Advisor vs. DIY Should You Hire a Financial Advisor

Advisor vs. DIY: Should You Hire a Financial Advisor?

Posted On January 6, 2026 By Scott Stratton, CFP(R), CFA In Financial Planning /   No Comments

A Practical Guide for Baby Boomers and Pre-Retirees With $500,000–$5M in Investments

Deciding whether to manage your financial plan yourself or hire a financial advisor is one of the most important decisions a retiree — or soon-to-be retiree — will make. Some investors are comfortable with spreadsheets and brokerage platforms. Others prefer the confidence that comes from a trusted partner.

This article helps you answer the core question:

Do you need a financial advisor — or can you reliably manage your own financial plan?

It’s written for baby boomers and pre-retirees with $500,000 to $5 million in investable assets, many of whom are planning for retirement income, tax timing, sequence of returns risk, and healthcare decisions.

What Does “DIY” Financial Management Really Mean?

DIY (“do it yourself”) financial management means you make investment and planning decisions yourself, without ongoing professional advice.

Typical DIY responsibilities include:

  • Choosing and rebalancing investments
  • Planning for retirement income
  • Tax planning and filing
  • Social Security claiming decisions
  • Estate and legacy considerations
  • Medicare and health insurance timing

DIY may be a good fit if:

  • You enjoy financial strategy and research
  • You have time and discipline to stay current with tax law and markets
  • Your financial situation is relatively simple

However, DIY is not one-size-fits-all, especially as complexity rises in retirement.

When DIY Might Be Adequate

Here are situations where managing your own finances can be reasonable:

🔹 Your financial picture is straightforward

For example:

  • You are approaching retirement with basic investments
  • You want a simple 3-fund portfolio
  • Your income sources are predictable

🔹 You already have strong financial knowledge and interest

If you understand retirement income sequencing, tax brackets, RMDs, Social Security strategy, and risk tolerance, you may handle much of the work yourself.

🔹 You don’t want or need ongoing advice

Some people prefer autonomy and avoid professional guidance intentionally — and they do fine with discipline and research.

🔹 Your goals are limited

For example:

  • You simply want to minimize fees
  • You plan to follow a passive indexing strategy

Even then, be mindful that doing it right still requires avoiding emotional trading, understanding tax consequences, and staying informed about changes to laws and markets.

When DIY is Risky — and Why Many Retirees Choose an Advisor

Most of the biggest financial mistakes retirees make are not about picking the right funds but about when and how to act — and how to avoid costly timing and tax errors.

Here are common areas where DIY falls short:

❌ Social Security Timing Errors

Different claiming ages can result in significantly different lifetime income. Not taking advantage of delayed retirement credits, or calling them too early, can cost tens of thousands of dollars.

(See: Social Security — It Pays to Wait)

❌ Tax Inefficiencies and Missed Opportunities

Taxable income sequencing — particularly with Roth conversions, capital gains, IRA withdrawals, and RMDs — is not intuitive. Avoiding surcharges like Medicare IRMAA and optimizing your tax brackets often requires modeling across multiple years.

(See: Roth Conversions After 60 — When They Make Sense and How to Reduce IRMAA)

❌ Required Minimum Distribution (RMD) Complexity

As of 2026, most retirees must begin RMDs at age 73 or later. Planning how and when to withdraw assets without unnecessary tax drag is a deep, ongoing exercise — not a one-time event. Mistakes can cost taxes and disrupt retirement income.

(See: Can You Reduce Required Minimum Distributions??)

❌ Healthcare Cost Planning

Early retirees often spend years on the ACA marketplace. Predicting how subsidies work — and how income timing affects them — is not something most DIYers manage well on their own.

(See: Using the ACA to Retire Early)

❌ Emotional Bias and Behavioral Risk

DIY investors often make their worst decisions exactly when they matter most — during market drops or volatility. A professional can provide emotional discipline, protect against timing risk, and restore perspective.

So When Does a Financial Advisor Actually Help?

A financial advisor — especially a fiduciary planner — adds value when your situation goes beyond “simple numbers.”

Here are common retirement scenarios where advisors add measurable value:

✔ You want a comprehensive retirement plan

This includes:

  • Income sequencing
  • Tax coordination across sources
  • Withdrawal strategy
  • Estate and legacy planning

✔ You have multiple income sources

Examples:

  • IRA/401(k)
  • Roth accounts
  • Social Security
  • Pension
  • Rental or business income

Balancing these for tax efficiency and longevity is hard.

✔ You want ongoing planning and updates

Retirement is not static — markets change, tax laws shift, and personal priorities evolve. Advisors help adjust the plan over time.

🔹 Planning for Cognitive Changes Over Time

Most retirees plan for longevity — the possibility of living a long life — but fewer plan for the reality that managing finances can become more difficult later in life, even for very capable people.

This isn’t about intelligence or financial knowledge. It’s about recognizing that decision-making often becomes harder under stress, illness, or cognitive decline, which affects a significant portion of people as they age. The changes are often gradual and not immediately obvious.

A trusted financial advisor can provide continuity over time — monitoring accounts, helping prevent costly mistakes, and serving as a steady presence if managing finances becomes more challenging later on. For many families, this aspect of advice is less about investment returns and more about protecting independence and dignity over the long term.

This is one reason many retirees choose to establish an advisory relationship before they feel they “need” it.

🔹 Ensuring a Smooth Transition for Your Spouse and Family

In many households, one person naturally takes the lead on financial decisions. If something were to happen, the surviving spouse or beneficiaries may suddenly be responsible for complex financial choices during an emotionally difficult time.

Without an established advisor relationship, this often leads to:

  • Rushed decisions
  • Unnecessary taxes
  • Poor investment changes
  • Or a scramble to find trustworthy guidance

Working with a fiduciary advisor helps ensure continuity. Your spouse already knows who to call, understands the overall plan, and isn’t forced to make major decisions without context or support.

For many families, this is one of the most important benefits of professional advice — peace of mind that the people you care about will not be left on their own.

Advisor Costs vs. DIY Tradeoffs

When people compare DIY investing to working with an advisor, the conversation often focuses on fees. Cost matters — but it’s only one part of the equation.

For retirees and pre-retirees with $500,000 to $5 million in investments, the more relevant question is often:

What risks am I trying to manage, and who helps me manage them if life doesn’t go as planned?

Investment returns are important, but tax efficiency, income coordination, behavioral discipline, and continuity often have a larger impact on long-term outcomes.

When DIY Might Still Make Sense

You might thrive with DIY if:

  • You have simple finances and clear goals
  • You know exactly what you’re doing
  • You are disciplined about rebalancing, taxes, and plan updates
  • You are not relying on this investment strategy for major life needs (e.g., retirement income, healthcare costs, college funding)

Even in these cases, one professional review of your plan can be valuable and cost-effective.

What Good DIY Looks Like

If you choose to DIY, here’s what successful DIY retirees have in common:

✔ Clear, written retirement income plan
✔ Annual tax and withdrawal modeling
✔ Solid emergency liquidity
✔ Asset location planning
✔ Intentional Roth vs traditional mix
✔ Awareness of Medicare/ACA/IRMAA implications
✔ Annual review of goals and asset performance

If you are not doing all of these, you’re probably leaving money and peace of mind on the table.

How a Fiduciary Advisor Works With You

A fiduciary financial advisor:

  • Must put your interests ahead of their own
  • Does not “sell” you proprietary products, but offers independent, objective advice
  • Designs a holistic plan tailored to your goals
  • Communicates clearly and frequently
  • Helps you stay on course through market cycles

From understanding RMD timing to Roth conversion sequencing, to Social Security optimization, the value is in coordination, not just calculation.

🔹 Frequently Asked Questions

Do I need a financial advisor if I’ve managed my own investments successfully?
Possibly not — especially if your situation is simple and you enjoy managing it. However, many successful DIY investors choose an advisor later in life for help with tax coordination, retirement income planning, and continuity as circumstances change.

Is hiring an advisor about giving up control?
No. A fiduciary advisor works with you, not instead of you. You remain in control of decisions, while benefiting from experience, planning structure, and an objective second set of eyes.

What happens if I’m no longer able to manage my finances someday?
This is where having an established advisor relationship can be valuable. An advisor can help provide continuity, work with trusted family members, and help ensure your plan continues to be followed.

Can I work with an advisor remotely?
Yes. Many retirees work successfully with advisors nationwide through secure video meetings, electronic document sharing, and regular communication — without being tied to a local office.

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Why Baby Boomers Need A Financial Advisor

Why Baby Boomers Need a Financial Advisor

Posted On October 12, 2025 By Scott Stratton, CFP(R), CFA In Financial Planning, Retirement Planning /  

For baby boomers entering or already in retirement, financial decisions have never been more complex—or more consequential. You’ve worked a lifetime to build your wealth, and the stakes are high: protecting your savings, generating reliable income, managing taxes, and leaving a meaningful legacy. The challenge isn’t just growing assets—it’s using them wisely, sustainably, and with confidence.

At Good Life Wealth Management, we understand that investors between 55 and 75 face a unique set of financial questions that require expertise, objectivity, and proactive planning. That’s where partnering with a fiduciary financial advisor and Certified Financial Planner™ (CFP®) can make a measurable difference in your family’s financial well-being.

The Challenges Facing Affluent Pre-Retirees

For individuals and couples with $1 million to $5 million in investable assets, retirement planning is both an opportunity and a challenge. While you may have more financial flexibility than most, higher net worth also brings more complexity—and greater tax exposure. Here are the most common issues affluent pre-retirees face:

  1. Decumulation Strategy:
    You’ve spent decades accumulating assets. But when and how should you begin drawing from them? Without a plan, it’s easy to pay unnecessary taxes or deplete accounts too quickly. Coordinating withdrawals from taxable, tax-deferred, and Roth accounts requires precise planning to maximize after-tax income and longevity of assets.
  2. Tax Management and Roth Conversion Timing:
    The years between retirement and age 73 (when RMDs begin) often present the best window for Roth conversions and other tax-optimization strategies. A fiduciary advisor models these moves to minimize lifetime tax liability, not just this year’s return.
  3. Market Risk and Sequence of Returns:
    Even affluent retirees can face shortfalls if markets decline early in retirement. A thoughtful investment strategy—emphasizing risk management, income diversification, and behavioral discipline—can protect against that risk.
  4. Rising Health Care and Long-Term Care Costs:
    With health care inflation outpacing general inflation, even wealthy families must plan for potentially hundreds of thousands of dollars in out-of-pocket costs. A CFP® can help evaluate insurance options, long-term care funding, and how these expenses fit into your financial plan.
  5. Estate and Legacy Planning:
    The SECURE Act has changed how beneficiaries inherit IRAs, and tax laws are constantly evolving. High-net-worth families need coordinated strategies among their advisor, attorney, and CPA to preserve wealth and ensure an efficient, meaningful transfer to the next generation.
  6. Behavioral and Emotional Challenges:
    Many successful individuals are highly capable but still feel uncertain when managing large sums in retirement. The shift from saving to spending, and from working to living off your portfolio, can feel uncomfortable. A trusted fiduciary advisor provides reassurance through data-driven planning, transparency, and accountability.

Why Work with a Fiduciary Financial Advisor?

Not all financial professionals are required to act in your best interest. Brokers and agents may recommend products that pay higher commissions, even if they’re not ideal for you. A fiduciary advisor, on the other hand, is legally and ethically bound to act solely in your best interest—without product incentives or conflicts of interest.

At Good Life Wealth Management, our fiduciary standard means:

  • Objective advice. We recommend strategies because they fit your goals—not because of any outside incentive.
  • Fee transparency. Our compensation is clear, predictable, and aligned with your success.
  • Comprehensive oversight. We coordinate your investments, taxes, estate plan, insurance, and retirement income strategy under one cohesive plan.

The Value a CFP® Brings to Your Financial Life

A Certified Financial Planner™ brings a level of rigor and expertise that goes beyond investment management. CFP® professionals complete advanced training and adhere to strict ethical standards, focusing on every aspect of your financial well-being.

For baby boomers, that means:

  • Customized Retirement Income Planning: Creating a tax-efficient withdrawal strategy that provides predictable income without depleting principal too soon.
  • Investment Management Tailored to Your Goals: Balancing growth, income, and preservation through a disciplined, evidence-based approach.
  • Tax-Aware Portfolio Construction: Using asset location and tax-loss harvesting to improve after-tax returns.
  • Social Security and Medicare Optimization: Timing benefits strategically and avoiding costly IRMAA surcharges.
  • Charitable and Legacy Planning: Aligning your wealth with your values through donor-advised funds, QCDs, and trust structures.
  • Behavioral Coaching: Helping clients avoid emotional mistakes during volatile markets, maintaining focus on long-term goals.

Studies by Vanguard and Morningstar have shown that working with a professional advisor can add 3% or more per year in net returns through better behavioral discipline, rebalancing, and tax efficiency. But beyond numbers, the real value of a trusted advisor is peace of mind—the confidence that you’re on track and making wise decisions.

How a Fiduciary Advisor Simplifies Complexity

Affluent families often have multiple accounts, business holdings, or real estate investments. A fiduciary advisor serves as your financial quarterback, bringing everything together into one cohesive strategy.

  • We help you see the full picture—net worth, cash flow, taxes, and investments—in one plan.
  • We coordinate with your CPA and attorney to ensure that tax and estate decisions align.
  • We proactively adjust your plan as tax laws, markets, and life circumstances change.

This holistic approach ensures your wealth works efficiently for you today, while positioning your legacy for tomorrow.

The True Benefit: Financial Confidence and Freedom

Ultimately, the goal of financial planning isn’t just to accumulate wealth—it’s to create the freedom to live your best life. For baby boomers entering retirement, that means:

  • Knowing your income is secure regardless of market conditions.
  • Paying only the taxes you owe—and not a dollar more.
  • Protecting your spouse and family from uncertainty.
  • Having a clear legacy plan that reflects your values and priorities.

At Good Life Wealth Management, we believe your retirement years should be a time of clarity, not confusion; of confidence, not anxiety. Working with a fiduciary CFP® ensures that every financial decision is guided by your goals, your timeline, and your values.

Take the Next Step Toward Financial Clarity

If you’re approaching retirement or already there, now is the time to build a comprehensive plan. The right guidance today can make all the difference over the next 20–30 years.

We invite you to schedule a conversation with Good Life Wealth Management to see how our fiduciary, evidence-based approach can help you protect, grow, and enjoy your wealth with confidence.

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New Tax Break for Boomers

New Tax Break for Boomers

Posted On August 11, 2025 By Admin In Tax Strategies /  

As part of the “One Big Beautiful Bill”, there is a new tax deduction for Americans over age 65. There will be a new $6,000 “Bonus” tax deduction which will be on top of your standard deduction or itemized deductions on your tax return. This will be per person, so a married couple who are both at least 65, will receive $12,000 in additional tax deductions.

Here are the new tax deduction amounts for 2025:

TAX YEAR 2025Single Married Filing Jointly
Standard Deduction$15,750$31,500
Over 65 Deduction$2,000$3,200
New “Bonus Deduction”$6,000$12,000
TOTAL$23,750$46,700

While the White House posted that “No Tax on Social Security is a Reality” under the OBBB, that is an exaggeration. Social Security will still be taxable, although more seniors will end up owing less taxes under the expanded tax deduction. Many retirees will owe no federal income taxes. The Bonus Deduction is not linked to Social Security and you do not have to claim SS to receive the deduction.

The Fine Print

If you itemize deductions, rather than taking the standard deduction, you are still eligible for the Bonus Deduction of $6,000 per person. So your deduction could be even higher than the deductions listed above. There are two other tax savings in the One Big Beautiful Bill:

  • A new deduction for interest on car loans, up to $10,000, for new vehicles made in the USA and purchased in 2025-2028. (I still hate the idea of borrowing money for a depreciating asset.)
  • The cap on deducting state and local taxes (SALT) has been increased from $10,000 to $40,000. This is great news for people in high tax states who itemize.

There is, however, a catch: there will be income restrictions on the $6,000 Bonus Deduction. The Deduction will be phased out if your MAGI (Modified Adjusted Gross Income) is above $75,000 single or $150,000 married. This will create planning opportunities for those over 65 to keep their taxable income under these income thresholds. Some ways we might do this include:

  • Avoid, reduce, or smooth IRA/401(k) distributions if you are under age 73. That’s the age RMDs start.
  • Withdraw from your Roth IRA if necessary, instead of your Traditional IRA.
  • If you are over age 73, Qualified Charitable Distributions (QCDs) from your IRA will reduce your MAGI while fulfilling your RMDs.
  • Avoid selling taxable stocks or funds which create capital gains. Capital Gains are included in MAGI.
  • Defer interest income with a fixed annuity (MYGA).
  • Defer your Social Security benefits until age 70.

Tax efficiency remains a core focus of our financial planning work for clients. As tax regulations change, we will find new ways to help manage your tax liabilities.

The Bad News

The new Bonus Deduction of $6,000 is not permanent – it will expire after 2028. It is not an accident that the expiration will be in the election year. The Republicans will take credit for the tax savings and promise to extend the deduction if they stay in control. And if they lose and the deduction goes away, they can claim Democrats took away your tax deductions. It is a brilliant move politically, although also manipulative and a way to bribe voters. Both sides do this, but this feels quite slimy to me.

The tax cuts in this tax bill will increase the deficit by an estimated $3 trillion over the next decade. We are giving a tax cut to grandparents which will have to be paid for by their grandchildren. Just because this is popular doesn’t mean it is a smart policy for the country, long-term. Our growing debt will have many side effects:

  • Interest on the debt is now the largest item in the US budget, surpassing defense spending in 2024.
  • Debt will crowd out investment in growth, leading to higher inflation, a weaker economy, and eventually undermining market confidence.
  • We will be worse prepared to address the failure of Social Security payments in 2033.
  • Deficit spending will rise to 7% of GDP by 2026. If we have to borrow 7% to achieve a GDP growth rate of 3%, we do not have a healthy economy.

Final Thoughts

I am in favor of lower taxes and anything which helps my clients keep more of their money. My job is to help investors grow and preserve their wealth which includes using every possible tax advantage we can find. I am passionate about this work and it makes a direct impact on people’s lives.

I am pleased to see the Child Tax Credit continued under the bill and increased from $2,000 to $2,200. Other than that, however, the Bill serves to transfer wealth from the young to the old, which will further widen the income and wealth disparities in our country.

It is disappointing that neither party wants to address the long-term issues of our debt and underfunded entitlement programs. I’d like to see tax cuts linked to corresponding savings in government spending. At some point, we have to figure out how to reduce deficits, manage the debt, and fix our broken Social Security and Medicare systems. Unfortunately, the Big Bill doesn’t look very beautiful for tackling any of those problems. Washington today cannot look any further out than the next election and that’s why we keep making short-sighted choices.

In 1957, John F Kennedy won the Pulitzer Prize for his book, Profiles in Courage. He wrote about eight Senators who had the political courage to make unpopular choices in the long-term interests of the country. Kennedy noted that politicians face the challenge of three pressures: to be liked (to do what is popular), to get re-elected, and the pressure of special interest groups. That remains true today. I wish more of our current politicians would give the American people the same credit as Kennedy did: “the people will not condemn those whose devotion to principle leads them to unpopular courses, but will reward courage, respect honor and ultimately recognize right.”

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Stocks, Bonds, and Risk

Stocks, Bonds, and Risk

Posted On May 27, 2024 By Scott Stratton, CFP(R), CFA In Portfolio Management /  

I enjoy watching history documentaries, especially about the WWII era. One film shared this quote from a US Army manual:

“…commanders need to balance the tension between protecting the force, and accepting and managing risks that must be taken to accomplish their mission…”

While I am neither soldier nor general, as a portfolio manager, my challenge is to protect client’s assets while accepting and managing the risks that must be taken to achieve their goals, such as retirement. Stocks have been doing very well. In the past week, the S&P 500, NASDAQ, and the Dow have all made new highs. The S&P is up 11 percent, year to date, a fantastic run on top of last year’s great performance. Where are the risks today, and how can we manage the risks to accomplish our mission?

Performance Chasing

Some investors are frustrated that their diversified portfolio is not up as much as the S&P. There is an increasing feeling that stocks are invincible right now and everyone wants to ride the gravy train for as long as they can. Caution is being thrown to the wind as investors seem to be willing to pay any price for certain tech stocks – even if the company is trading for 100 times what they will make this year. The Bull Market appears to be alive and well and so is investors’ performance chasing.

It’s remarkable that we’ve had such high interest rates, and an inverted yield curve, and the economy continues to grow. Maybe the Fed will finally engineer the soft landing that they have been unable to achieve in the past. I hope that happens, but hope is not a good investment rationale.

We remain invested in the stock market, but I hardly think this is the time to become more aggressive. At some point, the high valuations will matter. In the past, when the S&P has traded for 21 times forward earnings (like now), the subsequent years of returns were below average. That should make sense to everyone, just as when the market is cheap, the subsequent returns are usually above average. Both reflect a reversion to the mean.

Bonds Can Get The Job Done

What do today’s stock valuations suggest about forward returns? As of May 15, 2024, the Vanguard Capital Markets Model suggests a 10-year return of US stocks of 4.3%, plus or minus one percent. That is less than half of historical returns, and would be quite a disappointing performance.

And where are bond yields today? The 10-year US Treasury has a yield of 4.5% and we can find 10-year Agency bonds near 6%. Remarkably, the expected return from bonds is now higher than stocks for the next decade. Investors are having a hard time getting their head around this new reality because over the past decade, the S&P 500 (SPY) is up 12% annually, while the Aggregate bond index (AGG) is up only 1.25% a year.

At no point in the last 15 years have bonds looked this good compared to stocks, on a forward looking basis. To investors, bonds look boring and stocks are exciting. However, if you are focused on how to achieve your goals over the next decade, while minimizing the risk of losses to your portfolio, you may benefit from adding more bonds.

What Is Your Mission?

Many of my clients are within five years of retirement or have already retired. For many, our mission is to provide steady growth, spin off some income, and not blow up the portfolio. We are concerned about sequence of returns risk and longevity risk. For clients needing income and withdrawals, bonds and fixed annuities are an excellent choice.

For investors who are in growth mode, there is still a good case for bonds. We should focus on the long-term returns available, with the least amount of volatility. In portfolio management terms, we aim to provide a strong risk-adjusted return, measured by a higher Sharpe Ratio. And for these growth investors, bonds still play a role. Bonds can improve our risk profile and also provide an opportunity for flexibility in the future.

With bonds, you can consolidate your gains while you wait for the stock market to have a correction at some point in the years ahead. With stocks, we may have some years of growth and then the next Bear Market could bring us right back to today’s levels (or maybe even lower). The investor who has bonds (growing by 5%), has a future opportunity to rebalance. We can trim the bonds and buy back stocks when they trade at a lower Price to Earnings ratio (PE). We can be defensive today, while waiting for a better opportunity to be more aggressive.

Don’t Be A Hero

You don’t have to be fully invested in stocks. If you have done a financial plan, you should have an idea of what required return is necessary to accomplish your goals. In many cases, today, bonds can provide the return needed to achieve your objectives. And that reduces the uncertainty of stocks not performing as hoped or as they have historically.

Ideally, investing should be boring. We don’t want to have exciting investments. Our Wealth Management process is focused on protecting your wealth and accepting and managing the risks that must be taken to accomplish your goals. If we can take a path with less risk and more certainty, that is often what we should choose. We look at future expected returns as our guide, rather than recent past performance.

Stocks have had a strong performance and we will continue to invest in a diversified portfolio. We should also point out that while the expected return of US stocks is only 4.3%, Ex-US stocks have an expected return of 7.7%. Opportunities still exist. But for now, bonds offer a compelling return versus an expensive US stock market.

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What is a MYGA Annuity

What is a MYGA Annuity?

Posted On March 7, 2024 By Scott Stratton, CFP(R), CFA In Portfolio Management, Retirement Planning /  

How a fixed income annuity can provide guaranteed returns and predictable retirement income — especially for retirees in Texas, Arkansas, and nationwide.

A Multi-Year Guaranteed Annuity (MYGA) is a fixed-rate annuity that offers a guaranteed interest rate for a defined period — typically 1 to 10 years — making it a useful tool for retirees seeking predictable income or a safe place to grow cash. MYGAs are popular with conservative investors because they provide certainty in an uncertain market and can complement traditional retirement income sources.

How MYGAs Work (Straightforward Explanation)

A MYGA is an insurance contract in which you pay a lump sum upfront and the insurance company credits a fixed interest rate for a set term. Unlike market-linked investments, a MYGA offers stability — you know the rate and return ahead of time.

Here’s what this means:

  • You deposit a lump sum (often $5,000+; many competitive products start closer to $20,000+).
  • The annuity earns a guaranteed fixed rate for the term you choose (e.g., 3, 5, or 7 years).
  • Earnings grow tax-deferred until you withdraw them.
  • Upon maturity, you can take the money, renew into a new contract, or elect income payout options.

This makes MYGAs similar to CDs in principle — but with tax deferral and often higher rates.

Why Retirees Like MYGAs (Guaranteed Return and Safety)

MYGAs are especially appealing if you want:

  • Predictable, guaranteed interest income
  • Tax-deferred growth
  • A conservative portion of your retirement portfolio
  • Stability in a low-volatility product
  • Competitive Interest Rates: currently we offer a 5-year MYGA at 5.75%, a full 2% more than a 5-year Treasury Bond

Because returns are fixed, you don’t have to worry about market ups and downs affecting your principal during the contract term.

MYGA vs. CDs and Traditional Fixed Accounts

MYGAs are often compared to bank CDs, but there are important differences:

FeatureMYGABank CD
Rate GuaranteeGuaranteed by insurerFDIC/NCUA insured
Tax TreatmentTax-deferred earningsInterest taxed yearly
Income OptionsCan convert to incomeNo lifetime income option
LiquidityLimited, may have surrender chargesEarly withdrawal penalty
FlexibilityOptions at maturityLess flexible
Based on typical product characteristics

MYGAs are backed by insurance companies and state guaranty associations — not FDIC insurance — so the financial strength of the issuer matters.

How MYGAs Can Fit Into Retirement

MYGAs can provide predictable income or serve as a safe allocation within a broader retirement income plan. This can include:

🔹 Income Planning

If you want a fixed stream of interest income during early or established retirement, a MYGA can fill the gap between Social Security, pensions, or RMDs.

🔹 Laddering for Predictable Cash Flow

Buying MYGAs with staggered maturities ensures you can take money or reinvest at regular intervals — similar to a bond ladder.

🔹 Risk Reduction

Because returns are fixed, they provide stability in an otherwise volatile market.

For a deeper look at how MYGAs compare with other retirement tools, see our article on fixed annuities and retirement income strategy.

What You Should Know Before You Buy

MYGAs aren’t right for everyone. Key considerations include:

🔸 Liquidity and Surrender Charges

MYGAs typically have surrender periods during which withdrawals beyond a penalty-free amount may incur charges. Read the contract carefully.

🔸 Tax Considerations

Growth is tax deferred, but withdrawals are taxed as ordinary income. If you withdraw before age 59½, you may face a 10% IRS penalty on earnings.

🔸 Insurer Strength

Check the insurer’s ratings and the state guaranty association coverage limits.

These features underscore why it’s smart to work with a fiduciary who can match product features to your personal situation.

Why Consider a MYGA With Us (Texas, Arkansas & Nationwide)

If you’re a retiree seeking income — even if you’re not looking for full wealth management — MYGAs can provide competitive fixed income options with market-leading interest rates. Our access to top annuity carriers means clients in Texas, Arkansas, and across the U.S. can secure highly competitive rates and terms that align with their income goals.

We help you:

  • Evaluate options across multiple products and terms
  • Compare surrender periods, riders, and features
  • Make decisions aligned with your risk tolerance and income timeline

MYGAs can be a standalone retirement income solution or a component of a broader plan. Whether you want a safe place for excess cash or a predictable income stream, we can help you explore whether a MYGA fits your needs.

For broader retirement planning that addresses sequence of withdrawals, taxes, and longevity risk, check out our Retirement Income Strategy and our Who We Help pages.

Frequently Asked Questions

What rate can I expect on a MYGA in 2026?

Current competitive MYGA rates are about 5.75% for a 5-year and depend on term and issuer. These rates can be materially higher than traditional CDs or short-term bonds. They also vary quite a bit from insurer to insurer, so it can pay to have an independent agent who can shop around for the best rates and features.

Are MYGAs safe?

MYGAs are backed by insurance companies and state guaranty associations, not the FDIC. It’s important to review the issuer’s rating and the contract terms.

Can I use a MYGA for retirement income?

Yes. MYGAs can provide predictable income or supplement your other retirement income sources when structured appropriately.

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US and French Social Security

US and French Social Security

Posted On April 14, 2023 By Scott Stratton, CFP(R), CFA In Retirement Planning /  

We are in Paris and several clients have reached out to make sure we are doing okay, given the demonstrations and riots regarding France’s retirement system. Yes, we are fine and actually never saw any of these events other than on the news. Day to day life in Paris is normal, and thankfully the garbage strike is over. It has been perfectly tranquil in our neighborhood and we are enjoying life in the city.

Why are the French upset? Currently, if you are 62 and have worked for 42 years, a French citizen can receive their full retirement benefit of 50% of the average salary of their highest paid 20 years of work. If you don’t have 42 years of contributions, you will receive less than 50%, or you can work for longer to increase your benefit up to 50%. So, if you had been making $60,000 (Euros actually), you could potentially retire at 62 with a $30,000 pension. Under the new rules, the full retirement benefit will not become available until age 64 with 43 years of work. There are some interesting parallels between US and French Social Security.

The French Connection

In a recent interview, France’s President Macron defended the changes, which have been enormously unpopular. Macron explained that the program has always been an entitlement program, where current benefits are paid by current taxes. It is not a personal savings or investment account. When Macron took office, there were 10 million retirees receiving benefits, out of France’s 67 million population. Today, there are 17 million retirees and that number will grow to 20 million by 2030. 20 million pensioners out of a total of 67 million people. There are 1.7 workers in France for each retiree.

1.7 workers cannot provide an average monthly benefit of 1300 Euros for each retiree. There are only two options, increase taxes or decrease benefits. France already has high taxes, 20% just for social programs (this also includes health insurance, unemployment, maternity benefits, and other programs). 14% of France’s GDP is just retirement pensions. France compared their program and expenditures to similar countries and recognized that their retirement age was too low, given how much longer people are living today.

Macron tried to work with representatives in their Parliament on a solution. But when no agreement could be reached, he issued an executive order to make the changes without a vote. He noted that he had to do what was in the country’s best interest in the long term and preserve the program for their children and grandchildren, even if it was not the most popular thing to do. I was impressed by his directness, intelligent explanation of a complex problem, and courage to do the right thing even when it is not easy or popular.

The US Conundrum

I’ve been writing about the problems facing US Social Security since 2008. Back then, the 2036 projected collapse of the Social Security Trust Fund seemed like a lifetime away. Today, Social Security projects that the Trust Fund will be depleted by 2033. At that time, taxes will only cover about 70% of promised benefits. And every year, the Social Security Trustees report tells us how much we need to increase taxes or decrease benefits to keep the program solvent for 75 years.

Unfortunately, over the last 15 years no changes have occurred. It has been political suicide for any politician to suggest reforming Social Security. The easiest attack ad has always been to say that your opponent wants to “take away your Social Security check”. So we keep on marching towards that cliff with no change in direction. Shame on our politicians for not being willing to save the foundation of our retirement.

When Social Security started, there were 16 workers for every retiree and the average life expectancy was 65. Today, there are 2.8 workers for every retiree and that ratio continues to shrink. The typical 65 year old, in 2023, will live for at least 20 years. Like in France, it doesn’t matter what “you paid into Social Security”. That’s not how the program ever worked. Current taxes pay current beneficiaries. Your past contributions were spent on your parent’s or grandparent’s check.

No Easy Solution

Compared to France, the US demographics may look better. However, France actually is running a smaller deficit on their retirement program – only a 10 Billion Euro average annual shortfall for the next decade. They actually ran a surplus in 2022 and are proactively making these changes looking forward to the decade ahead. They’re making changes before there is a deficit! (Social Security spent only $56 Billion of the Trust Fund last year, but this will accelerate and deplete the whole $2.8 Trillion over the next 10 years.)

For the US, if we we wait, it will magnify the size of the changes needed. It would be better to start today to save Social Security. We can either increase taxes or reduce benefits. Those are the only two options. No one wants to do either, so we have to reach a compromise.

Thankfully, there are actuaries at Social Security who study all proposals. Their annual report estimates how much of the shortfall could be reduced for each change. Here are some of their calculations, looking at the improvement of the long-range actuarial balance. (We should be looking for some combination which equals at least 100%.)

Impact of Possible Changes to US Social Security

  • Reduce COLAs by 1% annually: 56%
  • Change COLA to chained CPI-W: 18%
  • Calculate new benefits using inflation rather than SSA Average Wage Index: 80%
  • Reduce benefits for new retirees by 5% starting 2023: 18%
  • Wage test. Reduce SS benefits from 0-50% if income is $60k-180k single/$120k-360k married: 15%
  • Increase Full Retirement Age from 67 to 69 by 2034, and then increase FRA by 1 month every 2 years going forward: 38%
  • Increase the Payroll Tax from 12.4% to 16% in 2023: 103%
  • Eliminate SS cap and tax all wages: 58%
  • Eliminate SS cap, tax all wages, but do not increase benefits above the current law maximum: 75%
  • New 6.2% tax on investment income, for single $200k / married $250k: 29%

I don’t have an answer for what Washington will do. But we can look at what will actually work. And what is perhaps even more interesting is what doesn’t work. It is shocking, for example, that wage testing SS only improves the shortfall by 18%. Or that Reducing COLAs by 1% every year only will cover half the shortfall. Unfortunately, we may need to increase taxes. Moving to 16% payroll tax would fully cover the shortfall. That would be a relatively small increase from 6.2% to 8%, each, for an employee and the employer. But that is a regressive tax, which would impact low earners more than high earners. For reforms to work, it might require a combination of both increased taxes and reductions in the way benefits increase.

Kicking The Can Down The Road

Will the US take action to save Social Security, or will the reaction in France scare US Politicians? It’s hard to imagine our divided Congress reaching a compromise on an issue as difficult and controversial as changing Social Security. But any politician who is still talking about the other side as “trying to take away your Social Security” is now part of the problem and not part of the solution. Kicking the can down the road is not going to help America.

What is certain is the need to save Social Security. It is the largest source of retirement income for most Americans. And the lower your income, the more Social Security is needed to cover retirement expenses. We can’t keep ignoring the future of Social Security, it’s not going to get better on its own. The status quo is not an option.

I hope the US won’t see the same riots as Paris. But I also hope US politicians will do their job and have the courage to make the tough choices that are in the best interest of the public. US and French Social Security are both in the same precarious state. Let’s hope Winston Churchill was right: “You can always count on Americans to do the right thing, after they have exhausted all other possibilities.” That day is coming soon.

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SECURE Act 2.0 Retirement Changes

Secure Act 2.0 Retirement Changes

Posted On December 29, 2022 By Scott Stratton, CFP(R), CFA In Retirement Planning /  

The SECURE Act 2.0 passed this week after being discussed in Washington for nearly two years. The Act could not make it through Congress on its own, but it was stuffed into the Omnibus Spending Bill that was required to avoid an imminent government shutdown. I’ll save that rant for another day and focus on some of the dozens and dozens of changes to retirement planning in the Secure Act 2.0 which will affect you.

First, some background: The original SECURE Act was passed in December 2019. This legislation was the largest change to retirement planning in recent decades. It included increasing the age of RMDs from 70 to 72 and eliminating the Stretch IRA for beneficiaries.

The SECURE Act 2.0 goes even further and has a large number of changes to help improve retirement readiness for Americans. We are not going to cover all of these changes, but focus on a few key areas that are likely to apply to my clients.

Required Minimum Distributions

The SECURE Act 2.0 will gradually increase the age of RMDs from 72 to 75. Next year, the age to start RMDs will be 73, and then this will increase to age 75 in 2033. So, if you were born before 1950, your RMD age will remain 72 and you have already started RMDs. If you were born between 1951-1959, your RMD age is 73. And if you were born in 1960 or later, RMDs will begin in the year you turn 75.

I’m happy to see RMDs pushed out further to allow people to grow their IRAs for longer. For investors, this will extend the window of years when it makes most sense to do Roth Conversions. People are living longer and we should be pushing out the age of RMDs and starting retirement.

Roth Changes

Washington loves Roth IRAs. Anyone who thinks Washington doesn’t like Roths should consider the incredible expansion to Roths in SECURE Act 2.0. Roths are here to stay.

First, SEP IRAs and SIMPLE IRA plans will be amended to include Roth Accounts. This brings them up to par with 401(k) plans which have offered a Roth option for several years now. What does this mean? Roth contributions are after-tax and grow tax-free for retirement. You will be able to now open a Roth SEP or a Roth SIMPLE. Do you have a W-2 job and also self-employment income? You can do a 401(k) at work and also a Roth SEP for your self-employment.

2.0 also eliminates the RMD requirement from Roth 401(k)s. This was an odd requirement, and could easily be avoided by rolling a Roth 401(k) to a Roth IRA. But it still caught some people by surprise, so I am glad they eliminated this.

Starting in 2023, Employers may now make matching contributions into Roth 401(k) sub-accounts for employees. These additional contributions will be added to the employee’s taxable income. So, this may not make sense for everyone.

Forced Roth for Catch-Up Contributions

In 2024, high wage earners will be forced into using a Roth sub-account for catch-up contributions. If you are over age 50, you can make catch-up contributions. If you made over $145,000 in the previous year, your catch-up contributions must go into a Roth 401(k) starting in 2024. You will no longer be able to make Traditional (“deductible”) contributions with catch-up amounts. Oh, and if your company does not currently offer a Roth option, everyone over 50 will be prohibited from making any catch-up contributions.

This one will be a mess and is one of the only negative impacts we will see from SECURE Act 2.0. It will take many months for 401(k) providers and employers to update their systems and figure out how to implement these new changes.

Lots of Roth changes, but what isn’t here? The SECURE Act 2.0 didn’t eliminate the Backdoor Roth IRA. Many in Congress have been wanting to kill the Backdoor Roth, but it lives on. There are no new restrictions on Roth Conversions of any sort. Why so much love for Roths? Washington wants your tax money now, not in 30 years.

529 Plan to Roth

What if you fund a 529 College Savings plan for your child and they don’t use all the money? Currently, you can change the 529 plan to another beneficiary. But if you don’t have another beneficiary, withdrawing the money could result in taxable gains and a 10% penalty. The SECURE Act 2.0 is creating a third option: you can rollover $35,000 from a 529 plan to a Roth IRA for the beneficiary.

Here are the requirements. You must have had the 529 plan open for at least 15 years. You cannot rollover any contributions made in the preceding five years. Each year, the amount rolled from the 529 to the Roth is included towards the annual Roth contribution limit. For example, this year the limit is $6,500. The maximum you could roll from a 529 would be $6,500. But if the beneficiary already contributed $3,000 to an IRA (Roth or Traditional), you could only roll $3,500 from the 529 to the Roth. Thankfully, there are no income limitations to make this rollover. The lifetime limit on rolling over a 529 to a Roth will be $35,000, so this may take 5-6 years assuming the beneficiary makes no other IRA contributions.

You can change the beneficiary of a 529 plan to yourself. So, could you take an old 529, change the beneficiary to yourself and then roll it into your own Roth IRA? It is unclear in the legislation if a change in beneficiary will start a new 15-year waiting period. We will have to wait for additional rules to find out.

Other SECURE Act 2.0 Retirement Changes

So many changes! (Here is the most detailed summary I have seen so far.) These won’t impact everyone but I am studying all of these to see who might benefit:

  • IRA catch-up amounts will be indexed to inflation and increase in $100 increments.
  • 401(k) Catch-up contributions will be increased for ages 60-63. The amount will be $10,000 or 150% of the annual amount, whichever is higher.
  • QCD (Qualified Charitable Distributions) limit of $100,000 will be indexed to inflation.
  • New exceptions to the 10% premature distribution penalty.
  • Emergency Savings Accounts, allowing people to access their 401(k)s without penalty. (Bad idea, but so many people in distress do this and then have to pay penalties and taxes, hurting them even further.)
  • QLAC limit increased to $200,000.
  • Allowing matching 401(k) contributions for payments towards student loans.
  • Tax credits for small employers who start a retirement plan.
  • New Starter 401(k) plans.
  • Lower penalties for missed RMDs.

I appreciate that Washington wants to make it easier for Americans to save for retirement. The SECURE Act 2.0 has a vast amount of retirement changes to incentivize the behavior the government wants to see. For those who are able to save for retirement, they are making it easier to save and accumulate assets. Your retirement is your responsibility! And retirement planning is my job. I’m here to help with your questions, preparation, and implementing your retirement goals.

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Stocks Versus Bonds Today

Stocks Versus Bonds Today

Posted On November 14, 2022 By Admin In Portfolio Management /  

Where is the best opportunity – in stocks or bonds? I’ve been enthusiastic about the rising interest rates in 2022 and this has impacted the relative attractiveness of stocks versus bonds today. What do we expect from stocks going forward?

Vanguard’s Investment Strategy Group publishes their projected return for stocks for the next 10 years. And while no one has a crystal ball to know exactly how stocks will perform, this is still valuable information. They look at expected economic growth, dividend yield, and whether stock values (P/E ratios for example) might expand or contract.

Their median 10-year expected return for US stocks is 5.7%, with a plus or minus 1% range, for a range of 4.7% to 6.7%. This is actually up from the beginning of the year. As stocks have fallen by 20%, we are now starting from a less expensive valuation. But a projected return of 5.7% for the next decade would be well below historical averages, and most investors are hoping for better.

Is Vanguard being too pessimistic? No, many other analysts have similar projections which are well below historical returns. For example, Northern Trust forecasts a 6% return on US stocks over the next five years. And of course, these are just projections. Returns could be better. Or worse!

Bonds Are An Alternative

Last week, I bought some investment grade corporate bonds with a yield to maturity of 6% over three to five years. Bonds have much less risk than stocks and have only a fraction of the volatility of stocks. As long as the company stays in business, you should be getting your 6% return and then your principal back at maturity.

If we can buy a good bond with a return of 5.5% to 6.0%, that completely matches the projected stock returns that Vanguard expects. Why bother with stocks, then? Why take the risk that we fall short of 6% in stocks, if we can get a 6% return in bonds? Today, bonds are really attractive, even potentially an alternative to stocks.

For many of our clients, bonds look better than stocks now. And so we may be trimming stocks by year end and buying bonds, under two conditions: 1. The stocks market remains up. We are not going to sell stocks if they fall from here. 2. We can buy investment grade bonds, 3-7 years, with yields of at least 5.5% and preferably 6%. And we have to find different bonds, because we aim to keep any one company to no more than 1-2% of the portfolio.

We won’t be giving up on stocks – not at all. But we may look to shift 10-20% of that US stock exposure to bonds.

Three Paths for the Market

I think there are three scenarios, all of which are okay.

  1. Stocks do way better than 6%. The risk here is that stocks could perform much better than the 5.7% estimate from Vanguard. Maybe they return 8% over the next five years. Well, this is our worst scenario: we make “only” 6% and are kicking ourselves because we could have made a little bit more if we had stayed in stocks.
  2. Stocks return 6% or less. In this case, it is possible we will get the same return from bonds as the expected return from stocks. And if stocks do worse than expected, our bonds might even outperform the stocks. That’s also a win for bonds.
  3. Stocks decline. What if the economy goes into recession, and stocks drop? If stocks are down 10% and we are up 6% a year on bonds, we will be really happy. In a recession, it’s likely that yields will drop and the price of bonds will increase. The 6% bond we bought might have gone up in value from 100 to 104. Then, our total return on the bond might be 10%, and we could be 20% ahead relative to stocks’ 10% drop. And in this scenario, we don’t have to hold the bonds to maturity. We could sell the bonds and buy stocks while they are down.

Smoother is Better

I’m happy with any of those three scenarios. Many investors are feeling some PTSD from the market performance since 2020. Many will be happy to “settle” for 5.5% to 6% from bonds, versus the 5.7% expected return from stocks. And of course, stocks won’t be steady. They may be up 20% one year and down 20% the next. It is often a roller coaster, and so increasing bonds may offer a smoother ride while not changing our expected return by much at all.

Should everyone do this? No, I think if you are a young investor who is contributing every month to a 401(k) or IRA, don’t give up on stocks. Even if the return ends up being the same 6%, you will actually benefit from the volatility of stocks through Dollar Cost Averaging. When stocks are down, you are buying more shares. So, if you are in accumulation, many years from retirement (say 10+), I wouldn’t make any change.

But for investors with a large portfolio, or those in or near retirement, I think they will prefer the steady, more predictable return of bonds. When the yield on bonds is the same as the 5-10 year expected return on stocks, bonds make a lot of sense. The risk/reward comparison of stocks versus bonds today is clear: bonds offer the same expected return for less risk. We will be adding to bonds and adjusting our portfolio models going into 2023.

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Inflation Investment Ideas

Inflation Investment Ideas

Posted On July 15, 2022 By Admin In Portfolio Management /  

Inflation continues to shock the Global economy and has become a major concern when we discuss investment ideas. This week’s data showed the Consumer Price Index up 9.1% over last year, and the Producer Price Index is up over 11%. These are numbers not seen since 1981.

Today, I’m going to share some thoughts on inflation and get into how we want to respond to this situation. But first, here is an inside look at the government response to inflation.

Federal Reserve Hitting the Brakes

Last week, I attended a breakfast meeting for the Arkansas CFA Society at the Federal Reserve office in Little Rock. Our guest speaker was James Bullard, president of the St. Louis Federal Reserve Bank and voting member of the Open Market Committee which sets interest rates.

Bullard said that we were at a profound regime switching moment today, and that this is not just a blip in inflation but a “stunning amount of inflation”. He stated that the Fed would move aggressively to reduce inflation and that they were committed to their inflation target of 2%. He thinks the Fed will continue to raise rates until policy rates are greater than the inflation rate and may need to hold those high rates for years to come to bring inflation down.

Bullard felt that the current inflation levels are not simply a temporary supply shock from the Ukraine War. Output is actually up. In March 2020, the Fed responded very quickly to support an economy crashing from COVID-19 shutdowns. 60 days later, markets recovered and housing boomed. He wishes that they had reduced their asset purchases sooner. Instead, the Fed is only now ceasing to buy bonds and is allowing their holdings to run-off as they mature. The global stimulus response was correct, but has overheated.

He was less concerned about the possibility of a recession. Bullard said that recessions are difficult to predict and that the Fed is going to focus on getting inflation under control first. Inflation remains a global problem, but the US Federal Reserve will lead the way on fighting inflation, as the European Central Bank has other issues making them slower to respond.

Inflation, Rising Rates, Recession

It’s important to understand that even if inflation remains elevated for a couple of years, the impact of inflation may only be part of the story. Our investment ideas cannot simply assume high inflation as the only factor. We have to also consider the likelihood of rising interest rates and a recession. We’d love it if the Federal Reserve can orchestrate a soft landing as they apply brakes to this runaway economy. But they have not been very good at soft landings in the past.

The Fed policies are starting to work. Since the June inflation numbers, we’ve already seen the price of oil down by 20%. Mortgage applications are down and we should start to see housing inventories normalize and home prices stop their double digit increases. Interest rates have doubled compared to last year – 5.5% versus 2.75% for a 30-year mortgage – and this will impact how much home buyers can afford to pay. The Bloomberg Commodity Index was at 130 on June 16th and is now at 113, a drop of 13% in one month.

It is hard to imagine additional inflation shocks or surprises at this point. Despite the headlines, markets already know we have inflation. Inflation remains high, but may have peaked and should be starting to come down. The question is what is next? How will the markets respond to the Fed actions? Here are five thoughts about where to go from here.

Five Inflation Investment Ideas

  1. Rising Rates. Bond investors beware. The Fed is going to continue to raise interest rates for an extended period. Keep your duration short on bonds. Consider floating rate bonds, if you don’t have any. Stay high quality – rising rates may cause defaults in weaker credits.
  2. I-Bonds. These are inflation linked US savings bonds. They’ve been in the news this year, but I’ve been writing about them since 2016. Limited to $10,000 in purchases a year. These could do great for a couple of years.
  3. Recession and Stocks. We might already be in a recession today, but won’t know it until later economic data shows a negative GDP for two quarters. Please resist the temptation to try to time the stock market. Recessions are a lagging indicator; stocks are a leading indicator and stocks will bounce back sooner. If you try to get out of stocks, it will be very difficult to get back in successfully. Instead, focus on diversification, with Value and Quality stocks. Avoid the high-flying growth names, we are already seeing those stocks get pummelled.
  4. Roth Conversions. We are in a Bear Market, with the S&P 500 Index down 20%. This could be a good time to look at Roth Conversions, if you believe as I do that stocks will come back at some point in the future. An index fund that used to be $50,000 is now trading for $40,000. Do the Roth Conversion, pay taxes on the $40,000 and then it will grow tax-free from here. This works best if you anticipate being in a similar tax bracket in retirement as today.
  5. Cash is Trash. Inflation is reducing your purchasing power. Thankfully, rising interest rates means we can now earn some money on Bonds and CDs. We can build laddered bond portfolios from 1-5 years with yields of 3-5%. And we have CDs at 3% as short as 13 months. Those are a lot better than earning 0% on cash. If you don’t need 100% liquidity, short-term bonds, CDs, and T-Bills are back.

Perseverance and Planning

I believe in long-term investing. Times like these will challenge investors to have the perseverance to stay the course. Rising rates and a possible recession in the months ahead may pose additional losses to our investment portfolios. If I thought we could successfully avoid the losses and step away from the market, I’d do that in a heartbeat. But all the evidence I have seen on market timing suggest it is unlikely to add any value, and would probably make things worse. We will stay invested, continue to rebalance, tax loss harvest, and carefully consider our options and best course of action.

With higher inflation, the cost of living in retirement increases, and so we have to aim for equity-like returns to make plans work. For our clients who are in retirement or close to retirement, we typically have a bucket with 5-years of expenses set aside in short-term bonds. And that bucket is still there and we won’t need to touch their equities for five years. In many cases, we have bonds which will mature in 2023, 2024, etc. in place to fund your spending or RMD needs. So, I am happy we have the bucket strategy in place, it is working as we had planned.

We have shared some inflation investment ideas, but I think the risks to investors may be greater from the Fed. Rising rates and recession are likely in the cards as they look to slow the economy. In spite of the headlines, this will undoubtedly be different than 1981, so I’m not sure we have an exact road map of what will happen. But, I will be your guide to continue to monitor, evaluate, and recommend what steps we want to take with our investments.

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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.

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.

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:

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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