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FIFA Financials

R Quinn  |  Jul 19, 2026

"If you're a LedZep fan, try to catch one of Jason Bonham's "Led Zeppelin Experience" shows. Jason is, of course, John Bonham's son. Caught it at Wolftrap in Northern Virginia a couple years back. Fantastic show! Jason is currently touring too! Check www.jasonbonham.net I think."
- Mark Ukleja
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Looking Back On My Hard Luck Days

DAN SMITH  |  Aug 7, 2026

"I too have been guilty of worrying about money. But the longer I live (I will soon be 82), I realize that good health is a true blessing. I know many people younger than me who do not have good health, and all the money in the world cannot change that. The 2nd blessing (not in order) is having great friends and family. There is much to be thankful here as well. I belong to a small Bible study group of 10 men. As I write this, one has a young granddaughter who is seriously ill and hospitalized with kidney infections, another is bed ridden with Parkinsons, another has an adult son undergoing treatment at a mental health hospital for a mental condition, I have a special needs granddaughter, and I lost my beloved wife of 57 years last year. Faith keeps us all grounded on what is important in life. It is not money."
- Jerry Pinkard
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For most retirees, the greatest fear is not death—it is running out of money before they die.

Matt Halperin  |  Aug 6, 2026

"Ted, I agree with your math. $5,500/month is $66,000/year, or an 8.6% initial withdrawal rate on $768K. But I think the more interesting question is when you make the annuity decision. In our hypothetical, Person C commits $100K to a deferred annuity at age 45 in exchange for $5,500/month for life beginning at 65. That's a legitimate way to insure against longevity and market risk. My objection is committing the money 20 years before you know whether you'll actually need that insurance. The alternative is to leave the $100K invested. If it achieved the historical return of the total U.S. stock market over those 20 years, it would be worth approximately $768K at age 65. At that point, you have both wealth and flexibility:
  • Stay invested in VTSAX/VTI.
  • Diversify to something like 60/40.
  • Annuitize some or all of the portfolio.
  • Buy an immediate annuity—or another annuity product.
  • Or decide you don't need an annuity at all.
And you can make that decision based on your actual circumstances at 65: Social Security, other assets, health, spending needs, whether you're still working, risk tolerance, longevity expectations and desire to leave money to heirs. As for the $5,500/month withdrawal, I don't think "8.6%" tells the whole story. The portfolio doesn't have to earn 8.6% and preserve the $768K. It can consume principal. As an illustration, using long-term historical average returns:
  • A 100%-stock portfolio could still have substantial assets after 20 years of $66K annual withdrawals and, under a simple constant-return illustration, could have significant assets remaining even at 100.
  • A 60/40 portfolio produces a less favorable result but, under those assumptions, could still last into the late 90s.
Those aren't forecasts—sequence-of-returns risk could produce a much worse result. But again, the 65-year-old gets to assess that risk at 65, rather than having the 45-year-old make the decision for him. And if the portfolio does well, the retiree gets something the pure-life annuity doesn't provide: remaining capital and potential money for heirs. My question is why voluntarily give up the flexibility of $100K at age 45 when you can preserve the option to buy that insurance at 65—or later—when you actually know whether you need it. The annuity buys certainty of a specific outcome. The investment preserves optionality and the potential for growth. I'd rather preserve the optionality and only buy the certainty later if I feel I need it. In my case, I don't see that day coming, so I'm glad I deflected all those annuity sales pitches years ago."
- Dunn Werking
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Roth Conversions and Taxes

ArticleJohn Urban  |  Aug 8, 2026

EVERY ARTICLE ABOUT Roth conversions says the same thing: pay the tax from taxable money, not from the IRA. That is good advice if you have taxable money. Plenty of retirees do not. Their savings sit almost entirely in a traditional IRA, built from years of 401(k) contributions and a rollover at retirement, with little brokerage money and no cash reserve worth naming. For them, “pay from outside money” is not advice. It is a condition they do not meet. Their real choice is a self-funded conversion or no conversion at all. The familiar warning is that self-funding requires a gross-up. You withdraw money to pay the conversion tax, that withdrawal is itself taxable, so you have to withdraw a little more. Less discussed is what else that withdrawal sets off. It makes more of your Social Security taxable, it raises your Medicare premiums two years later, and in a high-tax state it enlarges the amount that has to leave the IRA. Here is what those three cost, on one household. A cautious conversion Meet Dianne, a composite rather than a real person. She is 66, single, retired to Florida, with $1 million in a traditional IRA and nothing outside it. Social Security pays her $28,000 a year. She is past 59 and a half and already on Medicare. Florida keeps state income tax out of the arithmetic for now. She converts $40,000. Careful, modest, the size people choose when they are trying not to do anything dramatic. The tax on that conversion, paid from a checking account she does not have, would be $4,234. Funding it from the IRA instead, the withdrawal that covers it is $5,125, and her tax rises to match. That extra $891 is 17.4% of the $5,125 she withdrew. Her ordinary-income bracket is 12%. Twelve of those points are the tax on the withdrawal itself, which is the gross-up everybody expects. The other 5.4 points come from $2,300 of her Social Security being pulled into taxable income by that same withdrawal. Paying from cash, $21,500 of her benefit would be taxable. Self-funding, $23,800 is. The difference is caused by how she paid, not by what she converted, and nothing on her return will label it. Not a smaller version of a large one The effect is not linear. Run the same woman at $150,000 and 85% of her benefit, the statutory maximum, is already taxable before she funds the tax. The funding withdrawal drags in nothing further, and this particular cost is zero. That is not an argument for converting more. It is an argument against assuming a small conversion is simply a smaller version of a large one. The one that looks cautious can carry the higher marginal rate. What self-funding actually costs Give Dianne the $150,000 conversion, still with no outside cash, and add the state question. Still in Florida, $195,469 has to leave the traditional IRA to put $150,000 into the Roth. Move her to California, changing nothing else, and it is $219,751. That is $1.30 of IRA spent for every dollar reaching the Roth, against $1.47, and the gap is California income tax compounded through the gross-up. If a move across state lines is anywhere in your plan, the order of operations may matter more than the size of the conversion. But $1.47 invites a conclusion it does not support, and I would rather correct that myself than let it travel. A conversion is taxable whichever pocket pays. Of the $69,751 Dianne withdraws in California, roughly $44,639 replaces cash she would have spent anyway. The incremental cost of self-funding, in wealth given up, is $25,111. About 17% of the conversion, not 47. The bill that arrives in 2028 At that $150,000 conversion, self-funding also costs Dianne $1,735 in higher Medicare premiums, a surcharge of $6,355 rather than $4,620, charged on top of the standard premium, for one year, and hers alone as a single filer. The bill arrives two years late. Medicare sets her 2028 premiums from her 2026 income, so the cost is invisible at the moment she is deciding how to pay the 2026 tax. When it can still make sense Doing nothing is not free either. Money left in a traditional IRA comes out eventually, under required distributions, at whatever rates apply then, possibly to a survivor filing single, possibly to heirs facing a 10-year deadline. Where self-funding still holds up, a few things tend to be true. The rate gap is durable rather than a one-year accident. Whether it repays a cost this size depends on time, future tax rates and investment returns. A temporary dip in income is a thin foundation. A structural window, after retirement and before Social Security or required distributions begin, is more compelling. There is runway, because shrinking the portfolio to change its tax character needs years of tax-free growth to earn back. Age 59 and a half is cleanly behind you. The converted amount is not subject to the 10% additional tax on early distributions. A separate distribution taken to pay the tax generally is, unless an exception applies. And enough is left afterward. Check the balance after the funding withdrawal, not after the conversion. Dianne’s California IRA drops to $780,249, and whether that funds the next 30 years matters more than whether the conversion was tax-efficient. A practical warning about withholding Withholding from the conversion is not a cheaper way to pay the tax. It reduces what reaches the Roth. Elect 24% on Dianne’s $40,000 conversion, as this illustration does rather than as any custodian requires, and $9,600 goes to the IRS while $30,400 lands in the Roth, against $4,234 actually owed. The cash comes back next spring as a refund. The Roth room does not come back at all. Restating the rule Pay the conversion tax from outside cash if you have it. That remains the best answer. It is not an answer for the retiree whose savings are almost entirely in a traditional IRA. For that person, “never pay from the IRA” skips the actual decision, which is whether a self-funded conversion, with its full marginal cost, beats leaving the money where it is. Before deciding, count the gross-up, the Social Security effect, state tax and the Medicare bill two years later. Sometimes that arithmetic still says no. It beats applying a rule written for somebody with a different balance sheet. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.
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Before Someone Else Decides

Kathleen Rehl  |  Aug 2, 2026

"Thank you so much Kathleen. I plan to use your booklet. This is why I read HD"
- Nick Politakis
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Short term and long term Social Security planning

William Perry  |  Aug 4, 2026

"with $40 trillion of debt we will have deflation when pigs fly."
- Nick Politakis
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Risk and Taxes

ArticleAdam M. Grossman  |  Aug 8, 2026

AFTER YEARS OF heady gains in the stock market, many investors are facing the same question: To manage risk, they’d like to cut back on one or more of their holdings. But because of the potentially costly tax bill that might result, they aren’t sure exactly how to do that. How can you square this circle? One easy option would be to donate appreciated assets to charity. But that would make sense only if it aligns with your charitable goals and, of course, if you don’t need those funds for other uses. How else could you strike a balance between managing risk and limiting taxes? Here’s how I would answer this question. Step 1. I’d start by estimating the potential risk level among your holdings. While there’s no single litmus test, you could ask the following questions. First, how large a portion of your assets does any single holding represent? As a rule of thumb, I’d focus first on individual stocks that top 5%. Why 5%? My operating assumption is that any individual stock could experience a 50% decline during a crisis. So if a holding is limited to 5%, then a 50% drop would result in an overall portfolio impact of just 2.5%. I see that as very manageable. To be sure, stocks can certainly decline by more than 50%, but I view this as a reasonable figure for risk management. While I worry most about the risk posed by single stocks, it’s also important to examine the overall composition of your portfolio. That’s because, counterintuitively, a portfolio of 30 stocks could end up being riskier than a group of just 10. Harry Markowitz, the father of Modern Portfolio Theory, explained why. In his initial work back in the 1950s, Markowitz used railroad company stocks to explain the concept of diversification. There’s nothing inherently wrong with railroad stocks, Markowitz explained. But if a portfolio consists of only railroad stocks, then that would be a problem—because companies in the same industry are often impacted by the same economic factors. In other words, a portfolio consisting of a large number of holdings might only appear diversified, so it’s important to look under the hood. Another risk factor to consider: Do you work for a public company and own the company’s stock? If so, that would be a reason to consider diversifying more quickly (within the permitted time windows). What if you own only mutual funds or ETFs? Diversified funds tend to be less risky than individual stocks, but that’s not always the case. The fund industry launches as many as 1,000 new funds each year, including many with very aggressive strategies. So it’s important to check each fund’s holdings. You can find that information on the fund company’s website or on a site like Morningstar (Here, for example, are the top holdings in Vanguard’s S&P 500 index fund). Step 2. Next, you’d want to estimate how much a loss might impact you. As with most questions in personal finance, there are two answers to consider: how it might affect you in dollar terms, and the degree to which a loss would simply be upsetting. Both are important. Step 3. If you determine the holding in question does represent a material risk, then you’d want to estimate the potential tax impact. Here are questions you might ask: What would the tax be if you exited the entire position? Would it push your income into the next capital gains bracket? Are there tax lots with less appreciation you could take advantage of? Do you have losses you could use to offset some of the gains? Do you expect to be in a higher or lower tax bracket next year? Step 4. If you conclude that the tax bill might be significant, what steps could you take to reduce a holding tax-efficiently? Here are strategies to consider: For starters, I suggest deciding on a target percentage for the holding. While ideally I prefer bringing any individual stock down to a 5% weighting, that figure isn’t a rule. All things being equal, the larger a portfolio, the more risk you can afford. After deciding on a target percentage, the simplest approach would be to set up a long-term sale plan—like dollar cost averaging but in reverse. Suppose you’d like to sell 1,200 shares of a given stock. You could sell 100 shares each month for twelve months. You’d do that regardless of whether the stock happens to be up or down that month. That 12-month schedule isn’t a rule. If your holding is very significant, you might opt for a longer timeframe. On the other hand, if you feel the stock has a particularly highflying valuation, you might choose a quicker pace. The key, in my view, is just to get started. As the writer Carveth Read wrote, “it’s better to be roughly right than precisely wrong.” Selling a stock down over time is the simplest way to reduce risk, but it’s hardly the most tax efficient. Another approach that’s been gaining in popularity is known as a 351 exchange fund. With a 351, the idea is that a group of investors, each with their own portfolios of appreciated securities, come together and collaborate to diversify their respective holdings. To provide a simplified illustration, imagine two investors, each with a concentrated holding, one in Microsoft and the other in Apple. Each would benefit by diversifying, and that’s what a 351 exchange fund allows. Each would contribute their respective shares into a common pool that would then hold some Apple and some Microsoft. This new investment would be structured as an ETF, and each investor would be issued shares proportional to the size of their contribution. Importantly, the initial creation of a 351 fund doesn’t entail any tax. Taxes are due only when an investor later sells shares of that ETF. This is a simplified example. In reality, a 351 exchange fund would hold many more than just two holdings. They’re actually required to meet various diversification requirements. As a result, investors in 351 funds may end up feeling sufficiently diversified and thus comfortable holding their fund shares for the long term. That would make this strategy potentially the most tax-efficient way to manage portfolio concentration risk. This is just an overview, though. If you’re interested in 351 strategies, I suggest further research. In July, The Wall Street Journal discussed these funds in some detail. In addition, a firm called Alpha Architect, the largest player in this area, has a number of helpful explanatory videos on its site.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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“Gerontocracy” in America

Chris Rush  |  Aug 6, 2026

"Thanks for sharing this, Chris. I found Moyn’s notion that “age limits for political office are a must” ageist, and his book’s loaded, buzzword-laden title polarizing. His sprawling narrative seems to conflate a demographic anomaly (the baby boom) and long-lamented political challenges such as special interest money and the incumbency effect, among other factors. Given that, his prescribed remedies miss the root causes and aim for a more convenient target: the aged. At age 54, he might consider what his ideas mean for his own cohort: Generation X. As a considerably smaller generation, we already lack much influence. Under Moyn’s proposals, Generation X—and future generations—might have even less of a voice upon reaching our “golden years.”"
- D.J.
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Jonathan’s Parting Thoughts: No. 8

Jonathan Clements  |  Aug 7, 2026

"Rob Berger had a YouTube video published 3 years ago titled "Avantis All Equity Market ETF (ticker: AVGE) Pros and Cons" where he discussed this fund which was new as it started in 2022 and he also made some comparisons with VT. I interpret Rod Berger's main concern about AVGE was the fact that as the fund was new that the newness alone was then disqualifying for him to include in his holdings. AVGE is also a fund of funds, is actively managed, tilts toward value, tilts towards US and uses a mathematical formula to look at past profitability to help fund management project which investments will be profitable in the future. That may parallel your investing thinking but I have gone with VT, for better or worse, which tracks the appropriate world equity index. A couple of key numbers and considerations - Expense ratios (net current) - AVGE 0.23%, VT 0.06% YTD gain per Morningstar 8/6/2025 to 8/7/2026 - AVGE +28.71%, VT +23.32% The VT fund at 6/30/2026 was about 80 times the size of AVGE The AVGE has a large Bid/Ask Spread which likely is caused because it is a "fund of funds" that trades underlying small-cap and value-tilted global equities and because of lower daily trading volume compared to a much larger fund like VT."
- William Perry
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Taxing Social Security benefits

R Quinn  |  Aug 6, 2026

"Ahh, the joy of definitions in the IRC. They got you either way."
- Mark Eckman
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Inflation, prices, COLAs, retirement and the last 16 years

R Quinn  |  Jul 27, 2026

"I suspect the posts you read from seniors are those that do not really have adequate funds built up in IRAs (or other investment orientated savings) to act as the buffer on top of SS. The world has however changed and anyone who has retired in the past 10 years (or is coming up to retirement) should be aware of the utility in maintaining equity market exposure as a key part of managing inflation (and other life event) risks. As has been discussed before SWR is only a tool not the entire answer. If you're asking how much can I draw from $1m capital then 40k pa (rising with inflation) is a reasonable answer for a 30 year lifespan etc. That does nothing to tell you whether $40k will support your lifestyle and/or leave enough surplus for unexpected needs. Hence why you also need a budget or alternately the discipline to live within the income. I'd suggest it is wise to at least think about financial strategy in weathering unexpected needs. But it doesn't need to negate the overall drawdown strategy - for some it might be drawing at only 3.5%, for others maintaining a cash-like emergency fund or being prepared to sell a second home or whatever. My approach is to have a notional "when it's gone, it's gone" pot to cover lumpy one-off spend. Then I top it up from excess from my planned drawings or if it goes, replenish by paring back lifestyle spending a bit. Some people might need to see that as a physically separate fund/account. That's personal choice (possibly for those allergic to spreadsheets/budgeting ;) ) and largely just accounting presentation."
- bbbobbins
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When your 401(k) excludes target date funds

JM  |  Aug 1, 2026

"What are the lowest fee funds? Maybe there's actually a good one."
- Randy Dobkin
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FIFA Financials

R Quinn  |  Jul 19, 2026

"If you're a LedZep fan, try to catch one of Jason Bonham's "Led Zeppelin Experience" shows. Jason is, of course, John Bonham's son. Caught it at Wolftrap in Northern Virginia a couple years back. Fantastic show! Jason is currently touring too! Check www.jasonbonham.net I think."
- Mark Ukleja
Read more »

Looking Back On My Hard Luck Days

DAN SMITH  |  Aug 7, 2026

"I too have been guilty of worrying about money. But the longer I live (I will soon be 82), I realize that good health is a true blessing. I know many people younger than me who do not have good health, and all the money in the world cannot change that. The 2nd blessing (not in order) is having great friends and family. There is much to be thankful here as well. I belong to a small Bible study group of 10 men. As I write this, one has a young granddaughter who is seriously ill and hospitalized with kidney infections, another is bed ridden with Parkinsons, another has an adult son undergoing treatment at a mental health hospital for a mental condition, I have a special needs granddaughter, and I lost my beloved wife of 57 years last year. Faith keeps us all grounded on what is important in life. It is not money."
- Jerry Pinkard
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For most retirees, the greatest fear is not death—it is running out of money before they die.

Matt Halperin  |  Aug 6, 2026

"Ted, I agree with your math. $5,500/month is $66,000/year, or an 8.6% initial withdrawal rate on $768K. But I think the more interesting question is when you make the annuity decision. In our hypothetical, Person C commits $100K to a deferred annuity at age 45 in exchange for $5,500/month for life beginning at 65. That's a legitimate way to insure against longevity and market risk. My objection is committing the money 20 years before you know whether you'll actually need that insurance. The alternative is to leave the $100K invested. If it achieved the historical return of the total U.S. stock market over those 20 years, it would be worth approximately $768K at age 65. At that point, you have both wealth and flexibility:
  • Stay invested in VTSAX/VTI.
  • Diversify to something like 60/40.
  • Annuitize some or all of the portfolio.
  • Buy an immediate annuity—or another annuity product.
  • Or decide you don't need an annuity at all.
And you can make that decision based on your actual circumstances at 65: Social Security, other assets, health, spending needs, whether you're still working, risk tolerance, longevity expectations and desire to leave money to heirs. As for the $5,500/month withdrawal, I don't think "8.6%" tells the whole story. The portfolio doesn't have to earn 8.6% and preserve the $768K. It can consume principal. As an illustration, using long-term historical average returns:
  • A 100%-stock portfolio could still have substantial assets after 20 years of $66K annual withdrawals and, under a simple constant-return illustration, could have significant assets remaining even at 100.
  • A 60/40 portfolio produces a less favorable result but, under those assumptions, could still last into the late 90s.
Those aren't forecasts—sequence-of-returns risk could produce a much worse result. But again, the 65-year-old gets to assess that risk at 65, rather than having the 45-year-old make the decision for him. And if the portfolio does well, the retiree gets something the pure-life annuity doesn't provide: remaining capital and potential money for heirs. My question is why voluntarily give up the flexibility of $100K at age 45 when you can preserve the option to buy that insurance at 65—or later—when you actually know whether you need it. The annuity buys certainty of a specific outcome. The investment preserves optionality and the potential for growth. I'd rather preserve the optionality and only buy the certainty later if I feel I need it. In my case, I don't see that day coming, so I'm glad I deflected all those annuity sales pitches years ago."
- Dunn Werking
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Roth Conversions and Taxes

ArticleJohn Urban  |  Aug 8, 2026

EVERY ARTICLE ABOUT Roth conversions says the same thing: pay the tax from taxable money, not from the IRA. That is good advice if you have taxable money. Plenty of retirees do not. Their savings sit almost entirely in a traditional IRA, built from years of 401(k) contributions and a rollover at retirement, with little brokerage money and no cash reserve worth naming. For them, “pay from outside money” is not advice. It is a condition they do not meet. Their real choice is a self-funded conversion or no conversion at all. The familiar warning is that self-funding requires a gross-up. You withdraw money to pay the conversion tax, that withdrawal is itself taxable, so you have to withdraw a little more. Less discussed is what else that withdrawal sets off. It makes more of your Social Security taxable, it raises your Medicare premiums two years later, and in a high-tax state it enlarges the amount that has to leave the IRA. Here is what those three cost, on one household. A cautious conversion Meet Dianne, a composite rather than a real person. She is 66, single, retired to Florida, with $1 million in a traditional IRA and nothing outside it. Social Security pays her $28,000 a year. She is past 59 and a half and already on Medicare. Florida keeps state income tax out of the arithmetic for now. She converts $40,000. Careful, modest, the size people choose when they are trying not to do anything dramatic. The tax on that conversion, paid from a checking account she does not have, would be $4,234. Funding it from the IRA instead, the withdrawal that covers it is $5,125, and her tax rises to match. That extra $891 is 17.4% of the $5,125 she withdrew. Her ordinary-income bracket is 12%. Twelve of those points are the tax on the withdrawal itself, which is the gross-up everybody expects. The other 5.4 points come from $2,300 of her Social Security being pulled into taxable income by that same withdrawal. Paying from cash, $21,500 of her benefit would be taxable. Self-funding, $23,800 is. The difference is caused by how she paid, not by what she converted, and nothing on her return will label it. Not a smaller version of a large one The effect is not linear. Run the same woman at $150,000 and 85% of her benefit, the statutory maximum, is already taxable before she funds the tax. The funding withdrawal drags in nothing further, and this particular cost is zero. That is not an argument for converting more. It is an argument against assuming a small conversion is simply a smaller version of a large one. The one that looks cautious can carry the higher marginal rate. What self-funding actually costs Give Dianne the $150,000 conversion, still with no outside cash, and add the state question. Still in Florida, $195,469 has to leave the traditional IRA to put $150,000 into the Roth. Move her to California, changing nothing else, and it is $219,751. That is $1.30 of IRA spent for every dollar reaching the Roth, against $1.47, and the gap is California income tax compounded through the gross-up. If a move across state lines is anywhere in your plan, the order of operations may matter more than the size of the conversion. But $1.47 invites a conclusion it does not support, and I would rather correct that myself than let it travel. A conversion is taxable whichever pocket pays. Of the $69,751 Dianne withdraws in California, roughly $44,639 replaces cash she would have spent anyway. The incremental cost of self-funding, in wealth given up, is $25,111. About 17% of the conversion, not 47. The bill that arrives in 2028 At that $150,000 conversion, self-funding also costs Dianne $1,735 in higher Medicare premiums, a surcharge of $6,355 rather than $4,620, charged on top of the standard premium, for one year, and hers alone as a single filer. The bill arrives two years late. Medicare sets her 2028 premiums from her 2026 income, so the cost is invisible at the moment she is deciding how to pay the 2026 tax. When it can still make sense Doing nothing is not free either. Money left in a traditional IRA comes out eventually, under required distributions, at whatever rates apply then, possibly to a survivor filing single, possibly to heirs facing a 10-year deadline. Where self-funding still holds up, a few things tend to be true. The rate gap is durable rather than a one-year accident. Whether it repays a cost this size depends on time, future tax rates and investment returns. A temporary dip in income is a thin foundation. A structural window, after retirement and before Social Security or required distributions begin, is more compelling. There is runway, because shrinking the portfolio to change its tax character needs years of tax-free growth to earn back. Age 59 and a half is cleanly behind you. The converted amount is not subject to the 10% additional tax on early distributions. A separate distribution taken to pay the tax generally is, unless an exception applies. And enough is left afterward. Check the balance after the funding withdrawal, not after the conversion. Dianne’s California IRA drops to $780,249, and whether that funds the next 30 years matters more than whether the conversion was tax-efficient. A practical warning about withholding Withholding from the conversion is not a cheaper way to pay the tax. It reduces what reaches the Roth. Elect 24% on Dianne’s $40,000 conversion, as this illustration does rather than as any custodian requires, and $9,600 goes to the IRS while $30,400 lands in the Roth, against $4,234 actually owed. The cash comes back next spring as a refund. The Roth room does not come back at all. Restating the rule Pay the conversion tax from outside cash if you have it. That remains the best answer. It is not an answer for the retiree whose savings are almost entirely in a traditional IRA. For that person, “never pay from the IRA” skips the actual decision, which is whether a self-funded conversion, with its full marginal cost, beats leaving the money where it is. Before deciding, count the gross-up, the Social Security effect, state tax and the Medicare bill two years later. Sometimes that arithmetic still says no. It beats applying a rule written for somebody with a different balance sheet. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.
Read more »

Before Someone Else Decides

Kathleen Rehl  |  Aug 2, 2026

"Thank you so much Kathleen. I plan to use your booklet. This is why I read HD"
- Nick Politakis
Read more »

Short term and long term Social Security planning

William Perry  |  Aug 4, 2026

"with $40 trillion of debt we will have deflation when pigs fly."
- Nick Politakis
Read more »

Risk and Taxes

ArticleAdam M. Grossman  |  Aug 8, 2026

AFTER YEARS OF heady gains in the stock market, many investors are facing the same question: To manage risk, they’d like to cut back on one or more of their holdings. But because of the potentially costly tax bill that might result, they aren’t sure exactly how to do that. How can you square this circle? One easy option would be to donate appreciated assets to charity. But that would make sense only if it aligns with your charitable goals and, of course, if you don’t need those funds for other uses. How else could you strike a balance between managing risk and limiting taxes? Here’s how I would answer this question. Step 1. I’d start by estimating the potential risk level among your holdings. While there’s no single litmus test, you could ask the following questions. First, how large a portion of your assets does any single holding represent? As a rule of thumb, I’d focus first on individual stocks that top 5%. Why 5%? My operating assumption is that any individual stock could experience a 50% decline during a crisis. So if a holding is limited to 5%, then a 50% drop would result in an overall portfolio impact of just 2.5%. I see that as very manageable. To be sure, stocks can certainly decline by more than 50%, but I view this as a reasonable figure for risk management. While I worry most about the risk posed by single stocks, it’s also important to examine the overall composition of your portfolio. That’s because, counterintuitively, a portfolio of 30 stocks could end up being riskier than a group of just 10. Harry Markowitz, the father of Modern Portfolio Theory, explained why. In his initial work back in the 1950s, Markowitz used railroad company stocks to explain the concept of diversification. There’s nothing inherently wrong with railroad stocks, Markowitz explained. But if a portfolio consists of only railroad stocks, then that would be a problem—because companies in the same industry are often impacted by the same economic factors. In other words, a portfolio consisting of a large number of holdings might only appear diversified, so it’s important to look under the hood. Another risk factor to consider: Do you work for a public company and own the company’s stock? If so, that would be a reason to consider diversifying more quickly (within the permitted time windows). What if you own only mutual funds or ETFs? Diversified funds tend to be less risky than individual stocks, but that’s not always the case. The fund industry launches as many as 1,000 new funds each year, including many with very aggressive strategies. So it’s important to check each fund’s holdings. You can find that information on the fund company’s website or on a site like Morningstar (Here, for example, are the top holdings in Vanguard’s S&P 500 index fund). Step 2. Next, you’d want to estimate how much a loss might impact you. As with most questions in personal finance, there are two answers to consider: how it might affect you in dollar terms, and the degree to which a loss would simply be upsetting. Both are important. Step 3. If you determine the holding in question does represent a material risk, then you’d want to estimate the potential tax impact. Here are questions you might ask: What would the tax be if you exited the entire position? Would it push your income into the next capital gains bracket? Are there tax lots with less appreciation you could take advantage of? Do you have losses you could use to offset some of the gains? Do you expect to be in a higher or lower tax bracket next year? Step 4. If you conclude that the tax bill might be significant, what steps could you take to reduce a holding tax-efficiently? Here are strategies to consider: For starters, I suggest deciding on a target percentage for the holding. While ideally I prefer bringing any individual stock down to a 5% weighting, that figure isn’t a rule. All things being equal, the larger a portfolio, the more risk you can afford. After deciding on a target percentage, the simplest approach would be to set up a long-term sale plan—like dollar cost averaging but in reverse. Suppose you’d like to sell 1,200 shares of a given stock. You could sell 100 shares each month for twelve months. You’d do that regardless of whether the stock happens to be up or down that month. That 12-month schedule isn’t a rule. If your holding is very significant, you might opt for a longer timeframe. On the other hand, if you feel the stock has a particularly highflying valuation, you might choose a quicker pace. The key, in my view, is just to get started. As the writer Carveth Read wrote, “it’s better to be roughly right than precisely wrong.” Selling a stock down over time is the simplest way to reduce risk, but it’s hardly the most tax efficient. Another approach that’s been gaining in popularity is known as a 351 exchange fund. With a 351, the idea is that a group of investors, each with their own portfolios of appreciated securities, come together and collaborate to diversify their respective holdings. To provide a simplified illustration, imagine two investors, each with a concentrated holding, one in Microsoft and the other in Apple. Each would benefit by diversifying, and that’s what a 351 exchange fund allows. Each would contribute their respective shares into a common pool that would then hold some Apple and some Microsoft. This new investment would be structured as an ETF, and each investor would be issued shares proportional to the size of their contribution. Importantly, the initial creation of a 351 fund doesn’t entail any tax. Taxes are due only when an investor later sells shares of that ETF. This is a simplified example. In reality, a 351 exchange fund would hold many more than just two holdings. They’re actually required to meet various diversification requirements. As a result, investors in 351 funds may end up feeling sufficiently diversified and thus comfortable holding their fund shares for the long term. That would make this strategy potentially the most tax-efficient way to manage portfolio concentration risk. This is just an overview, though. If you’re interested in 351 strategies, I suggest further research. In July, The Wall Street Journal discussed these funds in some detail. In addition, a firm called Alpha Architect, the largest player in this area, has a number of helpful explanatory videos on its site.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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“Gerontocracy” in America

Chris Rush  |  Aug 6, 2026

"Thanks for sharing this, Chris. I found Moyn’s notion that “age limits for political office are a must” ageist, and his book’s loaded, buzzword-laden title polarizing. His sprawling narrative seems to conflate a demographic anomaly (the baby boom) and long-lamented political challenges such as special interest money and the incumbency effect, among other factors. Given that, his prescribed remedies miss the root causes and aim for a more convenient target: the aged. At age 54, he might consider what his ideas mean for his own cohort: Generation X. As a considerably smaller generation, we already lack much influence. Under Moyn’s proposals, Generation X—and future generations—might have even less of a voice upon reaching our “golden years.”"
- D.J.
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Jonathan’s Parting Thoughts: No. 8

Jonathan Clements  |  Aug 7, 2026

"Rob Berger had a YouTube video published 3 years ago titled "Avantis All Equity Market ETF (ticker: AVGE) Pros and Cons" where he discussed this fund which was new as it started in 2022 and he also made some comparisons with VT. I interpret Rod Berger's main concern about AVGE was the fact that as the fund was new that the newness alone was then disqualifying for him to include in his holdings. AVGE is also a fund of funds, is actively managed, tilts toward value, tilts towards US and uses a mathematical formula to look at past profitability to help fund management project which investments will be profitable in the future. That may parallel your investing thinking but I have gone with VT, for better or worse, which tracks the appropriate world equity index. A couple of key numbers and considerations - Expense ratios (net current) - AVGE 0.23%, VT 0.06% YTD gain per Morningstar 8/6/2025 to 8/7/2026 - AVGE +28.71%, VT +23.32% The VT fund at 6/30/2026 was about 80 times the size of AVGE The AVGE has a large Bid/Ask Spread which likely is caused because it is a "fund of funds" that trades underlying small-cap and value-tilted global equities and because of lower daily trading volume compared to a much larger fund like VT."
- William Perry
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Manifesto

Aug 9, 2026

NO. 71: WE SHOULD take a broad view of our bond holdings—and include our paycheck, Social Security and other bond-like income streams. Result? We may find we have too much in bonds.

humans

Aug 9, 2026

NO. 41: OUR APPETITE for risk isn’t stable. As we settle on a stock-bond mix, we should ponder how much risk we can reasonably take and how much we can stomach. The first part is easy, but the second part—deciding how much risk we can truly tolerate—is tough. The reason: Our risk tolerance rises as stocks climb, but can evaporate when prices fall.

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Aug 8, 2026

MIMETIC DESIRE. While our needs may be driven by hardwired instincts to avoid, say, hunger and cold, our wants are often heavily influenced by others. According to mimetic theory, those we look up to show us what’s worth wanting. For instance, the boss or a celebrity discusses the joys of jogging—and suddenly we find ourselves buying running shoes.

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Aug 8, 2026

REFINANCE if it'll noticeably reduce your mortgage rate. That can be a smart move if, within a few years, you can recoup the refinancing’s cost through lower monthly payments. Want to get a handle on how much you’re truly saving? If you have, say, 19 years left on your loan, find out the monthly payment on a 19-year mortgage at today’s lower rate.

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Manifesto

Aug 9, 2026

NO. 71: WE SHOULD take a broad view of our bond holdings—and include our paycheck, Social Security and other bond-like income streams. Result? We may find we have too much in bonds.

Spotlight: Abuse

Be Suspicious

Paul Merriman   |  Feb 14, 2022

THIS IS NOT MY favorite topic. But it’s a necessary one these days—when a seemingly endless number of companies and individuals are intent on separating us from our money. Some of them will use any means, fair or foul.
I’m going to share a story about a longtime friend whose kindness and generous nature were used against him when he was vulnerable. As much as anyone I’ve ever known, my friend—I’ll call him Bill—was a gentle man and a gentleman.

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Lost Property

Sonja Haggert   |  Mar 2, 2023

OUR COMMUNITY HAS a Facebook-like online forum called Nextdoor. I tend to ignore the posts, which usually involve things like items for sale and new restaurant openings. But a recent post caught my eye—because it was from the Montgomery County Recorder of Deeds.
The article said Pennsylvania’s Attorney General had initiated a lawsuit against a realty company for deceptive practices targeting elderly, low-income and minority homeowners. The realty company was offering a “Homeowner Benefit Program” that gives homeowners anywhere from $400 to $1,000 upfront to lock into a contract.

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Who Stole My Home?

Sonja Haggert   |  Nov 11, 2024

YOU MIGHT RECALL my article warning about home title theft, where scammers try to claim ownership of your home. Since I wrote the article, the Federal Trade Commission has warned that one preventive measure, so-called title lock insurance, is bogus: It only alerts you to title fraud after the fraud has happened.
Thanks to a recent AARP article, there’s now greater awareness about home title fraud and ways to protect yourself. What can you do to prevent title fraud?

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Stop Bank Robbers

Adam M. Grossman   |  Sep 10, 2023

“YOUR CHECKING ACCOUNT balance is low.” It’s an alert none of us wants to receive, especially if we’ve just been paid. But that was the message that a friend—let’s call him Ron—got recently. A hacker had gained control of his account and started bleeding it dry.
Ron, it turns out, was lucky to have received that alert. Another friend—let’s call him Arthur—received no such alert when his account was also taken over by hackers this summer.

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How to protect your retirement savings from scammers?

smr1082   |  Jul 29, 2024

I was reading this New York Times Article today titled: ” How one man lost $740,000 to scammers targeting his retirement savings”. See this link.
This is a shocking reminder that scammers are getting more and more sophisticated. It is going to get worse. Criminals on the internet are increasingly going after Americans over 60 for their retirement savings. Potential losses last year were over $3.4 billion.
Here’s another link that’s relevant.
What steps should we take to protect our assets from scammers?

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Anti-Social Behavior

Max Chi   |  Jul 25, 2023

A QUARTER OF ALL reported losses from fraud in 2021 originated on social media, according to the Federal Trade Commission, and those losses cost about $770 million.
Yes, social media is a popular way to keep in touch with family and friends, receive news and get information. According to Pew Research, 73% of people ages 50 to 64 used social media in 2021, as did 45% of those ages 65 and over. But using social media requires vigilance.

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Spotlight: Friedman

Delayed Reaction

Dennis Friedman   |  May 15, 2024

IF YOU’VE READ MY articles, you know I don’t respond to readers’ comments very often. It’s not because I’m quiet or shy. Rather, it’s because I like to be thoughtful in my responses, rather than firing off a quick one- or two-sentence answer in the comments section. That brings me to four comments that I’ve found myself pondering, often months or even years after the article appeared. Here’s my belated response to each. Trading up. I wrote an article where I mentioned that we own a 2007 Honda Fit. One reader thought we should get a newer car, so we have the latest safety technology to protect us from aggressive drivers. “If not for yourself, get a newer car to protect your wife,” the commenter said. When we start taking some cross-country road trips, we’d like to buy a newer car with the latest safety features. In fact, our current budget calls for us to purchase a new vehicle this year. But I don’t think that’s going to happen because the Honda Fit is running well, and we don’t drive it very much. Indeed, last year, the car was driven just 545 miles. It’s well maintained and it’s only used for running errands, so we never take it very far from the house. Still, there will be a time when we’ll need another car, and one with the latest safety technology would be a good idea. Maybe the biggest reason I’m putting off buying a newer car is because I’ve had two cars stolen. They were both found, but one had been set on fire and the other was missing most of its parts. The more traumatic theft happened in the early 1970s, when I was 20 years old. I’d bought a Volkswagen Super Beetle and had it for just…
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Retirement Begins Long Before You Retire

Dennis Friedman   |  Sep 15, 2025

Including my time delivering newspapers, I’ve had a total of ten different employers in my life. Some jobs were more memorable than others. One of my early roles was at a company that created merchandise catalogs for department stores. I was twenty—shy, insecure, and working part-time while attending college. I mostly did the tasks no one else wanted: vacuuming, taking out the trash, cleaning the bathrooms. Yet, two women at that company saw potential in me that I couldn’t yet see in myself. One was Leni, the owner. She encouraged me to switch my major from history to business and promised that if I earned a business degree, she would make me her right-hand person. The other was Jodi, my age, who worked on staging photo shoots—and sometimes modeled herself. Fred from shipping insisted she liked me, but I never had the courage to find out. I never took Leni up on her offer. Perhaps it was because her son, who also worked there, didn’t like me. Or maybe I simply didn’t believe in myself. As for Jodi, I never asked her out. I couldn’t imagine someone like her being interested in a guy who cleaned toilets and had no plan for his life. My shyness held me back, too. These days, I’m no longer that shy, self-doubting kid. I tend to speak my mind—which brings me to retirement. Looking back, I realize that the habits I struggled with in my early jobs—self-doubt, hesitation, and risk avoidance—can have real consequences later in life, especially as we approach retirement. Some of what I’m about to say might be uncomfortable, but it’s important. Here are three ways people sabotage their own retirement: 1. Neglecting our health On a seven-hour flight to Amsterdam, the man next to me drank two regular Cokes, a…
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A Fine Example

Dennis Friedman   |  Jun 20, 2019

MY MOTHER IS 95 years old and in fairly good shape for her age. Yes, she repeats herself quite often. When she does, I tend to let it go in one ear and out the other. When she talks about my father, however, I listen very closely. One day, as I was backing the car out of the garage, she looked at all the cabinets my father built and said for the umpteenth time, “Sam was a smart man. Look at all the things he designed and built.” My father was one of the wisest men I’ve ever known. He was a machinist by trade. But he was very knowledgeable about life in general, including personal finance. I still remember something he said to me when I was young: "It's not how much money you make that’s important. It's what you do with your money that’s important." One day, I asked my father when would be a good time to invest some extra money I received from my employer. He answered “yesterday”—a reminder of the importance of investing early. He never tried to time the stock market or game the system in other ways. He was a meat-and-potatoes kind of investor. Just invest your money in a low-cost diversified fund and watch it grow. Today, my mother is still living off the money that her and my father invested. Isn’t that proof that you don’t have to reinvent the wheel when it comes to investing? Not only did I learn the basic principles about investing from my father, but also he instilled in me a work ethic that propelled me through my life. When I was a teenager, I used to watch him get up early to go to work and come home late in the evening. He sometimes did this six days…
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Market Turmoil

Dennis Friedman   |  Apr 7, 2025

I spend a lot of my free time reading, especially newspapers, which may seem odd to you given the dramatic drop in newspaper subscriptions over the years. I subscribe to three digital newspapers, and their breaking news alerts—which find their way into my email account—keep me busy. Lately, I’ve been bombarded with news about tariffs and the recent stock market decline. I have no idea how long this economic turmoil will last, and from what I’ve read, neither does anyone else. But here are three observations from the news that have caught my attention: Don’t Panic: Ron Lieber points out in his New York Times article that the time to panic about how the new tariff policy will affect prices and the stock market might be when Costco raises the price of its $1.50 hot dog-and-soda combo. The price hasn’t risen since 1985, and Costco’s chief financial officer has suggested they will never raise it. It Might Take a While: Edward Yardeni, President of Yardeni Research and successful at picking market bottoms, said that this usually happens after the Federal Reserve has taken action. But Jerome Powell, the Fed chair, has made it clear the central bank won’t intervene anytime soon until it understands the tariffs' effects on the economy. Don’t Miss Out: Diane Harris gives these eye-popping statistics in her column: “If you missed the 10 best days over the 20 years from 2005 to 2024, you would have reduced your returns by more than 40 percent, according to J.P. Morgan; If you missed 30 of the best days out of the roughly 5,000 trading days during that period, you’d have lost money, after inflation." Maybe the takeaway from these comments is that it’s best to sit tight and not panic. It might take a while for the stock…
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Lessons I’ve Learned

Dennis Friedman   |  Feb 5, 2024

I DIDN'T ALWAYS LIKE my retirement. After I quit my full-time job, I briefly went to work for another aerospace company. It seemed like the perfect arrangement for a retiree: just 16 hours a week, with the luxury of setting my own schedule. But it was the same old pressure cooker environment that I’d wanted to get away from. Although I was working fewer hours, it didn’t feel like I was retired. Instead, it felt like the same old grind. That’s when I realized a successful retirement was less about whether you worked or not, and more about doing things you enjoy. If I’d liked that part-time job, perhaps I would have felt like other folks, who call themselves retired and yet continue to work. That was a key lesson I learned early in retirement. Here are four other important lessons I’ve learned in the years since: 1. Staying independent. In California, if you’re age 70 or older, you have to pass a written test to renew your driver’s license. Many seniors dread the test. When my mother took it, there were 30 questions and you can only miss three. I was so proud of my mother, who at age 92 passed on her first try. My mother was a good driver in her later years. She had no physical or mental ailments that would keep her from driving. She valued her independence, and loved driving to her local grocery store or a nearby restaurant. Except I made one big mistake. After I retired and started spending more time with my mother, I drove her everywhere she wanted to go. By the time it dawned on me that I should let her drive to keep her driving skills sharp, it was too late. She no longer felt comfortable behind the…
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Changing My Mind

Dennis Friedman   |  Jun 19, 2020

THIS PANDEMIC HAS changed the way we live: Many people are physically distancing themselves, washing their hands more often and wearing a mask when they’re around others. But it’s also changed how I think about money—in six ways: 1. Emergency savings. Before the pandemic, I always thought a cash emergency fund equal to six months’ living expenses would be sufficient. Not anymore. The massive economic shutdown has led to millions of unemployed Americans—and it will take longer than six months for many of these folks to find work again. The implication: Perhaps we need not six months of emergency money, but one to three years of living expenses in a high-yield savings account or a short-term bond fund. 2. Bonds for safety. With yields so low, many people are again questioning bonds’ value as an asset class. Yes, we won’t earn much income from bonds in today’s environment. But their worth is in the safety they offer in difficult times. We should view purchasing high-quality bonds in the same way we view a homeowner’s insurance policy. Both will protect us from catastrophic events. Just like an insurance policy, the true value of bonds isn’t recognized until a crisis hits. Both the Great Recession and this year’s bear market has shown that U.S. government bonds perform well during economic calamity and can add stability to an investment portfolio. 3. Wall Street isn’t Main Street. During this pandemic, Wall Street-traded large corporations are faring much better than Main Street’s independent small businesses. The S&P 500 is down just 3.6% in 2020 because investors feel big companies will quickly recover. In fact, large firms like Netflix, Amazon and Clorox are experiencing rising sales during the pandemic. Meanwhile, there are thousands of small businesses in survival mode. They don’t have the financial resources of large…
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