Building early habits in your 20s

For many people, this decade is less about large balances and more about establishing patterns. Financial education outlets frequently emphasize the long runway available to younger savers. Investopedia.com discusses the long-term impact of starting early and allowing time to work in your favor. Common themes during this stage include:

• Developing a regular saving habit, even in small amounts
• Exploring employer-sponsored retirement plans, when available
• Learning basic investment concepts over time
• Treating retirement contributions as part of monthly expenses
• Expanding skills and experience that may increase earning potential

Adding structure in your 30s

As careers and family responsibilities grow, retirement planning often becomes more deliberate. For example, Charles Schwab provides a decade-by-decade overview of how retirement priorities may shift during this phase of life. Conversations during this decade often revolve around:

• Reviewing contribution levels as income changes
• Understanding how employer matching programs work
• Paying attention to debt and interest costs
• Considering how lifestyle decisions shape long-term finances
• Evaluating career growth or additional income opportunities

Taking inventory in your 40s

Mid-career can be a natural time to assess progress and revisit long-term projections. Many financial institutions have programs that address these topics. Topics frequently discussed include:

• Reviewing current balances alongside projected needs
• Understanding how high-interest debt may affect cash flow
• Identifying gaps between current savings and future income goals
• Revisiting contribution levels and investment allocations
• Checking Social Security earnings records for accuracy
• Considering whether new income streams may strengthen retirement readiness

Focus on the finish line in your 50s and 60s

As retirement moves closer, planning conversations often shift toward income timing and lifestyle expectations. AARP maintains a retirement resource center that covers considerations commonly discussed in the years leading up to retirement. Areas that frequently come into focus include:

• Continuing to save where possible
• Eliminating or reducing outstanding debt
• Thinking through retirement timelines and income sources
• Factoring healthcare and lifestyle preferences into cost expectations
• Clarifying what retirement may look like day to day

Retirement tips that apply at any age

No matter where you fall on the timeline, a few core ideas always support progress.

• Automate savings to remove decision fatigue
• Avoid comparing your progress to others with different circumstances
• Revisit your plan occasionally rather than ignoring it entirely
• Focus on what you can control today

The bottom line: Start where you are

Retirement planning is not about catching up to someone else’s path. It is about making the best decisions you can with the resources you have right now. Wherever you are starting from, taking action today creates options for tomorrow. As always, please contact our RRBB advisors with any questions or concerns regarding your situation.

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1. Have a plan

If you have a plan, review it for possible revisions. If you do not, consider getting one put together as soon as possible. Surprisingly, most do not know how much money is needed for retirement. This is being made much more difficult by inflation, which is playing a major role in finding the right answer. A retirement plan should consider how long you expect to live, how much money you will need, and the lifestyle you desire in retirement. Your plan should have measurable goals that you aim to achieve.

2. Think of your retirement ideas early

One of the most powerful tools for a well-funded retirement is to start saving early. The sooner you start saving, the better off you will be. Open a retirement account and start saving now. Increase the percentage of your pay that you place in tax-advantaged retirement savings accounts. This includes IRAs, 401(k)s, and other plans. In the early years, consider Roth IRAs and 401(k)s, as your marginal tax rate is typically lower, allowing for lower costs when contributing after-tax dollars to the account.

3. Maximize employer contributions

Many employers offer plans to help employees save for retirement. If your company has a pension plan, understand how it works and how much you can expect to receive upon retirement. If your company has a retirement plan contribution-matching program, take full advantage of this free money by making the minimum contributions required to receive this employer match. Review your employer-provided retirement savings options. Maximize the benefits they are providing.

4. Consider working after retiring

Do you plan to work during retirement or avoid work at all costs? Do you plan on having a pension or Social Security covering all your retirement needs, or none of them? Too often, retirees plan the extremes, but reality ends up being somewhere in between. For example, if you plan to have your pension plan fail and Social Security go broke, you may be taking too conservative an approach.

Create a range of retirement funding scenarios, not just the worst-case or best-case scenario. Consider no work or part-time work. Think about some contribution from Social Security and potential pension income if your employer has a program.

5. Understand the true nature of your retirement ideas

Are your ideas realistic in your future retirement plans? Have you correctly estimated the cost of health insurance? Have you really thought about the impact of relocating to a warmer climate? How important is living close to family and friends? Will you really downsize your home after the kids leave? If you have a retirement plan that includes relocating or traveling to far-off places, consider test-driving the idea before implementing it. You may be surprised at the result.

Retirement should be something to look forward to, especially with a little planning. As always, please contact our RRBB advisors with any questions or concerns regarding your tax situation.

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Retirement plan basics

Generally, if you participate in a tax-beneficial retirement plan, you cannot withdraw funds until you reach the age of 59 1/2. If you do, you are not only subject to income taxes but also to an additional 10% early withdrawal penalty.

Covered plans: Qualified plans like 401(k)s, 403(b)s, and 457s. Plus IRAs, SEPs, SIMPLE IRAs, and SARSEP plans.

The penalty: 10% early withdrawal penalty. 25% with SIMPLE plans when funds are withdrawn within 24 months of opening the account.

Roth accounts: The early withdrawal penalty applies to Roth IRAs if funds are withdrawn before age 59 1/2 or within 5 years of the contribution. The penalty ONLY applies to earnings, as your contributions in this account were already taxed.

The early withdrawal penalty

The early withdrawal penalty can be avoided before reaching age 59 1/2. Here are the common ways to do so:

1. Substantially equal payments. If you make equal payments for at least 5 years or until you reach age 59 1/2, using IRS-approved calculations, AND are not employed by the employer sponsoring the plan, you can avoid the penalties.
2. Birth or adoption. Up to $5,000 per child can be withdrawn.
3. Death/disability/terminally ill. There is still compassion here.
4. Disaster recovery distributions. Up to $22,000 if in a federally declared disaster recovery area.
5. Victim of domestic abuse (spouse or domestic partner). Up to $10,000 or 50% of the account value, whichever is less.
6. Medical expenses. If you need to withdraw from your IRA to fund medical expenses in excess of 7.5% of your Adjusted Gross Income, you may do so penalty-free.
7. You’re the beneficiary. If you are the beneficiary of someone else’s IRA and they die, there is usually an opportunity to withdraw funds without the penalty. Plenty of caution is required in this scenario because if treated incorrectly, the penalty might apply.
8. Conversions of traditional IRAs to Roth IRAs. Want to convert your traditional IRA into a Roth IRA to avoid paying taxes on future account earnings? No problem. This is also considered a qualified event to avoid the 10% penalty.

To complicate matters, the following are examples of penalty-free withdrawals from IRAs, but they are not available to qualified plans such as 401(k)s.

1. Medical insurance premiums if unemployed. If you receive federal or state unemployment for 12 or more consecutive weeks, you may pay for medical insurance premiums from your Traditional IRA without paying the 10% early withdrawal penalty. The premiums may cover yourself, your spouse, and your dependents’ medical insurance premiums.
2. Paying for education. You may pay for tuition, books, fees, supplies, and equipment at a qualified post-secondary institution for yourself, your spouse, your child, or grandchild from your Traditional IRA without paying the 10% penalty.
3. First-time homebuyer expenses. IRA distributions of up to $10,000 to help pay the qualified acquisition costs of a first-time home buyer and avoid the early withdrawal penalty. This is a lifetime limit per individual. A first-time homebuyer is defined by the IRS as not having an ownership interest in a principal residence for two years prior to the new home acquisition date. Even better, to qualify, the home can be for you, your spouse, your child, your grandchild, your parent, or another ancestor.

Key takeaways

• Remember, the above ideas help you avoid an early withdrawal penalty on funds withdrawn from your IRA or 401(k) before age 59½. After this age, there is no early-withdrawal penalty. The penalty is also waived if you become permanently or totally disabled or use the funds to pay an IRS tax levy.
• While the above events allow you to avoid the 10% early withdrawal penalty, you will still need to pay the income tax due on the withdrawn funds.
• The IRS has a nice chart that outlines these exceptions. It is noted here for your use.

Before taking any action, contact our RRBB advisors to have your situation reviewed. It’s almost always better to keep funding your IRA or 401(k) until you retire.

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How to use retirement contributions

• Identify the type(s) of retirement savings plans that you currently use.
• Note the plan’s annual savings limits to adjust your savings and take full advantage of the yearly contributions. Remember, a missed year is a missed opportunity that does not come back.
• If you are 50 years or older, add the catch-up amount to your potential savings total.

New for 2026

• There is an increase in the 401(k), 403(b), and 457 catch-up contributions you may use if you are ages 60 to 63.
• If you are in a 401(k) program AND your income is $150,000 or more AND you are age 50 or over, your catch-up contributions MUST BE made in a Roth 401(k). If your employer does not offer one, you are out of luck with this incremental contribution.
• Take note of the income limits within each plan type.
• For traditional IRAs, if your income is below the noted threshold, your taxable income is reduced by your contributions. The deductibility of your contributions is also limited if your spouse has access to a plan.
• For Roth IRAs, income limits restrict who can participate in the plan.

Retirement planning

If you have not already done so, also consider:

• Setting up new accounts for a spouse or dependent(s)
• Using this time as a chance to review the status of your retirement plan, including beneficiaries
• Reviewing contributions to other tax-advantaged plans like Flexible Spending Accounts and Health Savings Accounts.

Contact our RRBB advisors for more information or if you are ready to plan your 2026 retirement contributions.

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Borrowing money from your 401(k)

If you withdraw funds from a 401(k) before age 59½, you may be in for a surprise at tax time. Withdrawals are subject to income tax and are often subject to a 10% early withdrawal penalty. A better option is to borrow the money from yourself. 401(k) loans are available for up to 50% of your account balance.

Advantages

There are many advantages of borrowing money from your own retirement account.

• No immediate tax. You do not pay income taxes on the funds lent to you. If you withdraw the funds, you must pay ordinary income taxes and a potential penalty on the withdrawal.
• You repay the loan. This re-establishes your original retirement account contributions for use during retirement.
• Your interest payment is to yourself. Your 401(k) loan payment includes interest. This interest provides you with a return on your original contributions. It is better to pay yourself interest than to pay this interest to a bank.

Disadvantages

• Repay, or else. If you leave your current employer, you will need to repay all outstanding 401(k) loans immediately. If you do not, your remaining loan balance is treated as a withdrawal, subject to income tax and a potential early withdrawal penalty.
• Opportunity lost. Your 401(k) loan amount is no longer invested. While your interest payments provide a small return, they are usually much lower than those available through retirement account investment options.
• Less take-home pay. If you wish to continue contributing to your retirement savings at the same level as before you took out the loan, your take-home pay will now be lower as you are making contributions and paying off your 401(k) loan.

Before deciding to borrow from your retirement savings, consider all your alternatives. But most importantly, understand that if you leave your job, you must repay the loan or face a potential tax hit! Contact our RRBB advisors for more information or if you have any questions.

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For those contributing to Social Security through wages, the potential maximum income subject to Social Security taxes is increasing to $184,500. This represents a 4.8% increase in your Social Security taxes! What’s of interest here is the continued practice of raising the income subject to Social Security well beyond the annual Consumer Price Index. Here’s a recap of the key dollar amounts.

2026 Social Security benefits

What it means for you

• Up to $184,500 in wages will be subject to Social Security taxes, an increase of $8,400 from 2025. This amounts to a maximum annual employee Social Security payment of $14,114.25 (an increase of $643), so plan accordingly. You can claim a credit on your tax return for any excess Social Security taxes you paid due to having multiple employers.
• For all retired workers receiving Social Security retirement benefits, the estimated average monthly benefit will be $2,071 in 2026, an increase of $56 per month.
• SSI is the standard payment for people in need. To qualify for this payment, you must have little income and few resources ($2,000 if single, $3,000 if married).
• A full-time student who is blind or disabled can still receive SSI benefits. However, their earned income must not exceed the monthly and annual student exclusion amounts listed above.

Social Security & Medicare Rates

The Social Security and Medicare tax rates do not change from 2025 to 2026. The rates are 6.2% for Social Security and 1.45% for Medicare. There is also a 0.9% Medicare wages surtax for single taxpayers with wages above $200,000 ($250,000 for joint filers) that is not reflected in these figures. Please note that your employer also pays a 6.2% Social Security tax and a 1.45% Medicare tax on your behalf. The 15.3% self-employment tax rate reflects these amounts, as self-employed individuals pay both halves of the tax.

Contact our RRBB advisors for more information or if you have any questions.

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IRS gift-giving rules

1. You may give up to $19,000 to any individual (donee) in 2025 and avoid any gift tax filing requirements.
2. If married, you and your spouse may transfer up to $38,000 per donee.
3. If you provide a gift to your spouse who is not a U.S. citizen, the annual exclusion amount is $190,000.
4. Gifts in excess of this annual amount trigger the need to file a gift tax form with your individual tax return. The excess gift amounts are then added to your estate for potential estate taxation.
5. The estate tax currently has a maximum rate of 40%, and the donor of the gift (or their estate) is responsible for paying the tax.

Leveraging gift rules

Remember, you can transfer up to $19,000 ($38,000 if married) to anyone you wish each year tax-free. Additionally, most states also adhere to this federal law. So if you wish to move assets to loved ones without the burden of future taxation, consider the following ideas.

• Make periodic gifts. Remember, the gift-giving limit is per calendar year. To take full advantage of this tax-free transfer, consider starting now and making periodic payments. Every year you miss out on this limit, which reduces the amount a couple can transfer tax-free to each donee by up to $38,000.
• Fund college savings. Consider donating money to 529 college savings plans for children and grandchildren. This can be done with automated deposits into the account. You or your grandchild’s parent could establish the account.
• Pay medical and education bills directly. If you are concerned about exceeding the annual gift limit to a single person, consider paying bills directly. Examples of this strategy might be paying medical bills directly to a hospital or directly paying college bills for a loved one.
• Donate property. Gifts can include property as well as cash. You can donate investments or other physical property. If you do this, document the property’s fair market value at the time of transfer. The IRS requires this documentation to ensure the value of the property transferred is consistently valued by you and the person receiving the gift.
• Help build a down payment. Often, children burdened with college debt cannot afford the down payment required to buy their first home. You can help by contributing to a down payment through gift transfers.
• Leave a cushion. Remember the annual limit. If you provide a gift to an individual for the maximum allowable amount, you may not provide any other gifts to that person during the year, or the event would be deemed excess gift-giving and require filing a gift tax form.

Keeping perspective

Understanding and leveraging the annual gift tax rules can create tremendous tax savings. But this strategy should be in conjunction with understanding your personal financial needs. Providing gifts of funds that you might later need for your own retirement can be problematic. It’s best to review your gift plans before taking action. Contact our RRBB advisors if you have any questions or if you’re ready to take the next step.

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The million-dollar tax-free idea

As soon as your child begins to earn income, open a Roth IRA and set a contribution goal to reach before they graduate from high school. Assuming an 8% expected rate of return, the investments made by age 19 will grow to forty times their value by the time they reach 67 (the current full retirement age). For example, investing $2,500 before graduation will increase to $100,000 by retirement. If you can bump that up to a $25,000 investment before graduation, at retirement it will be worth $1 million!

Compound interest occurs when interest is earned on the interest generated from the initial contribution. The more time the investment has to grow, the more exponential growth will occur. By starting to save before graduating from high school, the investment will have nearly fifty years of compounding growth.

Even better, while contributions to Roth IRAs must be after-tax contributions, any earnings are tax-free as long as the rules are followed! Simple to say, but how do you get $25,000 into a child’s Roth IRA? Here are some ideas.

How to jump-start their retirement

1. Hire your child. Roth IRA contributions are limited to the amount of income your child earns, so earned income is key. If you own a business or even make some money on the side, consider hiring your child to help with cleaning the office, filing, or other tasks they can handle.
2. Look for acceptable young-age work ideas. Babysitting, yard work, walking pets, shoveling, and lawn work are all good ideas to help your child earn an income at a younger age. Cash-based income can be more challenging to prove. Therefore, it is essential to keep track of it and consider filing a tax return, even if it’s not necessary.
3. Leverage high school years. Ages 15 through 18 are when your child will have their highest earning potential before graduation. Summer jobs, internships, and part-time jobs during the school year can provide a consistent income stream to contribute to a Roth IRA while also offering spending money.
4. Parent or grandparent matching idea. Your child’s income into the Roth IRA does not have to be directly from them. It simply sets the contribution limit. Make a deal that for every dollar your child saves for college, a parent or grandparent will contribute a matching amount to their Roth account. It can be a college and retirement savings in one!

By helping your child get a head start on saving, it should ease any anxiety regarding retirement and help them focus on school, starting their career, and other personal development goals. Contact our RRBB advisors if you have any questions.

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1. Your Home

Your home can create unexpected tax liabilities. Property value appreciation, home improvements, and mortgage refinancing influence how much tax you pay. You might pay higher property taxes when your home’s value increases substantially. Selling a home can also lead to capital gains taxes if you’ve lived in the property for less than two years or exceed the home sale exclusion amounts.

Tax Planning Tips for Your Home:

• Get a professional property assessment to ensure you’re not overpaying property taxes. If so, know your location’s time frame and process to amend your property’s value in their formula.
• Consider timing home improvements to manage potential tax consequences. Be smart about when assessments are applied to your location’s property value.
• If selling, understand capital gains exclusion rules ($250,000 for single taxpayers, $500,000 for married couples).

2. Your Investments

Review your refinance closing disclosure to identify deductible mortgage points or fees. Investment income can impact your tax bill. Capital gains, dividend distributions, and frequent trading can all cause tax consequences. Different investments also face different tax rates: short-term capital gains get taxed at higher ordinary income rates, and long-term gains typically receive more favorable treatment.

Tax Planning Tips for Your Investments:

• Implement tax-loss harvesting to offset capital gains.
• Hold investments for over a year to qualify for long-term capital gains rates.
• Consider tax-efficient investments like index funds or ETFs.
• Maximize contributions to tax-advantaged accounts like 401(k)s and IRAs.

3. Your Retirement

Retirement accounts offer financial opportunities. But they can also cause tax pitfalls. Required minimum distributions (RMDs), early withdrawal penalties, and the tax treatment of different retirement account types influence your tax bill.

Tax Planning Tips for Your Retirement Accounts:

• Understand RMD rules and plan withdrawals strategically. Sometimes, the most cost-effective plan withdrawals occur long before the RMD rules come into play!
• Consider tax-efficient Roth conversions to manage future tax liability.
• Maximize health savings account (HSA) contributions as an additional retirement account.
• Explore catch-up contributions if you’re age 50 or older.

4. Your Life Events

Significant life changes can dramatically change your tax situation. Marriage, divorce, having children, changing jobs, or experiencing considerable income shifts can all reshape your tax liability.

Tax Planning Tips for Life Changes:

• Reassess your filing status, as life changes may affect your tax bracket and deductions.
• Track new deductions and credits, as life events like adoption or education expenses may qualify for specific tax breaks.
• Understand the age triggers built into the tax code and plan accordingly. This is especially important to understand as your children get older.

Sometimes, your tax plan will show you an unavoidable, upcoming tax event, but you can plan for it to avoid surprises. But other times, your plan can help lower your tax liability, so it is best to begin as soon as possible. Contact our RRBB advisors if you have any questions or are ready to start your tax planning today.

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Check your Social Security records

The Social Security Administration (SSA) gets a ton of fraudulent W-2s and 1099s and can’t catch them all. This is creating a high degree of reporting errors, even when identity thieves do not file tax returns. In addition, the SSA and your employer occasionally make errors. Unfortunately, the only way to catch these problems is if you see them. Waiting until retirement may be too late to correct a mistake made 10 or 20 years ago. Common issues created by these errors and their impact are:

1. Incorrect amounts. If the SSA does not receive a W-2 wage statement from an employer, you will not see credit for these earnings. Since your Social Security retirement check is based on your lifetime earnings, if you have earnings that are missing, your retirement check will be permanently lower.
2. Missing the correct length of time. In addition to receiving credit for earnings, you also need to work 40 quarters or 10 years to be fully eligible for retirement benefits. These missing earnings reports reduce the number of working quarters. Mess up here and you may not qualify for benefits at all!
3. The three-year correction time limit. Per the SSA, an earnings record can be corrected at any time up to three years, three months, and 15 days after the year in which the wages were paid or the self-employment income was derived. While there are exceptions for fraud and obvious clerical errors, why risk the hassle by not finding mistakes and fixing them when they happen?

How to review your earnings report

Thankfully, it’s now easier to confirm the accuracy of your account by visiting www.ssa.gov and using the SSA’s online tool. There, you can review your historical earnings statements. To use the tool, there is a sign-up process that includes several safety measures to protect your identity. This is usually through ID.me. You must provide a valid ID and be able to take a photo of yourself and your ID.

Once you log in, review your earnings report for any errors. If you see an error, take steps to correct it immediately. You can do this by contacting the SSA:

• Telephone: 1 (800) 772-1213
• Mail: Social Security Administration Office of Earnings Operations, PO Box 33026, Baltimore, MD 21290-3026

Of course, you can also always feel free to contact our RRBB advisors if you have any questions. Since you may have just completed last year’s tax filing, now is a great time to get in the habit of reviewing your Social Security records. It is your future.

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