooner rather than later, Congress set up the so-called Required Minimum Distribution (RMD).

Whether they need the money or not, retirees are forced to take out of their retirement plans, and pay taxes on, an ever-growing portion of their balances each year, starting the year after they turn 73 (if you reach age 72 after Dec. 31, 2022 - those born 1951-1959). The RMD age increases to 75 for an individual who turns age 74 after December 31, 2032 - those born in 1960 or later.

Don’t take out your full RMD, and you could face a hefty 25% penalty of every dollar you failed to withdraw.

The IRS offers several tables that tell you your RMD percentage for your age. The so-called Uniform Lifetime Table (see below) applies to most taxpayers.

As you can see, when you’re 73, you have to withdraw and pay taxes on 3.774% of your retirement plan balances. (Take one divided by the Distribution Period Factor to find the percent of the withdrawal. For example, 1/26.5 = 3.774%).

At age 75, it’s 4.07%. When you’re 80, it’s 4.95%. Turned 90? Now it’s 8.2%.

If you make it to your 100th birthday, it’s 15.63%.

Considering that good retirement planning has you withdraw no more than 4% of your portfolio to fund your retirement expenses, from age 75 and on, RMDs force you to draw more than you should, so the tax man can get his cut.

7 Well-Known Ways to Sidestep the RMD

There are 7 ways your financial advisor may help you sidestep or at least reduce your RMDs.

1. Withdraw more earlier: If you draw down your retirement plan balances before you’re 73, your RMDs will be lower. This may make sense if, for example, it lets you delay claiming Social Security benefits, increasing your eventual benefits by up to 24%. The problem is that this “solution” reduces (not avoids) your RMD by draining your nest egg.

2. Convert traditional IRAs to Roth IRAs: Since Roth IRAs are funded with after-tax dollars, they’re not subject to the RMD. However, this conversion causes you to pay taxes now. Hardly a great solution for avoiding the excess taxes forced by RMDs after you turn 73.

3. Investing in Qualified Longevity Annuity Contracts (QLACs): You’re allowed to invest up to a quarter of your IRA or 401(k) in QLACs, without those annuities being subject to RMDs. However, that’s limited to $200,000, and it also reduces the money you control and can leave for your heirs.

4. Invest your tax-deferred accounts in bonds and bond funds: Since income from bonds is taxed at your regular income tax rates, while returns from stocks get taxed at lower rates, holding bonds and bond funds in tax-deferred accounts and stocks and stock funds in taxable accounts reduces your taxes over the long haul. The problem is that if your retirement accounts are the bulk of your liquid wealth, you’d be sacrificing the far higher returns you’d likely have from stocks compared to bonds.

5. Donate your RMD as a Qualified Charitable Distribution (QCD): If you want, you can donate up to $105,000 a year (in 2024) to charities from your retirement plans, and this satisfies the RMD without hitting you with a tax bill. While charitable giving is a good cause, this isn’t a way to retain more of your wealth to leave to your heirs.

6. Time your first RMD earlier: Your first RMD must be taken by April 1 following the year you turn 73. After that, each RMD has to be taken by December 31 of the relevant tax year. Depending on your tax bracket situation, if you delay RMDs as long as legally allowed, you’ll take two RMDs in the tax year following the year you turn 73, which could push you into a higher bracket.

7. Keep working: If you continue working past age 73, RMDs are suspended for the retirement plan where you work (you still have to take RMDs from all your other retirement plans, but not your employer-sponsored plan). Except… if you own more than 5% of your employer. If you do own greater than 5% of the company, this exclusion doesn’t apply to you.

An Innovative Way to Avoid RMDs Altogether

As mentioned above, if you own 100% of your business that 7th method won’t help you. However… What if you’re ready to call it a career before age 73?

You find a buyer for your business and sell at least 95% of it. Now that you no longer own more than 5%, your 401(k) balance from your employer-sponsored retirement plan isn’t subject to RMDs, as long as you stay on the payroll. You could even make retaining you as an employee a requirement of the sales contract.

There are a few hoops to jump through…

• Complete the sale of at least 95% of your business before the calendar year in which you turn 73.

• Sell to someone who isn’t your direct relative (spouse, child, parent, etc.)

• Remain on the company payroll for as long as you want to defer your RMD

Interestingly, my accountant says there’s no requirement on how many hours you work, your hourly pay, or what work you do. It could be 10 hours a month at minimum wage for reviewing documents. You just need to remain on the payroll and continue to participate in the 401(k). Please consult with your CPA to confirm how this strategy might work best for you and any updated tax guidance.

Even more interesting, before you sell your business, you can make sure your 401(k) allows you to roll over other tax-deferred retirement plans into it. Then, roll all your traditional IRAs into the RMD-proofed 401(k).

Voila! No more RMDs!

Now, your withdrawals are dictated solely by your spending needs, dramatically reducing your tax bills later in life.

If you don’t own >5% of your employer (and especially if you own none of it), and they don’t have a set retirement age, being friendly with the owner offers benefits beyond a friendly face at work.

Ask her to keep you on the payroll at minimal hours and minimum wage, so you can delay your RMDs. Here too, you may be able to roll over your IRAs into the company’s 401(k).

The Bottom Line

RMDs may force you to deplete your tax-advantaged retirement plans faster than you need or want. There are at least 7 ways to reduce or delay your RMDs.

The above options show an innovative approach to the one RMD exception letting owners of small businesses legally sidestep RMDs for as long as they want if they’re planning to sell their business anyway.

Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. Before making major financial decisions, please speak with us or another qualified professional for guidance. The original version of this article first appeared on Wealthtender written by Opher Ganel.

What Is an Installment Sale?

An installment sale is a financial arrangement where the seller receives payments for their business over a period of time, rather than in a single lump sum. This method allows you to spread the income from the sale over several years, which can have favorable tax implications and provide a steady stream of income post-exit.

How It Works

1. Agreement: You and the buyer agree on the total sale price of your business and the terms of the installment payments.

2. Down Payment: The buyer typically makes a down payment upfront, with the remainder paid over a specified period, often ranging from a few years to a decade.

3. Installments: The buyer makes regular installment payments (monthly, quarterly, or annually) until the full purchase price is paid.

For example, if you sell your business for $1 million with a $200,000 down payment, the remaining $800,000 (plus interest) could be paid in equal installments over five years.

Tax Treatment of Installment Sales

One of the most attractive aspects of an installment sale is the potential tax benefits. Here’s how taxes are typically treated:

• Deferred Capital Gains Tax: Instead of paying a large capital gains tax in the year of the sale, you pay tax only on the portion of the gain you receive each year. This can result in significant tax savings.

• Income Spreading: By spreading out the income over several years, you may be able to keep yourself in a lower tax bracket each year, further reducing your overall tax liability.

• Avoiding Higher Medicare Premiums: Installment sales can help individuals avoid higher IRMAA (Income-Related Monthly Adjustment Amount) surcharges that those with higher incomes must pay in addition to their Medicare Part B and Part D premiums.

• Possibly Lowers Additional Tax on Social Security Benefits: These types of sales may help prevent more of your Social Security benefits from being taxed by keeping income lower.

According to the Internal Revenue Service (IRS), installment sales are a recognized method for reporting gains, and they require specific tax forms and guidelines to ensure compliance.

Benefits of an Installment Sale

1. Tax Advantages: As mentioned, spreading the capital gains tax over several years can reduce your immediate tax burden and potentially keep you in a lower tax bracket.

2. Steady Income Stream: An installment sale provides a predictable stream of income, which can be especially beneficial if you’re transitioning into retirement.

3. Attracting Buyers: Offering an installment sale can make your business more attractive to buyers who might not have the liquidity for a lump-sum purchase.

4. Flexibility: You can negotiate terms that suit both you and the buyer, including the interest rate on the unpaid balance, which can provide additional income.

Taking the Next Steps

Considering an installment sale for your business exit can offer numerous advantages, but it’s essential to approach it with careful planning. Here are the next steps you can take:

1. Consult with a Financial Advisor: Discuss your exit strategy and the potential benefits of an installment sale with a financial advisor who can guide you through the process.

2. Engage a Tax Professional: Work with a tax advisor to understand the specific tax implications and how to structure the sale for maximum benefit.

3. Draft a Solid Agreement: Ensure that the installment sale agreement is comprehensive and legally sound. This typically involves working with an attorney experienced in business transactions.

4. Plan for Your Future: Think about how the steady income from an installment sale will fit into your broader financial plan, including retirement and other long-term goals.

By taking these proactive steps, you can position yourself for a smooth and financially advantageous business exit. An installment sale not only provides tax benefits and steady income but also makes your business more appealing to a broader range of buyers.

Exiting your business is a significant milestone, and with the right planning and support, you can ensure it’s a successful and rewarding transition. Reach out today to explore how you can benefit from working with a financial advisor that specializes in guiding business owners into the next chapter of your life.

What is a 529 College Savings Plan?

A 529 College Savings Plan is a tax-advantaged savings account designed to help families save for future education expenses. Named after Section 529 of the Internal Revenue Code, these plans are sponsored by states, state agencies, or educational institutions. They offer a flexible and powerful way to invest in your child's educational future.

How Does a 529 Plan Work?

1. Opening an Account: You can open a 529 plan through your state’s program or a financial institution. However, you are not limited to only your own state’s plan. If you live in a state with state tax benefits on contributions, it may be more favorable from a tax perspective to open a plan in your home state. If you live in a state with no state income tax, like Florida, you are free to choose any state’s plan. This provides you with greater freedom to select a plan that has minimal fees, optimal investments, and ease of administration.

2. Selecting and Changing a Beneficiary: You’ll need to choose a beneficiary, usually your child, when you open the account. The beneficiary is the person who will be using the funds for qualified educational purposes. 529 plans have quite a bit of flexibility in terms of who in the family qualifies to use the funds. You have the option to change the beneficiary to an eligible family member without any penalty or tax consequences so long as the original adult (commonly called the Participant) is the same individual. This flexibility can be a game-changer for families with multiple children or for passing unused funds down to the next generation. If one child receives a scholarship or decides not to attend college, you can redirect the funds to another family member's education.

3. Contributing to the Account: You can contribute to the account as frequently as you like, up to the plan’s contribution limits. Some states offer automatic contribution options to make saving even easier. In 2024, you can contribute up to $18,000 per individual, or $36,000 per couple per child without filing a gift tax return. Another great feature of these plans is the option to superfund the account. That means you could gift five years’ worth of gifts at one time: $90,000 or $180,000 for single or married couples respectively. Just remember to file IRS form 709 to track the gift as part of your lifetime gift tax exemption. This can be a great solution for a grandparent who is trying to gift money to pass on to the next generation and would be considered outside of their estate.

4. Investing the Funds: The money you contribute is invested in a portfolio of your choice. Most plans offer a range of investment options, from conservative to aggressive, depending on your risk tolerance and time horizon. Many of these plans offer age-based solutions which will be more growth-focused while they are younger and automatically convert to a more conservative portfolio as the child gets closer to college age. This can be a great set-it-and-forget-it solution for someone who doesn’t want to remember to manage and rebalance the portfolio over time.

5. Using the Funds: When your child is ready for college, you can withdraw the funds tax-free, as long as they are used for qualified education expenses such as tuition, fees, books, and room and board.

Tax Treatment of 529 Plans

One of the most compelling features of a 529 plan is its tax advantages:

• Tax-Free Growth: Earnings on your contributions grow tax-free, which can significantly increase the amount available for education expenses.

• Tax-Free Withdrawals: Withdrawals used for qualified education expenses are also tax-free, meaning you don’t pay federal taxes on the growth when you use it for education or an eligible rollover to a Roth IRA.

• State Tax Benefits: Many states offer additional tax benefits, such as deductions or credits for contributions to a 529 plan. For example, in New York, residents can deduct up to $5,000 ($10,000 for married couples) of their contributions from their state income taxes each year.

Benefits of 529 Plans

1. Flexibility: Funds in a 529 plan can be used for a variety of educational expenses at eligible institutions across the U.S. and even some abroad. This includes vocational schools, community colleges, and traditional four-year universities. It covers books and fees, room and board, meal plans on campus, computers and lab fees, and can be used for K-12 private tuition.

2. High Contribution Limits: Unlike some other savings vehicles, 529 plans typically have high contribution limits, often exceeding $300,000, depending on the state.

3. Control Over the Account: As the account owner, you retain control over the funds. You can change the beneficiary to another family member if the original beneficiary doesn’t need the funds.

4. Minimal Impact on Financial Aid: Money in a 529 plan is considered a parental asset, which generally has a smaller impact on financial aid eligibility compared to assets held directly by the student. For FAFSA purposes, a grandparent-owned 529 plan currently does not impact a student’s financial aid eligibility.

5. Easy to Set Up and Manage: Opening a 529 account is straightforward, and many plans offer online management tools and resources to help you stay on track.

6. New Roth IRA Rollover Option: Starting in 2024, Congress is allowing up to $35,000 in leftover savings from 529 plans to roll tax-free into a Roth IRA for the eligible beneficiary. This eliminates fears of overfunding the accounts or in the event the child doesn’t go to college and having funds trapped within the plan or taxed for unqualified distributions. With the new 529 rollover-to-Roth, a plan could be started at birth and transferred after the plan has been opened for 15 years to begin saving for the beneficiari’s retirement if funds were no longer needed for college expenses. The beneficiary would still need to show earned income in order to make the contribution to the Roth IRA. In 2024, the maximum Roth IRA contribution limit is $7,000 so it would take five years to maximize the full $35,000 rollover option.

Taking the Next Steps

In recognition of National 529 Day, now is the perfect time to start or review your college savings strategy. Here’s how you can get started:

1. Evaluate Your Options: Research the 529 plans offered by your state and compare them with plans from other states to find the one that best suits your needs.

2. Consult with a Financial Advisor: Schedule a meeting with a financial advisor to discuss your goals and get personalized advice on selecting and managing a 529 plan.

3. Set Up Automatic Contributions: Consider setting up automatic contributions to make saving easier and more consistent.

4. Stay Informed: Keep track of your plan’s performance and stay informed about any changes in tax laws or plan benefits that could affect your savings strategy.

By taking these steps, you can make a significant impact on your child’s future education and reduce the financial burden of college costs. A 529 College Savings Plan is a powerful tool that can help your family achieve its educational, multi-generational, estate, and retirement planning goals while enjoying the tax benefits.

Celebrate National 529 Day by investing in your child’s future today. For personalized advice and support, don’t hesitate to reach out. Let’s make your child’s educational dreams a reality!