December 2025 - Private Tax Solutions

15 Dec 2025

Introduction

Realizing a big gain from a winning investment can feel great — until Uncle Sam’s tax bill shows up. That’s why using smart capital gain tax strategies 2025 is critical for anyone looking to keep more of their profits. With the right moves, you can reduce or defer taxes legally, especially if you’re dealing with a concentrated position or highly appreciated stock. Below are some advanced, IRS-compliant strategies to consider before you cash out.

Why Tax Strategy Matters

If you simply sell a stock or other appreciated asset, you trigger a taxable event. That can mean paying 15–20% (or more, depending on income) of your gains in taxes — which can seriously cut into what you keep. However, if you plan ahead and use the right tools, you can defer or even reduce that tax liability significantly.

Using smart tax strategies isn’t about evading taxes — it’s about using the tax code wisely to preserve more of your wealth.

Top Capital Gain Tax Strategies 2025

Here are some of the most effective strategies for minimizing your capital-gains tax exposure, especially when you’re dealing with large gains or concentrated investments.

1. Use a Section-351 ETF or Investment Pool
If you hold a highly appreciated stock position, one option is to contribute those shares to a newly formed ETF or investment pool under a Section-351 transaction. This move can allow you to diversify without triggering a taxable sale — your cost basis carries over to the new ETF shares.

2. Enter a Forward Contract or Variable Forward Agreement
For very large positions, you may use a prepaid variable forward contract. This allows you to pledge appreciated stock for a loan, giving you liquidity while deferring the tax until a later date. This strategy is complex and usually available only for substantial holdings.

3. Invest Gains into Qualified Opportunity Zones (QOZ)
Once you sell appreciated investments, reinvesting the proceeds into an approved Qualified Opportunity Zone fund could defer tax liability for several years — a useful strategy if you’re open to real-estate or long-term investments.

4. Use Charitable Trusts or Donor-Driven Structures
If you’re inclined to give, a charitable remainder unitrust or similar structure can defer gains. By donating appreciated assets directly, you can receive income over time or commit to charitable giving — potentially reducing or deferring the capital gain tax.

5. Gift Assets to Low-Income Family Members
If you have trusted family members with low taxable income (above the “kiddie tax” thresholds), gifting appreciated shares — which they may sell — can shift the tax burden to someone in a lower bracket, minimizing tax on gains.

6. Combine With Traditional Tax-Efficient Moves
Don’t forget tried-and-tested basic strategies: hold assets more than a year to get favorable long-term rates, offset gains with losses (tax-loss harvesting), or time sales during lower-income years to avoid hitting high brackets

When These Strategies Make the Most Sense

You have a large, highly appreciated position (single stock, large investment) and want to avoid a big tax hit.
You’re comfortable with complexity or long-term commitments — some strategies require long holding periods or intricate agreements.
You’re open to alternative investments (real estate via QOZ, charitable giving, trusts).
You’re planning for wealth preservation or legacy rather than quick liquidation.

What to Watch Out For

Some advanced strategies (like forward contracts or Section-351 ETFs) often involve high fees, restrictions, or long lock-up periods.
Tax laws and rules can change — always consult a tax or financial advisor before doing complex maneuvers.
Timing — delaying gains can also delay liquidity, which might matter depending on your financial goals.

Conclusion

Making a profit on an investment is just the first step. What you do afterward matters — because taxes can eat a big chunk of your gain. With smart capital gain tax strategies 2025, you don’t have to settle for paying full tax immediately. Whether through ETFs, opportunity funds, charitable trusts, or tax-smart planning, there are legal, effective tools to preserve more of your wealth.

If you’re facing a big gain, it’s worth pausing and evaluating your options — sometimes a little planning can save thousands (or more) in taxes.

by Donald Hayden

08 Dec 2025

Introduction

If you inherited a retirement account, pay close attention: the inherited IRA changes 2025 are now in effect, and missing the updated requirements could bring serious tax penalties. These changes affect how heirs must withdraw funds, how fast the account must be emptied, and how distribution choices can impact taxes. In this guide, we’ll walk you through what’s new, who’s affected, and how to handle an inherited IRA to avoid costly mistakes.

What’s Changing in 2025

Since 2020, many non-spouse beneficiaries of inherited IRAs have been under a “10-year rule,” meaning the account must be emptied within 10 years of the original owner’s death.
Starting in 2025, if the original IRA owner had already reached their required minimum distribution (RMD) age before death, beneficiaries must also take annual required minimum distributions (RMDs) during those 10 years. Missing those yearly withdrawals can trigger a penalty.
The penalty for missed RMDs may be steep — making it crucial for heirs to track and withdraw correctly starting 2025.

Who Is Affected

Most non-spouse beneficiaries, such as adult children inheriting a parent’s IRA.
Beneficiaries of accounts from owners who had already started taking RMDs before death.
Beneficiaries who previously planned to “stretch” distributions over their lifetime — that option is mostly gone now.

Exceptions: Some beneficiaries remain exempt from the new RMD rule — for example, surviving spouses, minor children of the original owner, disabled or chronically ill individuals, and beneficiaries within a certain age range.

Risks & Common Mistakes Under the New Rules

Missing annual RMDs — since 2025 the IRS enforces penalties if you skip required withdrawals.
Waiting until the end of 10 years to withdraw — this can push the entire distribution into one tax year, possibly bumping you into a higher tax bracket.
Lack of planning for estate or beneficiary structure — failing to update beneficiary designations or ignore the new rules could cost heirs significantly.

Smart Withdrawal Strategies for 2025

Plan for annual withdrawals (RMDs) if required — don’t wait until year 10.
Spread withdrawals over multiple years, especially if income is expected to fluctuate — this can smooth out taxable income.
Work with a tax advisor or CPA, especially if you inherit multiple accounts or plan other retirement moves (like conversions).
Check beneficiary designations and timing — make sure you know whether the original owner had started RMDs before passing.
Avoid large lump-sum withdrawals at the end — it may create a tax spike and reduce flexibility.

What You Should Do First If You Inherited an IRA

Confirm when the original owner passed and whether they started RMDs before death.
Contact the account custodian to request required withdrawal schedules for 2025 and beyond.
Run a multi-year tax projection to estimate the impact of withdrawals.
Consult a financial or tax professional to set up the best plan — especially if you have other taxable income or retirement accounts.

Final Thoughts

The 2025 changes to inherited IRAs represent a significant shift in retirement and estate planning. For heirs, it’s critical to understand the new distribution and penalty rules — and act promptly. With careful planning, smart withdrawal strategies, and perhaps professional advice, you can secure your inheritance and avoid unnecessary tax burdens.

If you inherited an IRA, now is the time to review your account and plan your next steps carefully.

by Donald Hayden

06 Dec 2025

Introduction

If you have a family business or assets you plan to pass on, now is the time to pay attention. With changing dynamics in wealth transfer and generational expectations, family succession planning 2025 has become more important than ever. A successful plan ensures your legacy — not just in money, but in values, business continuity, and family harmony. In this post, we break down what really matters in succession planning for the next generation, why many families fail, and how you can build a strategy that lasts.

Why Succession Planning Matters — and Why It Often Fails

Running a business or building wealth is one thing; passing it on to the next generation is another entirely. Without a solid succession plan, families risk losing assets, triggering legal disputes, or watching hard-earned wealth dissolve. Studies show that poor succession planning leads to loss of institutional knowledge, business destabilization, and even total failure in some cases.

Key risks include:

Lack of clarity on who inherits what — leading to family conflict.
No structured governance or clear roles for next-gen successors.
Failure to align estate planning and business succession — which undermines both wealth transfer and operational stability.

What Really Matters in Family Succession Planning 2025

Here are the core elements that every family should focus on when creating a succession plan in 2025:

1. Define Your Family’s Vision and Values

Before drafting legal documents or naming successors, it’s crucial to clarify what your family stands for. What are your long-term goals? Do you aim to preserve a business, pass on assets, or maintain a philanthropic legacy? A shared vision helps align decisions — and keeps the legacy meaningful beyond money.

2. Establish Governance — Not Just Ownership

Succession planning isn’t just about handing over shares or assets. It’s about creating a governance structure: defined roles, clear decision-making authority, communication protocols, and boundaries. This structure helps prevent disputes and provides continuity — whether it’s a family business, investment fund, or estate.

3. Plan for Wealth Transfer and Estate Efficiency

Effective planning should combine business succession strategies with estate and legal planning. This ensures assets transfer smoothly, with minimal tax burden and legal friction. It’s not enough to rely on a will or trust — you need coordinated estate documents, transparent beneficiary designations, and tax-efficient strategies to preserve long-term value.

4. Prepare the Next Generation — Mentorship, Education, and Values Transfer

Passing on wealth or a business isn’t just legal paperwork. It’s about preparing heirs financially, emotionally, and mentally. Education about business operations, financial responsibility, and shared family values can make the difference between a thriving legacy and a broken one.

5. Flexibility — Because Life Changes

Succession plans should evolve. Life events — retirement, growth, new family members, changes in tax laws — can shift what’s best. A good plan remains flexible, with periodic reviews to adapt to new circumstances.

Practical Steps to Build Your Succession Plan in 2025

If you’re ready to take action, here’s a roadmap to get started:

Gather family stakeholders for an open discussion on goals, vision, and concerns.
Draft a family mission statement or “family constitution” — outlining values, roles, and governance structure.
Review all legal documents (wills, trusts, shareholder agreements, beneficiary designations) and align them with your goals.
Assign roles and responsibilities; identify who will take over management, oversight, or ownership.
Educate the next generation — offer mentorship, financial education, and exposure to the business or assets.
Set periodic reviews (e.g., every 2–3 years) to adjust the plan as needed.

Common Mistakes to Avoid

Ignoring family communication — secrecy or assumptions lead to conflict later.
Focusing only on legal transfer, not values, education, or governance.
Treating succession as a one-time task — instead of a living, evolving process.
Overlooking estate taxes or complex asset types (businesses, properties, investments).
Forgetting to update documents after major life events (marriage, birth, retirement, relocation).

Conclusion

Family succession planning in 2025 isn’t just about passing down wealth — it’s about preserving legacy, values, business continuity, and family harmony. By defining a clear vision, establishing governance, preparing heirs, and staying flexible, you can build a plan that lasts for generations.

If you’re thinking about safeguarding your family’s future — now is the best time to start the conversation.

by Donald Hayden

02 Dec 2025

Introduction

If you’re looking to make charitable giving more strategic and financially efficient, donor‑advised fund strategies 2025 offer a compelling route. A donor‑advised fund (DAF) lets you contribute cash, appreciated assets, or other investments, receive an immediate tax deduction, and then recommend grants to charities over time — all while your contribution grows tax‑free.

With rising incomes, volatile markets, or one-time windfalls, DAFs give donors flexibility: you lock in the tax benefit now, but decide later which causes to support. In this guide, we’ll walk you through how DAFs work, why they’re tax-smart, and practical strategies to maximize both philanthropy and tax savings.

How Donor‑Advised Funds Work

Contribute assets — cash or appreciated securities: When you donate cash, stocks, or even more complex assets (in some cases) to a DAF, you get an immediate tax deduction.
Benefit from tax-free growth: The money in the DAF can be invested and can grow over time without triggering taxes, increasing the potential value of your eventual grants.
Decide on grants later: You can choose which charities to support and when, giving you time to research causes and align donations with your values or financial circumstances.

Because of its flexibility and tax benefits, a DAF is often seen as a simpler, more efficient alternative to a private foundation.

Why DAFs Are Especially Useful Now

1. Capture Deductions in High‑Income Years

If you have a year with unusually high income — maybe due to bonuses, business gains, or selling a property — contributing to a DAF lets you “front‑load” giving. You get the full deduction when you need it most, then spread out grants over future years.

2. Donate Appreciated Assets to Avoid Capital Gains Taxes

Rather than selling appreciated securities and donating the cash, you can donate the assets directly to a DAF. This avoids triggering capital gains taxes while still allowing a deduction based on fair market value — often a more tax‑efficient move.

3. “Bunch” Donations to Surpass Standard Deduction Thresholds

With many taxpayers no longer itemizing annually, DAFs allow you to “bunch” several years’ worth of donations in one go. This can help you exceed the standard deduction threshold for one year, then take standard deduction in following years while still granting to charities via the DAF.

4. Support Legacy & Estate Planning Goals

For people thinking long-term — about legacy giving or estate tax strategy — DAFs offer a mechanism to reduce taxable estate value and ensure a philanthropic legacy, without the complexity and administrative burden of a private foundation.

Practical DAF Strategies to Consider

Strategy	When It Makes Sense
Large one-time contribution (cash or assets)	In a high-income or high-gain year — to maximize deduction now
Donate appreciated securities / stock instead of cash	When holding long-term appreciated investments to avoid capital gains
Bunch multiple years of giving into one	If you don’t itemize annually or standard deduction is higher
Stagger grants over time	If you want to support multiple charities over several years without repeating admin
Use DAF as part of estate/legacy planning	For long-term charitable impact and reduction of taxable estate

Things to Keep in Mind (DAF Caveats & Best Practices)

Once you contribute to a DAF, it’s irrevocable — those assets no longer belong to you.
To maximize benefits, consider paying taxes or capital gains using non‑donated assets — not by selling just to donate.
Keep documentation of contributions and grants — for both tax and compliance purposes.
Choose a reputable DAF sponsor (community foundation, financial institution, or charity) that has transparent fees and grant distribution policies.

Conclusion: DAFs Let You Give Smart — On Your Time

Donor‑advised funds offer a powerful blend of flexibility, tax‑efficiency, and strategic giving. Whether you’re in a high-income year, holding long-term appreciated investments, or planning a philanthropic legacy, DAFs give you the control to act now — tax advantages included — but decide later how and when your donations are distributed.

If you’re considering charitable giving in 2025 (or beyond), a DAF might be your most effective tool. Pair it with smart timing and asset management, and you can make a meaningful impact for causes you care about — while optimizing your financial position.

by Donald Hayden

02 Dec 2025

Introduction

Big changes are coming for Health Savings Accounts (HSAs) in 2025. The HSA access expansion 2025 aims to broaden eligibility, making HSAs available to a much larger group of Americans. These updates could help millions take advantage of powerful tax benefits, better healthcare savings, and more flexible options. Here’s everything you need to know.

What’s Changing for HSAs in 2025

1. More Health Plans Will Now Qualify

Historically, only people enrolled in high-deductible health plans (HDHPs) could open and contribute to an HSA. The new bill aims to expand this by allowing more plan types — including Bronze marketplace plans and some Catastrophic plans — to count as HSA-eligible.

2. Direct Primary Care (DPC) May Become Compatible

Patients using a direct primary care model, where they pay a monthly fee for routine care, may also become eligible for HSA contributions if their coverage meets certain deductible requirements.

3. Telehealth Services Get Permanent Flexibility

A rule that temporarily allowed telehealth services to be included before meeting the deductible is expected to become permanent. This makes more telehealth-friendly plans compatible with HSAs.

Why This Matters: The Triple Tax Advantage

HSAs are one of the most tax-advantaged financial tools available. They offer:

Tax-free contributions
Tax-free investment growth
Tax-free withdrawals for qualified medical expenses

With expanded eligibility, more Americans will have access to these benefits, making HSAs not just a healthcare tool but also a smart long-term financial planning strategy.

Broader Opportunities Under the New Rules

Higher contribution limits may allow families to save more each year.
Wellness and fitness programs could potentially become eligible for HSA spending under expanding guidance.
Employer-sponsored clinics may become easier to use without losing HSA eligibility.
Telehealth incentives could expand access to lower-cost care options.
Financial inequality concerns may arise, as critics point out that those with higher incomes are more likely to contribute to HSAs.

How to Prepare and Make the Most of the Changes

Review your health plan to see if you may qualify for an HSA under the new rules.
Maximize your contributions once you become eligible to take full advantage of tax savings.
Track potential new HSA-eligible expenses, especially wellness or fitness-related items.
Plan long-term, as HSAs can double as a retirement tool for medical expenses.
Talk to a financial advisor if you’re unsure how to integrate HSAs into your financial strategy.

Conclusion

The upcoming expansion of HSA eligibility in 2025 could have a significant impact on how Americans save and plan for healthcare costs. With more plan types becoming eligible and broader flexibility built into the system, it’s a great time to evaluate your health coverage and ensure you’re maximizing these powerful tax benefits.

by Donald Hayden

02 Dec 2025

Introduction

Many families assume that once you earn “too much,” you’re automatically disqualified from college aid. But today, that assumption couldn’t be more wrong. Even affluent households can find substantial scholarship dollars, grants, and tuition benefits — if they know where to look. In this post, we’ll explore why “free money for college” isn’t just for low‑income families, and how strategic planning can help any budget.

Why “Free Money” Isn’t Just for Low-Income Families

Merit-based scholarships are rising. Colleges increasingly offer merit aid to attract high-performing students — regardless of parental income.
Skill-based & specialized scholarships: Some awards focus on talents and interests — like cybersecurity, engineering, digital media or esports — rather than financial need.
State ‘Promise’ and workforce grants: Many states now offer “last-dollar” scholarships or grants for high-demand fields, often with service commitments.
Employer tuition benefits: Some companies offer tuition support — even for dependents or part-time employees — which can stack with other aid.

How Smart Families Can Combine Resources

Rather than seeing aid as a “bonus,” treat it like part of an overall funding strategy.

Strategy	Why It Matters
Apply for FAFSA or relevant aid forms anyway — even if income seems high	Some schools require it to unlock merit or state institutional aid.
Stack aid intelligently — use scholarships, state grants, 529 savings, and employer benefits together	Reduces out-of-pocket costs without jeopardizing liquidity
Check each school’s “aid stacking” rules	Some cap total aid at tuition; others allow additional coverage for housing/books.
Target workforce-aligned majors (e.g. STEM, healthcare, public service)	These often have dedicated grants or scholarships via state or federal programs.

What to Do Now: 5-Step Checklist

Don’t assume you’re ineligible based on income. Even affluent families have a shot at merit aid.
Build a “scholarship profile” — gather a student’s academic record, extracurriculars, skills, intended major.
Research colleges’ merit-aid charts & automatic merit thresholds. Aim for schools where your student ranks in the top 25% — those are likeliest to offer aid.
File FAFSA (or equivalent), if required — even if you don’t expect need-based aid.
Explore employer or state tuition assistance programs (for employees or dependents).

Why This Approach Makes Sense for Affluent Families

College sticker prices are increasing faster than inflation — this structural pressure affects everyone.
By treating scholarships and grants as a core part of budgeting (not “extras”), you preserve savings and liquidity.
It helps avoid student debt, which many families — even high-income households — underestimate.

Conclusion

“Free money for college” isn’t just a myth for middle- or low-income families. With the rise of merit scholarships, state grants, employer tuition support, and clever stacking strategies, even affluent families have real opportunities to reduce or eliminate college costs. The key: treat funding as a strategic project — research, apply, and plan early.

by Donald Hayden

02 Dec 2025

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Understanding how money moves in and out of your wallet can make a big difference over time. Whether it’s navigating tax changes, handling extra income from overtime, or taking on a new auto loan, smart financial decisions require clarity. Here’s a breakdown of key money matters you should be paying attention to this year.

by Donald Hayden

02 Dec 2025

Introduction

As you head into the year-end, now is the perfect time to sharpen your tax strategy and put proactive measures in place. Whether you’re enjoying retirement or nearing that milestone, taking action on key tax moves before December 31 can help protect your income, reduce your tax bill, and set you up for a smoother 2026. Retirees face a unique tax landscape—including required minimum distributions (RMDs), Roth conversion decisions, and the impact of new tax rules.
In this article, we’ll walk through 10 strategic actions you should consider to stay ahead of tax issues, plus practical steps you can take right away.

1. Review Your RMDs (Required Minimum Distributions)

If you’re age 73 or older, you’re required to take minimum distributions from your Traditional IRAs, 401(k)s or other qualified plans. Missing your RMD deadline—or delaying a first RMD into April of the following year—can trigger significant tax consequences, including being pushed into higher tax brackets.
Action step: Verify how much you owe for 2025, check whether you’re on track or will need to take two distributions in one year, and plan accordingly.

2. Think About Roth Conversions

Converting Traditional IRAs or similar accounts into a Roth IRA can make sense if your taxable income is relatively low now but likely to increase later. Accelerating a Roth conversion now may lock in tax-free growth and ensure your future withdrawals won’t be taxed.
Action step: Review your projected income for the year to determine whether a Roth conversion makes sense before December 31.

3. Harvest Investment Losses (Tax-Loss Harvesting)

Tax-loss harvesting involves selling investments at a loss to offset capital gains in your taxable brokerage account. This is a powerful strategy to reduce your tax liability if you’ve realized significant gains this year.
Action step: Review your taxable investment accounts and identify any loss positions that may help offset this year’s gains.

4. Consider Converting a 529 into a Roth

Recent rule changes now allow some taxpayers to convert unused 529 plan funds into a Roth IRA under specific conditions. This can be a smart move if you have leftover education savings and want to redirect funds toward long-term tax-free retirement growth.
Action step: If you have unused 529 funds, confirm your eligibility and evaluate whether a conversion fits into your long-term tax plan.

5. Use Deduction “Bunching” to Your Advantage

If you itemize deductions, you may benefit from “bunching” — grouping large deductible expenses into a single year so you can claim itemized deductions one year and the standard deduction the next.
Action step: Consider prepaying charitable contributions, medical bills or property taxes before year-end if you expect to itemize.

6. Finish Charitable Contributions Before Year-End

Charitable giving remains one of the most flexible and tax-efficient strategies available to retirees. Completing your charitable contributions before December 31 ensures the deduction counts for this tax year.
Action step: Finalize your charitable giving plan, whether through direct donations, donor-advised funds or qualified charitable distributions (QCDs).

7. Update Retirement Income Withholding and Estimated Taxes

If you receive retirement income—such as pension payments, annuities or Social Security—your withholding may need updating to avoid under-payment penalties.
Action step: Review your year-to-date withholding and estimated tax payments. Make adjustments now to prevent surprises at tax time.

8. Review Your Healthcare Coverage During Open Enrollment

Medicare and marketplace plans often change from year to year. Comparing your choices during open enrollment ensures you’re receiving the best benefits for your health and tax situation.
Action step: Review coverage changes, plan costs and potential impacts to your taxable income or Medicare surcharges.

9. Revisit Your Estate Plan and Beneficiary Designations

Estate tax thresholds, gift limits and inherited IRA rules continue to shift. Reviewing your estate planning documents annually helps ensure your assets are protected and distributed according to your wishes.
Action step: Update wills, trusts, designations and powers of attorney. Confirm everything reflects your current life situation.

10. Lock in the Year-End Review (Make Tax Planning a Priority)

Waiting until tax season to make changes often results in missed opportunities. By taking action now, you maintain control over your income, deductions and tax exposure.
Action step: Schedule a year-end meeting with your tax professional and review all income sources, deductions and upcoming tax-law changes.

Conclusion

The end of the year is more than just a holiday season—it’s a strategic tax planning window. For retirees, the difference between acting now and waiting until filing season can significantly impact cash flow, taxes owed and long-term financial security. With the right guidance—and a proactive plan—you can turn year-end tax decisions into long-term advantages.

by Donald Hayden

02 Dec 2025

Introduction

A Roth IRA conversion 2025 is one of the top strategies for retirement planning this year. It involves moving money from a traditional IRA or 401(k) into a Roth IRA. The main advantage? Once the money is in a Roth, it grows tax-free and withdrawals in retirement are also tax-free.

Recent research shows that a one-time conversion may often outperform spreading the conversion over several years, which has many people rethinking their retirement strategies. In this guide, we’ll break down what a Roth conversion is, why it might make sense in 2025, the risks involved, and practical tips to make it work for you.

What is a Roth IRA Conversion?

A Roth IRA conversion is essentially a tax move. You take money from a pre-tax retirement account (like a traditional IRA or 401(k)) and move it into a Roth IRA. Because traditional accounts are funded with pre-tax dollars, the conversion amount is considered taxable income in the year you make the switch.

Once it’s in a Roth IRA:

The money grows tax-free
Qualified withdrawals in retirement are tax-free
There are no required minimum distributions (RMDs) during your lifetime

Think of it like paying the tax now so you don’t have to pay it later — and that future tax-free growth can be significant, especially if your investments continue to compound over decades.

Why a Roth Conversion Might Make Sense in 2025

1. Tax-Free Growth & Withdrawals

The biggest benefit of a Roth IRA is tax-free growth. Once your money is in a Roth, any earnings, dividends, or interest grow without being taxed. When you withdraw in retirement, you pay nothing — unlike a traditional IRA, where withdrawals are taxed as ordinary income.

Example:
Imagine converting $50,000 today, and over 20 years, it grows to $150,000. In a Roth, you pay zero tax on that $100,000 in gains. In a traditional IRA, that same $100,000 would be taxed at your retirement income rate.

2. No Required Minimum Distributions (RMDs)

Traditional IRAs require you to start taking distributions at age 73 (as of 2025 rules). Roth IRAs, on the other hand, have no RMDs during your lifetime, giving you flexibility to leave the money invested longer or pass it on to heirs.

3. Estate Planning Advantages

Roth IRAs are powerful estate-planning tools. Since withdrawals are tax-free, heirs can inherit your Roth IRA without facing huge tax bills. This can make a big difference in passing wealth efficiently to the next generation.

4. Tax Rate Arbitrage

The key to a smart Roth conversion is timing your taxes. If you anticipate being in a higher tax bracket in retirement, paying taxes now on the converted amount could save you money in the long run.

Example:
If you’re currently in a 22% federal tax bracket but expect to be in 28% in retirement, paying 22% now instead of 28% later can yield significant savings.

5. One-Time Conversion May Be Best

Data suggests that a full, one-time Roth IRA conversion may outperform spreading it out over multiple years, depending on your income and tax scenario. This approach can also simplify your tax planning and reduce uncertainty about future tax rates.

Risks and Key Considerations

While Roth conversions can be very beneficial, they are not without risks. Here’s what to keep in mind:

Upfront Tax Cost: Converting triggers a taxable event. Large conversions can push you into a higher tax bracket, so planning is critical.
Medicare IRMAA Impact: Higher income from a conversion can increase your Medicare Part B and D premiums.
Five-Year Rule: Each conversion has a five-year waiting period. Early withdrawals of converted amounts before five years may incur a 10% penalty if you’re under 59½.
Irrevocable Decision: Once converted, you cannot “undo” it. The option to recharacterize (undo) conversions was eliminated in 2018.
Pay Taxes from Outside Assets: Using the converted funds to pay taxes reduces the actual benefit of the conversion.

When a Roth Conversion Makes the Most Sense

Here are some scenarios where a Roth conversion is particularly advantageous:

You’re in a low-income year, making the tax hit more manageable
You expect higher tax rates in retirement
You have cash outside your retirement accounts to cover conversion taxes
You don’t need the money for at least five years, allowing it to grow in the Roth
You want to minimize RMDs and maximize legacy planning
You’re planning to move to a higher-tax state in the future

How to Do It Smartly

1. Run the Numbers

Before making a conversion, calculate the potential tax bill and compare it with the long-term benefit. Many financial planning tools or advisors can help model one-time vs. staggered conversions.

2. Phase Conversions If Needed

While one-time conversions often perform better, you can still spread the conversion over a few years to manage tax impact and stay in a lower bracket.

3. Time It With Income Dips

Years with unusually low income are ideal for conversions, since your taxable income will be lower, reducing the conversion’s tax burden.

4. Coordinate With Other Tax Moves

Combine your Roth conversion with strategies like charitable donations or harvesting investment losses to offset taxes.

5. Consult a Tax Professional

Roth conversions involve complex rules, including Medicare premiums, state taxes, and potential changes to federal tax law. Professional guidance can help avoid costly mistakes.

Practical Example of a One-Time Roth Conversion

Suppose Jane, age 55, has a traditional IRA with $200,000. She expects her tax bracket to rise in retirement. She decides to convert $100,000 in one year.

Current tax bracket: 22% → pays $22,000 in taxes this year
Future growth in Roth: tax-free for decades
Benefit: avoids higher taxes later and reduces future RMDs

By paying taxes now with cash outside her IRA, Jane maximizes the amount growing tax-free, leaving her more flexible in retirement.

Conclusion

A Roth IRA conversion can be a powerful strategy for retirement planning, offering tax-free growth, no required minimum distributions, and estate-planning advantages. While a one-time conversion often outperforms spreading conversions over time, it’s not a one-size-fits-all solution.

Carefully evaluate your current and expected future tax situation, cash flow needs, and retirement goals. By running the numbers and working with a qualified advisor, you can develop a Roth conversion plan tailored to your circumstances — one that may save you money and give you more flexibility for a comfortable retirement.

by Donald Hayden

02 Dec 2025

Intro

If you’re saving for retirement, 2026 brings important updates. The IRS has officially raised contribution limits for 401(k) plans, IRAs, and several other tax-advantaged retirement accounts. These higher limits create new opportunities to reduce taxable income, accelerate retirement savings, and take advantage of enhanced catch-up provisions. With thoughtful planning, these updates can make a meaningful difference in your long-term financial strategy.

What’s Changing for 2026

The IRS increased several key limits for the 2026 tax year.

The annual employee contribution limit for 401(k), 403(b), 457, and TSP plans rises to $24,500.
Traditional and Roth IRA contribution limits increase to $7,500.
Workers aged 50 and older may contribute an additional $8,000 in catch-up contributions.
Certain employees aged 60–63 may qualify for even higher “super catch-up” contributions depending on plan rules.

These adjustments offer more room for tax-advantaged growth and flexibility in retirement planning.

Why These Changes Matter for Tax Planning

1. Higher Tax-Deferred Savings Potential

The increased limits allow you to shelter more income from taxes. For high earners or those anticipating higher future tax rates, maximizing these contributions can significantly reduce long-term tax exposure.

2. Improved Catch-Up Opportunities

Individuals aged 50 or older now have greater opportunity to strengthen their retirement security through expanded catch-up allowances. This is especially important for those who may have started saving later in life.

3. Income Thresholds Still Apply

While limits increased, income-based rules such as Roth IRA phaseouts still determine eligibility. Higher earners may need alternative strategies, such as backdoor Roth contributions or coordinated employer plan strategies.

Key Factors for Business Owners and Self-Employed Professionals

Retirement strategies for business owners follow similar rules but with additional planning considerations:

Solo 401(k), SEP IRA, and SIMPLE IRA plans follow inflation-adjusted limits and often allow higher combined employer/employee contributions.
Total contributions to defined-contribution plans, including employer contributions, may rise significantly under 2026 limits.
Business owners must monitor compensation levels, plan participation rules, and coordination across multiple entities.

Strategic planning helps ensure contributions remain compliant while maximizing tax benefits.

What You Should Do Now

Here are practical steps to make the most of the new 2026 limits:

Review current contribution settings to determine whether adjustments are needed.
Evaluate catch-up eligibility if you are age 50 or above.
Coordinate employer and employee contributions if you own a business or are self-employed.
Monitor income levels to avoid unintended phaseouts or contribution restrictions.
Work with a tax professional to develop a personalized contribution strategy for 2026.

Small adjustments made early in the year can significantly improve your long-term retirement results.

Final Thoughts

The updated 2026 retirement contribution limits offer an opportunity to strengthen your financial future. Higher caps, enhanced catch-up options, and strategic tax planning work together to create a significant advantage for savers. Whether you are a high-earning professional, business owner, or someone preparing for retirement, understanding and leveraging these changes can help you build a more secure financial foundation.

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