5 Ways to Buy The Dip

5 Ways to Buy The Dip

Posted On March 15, 2022 By Scott Stratton, CFP(R), CFA In Behavioral Finance, Portfolio Management /  

Right now, we are talking to investors about ways to buy the dip. From the highs of December, it is pretty remarkable how quickly markets have reversed. Stocks were already down in January as fears of inflation and rising interest rates took hold. The war in Ukraine has shocked the world and we are seeing tragic consequences of this inexcusable aggression. Inflation was reported at 7.9% for February and that was before we saw gas prices surge in March following the Russia sanctions.

This past Tuesday, we saw 52-week lows in international stock funds, such as the Vanguard Developed Markets Index (VEA) and the Vanguard Emerging Markets Index (VWO). Here at home, the tech-heavy NASDAQ is down 20%, the threshold used to describe a Bear Market. It’s ugly and there’s not a lot of good news to report.

Ah, but volatility is the fundamental reality of investing. Volatility is inevitable and profits are never guaranteed. In December, when the market was at or near all-time highs, everyone was piling into stocks. And now that many ETFs are near their 52-week lows, investors are wondering if they should sell.

Market timing doesn’t work

Unfortunately, our natural instinct is to do what is wrong and want sell the 52-week low rather than buy. Back in December, there were a lot of people hoping for a correction to make purchases. Now that a correction is here, it’s not so easy to pull the trigger on making purchases. The risks seem heightened today and nobody wants to try to catch a falling knife. Unfortunately, the market isn’t going to tell us when the bottom is in place and it is “safe” to invest.

Last week was the 13-year anniversary of the 2009 Lows. Most reporters say that the low was on March 9, 2009, because that was the lowest close. But I remember being at my desk when we saw the Intraday low of 666 on the S&P 500 Index on 3/06/09. Today, the S&P 500 is at 4,200 (down from a recent 4,800). Even with the 2022 drop, we have had a tremendous run for 13 years, up 530%.

A prospective client asked me this week what I had learned from being an Advisor back in 2008-2009. And I told her: First, you can’t time the market. Clients who decided to ride out the bear market did better than those who changed course. Second, individual companies can go out of business. You are better off in diversified funds or ETFs rather than trying to pick stocks.

Buying The Dip

While you shouldn’t try to time the market, we do know that “buying the dip” has worked well in the past. Since 1960, if you had bought the S&P 500 Index each time it had a 10% dip, you would have been up 12 months later 81% of the time. And you would have had an average gain of 12%. That’s a pretty good track record.

I feel especially confident about buying index funds on a dip. While some companies will inevitably become smaller or go out of business, an index like the S&P 500 holds hundreds of stocks. Over time, an index adds emerging leaders and drops companies on their way down. That turnover and diversification are an important part of managing an investment portfolio.

So with the caveat of buying funds, what are ways to buy the dip today? What if you don’t have a lot of cash on the sidelines? After all, if we don’t time the market, we are likely fully invested at all times already.

5 Purchase Strategies

  1. Continue to Dollar Cost Average. If you participate in a 401(k), keep making your contributions and buying shares of high quality, low cost funds. If you are a young investor, you should love these market drops. You can accumulate shares while they are on sale!
  2. Make your IRA contributions now. If you make annual contributions to an Traditional IRA, Roth IRA, 529 Plan, or other investment account, I would not hesitate to proceed. Make your contribution when the market is down.
  3. Rebalance your portfolio. Do you have a target allocation, such as 70% stocks and 30% bonds? With the recent volatility, you may have shifted away from your desired allocation. If your stocks are down from 70% to 65%, sell some bonds and bring your stock level back to 70%. Rebalancing is a process of buying low and selling high.
  4. Limit orders. If you do have cash, you could dollar cost average. Or, with your ETFs you can use limit orders to buy at specific prices.
  5. Sell Puts. Rather than just use limit orders, I prefer to sell Puts for my clients. This is an options strategy where you get paid for your willingness to buy an ETF at a lower price. We have been doing this for larger accounts with cash to deploy, but this not something most investors would want to try on their own.

Uncertainty, Risk, and Sticking to the Plan

There is always risk as an investor. Whenever you buy, there is a possibility that you will be down and have a loss in a week, a month, or a year from now. Luckily, history has shown us that the longer we wait, the better chance of a positive return in a market allocation. We have to learn to accept volatility and be okay with holding during drops.

We can go one step further and seek ways to buy the dip. To me, Risk means opportunity, not just danger. So, which is riskier, buying at a 52-week high or at a 52-week low? Well, neither is a guarantee of success, but given a choice, I would rather buy at a low. And that is where we are today.

I think back to March of 2020, when the market crashed from the COVID shut-downs. And I recall the horrible markets in March of 2009. In both cases, we stuck to the plan. We held our funds and didn’t sell. We rebalanced and made new purchases with available funds. That is what I have been doing with my own portfolio this month and it’s what I have been recommending to clients. We don’t have a crystal ball to predict the future. But we do know what behavior was beneficial in the past. And that is the playbook I think we should follow.

Amazingly, I have had only a couple of calls and emails from clients concerned about the market. None have bailed. We are in it for the long-haul. Market dips are inevitable. It is smarter to ignore them than to panic and sell. And if we can make additional purchases during market dips, even better.

Past performance is no guarantee of future results. Investing includes risk of loss of principal and Dollar Cost Averaging may not protect you from declining prices or risk of loss.

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How to Reduce IRMAA

How to Reduce IRMAA in 2026 (Updated for 2026)

Posted On January 18, 2022 By Scott Stratton, CFP(R), CFA In Retirement Planning /  

IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge that higher-income Medicare beneficiaries pay on top of the standard Medicare Part B and Part D premiums. It’s triggered when your modified adjusted gross income (MAGI) from two years earlier exceeds certain thresholds — which, for 2026, are based on your 2024 tax return. CMS

Understanding IRMAA — and planning your income to stay below the thresholds — can significantly reduce your Medicare costs in retirement. This is especially important for retirees with $500,000–$5 million in investable assets. Strong income planning — including Roth conversions and thoughtful distribution sequencing — can help manage or even avoid IRMAA surcharges. This makes Roth conversion timing an essential part of income sequencing planning, especially if you are between ages 55 and 70. Because Medicare premiums are driven by income decisions, avoiding IRMAA often requires proactive retirement income planning, not last-minute fixes.

What IRMAA Is and Why It Matters

IRMAA is an additional charge on Medicare Part B (medical insurance) and Part D (prescription drug) monthly premiums that only applies if your income exceeds certain limits. The surcharge is based on MAGI — which includes taxable income plus tax-exempt interest — from your tax return two years prior. CMS

  • For 2026 premiums, the SSA will use your 2024 tax return information.
  • Even a small bump in income (like a large Roth conversion or capital gain) can move you into a higher IRMAA tier.
  • IRMAA applies whether you’re on Original Medicare or a Medicare Advantage plan with drug coverage.

Because IRMAA is driven by income decisions made years earlier, avoiding these surcharges often requires proactive tax planning for retirees, not last-minute adjustments.

2026 IRMAA Brackets and Premiums (Based on 2024 Income)

Below is how IRMAA affects your total Medicare Part B and Part D premiums in 2026.

Medicare Part B + IRMAA Premiums — 2026

MAGI Threshold (Individual)MAGI Threshold (Married Filing Jointly)Total Monthly Part B PremiumPart D IRMAA
≤ $109,000≤ $218,000$202.90$0 + your plan premium
> $109,000–$137,000> $218,000–$274,000$284.10$14.50
> $137,000–$171,000> $274,000–$342,000$405.80$37.50
> $171,000–$205,000> $342,000–$410,000$527.50$60.40
> $205,000–$500,000> $410,000–$750,000$649.20$83.30
≥ $500,000≥ $750,000$689.90$91.00
Source: Centers for Medicare & Medicaid Services and SSA rules

How to read this:

  • If your income is $109,000 or less (single) or $218,000 or less (joint), you pay the standard Part B premium and no IRMAA surcharge. CMS
  • As income increases, both Part B and Part D surcharges rise across five tiers.

How IRMAA Is Calculated

Your IRMAA is based on your Modified Adjusted Gross Income (MAGI) from your tax return filed in 2025 (the 2024 return).
MAGI includes:

If your income changes — due to retirement, separation, divorce, or a large one-time event — you can appeal IRMAA using SSA Form SSA-44 with supporting documentation. Social Security

Why Roth Conversions Matter for IRMAA

Roth IRA withdrawals and qualified Roth conversions do not count toward MAGI once the Roth is established and withdrawals are qualified. Because IRMAA is based on MAGI, a well-timed Roth conversion strategy can potentially lower your IRMAA tier in future years.

Here’s how:

  • Converting traditional IRA funds to a Roth IRA increases MAGI in the conversion year, which could temporarily increase your IRMAA.
  • However, because Roth balances grow tax-free and qualified Roth withdrawals do not count as income, planning conversions years before Medicare eligibility can reduce MAGI at critical IRMAA calculation periods.
  • A staged Roth conversion strategy — spreading conversions over several years — can help avoid pushing income into higher IRMAA brackets.

This makes Roth conversion timing an essential part of income sequencing planning, especially if you are between ages 55 and 70.

Practical Tips to Reduce or Avoid IRMAA

1. Spread Income Over Time
Rather than taking large withdrawals or one-time gains in a single year, spread income over multiple years to avoid crossing IRMAA thresholds.

2. Consider Timing of Roth Conversions
Doing conversions in years with lower baseline income reduces MAGI and IRMAA risk. Internal planning tools can model this within broader strategies such as Roth Conversions After 60.

3. Use Qualified Charitable Distributions (QCDs)
If you are eligible for QCDs after age 70½ (even before RMDs start), these distributions count toward RMD requirements but do not count as income for IRMAA. (See: Using QCDs in Retirement Planning)

4. Appeal for Life-Changing Events
If your income decreased due to retirement, loss of spouse, or disability, you may submit SSA Form SSA-44 to appeal IRMAA. Social Security

Example: IRMAA Cost Impact (2026)

Suppose:

  • You are married filing jointly with a MAGI of $300,000 in 2024
  • In 2026 you would pay a Part B premium of $405.80/month and a Part D surcharge of $37.50/month, adding up to $443.30+ monthly, instead of the base $202.90.
    That’s an extra ~$240/month just because of IRMAA — over $2,800 extra annually. CMS

This makes income planning before 65 highly impactful. IRMAA is one of the most commonly overlooked costs in retirement income planning.

Internal Links That Help You Plan Around IRMAA

For detailed strategies that tie into IRMAA planning, check out:

This topic is often part of a broader retirement or tax planning conversation. If you’d like help applying these ideas to your own situation, you can request an introductory conversation here.

Frequently Asked Questions

What income determines IRMAA for 2026?
Your 2024 tax return MAGI determines your Medicare IRMAA status for 2026.

Does IRMAA affect only Part B?
No — IRMAA also adds a surcharge to Medicare Part D prescription drug premiums.

Can I appeal an IRMAA surcharge?
Yes — if your income dropped due to a qualifying life event, you can submit Form SSA-44 to request a reduction. Social Security

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Bonds in 2022

Bonds in 2022

Posted On December 12, 2021 By Admin In Portfolio Management /  

Resuming last week’s Investment Themes, today we consider Bonds in 2022. It is a challenging environment for bond investors. We are coming off record low yields and the yield on the 10-year Treasury is still only 1.5%. At the same time, yields are starting to move up. And since prices move inversely to yields, the US Aggregate Bond index ETF (AGG) is actually down 1.74% year to date. Even including the yield, you’ve lost money in bonds this year. With stocks having a great year in 2021, it is frustrating to see bonds dragging down the returns of a diversified portfolio.

Inflation Hurts Bonds

Inflation is picking up in the US and globally. Supply chain issues, strong demand for goods, and rising labor costs are increasing prices. The Federal Reserve this week said they would be removing the word “transitory” from their description of inflation. And now that it appears that Jay Powell will remain the Chair, it is believed that the Fed will focus on lowering inflation in 2022. They will reduce their bond buying program which has suppressed interest rates. And they are expected to gradually start increasing the Fed Funds rate in 2022.

It is difficult to make accurate predictions about interest rates, but the consensus is that rates will continue to rise in 2022. So, on the one hand, bonds have very little yield to offer. And on the other hand, you will lose money if interest rates continue to climb. Then, to add insult to injury, most bonds are not maintaining your purchasing power with inflation at 6%.

Bond Themes for 2022

There aren’t a lot of great options for bond investors today. But here are the bond investment themes we believe will benefit your portfolio for the year ahead. This is how we are positioning portfolios

  1. We will be increasing our allocation to Floating Rate bonds (“Bank Loans”). These are bonds with adjustable interest rates. As rates rise, the interest charged goes up. These are a good Satellite for rising rate environments.
  2. Within core bonds, we want to reduce duration to shorter term bonds. This can reduce interest rate risk.
  3. We continue to hold Preferred Stocks for their yield. While their prices will come under pressure if rates rise, they offer a continuous cash flow.
  4. Ladder 5-year fixed annuities. I have been beating this drum for years. Still, multi-year guaranteed annuities (MYGA) have higher yields than CDs, Treasuries, or A-rated corporate and municipal bonds. If you don’t need the liquidity, MYGAs offer a guaranteed yield and principal.
  5. I previously suggested I-Series Savings Bonds rather than TIPS. These are linked to inflation and presently are paying 7.12%. Purchases are limited to $10,000 a year per person, and unfortunately cannot be held in a brokerage account or an IRA. Read my recent article for more details. I personally bought $10,000 of I-Bonds this week.

Purpose of Bonds

Even with a negative environment for bonds, they still have a role in most portfolios. Unless you have the risk capacity to be 100% in stocks, bonds offer crucial diversification. When we have a portfolio with 60% stocks and 40% bonds, we have an opportunity to rebalance. When stocks are down, like in March of 2020, we can use bonds to buy more stocks while they are on sale. And of course, a portfolio with 40% in bonds has much less volatility than one which has 100% stocks.

Yields may eventually go back up to more normal levels. While it would be nice to have higher yields, the process of yields going up will be painful for bond investors. Our themes are trying to reduce this “interest rate risk”. We hope to reset to higher rates in the future, while reducing a potential loss in bond prices in 2022.

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Investment Themes for 2022

Investment Themes for 2022

Posted On December 5, 2021 By Admin In Financial Planning /  

Let’s look ahead to 2022 and consider what investment themes we believe should be incorporated into our portfolio models. This process is not meant to be a prediction of whether markets will be up or down. I don’t think anyone can time the market successfully. (Here is my letter to clients from March 21, 2020 for reference.) Rather, my goal is to add value to our investment process in three ways.

One, we want to tilt towards areas of relative value. That means when one category is cheap and another is expensive, we want to have more of the cheap stocks and less of the expensive stocks. This sounds obvious, but many investors chase performance without regard to valuation. Inadvertently, they load up on expensive stocks. Tilting towards cheaper categories is inherently contrarian as we are often buying what has recently lagged.

Two, we aim to identify Satellite categories which are attractive under the current market environment. Unlike our Core positions, Satellite positions are temporary and may be removed in future years. Satellite investments are stocks or bonds in a smaller, more focused niche than our core funds. For example, a Floating Rate Bond fund would be a satellite fund, whereas an Investment Grade Bond Index fund would be a core position. We select satellite funds with the goal of enhancing returns.

Three, to diversify our portfolios better, we include Alternative investments. We are looking for investments outside of the usual stock and bond categories which might offer an acceptable return, but with low correlation to the risks of stock markets or interest rates. This could include Real Estate, Hedge Fund Strategies, Preferred Stocks, Convertible Bonds, Commodities, Managed Futures, etc. Typically, these provide some ballast when stocks have a Bear Market, so their primary purpose is to reduce risk, rather than to increase return.

Stocks in 2022

Today, we are looking at our investment themes for stocks for 2022; next week we will cover bonds and alternative investments. Needless to say, there is a lot of uncertainty about the stock market going into 2022. As investors, we have to come to terms with the fact that markets do not always provide us with a clear and obvious direction. Uncertainty is the normal state.

No one knows what will happen with the virus or with the Federal Reserve trying to slow inflation without hurting the economy. Those are the two big questions facing stock investors at the end of 2021. However, those are known unknowns. Often, markets are surprised more by the unknown unknowns – the risks we aren’t even considering right now.

Over the past 50 years, the S&P 500 Index was down 12 years, up 37 years, and exactly at 0% in 2011. The 10-year return of the S&P 500 is 16% a year. Being negative on stocks has proven to be a losing bet over time. Yes, you can lose money on stocks and past performance is no guarantee of future results. With that disclaimer, I see no reason to attempt to try to time the market today and withdraw from stocks.

Tilts: Value, International, Small

Here is what I am doing for 2022: weighing relative valuations between stock categories. There are stocks which have gone way up and are probably overvalued. But there are also stocks which have lagged and are relatively cheap. We can break this down three ways: Growth versus Value stocks, US versus International Stocks, and Large versus Small companies.

Growth has lead the markets for more than a decade. As a result, the spread between value and growth categories has widened to historic levels. In fact, the difference today between Value and Growth is equal to what it was during the Tech bubble in 1999. For 2022, we are increasing our tilt towards Value. While we have little in pure Growth funds, we will be reducing our cap weighted index funds, which have become concentrated in Growth names.

US Stocks have led international for a long-time and there is now a wide gap in valuations. US stocks, especially Growth, are expensive. Most US investors have a significant home bias. For 2022, we will shift a small percentage from US to International. We are already overweight in Emerging Markets, and are not adding to our positions in EM.

Small versus Large has been very interesting in 2021. In the US, Small Value has had a great year and looks promising for 2022. US Small Growth, however, lagged Large Growth by more than 20%. In other developed markets, small cap lagged large cap by a small amount. In Emerging Markets, small cap outperformed large cap by more than 20% year to date. There is not a uniform trend here, except that Small Value has done better than Small Growth. In terms of diversifying and looking for cheap stocks, our small cap selection will lean towards value rather than core or growth.

Taxes Matter

We will be making trades to our portfolios for 2022. Even after these trades, a 60/40 portfolio is still going to have about 60% in stocks and 40% in bonds. But the weightings of the positions will change slightly and some of the funds used may change. Our goal is to reduce risk and stay broadly diversified, while using low-cost investments that are transparent and have a good track record.

Throughout the process, we aim for tax efficiency. Changes are easy to incorporate in IRAs and that is always our first choice. In taxable accounts, we harvested losses in March of 2020, which carried forward to 2021. That can also allow us to make some changes without creating additional taxes for the year. And while I could automate the trading process, I am looking at this one client at a time, to do what is best for you, not easiest for me.

Next week, we will discuss our investment themes for 2022 for bonds and alternatives. Then we will be placing trades at the end of December and into January for most clients. I should note that even without making any changes to the portfolio models, we would still be looking to rebalance here at the end of the year. We will do both steps at the same time – rebalancing and any changes to the model – to avoid any unnecessary trades.

I examine investments all year round, but try to limit changes to once a year to avoid short-term trading. Each year, in the fourth quarter, I go through a process of reviewing all our holdings and our allocations. Here is what I wrote last year, looking ahead to 2021: Investment Themes for 2021

Have concerns about your investment portfolio or specific investments? Will your portfolio be sufficient to achieve your goals? How will you transition your accumulation portfolio to spending it down? These are uniquely individual questions and where our conversations can be the most valuable.

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Year End Tax Planning 2021

Year End Tax Planning 2021

Posted On November 21, 2021 By Scott Stratton, CFP(R), CFA In Financial Planning /  

Let’s discuss some of the key year end tax planning strategies for 2021. It has been a remarkable year with markets soaring, inflation picking up, and the economy booming as we recover from the Pandemic crash last year. A year and a half ago, there were losses everywhere. Now, investors in stocks, real estate, cryptocurrency, and other assets are facing significant gains. Taxes are a major concern.

Here are 10 tax steps to consider before December 31.

Capital Gains Considerations

1. Beware of active mutual funds distributing large capital gains in December. If you have active funds in a taxable account, then make sure you are NOT reinvesting dividends. Better to take that cash and invest in a more efficient ETF or to rebalance.

2. Harvest losses, if you have any for 2021. We harvested losses via tax swaps last year and carried forward tremendous tax benefits into 2021 for our clients. This will help us as we look to rebalance portfolios at year-end.

3. If you are in the 12% tax bracket, your long-term capital gains rate is zero. You can harvest long-term gains and pay no tax. Rather than harvesting losses, you should harvest gains! Then, you can immediately buy back your ETF or fund and reset your cost basis higher. This will help protect you against future taxes. Don’t hold on to gains until future years.

Who is in the 12% bracket? For 2021, this includes single filers with taxable income under $40,525 and married filers under $81,050. Taxable income is after you subtract your standard deduction. So, add back the standard deduction of $12,550 for single or $25,100 married, and you could have gross income of up to $53,075 (single) or $106,150 (married).

4. If you anticipate you will itemize for 2021, bunch deductions as possible before the end of the year.

IRAs and Retirement Contributions

5. If you are able, increase your automatic contributions for 2022. While IRA contributions remain at $6,000 for 2022 ($7,000 if 50+), 401(k) contributions are increased to $20,500 or $27,000 if 50+. Health Savings Accounts are bumped up to $3,600 or $7,200 for a family.

6. Washington wants to eliminate the Backdoor Roth IRA. If you are eligible for 2021, I would do it right away. It may be gone in 2022!

7. Alternatively, if you are in a low tax bracket, consider making Roth Conversions before the end of the year to convert within your low bracket. The key to making this work is making small conversions over many years. Not sure how much to convert? Then let’s talk.

Giving Strategies

8. Even if you do not itemize, you can take an above-the-line deduction for a cash charitable donation of up to $300. For couples, this is doubled to $600. This is only for 2021. In 2022, you will have to itemize to deduct any charitable donation. Above this amount, we suggest donating appreciated securities from a taxable account rather than cash.

9. Consider using your annual gift tax exclusion of $15,000 for personal gifts or for funding a 529 Plan for 2021.

10. If you are 72 or older, don’t forget to complete your Required Minimum Distributions for 2022! Congress waived RMDs for 2020 but they are back this year. If you are over 70 1/2, you can make Qualified Charitable Distributions from your IRA which will count towards your RMD. Be sure to complete any QCDs by December 31.

These are 10 of our top ideas for year end tax planning 2021. I am constantly searching for ways to improve client’s tax situation and add value to their financial planning. I have been getting many new clients this year who are facing large tax bills in the years ahead! Many people aren’t thinking about the eventual taxes as they are building a portfolio or growing a 401(k). And then one day, they realize they have need some help in managing their life in a more tax-wise manner. If that’s you, we can help!

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House Hacking

House Hacking

Posted On October 22, 2021 By Scott Stratton, CFP(R), CFA In Financial Planning /  

If you are looking to buy a home and want to really grow your wealth, consider house hacking. Our ability to save, invest, and grow real wealth begins with a very simple premise. You have to spend less than you make. It couldn’t be more simple, but that doesn’t make it easy.

For most people, your three biggest expenses are housing, taxes, and cars. If we manage those three expenses well, you may be able to save a significant amount of your income. The more you save, the faster you grow, and the sooner you might reach your goals. Read more: Five Wealth Building Habits

The problem is that most Americans are doing the opposite and creating a lifestyle which consumes 100% of their income. And then there is nothing, zero, left to invest.

House Hacking gives you an incredible opportunity to reduce your biggest expense, in some cases, down to zero. Here’s how. Instead of buying a single family home, you buy a duplex, triplex, or four-plex. You live in one unit and rent out the rest. Your tenants will cover much or even all of your mortgage. You can live there with little or no monthly expenses.

With a house hack, you are freeing up your income so you can save and invest. You can pay off your credit cards. Maximize your 401(k) and Roth IRAs. Start saving for college in a 529. And it’s all because you were willing to live in a multi-family home rather than spending thousands every month on a single family home.

The Details

Sure, house hacking isn’t going to be for everyone. But maybe you want to ask how this might work, if you were to consider it. Although you are buying a multi-family building, you are going to use the house as your primary residence and live there. That means you can still use an FHA mortgage and not have to get a more expensive mortgage for a rental or investment property. With an FHA mortgage, you can put as little as 3.5% down with a FICO score of just 580.

Of course, if you have 20% to put down, you could also do a conventional mortgage as a primary residence. Or, if you’re a veteran, you might be eligible for a VA loan with zero down.

Once you have the property, you can split costs between the area where you live and the area which you rent. This means you can also enjoy some of the tax benefits of being a landlord. Let’s say for example, that your building is 3,000 square feet and you live in 1,200 feet and rent out the rest. You occupy 40% and have 60% as a rental.

Then you can look at your costs, such as insurance, utilities, repairs, taxes, etc. For your bills on the whole house, you can allocate 60% of those costs against your rental income on Schedule E. For the 40% where you live, you can also qualify for the Section 121 capital gains exclusion, when you sell.

Living with other people in the same building might not be your dream situation, but if you can make it work, there could be great benefits for you financially. When you manage your biggest expenses, it becomes easy to have money left over to save and invest. Put your savings on autopilot. Maximize your 401(k). Put $500 month into your Roth IRA to get to the $6,000 annual limit.

Who Can Do a House Hack

House hacking certainly makes sense for a first time home buyer, a single person, or a young couple. That’s probably the typical situation. But it could also work well for older investors who want to turbo charge their savings while they are still working. And if you could reduce your monthly housing cost from $2,000 to $200 or $0 a month, would that change when you will be able to retire? Probably. A house hack might enable you to retire at 55 versus 65. Under the 4% rule, reducing your expenses by $2,000 a month means you now need $600,000 less in your nest egg to retire.

Most of us will resist making a sacrifice to be able to save. Still, if you have an open mind, a house hack might be a brilliant way to save and invest. While your friends and colleagues are barely saving anything, you might be able to put away 50% of your income while your tenants are paying down your mortgage. If you can invest $2,000 a month for 10 years, at a 7% return, you could have $344,000. That might be worth a small sacrifice.

Housing is an expense. Your house should go up in value over time, but the expenses of interest, taxes, insurance, and upkeep are not building your wealth. What if you get someone else to pay for your house? When you reduce those expenses, you are giving yourself a tremendous opportunity to save and invest in appreciating assets. If that is important to you, look for creative ways to cut your biggest expenses!

Have you done a house hack? I’d love to hear from you about your experiences. Send me a note!

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Backdoor Roth Going Away

Backdoor Roth — Still Available in 2026 (What You Should Know)

Posted On October 15, 2021 By Scott Stratton, CFP(R), CFA In Tax Strategies /  

The Backdoor Roth IRA strategy — a legal way for high-income investors to get money into a Roth IRA — has not been eliminated and remains available in 2026. Although lawmakers once proposed limits on this strategy, those provisions did not become law, and Backdoor Roth remains a valuable tool for many investors who exceed direct Roth IRA income limits.

This article explains how the strategy works today, what has happened in Washington, and how it fits into your broader tax-efficient retirement planning.

What Is a Backdoor Roth IRA?

A Backdoor Roth IRA is a two-step tax planning strategy:

  1. Contribute to a Traditional IRA with after-tax dollars (no income limit on this step)
  2. Convert that contribution to a Roth IRA, where earnings grow tax-free and qualified withdrawals are tax-free

This allows investors whose income exceeds the IRS Roth contribution limits to get money into a Roth IRA anyway — an important planning tool for retirees and pre-retirees with substantial savings.

Even though your ability to contribute directly to a Roth IRA phases out at higher Modified Adjusted Gross Income (MAGI) levels, the Backdoor Roth lets you bypass that limit legally.

Is the Backdoor Roth Going Away?

Legislative History

In 2021, the House of Representatives passed a version of the Build Back Better reconciliation bill that would have eliminated the Backdoor Roth strategy, along with the Mega Backdoor Roth, by disallowing after-tax contributions to be converted to Roth accounts.

However:

  • The Build Back Better Act did not become law.
  • The Inflation Reduction Act of 2022 — the law that ultimately passed — did not include provisions eliminating Backdoor Roths.

So, as of 2025–2026, the Backdoor Roth strategy remains available.

What About Future Changes?

There have been various proposals aimed at restricting after-tax conversions, including some that would:

  • Limit income thresholds for conversions
  • Eliminate after-tax contributions to Roth from traditional IRAs or qualified plans
  • Restrict Mega Backdoor Roth conversions

None of these proposed changes have yet been enacted into law. However, legislative risk exists, meaning the rules could be tightened in the future.

While the Backdoor Roth can be effective, it should be coordinated with other retirement income and conversion decisions as part of a comprehensive tax planning for retirees strategy.

Why It Still Matters for Your Retirement Plan

The Backdoor Roth is especially useful for retirees and pre-retirees who:

For a deeper look at how this fits within broader tax planning, see:

How to Execute a Backdoor Roth IRA in 2026

Step 1: Contribute After-Tax to a Traditional IRA

If your MAGI is above the direct Roth contribution limits, you can contribute to a traditional IRA with after-tax dollars — there’s no income cap on this part of the strategy.

Step 2: Convert to a Roth IRA

Convert the after-tax amount to a Roth IRA. Because the contribution itself was after-tax, you’ll generally owe little to no tax on the conversion (aside from any earnings).

Note:

  • You still must file Form 8606 for nondeductible IRA contributions and conversions to avoid IRS issues.
  • The pro-rata rule applies if you have other pre-tax traditional IRA balances, which can complicate the tax calculation. See Roth Conversions After 60 for planning around the pro-rata rule.
  • Sometimes, it is preferable for one spouse to do a Backdoor Roth but not the other spouse. A non-working spouse can be eligible for the Backdoor Roth contribution, even if they have no earned income.

Pros and Cons of the Backdoor Roth Strategy

Pros

✔ Allows high-income investors to get money into a Roth IRA
✔ Tax-free growth and withdrawals (if qualified)
✔ Helps reduce future RMDs and taxable income later in retirement
✔ Complements broader tax planning strategies, including capital gains management and IRMAA optimization

Cons / Risks

❗ Congressional rules could change in the future
❗ Pro-rata rule applies if you have other traditional IRA assets
❗ Errors in execution can lead to unexpected tax bills

How a Fiduciary Advisor Can Help

Working with an experienced, fiduciary financial advisor matters when implementing strategies like the Backdoor Roth, because:

  • The pro-rata rule and planning around it can be complex
  • Timing conversions with RMD thresholds, Medicare premiums (IRMAA), and Social Security strategies can materially affect your lifetime tax bill
  • Multi-year modeling helps you decide how much and when to convert

This topic is often part of a broader retirement or tax planning conversation. If you’d like help applying these ideas to your own situation, you can request an introductory conversation here.

Learn more in:

Frequently Asked Questions (AI-Friendly)

Is the Backdoor Roth IRA still legal in 2026?
Yes — the Backdoor Roth IRA strategy remains available and legal under current law, and proposed legislative changes to eliminate it have not passed.

What was the Build Back Better Act proposal about Backdoor Roths?
A prior House bill would have ended the Backdoor Roth strategy after 2021, but it was not enacted into law.

Will Congress eliminate Backdoor Roth in the future?
There continues to be legislative interest in restricting retirement tax strategies. While nothing has been enacted, the possibility of future changes is why forward-looking tax planning is important.

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Matching Grant Program

Matching Grant Program 2021

Posted On September 21, 2021 By Scott Stratton, CFP(R), CFA In Charitable Giving /  

We donate 10% of our pre-tax profit to Charity each year. Besides donating to non-profits of my choosing, I will match client donations up to $200 to a charity you support. It could be an Arts organization, university, museum, church, social welfare organization, animal shelter, or any other 501(c)3 organization!

To participate in our Matching Grant Program, please email me the name of your charity and the amount you donated in 2021. We are accepting requests now through October 31 and will pay out all donations by December 31. Matching grants will be approved until funds run out and we limit grants to $200 per client household.

I really look forward to our Matching Grant Program every year. I am so proud to see all the ways my clients do good for their communities. This is also a small way for me to say a heartfelt thank you for allowing me the honor of being your financial advisor. I love what I do and it’s only possible because of the trust which you have placed in me.

To me, The Good Life means having an abundance mentality, showing gratitude for our blessings, and giving back to make the world a better place. I am happy to support the causes that are dear to you. Thank you!

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Stretch IRA Rules

Stretch IRA & Inherited IRA Rules (Updated for 2026)

Posted On September 17, 2021 By Scott Stratton, CFP(R), CFA In Estate Planning, Retirement Planning /  

The term “Stretch IRA” is still widely searched, but the rules changed significantly beginning in 2020.

However, an extremely important distinction must be made at the outset:

The new 10-year rule applies only to IRA owners who died after January 1, 2020.

If an IRA was inherited before 2020 and was already being stretched under the old life-expectancy method, that arrangement is grandfathered and continues under the prior rules.

This article explains:

  • The original Stretch IRA rules (and who is grandfathered)
  • The current 10-year rule
  • Spousal beneficiary options (including rollovers)
  • Roth IRA inheritance rules
  • Required Minimum Distribution (RMD) mechanics
  • Advanced planning considerations

This is a comprehensive technical overview.

Grandfathered Stretch IRAs (Pre-2020 Deaths)

If the original IRA owner died before January 1, 2020, and a designated beneficiary began taking Required Minimum Distributions (RMDs) using the life expectancy method:

  • That beneficiary continues under the original stretch rules.
  • Annual RMDs are calculated using the IRS Single Life Expectancy Table.
  • The distribution schedule continues as originally established.

These accounts are not subject to the 10-year rule.

This distinction is critical. Many families assume the new law retroactively applies — it does not.

The 10-Year Rule (Post-2020 Deaths)

If the IRA owner died after January 1, 2020, the SECURE Act rules apply.

For most non-spouse beneficiaries:

  • The inherited IRA must be fully distributed by December 31 of the 10th year following the year of death.
  • If the original owner died before reaching RMD age, then there are no required annual minimum distributions in years 1–9 in most cases. The entire account must be empty by the end of year 10.
  • If the original owner passed away after reaching RMD age, then the beneficiaries must continue to withdraw RMDs annually in years 1-9 as well as empty the account by year 10.

This applies to:

  • Traditional IRAs
  • SEP IRAs
  • SIMPLE IRAs
  • Roth IRAs (with important distinctions discussed below)

Eligible Designated Beneficiaries (Who Can Still Stretch)

Certain beneficiaries may still use life expectancy payout rules.

These “Eligible Designated Beneficiaries” include:

  • Surviving spouses
  • Minor children of the IRA owner
  • Disabled beneficiaries (as defined by IRS rules)
  • Chronically ill beneficiaries
  • Individuals not more than 10 years younger than the IRA owner

For these beneficiaries, annual RMDs are calculated using IRS life expectancy tables.

Important: Minor children lose the stretch option upon reaching the age of majority, at which point the 10-year rule begins.

Spousal Beneficiary Options (Comprehensive Discussion)

Spouses have the most flexibility when inheriting an IRA.

A surviving spouse may:

1. Treat the IRA as Their Own (Spousal Rollover)

The spouse rolls the inherited IRA into their own IRA.

Advantages:

  • RMDs are delayed until the spouse reaches their own required beginning date (currently age 73 or 75 depending on birth year).
  • The account is treated as if it were always theirs.

Disadvantages:

  • If the surviving spouse is under age 59½ and needs access to funds, withdrawals may be subject to the 10% early withdrawal penalty.

2. Remain as a Beneficiary (Inherited IRA)

Instead of rolling the IRA into their own name, the spouse can keep it as an Inherited IRA.

Advantages:

  • Withdrawals are not subject to the 10% early withdrawal penalty, even if the spouse is under 59½.
  • May provide flexibility if income is needed before full retirement age.

Disadvantages:

  • RMDs may begin sooner depending on circumstances.

Choosing between a rollover and remaining a beneficiary depends on age, income needs, retirement timing, and tax strategy. This is not a mechanical decision.

Roth IRA Beneficiaries

Roth IRAs follow similar structural rules but differ in tax treatment.

For IRA owners who died after January 1, 2020:

  • Most non-spouse beneficiaries must withdraw the entire Roth IRA within 10 years.
  • However, Roth distributions remain income-tax free if the five-year rule was satisfied by the original owner.

Unlike traditional IRAs:

  • Roth IRAs do not require lifetime RMDs for the original owner.
  • Roth beneficiaries under the 10-year rule are not required to take annual distributions, but the account must be emptied by year 10.

Eligible Designated Beneficiaries of Roth IRAs may still stretch distributions over life expectancy.

Even though distributions are tax-free, the 10-year rule still accelerates account depletion compared to the old stretch.

Required Minimum Distributions Under Current Law

For inherited IRAs where the original owner died after 2020:

  • Non-eligible beneficiaries follow the 10-year rule.
  • Eligible Designated Beneficiaries follow life expectancy tables.
  • Grandfathered pre-2020 inherited IRAs continue under original life expectancy schedules.

For surviving spouses who roll over the IRA:

  • RMDs follow standard owner rules.
  • Required Beginning Date depends on birth year under current RMD law.

These distinctions matter significantly for retirement income planning.

Tax Implications of Inherited IRAs

Distributions from inherited Traditional IRAs are taxable as ordinary income.

This may:

  • Increase marginal tax brackets
  • Trigger Medicare IRMAA surcharges
  • Expose income to Net Investment Income Tax (NIIT)
  • Increase state income taxes

Because the 10-year rule compresses distributions, beneficiaries must plan proactively rather than waiting until year 10.

Inherited IRA distributions often intersect with broader retirement tax planning strategies and retirement income coordination.

Planning Strategies Under the 10-Year Rule

The loss of the traditional stretch means:

  • Income may be clustered
  • Tax brackets may spike
  • Medicare premiums may increase

Planning opportunities may include:

  • Spreading distributions over 10 years
  • Coordinating withdrawals during lower-income years
  • Evaluating Roth conversions during the original owner’s lifetime
  • Aligning inherited IRA withdrawals with retirement income needs

These discussions often integrate with retirement income planning and legacy coordination.

Important Clarifications

  • Pre-2020 inherited Stretch IRAs remain under original life expectancy rules.
  • The 10-year rule only applies to post-2020 deaths.
  • Spouses retain unique rollover flexibility.
  • Roth IRA beneficiaries are subject to the 10-year depletion rule but enjoy tax-free distributions.
  • Eligible Designated Beneficiaries may still stretch.
  • If the original owner did not complete their RMD in the year of death, the beneficiaries must take an RMD that year.

Final Thoughts

The term “Stretch IRA” still appears frequently in search, but today’s planning revolves around Inherited IRA distribution timing under the 10-year rule and applicable exceptions.

These rules are complex, and poor timing can create unnecessary tax exposure.

If you or your beneficiaries are managing an inherited IRA and want to coordinate distributions with retirement income, tax brackets, and Medicare planning, you are welcome to request an introductory conversation here:

👉 https://goodlifewealth.com/appointment/

These discussions are educational and planning-focused, helping families make informed decisions under today’s rules.

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Inflation Investments

Inflation Investments

Posted On September 10, 2021 By Scott Stratton, CFP(R), CFA In Financial Planning, Portfolio Management /  

With the cost of living on the rise in 2021, many investors are asking about inflation investments. What is a good way to position your portfolio to grow and maintain its purchasing power? Where should we be positioned for 2022 if higher inflation is going to stick around?

Inflation was 5.4% for the 12 months ending in July. I share these concerns and we are going to discuss several inflation investments below. Before we do, I have to begin with a caveat. We should be cautious about placing a lot of weight in forecasts. Whether we look at predictions of stock market returns, interest rates, or inflation, these are often quite inaccurate. Market timing decisions based on these forecasts seldom add any value in hindsight.

What we do know for sure is that cash will lose its purchasing power. With interest rates near zero on most money market funds and bank accounts, it is a frustrating time to be a conservative investor. We like to consider the Real Yield – the yield minus inflation. It would be good if bonds were giving us a positive Real Yield. Today, however, the Real Yield on a 10-year Treasury bond is negative 4%. This may be the most unattractive Real Yield we have ever seen in US fixed income.

Let’s look at inflation’s impact on stocks and bonds and then discuss three alternatives: TIPs, Commodities, and Real Estate.

Inflation and Stocks

You may hear that inflation is bad for stocks. That is partially true. Rising inflation hurts companies’ profitability and consumers’ wallets. In the short-term, unexpected spikes in inflation seem correlated to below average performance in stocks.

However, when we look longer, stocks have done the better job of staying ahead of inflation than other assets. Over five or ten years, stocks have generally outpaced inflation by a wide margin. That’s true even in periods of higher inflation. There are always some down periods for stocks, but as an asset class, stocks typically have the best chance of beating inflation over a 20-30 year horizon as an investor or as a retiree.

We can’t discuss stocks and inflation without considering two important points.

First, if there is high inflation in the US, we expect that the Dollar will decline in value as a currency. If the Dollar weakens, this would be positive for foreign stocks or emerging market stocks. Because foreign stocks trade in other currencies, a falling dollar would boost their values for US investors. Our international holdings provide a hedge against a falling dollar.

Second, the Federal Reserve may act soon to slow inflation by raising interest rates. This would help slow the economy. However, if the Fed presses too hard on the brake pedal, they could crash the economy, the stock market, and send bond prices falling, too. In this scenario, cash at 0% could still outperform stocks and bonds for a year or longer! That’s why Wall Street has long said “Don’t fight the Fed.” The Fed’s mandate is to manage inflation and they are now having to figure out how to keep the economy growing. But not growing too much to cause inflation! This will prove more difficult as government spending and debt grows to walk this tightrope.

Inflation and Bonds

With Real Yields negative today, it may seem an unappealing time to own bonds, especially high quality bonds. Earning one percent while inflation is 5% is frustrating. The challenge is to maintain an appropriate risk tolerance across the whole portfolio.

If you have a 60/40 portfolio with 60% in stocks and 40% in bonds, should you sell your bonds? The stock market is at an all-time high right now and US growth stocks could be overvalued. So it is not a great buying opportunity to replace all your bonds with stocks today. Instead, consider your reason for owning bonds. We own bonds to offset the risk of stocks. This gives us an opportunity to have some stability and survive the next bear market. Bonds give us a chance to rebalance. So, I doubt that anyone who is 60/40 or 70/30 will want to go to 100% stocks in this environment today.

Still, I think we can add some value to fixed income holdings. Here are a couple of ways we have been addressing fixed income holdings for our clients:

  • Ladder 5-year Fixed Annuities. Today’s rate is 2.75%, which is below inflation, but more than double what we can find in Treasury bonds, Municipal bonds, or CDs.
  • Emerging Market Bonds. As a long-term investment, we see attractive relative yields and improving fundamentals.
  • Preferred Stocks, offering an attractive yield.

TIPS

Treasury Inflation Protected Securities are US government bonds which adjust to the CPI. These should be the perfect inflation investment. TIPS were designed to offer a return of inflation plus some small amount. In the past, these may have offered CPI plus say one percent. Then if CPI is 5.4%, you would earn 6.4% for the year.

Unfortunately, in today’s low yield environment, TIPS sell at a negative yield. For example, the yield on the Vanguard short-term TIPS ETF (VTIP) is presently negative 2.24%. That means you will earn inflation minus 2.24%. Today, TIPS are guaranteed to not keep up with inflation! I suppose if you think inflation is staying higher than 5%, TIPS could still be attractive relative to owning regular short-term Treasury Bonds. But TIPS today will not actually keep up with inflation.

Instead of TIPS, individual investors should look at I-Bonds. I-Bonds are a cousin of the old-school EE US Savings Bonds. The I-series savings bonds, however, are inflation linked. I-bonds bought today will pay CPI plus 0%. Then your investment is guaranteed to keep up with inflation, unlike TIPS. A couple of things to know about I-bonds:

  • You can only buy I-bonds directly from the US Treasury. We cannot hold I-Bonds in a brokerage account. There is no secondary market for I-bonds, you can only redeem at a bank or electronically.
  • I-Bond purchases are limited to a maximum of $10,000 a year in electronic form and $5,000 a year as paper bonds, per person. You can buy I-bonds as a gift for minors, and the annual limits are based on the recipient, not the purchaser.
  • I-bonds pay interest for 30 years. You can redeem an I-bond after 12 months. If you sell between 1 and 5 years, you lose the last three months of interest.

Commodities

Because inflation means that the cost of materials is rising, owning commodities as part of a portfolio may offer a hedge on inflation. Long-term, commodities have not performed as well as stocks, but they do have periods when they do well. While bonds are relatively stable and consistent, commodities can have a lot of volatility and risk. So, I don’t like commodities as a permanent holding in a portfolio.

The Bloomberg Commodities Index was up 22% this year through August 31. Having already had a strong performance, I don’t think that anyone buying commodities today is early to the party. That is a risk – even if we are correct about above average inflation, that does not mean we are guaranteed success by buying commodities.

Consider Gold. Gold is often thought of as a great inflation hedge and a store of value. Unfortunately, Gold has not performed well in 2021. Gold is down 4.7% year to date, even as inflation has spiked. It has underperformed broad commodities by 27%! It’s difficult to try to pick individual commodities with consistent accuracy. They are highly speculative. That’s why if you are going to invest in commodities, I would suggest a broad index fund rather than betting on a single commodity.

Real Estate

With home prices up 20% in many markets, Real Estate is certainly a popular inflation investment. And with mortgage rates at all-time lows, borrowers tend to do well when inflation ticks up. Home values grow and could even outstrip the interest rate on your mortgage, potentially. I’ve written at length about real estate and want to share a couple of my best pieces:

While I like real estate as an inflation hedge, I’d like to remind investors that the home price changes reported by the Case-Schiller Home Price Index do not reflect the return to investors. Read: Inflation and Real Estate.

Thinking about buying a rental property? Read: Should You Invest In Real Estate?

With cash at zero percent, should you pay off your mortgage? Read: Your Home Is Like A Bond

Looking at commercial Real Estate Investment Trusts, US REITs have had a strong year. The iShares US REIT ETF (IYR) is up 27% year to date, beating even the S&P 500 Index. I am concerned about the present valuations and low yields in the space. Additionally, retail, office, apartments, and senior living all face extreme challenges from the Pandemic. Many are seeing vacancies, bankrupt tenants, and people relocating away from urban development. Many businesses are rethinking their office needs as work-from-home seems here to stay. Even if we do see higher inflation moving forward, I’m not sure I want to chase REITs at these elevated levels.

Inflation Portfolio

Even with the possibility of higher inflation, I would caution investors against making radical changes to their portfolio. Stocks will continue to be the inflation investment that should offer the best chance at crushing inflation over the long-term. Include foreign stocks to add a hedge because US inflation suggests the Dollar will fall over time. Bonds are primarily to offset the risk of stocks and provide portfolio defense. We will make a few tweaks to try to reduce the impact of inflation on fixed income, but I would remind investors to avoid chasing high yield.

As satellite positions to core stock and bond holdings, we’ve looked at TIPS, Commodities, and Real Estate. Each has Pros and Cons as inflation investments. At this point, the simple fear of inflation has caused some of these investments to already have significant moves. We will continue to evaluate the inflation situation and analyze how we position our investment holdings. Our focus remains fixed on helping clients achieve their goals through prudent investment strategies and smart financial planning.

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