The Mega Backdoor Roth Explained: A Powerful Tax Free Retirement Strategy for High Earners

Contributed by: Logan Dimitrie, CFP®

Is the Mega Backdoor Roth Worth Considering?

At Center for Financial Planning, Inc., I’m often asked how high earners can save more for retirement in a tax‑efficient way. One strategy that sometimes makes sense is the Mega Backdoor Roth. It kind of sounds like a cheat code from a 90s video game, but it’s actually a powerful tool if your employer plan allows it.

What It Is

A Mega Backdoor Roth lets you put far more into Roth savings than the normal IRA limit by using after‑tax contributions inside your 401(k) or 403(b).

How It Works

1. Max out your regular 401(k)/403(b)
   ($24,500 if under 50 & $32,500 if 50+ for tax year 2026 limits)

2. Add after‑tax contributions
   Some plans let you contribute beyond the normal limit, up to the overall $72,000 total plan limit for 2026.

3. Convert those after‑tax dollars to a Roth IRA
   Your plan needs to allow in‑service rollovers for this step.

Once converted, those dollars can grow tax‑free in a Roth IRA.

Why People Use It

• You can save much more into Roth than usual.

• Tax‑free growth and tax‑free withdrawals in retirement.

• No required minimum distributions from Roth IRAs.

Before You Jump In

This strategy isn’t available, or appropriate, for everyone. You’ll want to confirm:

• Your employer plan allows after‑tax contributions and in‑service rollovers

• You’re already maxing out regular retirement contributions

• You’re comfortable with a bit of extra complexity

Is It Right for You?

For some clients, the Mega Backdoor Roth becomes a key part of long‑term tax planning. For others, simpler strategies work just as well. If you’re curious about whether this could fit into your plan, I’m happy to walk through it with you.

Logan Dimitrie, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Logan specializes in Financial Independence, Early Retirement, Financial Planning for caregivers and Longevity Planning. Logan has been featured on the Caffeinated Conversations podcast.

Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Generally, if you take a distribution from a 401k prior to age 59 ½, you may be subject to ordinary income tax and a 10% penalty on the amount that you withdraw, in addition to any relevant state income tax. Contributions to a Donor Advised Fund are irrevocable. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Retirement Planning Challenges for Women: How to Face Them and Take Action

Contributed by: Sandra Adams, CFP®

If we are being completely honest, planning and saving for retirement seems to be more and more challenging these days – for everyone. No longer are the days of guaranteed pensions, so it’s on us to save for our own retirement. Even though we try our best to save…life happens and we accumulate more expenses along the way. Our kids grow up (and maybe not out!). Our older adult parents may need our help (both time and money). Depending on our age, grandchildren might creep into the picture.  Add it all up and the question is: how are we are supposed to retire? We need enough to potentially last 30 to 35 years (depending on our life expectancy). Ugh! 

While these issues certainly impact both men and women, the impact on women can be tenfold. Let’s take a look at some of the major issues women face when it comes to retirement planning. 

1. Women Have Fewer Years of Earned Income Than Men 

Women tend to be the caregivers for children and other family members. This ultimately means that women have longer employment gaps as they take time off work to care for their family. The result: less earned income, retirement savings, and Social Security earnings. It can also halt career trajectory.   

Action Steps 

• Attempt to save at a higher rate during the years you ARE working. It allows you to keep pace with your male counterparts.

• If you are married you may want to save in a ROTH IRA or IRA (with spousal contributions) each year, even if you are not in the workforce. 

• If you are serving as the caregiver for a family member, consider having a Paid Caregiver Contract drawn up to receive legitimate and reportable payment for your services. This could potentially help you and help your family member work towards receiving government benefits in the future, if and when needed. 

2. Women Earn Less Than Men 

For every $1 a man makes, a woman in a similar position earns 84¢ according to the Bureau of Labor Statistics. As a result, women see less in retirement savings and Social Security benefits based on earning less.  

Action Steps 

• Again, save more during the years you are working. Attempt to maximize contributions to employer plans. Also, make annual contributions to ROTH IRA/IRAs and after-tax investment accounts. 

• Invest in an appropriate allocation for your long term investment portfolio, keeping in mind your potential life expectancy. 

• Be an advocate for yourself and your women cohorts when it comes to requesting equal pay for equal work. 

3. Women Are Less Aggressive Investors Than Men 

In general, women tend to be more conservative investors than men. Analyses of 401(k) and IRA accounts of men and women of every age range show distinctly more conservative allocations for women. Especially for women, who may have longer life expectancies, it’s imperative to incorporate appropriate asset allocations with the ability for assets to outpace inflation and grow over the long term. 

Action Steps 

• Work with an advisor to determine the most appropriate long term asset allocation for your overall portfolio, keeping in mind your potential longevity, potential retirement income needs, and risk tolerance. 

• Become knowledgeable and educated on investment and financial planning topics so that you can be in control of your future financial decisions, with the help of a good financial advisor. 

4. Women Tend to Live Longer Than Men 

Women have fewer years to save and more years to save for. The average life expectancy is 82.1 for women and 77.8 for men according to the Centers for Disease Control and Prevention. Since women live longer, they must factor in the health care costs that come along with those years.   

Action Steps 

• Plan to save as much as possible. 

• Invest appropriately for a long life expectancy. 

• Work with an advisor to make smart financial decisions related to potential income sources (coordinate spousal benefits, Social Security, pensions, etc.) 

• Make sure you have a strong and updated estate plan. 

• Take care of your health to lessen the cost of future healthcare. 

• Plan early for Long Term Care (look into Long Term Care insurance, if it makes sense for you and if health allows). 

5. Women Who Are Divorced Often Face Specific Challenges and Are Less Likely to Marry After “Gray Divorce” (Divorce After 50) 

From a financial perspective, divorce tends to negatively impact women far more than it does men. The average woman’s standard of living drops 27% after divorce while the man’s increases 10% according to the American Sociological Review. That’s due to various reasons such as earnings inequalities, care of children, uneven division of assets, etc. 

The rate of divorce for the 50+ population has nearly doubled since the 1990s according to the Pew Research Center. The study also indicates that a large percentage of women who experienced a gray divorce do not remarry; these women remain in a lower income lifestyle and less likely to have support from a partner as they age. 

Action Steps 

• Work with a sound advisor during the divorce process, one who specializes in the financial side of divorce such as a Certified Divorce Financial Analyst (CDFA) (Note: attorneys often do not understand the financial implications of the divorce settlement). 

6. Women Are More Likely to Be Subject to Elder Abuse 

Women live longer and are often unmarried or alone. They may not be as sophisticated with financial issues. They may be lonely and vulnerable. New reports highlight financial exploitation as the fastest-growing form of elder abuse, disproportionately affecting older women, according to the Transamerica Institute.  

Action Items 

• If you are an older adult, put safeguards in place to protect yourself from Financial Fraud and abuse. For example: check your credit report annually and utilize credit monitoring services like EverSafe.  

• Have your estate planning documents updated, particularly your Durable Powers of Attorney documents, so that those that you trust are in charge of your affairs if you become unable to handle them yourself. 

• If you are in a position of assisting an older adult friend or relative, check in on them often. Watch for changes in their situations or behavior and do background checks on anyone providing services. 

While it is unlikely that the retirement challenges facing women will disappear anytime soon, taking action can certainly help to minimize the impact they can have on women’s overall retirement planning goals. I have no doubt that with a little extra planning, and a little help from a quality financial advisor/professional partner, women will be able to successfully meet their retirement goals.   

If you or someone you know are in need of professional guidance, please give us a call. We are always happy to help. 

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Raymond James is not affiliated with EverSafe.

The cost and availability of Long Term Care insurance depend on factors such as age, health, and the type and amount of insurance purchased. These policies have exclusions and/or limitations. As with most financial decisions, there are expenses associated with the purchase of Long Term Care insurance. Guarantees are based on the claims paying ability of the insurance company.

Can I Afford to Buy a Second Home?

Contributed by: Robert Ingram, CFP®

It’s a dream for many Americans as they envision retirement, having a second home as a vacation getaway, a seasonal escape, or a primary residence someday. Even with the relatively mild winter we’ve just experienced in Michigan It’s easy to appreciate the idea of living away during the cold months or enjoying a summer home up North. But before you can live the dream, do your due diligence and crunch the numbers.

Retirement income expenses include the daily cost of living and the things you want to enjoy. Making a large purchase, such as buying a second home, will take a significant chunk of your savings. If you’ve underestimated the cost, it will wreak havoc on your retirement income.

So, how realistic is your second home retirement plan? Factor in our suggestions below.

Purchasing Costs

If you plan to buy the home using a mortgage, you will of course have a monthly payment. While lower mortgage rates may help with the home’s affordability, even a smaller payment adds the extra expense that your retirement income sources will need to support. Calculate your withdrawal rate (the percentage of savings needed to be withdrawn each year) and determine if it’s sustainable over your retirement years.

Now, if you’re able to purchase the property without a mortgage, yes, you would avoid paying interest and you would have no monthly payment. On the other hand, using a portion of your retirement savings to purchase the home could mean that you have fewer assets reserved for other retirement spending needs. Consider the impact it may have on the sustainability of your retirement income and whether purchasing or financing the property is more advantageous.

Don’t forget about property taxes. They’re ongoing expenses that you must factor into your budget. They vary widely depending on the state and local community. Consider any difference in tax rates; non-homestead property is taxed higher than homestead property.

Additional Costs

Unfortunately, we know that the cost of owning a home doesn’t end with the purchase. This is certainly true with a second home as well. Depending on the property type, location, and climate/environment there may be additional costs that you aren’t used to with your current home. It’s vital that your plan supports these costs as well. Some examples include:

Insurance: You’ll pay annual premiums for homeowner’s insurance on two properties. Plus, homes with higher risk (e.g. hurricane prone southern states) often require additional flood or wind damage insurance. In some cases, this more than doubles the cost of the new policy.

Condo/Association Fees: Buying a condominium or a standalone house in a community with a neighborhood association will likely mean additional monthly fees. Homeowners associations may also impose special assessments during the time you own the property for maintenance projects, community amenities, etc. Understanding the previous history of assessments and the need for future projects can help you better prepare for those potential costs.

Maintenance on two properties: Now you have two homes to maintain. If your second property is far away or you won’t visit often, you may need to hire people locally to provide the maintenance services for you.

Home security: Especially for a home that is unoccupied for long periods of time, you want to protect it from vandalism, trespassing, and burglary. That could mean investing in security systems or working with local service providers to routinely check-in on the property.

Heating and cooling year-round: Unlike cottages or houses up North that you can close down and winterize, vacation homes in warm climates may require you to run the air conditioning when you’re not there. Issues like mold and mildew can be a problem when temperatures and humidity are too high, which is another reason you may need to hire local services to make sure everything is working properly.

Insect/pest control: Your second home may be in a region with insects or other critters that require more regular/aggressive pest control. Add this to your list of monthly or annual maintenance expenses.

What if I Plan to Rent Out my Second Home?

Renting out your second home could be an excellent way to generate additional income to offset the costs of ownership. However, you could face lifestyle compromises. Here are some considerations:

Local rules on renting: It’s critical to understand any local government ordinances or homeowners’ association restrictions on using your property as a rental. In some cases, short-term rentals are not allowed or there are limits on the total number of rentals.

Property management: The farther the distance between your rental and primary properties, the greater chance you’ll need to hire a property manager to provide on-site service for your vacation guests or long-term tenants. Property managers can advertise, book renters, and manage financial transactions. The cost to outsource these services is typically between 20–30% of the rental cost, depending on market.

Additional insurance coverage: Tenants may not be covered by your insurance. Homeowners insurance often covers incidents only when the property is owner-occupied. You may need to add a form of landlord insurance, depending on factors such as the frequency and amount of days you will have the property rented. Review your policy to be sure.

Extra maintenance and repair: You may face repairs and/or need to replace furniture. Studies suggest that the cost to maintain a vacation rental is 2–3% annually of the property value each year.

The decision to buy a second home involves a combination of both lifestyle and financial considerations. Build a sound plan by balancing your priorities. Consult with your financial planner as you work through these important life goals, and if we can be a resource for you, please reach out to us!

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Bob Ingram, and not necessarily those of Raymond James. Raymond James Financial Services, Inc. does not provide advice on mortgages. Raymond James and its financial advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified professional for your residential mortgage lending needs.

The Potential Impacts of Student Loans on Your Credit Score

Contributed by: Josh Bitel, CFP®

For those entering the workface today, student loan repayment can cause a significant impact, either positive or negative, on your credit score. 

Getting Started 

Beginning to repay these loans after the standard six-month grace period has expired can affect your ability to obtain other credit if not handled properly. One way to find out how you’re being affected is to pull a copy of your credit report. There are three major credit reporting agencies (Experian, Equifax, and  TransUnion) and you should get a copy of your credit report from each one. You can request your free annual credit report at AnnualCreditReport.com, the site authorized by federal law. Student loan institutions aren’t required to report information to all three bureaus, although many do, which is important to keep in mind. If you're repaying your student loans on time, these disciplined repayments will actually help your credit score. Conversely, if you are delinquent on payments or worse, default on your loans, your credit report can take a beating, potentially crippling your chances of obtaining other credit. 

Credit Score Factors 

Many different factors are used to determine your credit score. Some of these factors are more crucial than others. Among these critical factors are: 

• Your payment history. Meaning the consistency and punctuality of payments and how long your payment history is. 

• Your outstanding debt and amounts you owe on these accounts. How close your account balances are to your defined limits is also taken into consideration. 

• How long you've had credit. How long specific accounts have been open, and how long it has been since you've used each account 

• New credit and new inquiries. This means outstanding applications for new credit as well as additional inquiries for your credit reports, whether by institutions or yourself, can impact your credit score. 

• For a deeper look at your credit score composition, check out our updated resources on credit scoring.  

How Student Loans Can Affect Your Credit Score 

If you consistently make your student loan payments on time, your credit score should not be negatively affected. A nice tip to ensure consistency is to set up an auto-pay from a bank account. Most loan institutions will allow you to set up an automatic withdraw from your bank account, eliminating the need to remember to pay each month. As an added bonus, some institutions may even offer an interest rate discount for setting this up! 

Prospective creditors may look at other factors when analyzing your debt, and student loans can make this tricky. One example of this may be if you are in a lower-paying job, this makes your debt-to-income ratio unfavorable for some creditors. Another example may be your principal balances being largely unchanged in the early stages of repayment, which is common with long term repayment schedules, and some lenders may view this as a lack of paying down debt. 

It is important to monitor your credit history from all three bureaus regularly. If you find that your repayment history is not being reported correctly, contact your lender to make this correction. 

Suggestions to Help Reduce the Burden  

Being overburdened with debt can feel suffocating, here are some suggestions to take some weight off your shoulders: 

• Pay off your student loan debt as fast as possible. Doing so will help reduce your debt-to-income ratio, even if your income doesn't increase, which can make your credit score more favorable to lenders. 

• If you're struggling to repay your student loans and are considering asking for forbearance, ask your lender about any other options you may have. If you’re struggling to repay your student loans, ask your lender about income driven repayment (IDR) plans and SAVE plan (2023), which can lower monthly payments based on your income.  

• Ask your lender about replacement options such as graduated repayment or income-driven repayment plans, which can adjust payments to your financial situation. This means making smaller payments in the early years of the loan, with larger payments coming in the later years. 

• If you're really strapped, you can explore longer term options. Much like a home, when a longer repayment term is selected, you will likely be paying more in interest over the life of the loan, but the monthly payment can be significantly reduced. 

• If all else fails, don’t ignore your student loans. While student loans are rarely discharged in bankruptcy, recent changes have made it more possible in limited hardship cases. Always consult with a legal professional before considering this option. Talk to your lender about the options available for you, this can be crucial to maintaining a favorable credit history. 

If you have any questions about refinancing your student loans or improving your credit score, please contact your Financial Planner here at The Center, we’re always happy to help! 

Josh Bitel, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Josh Bitel and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

A History of Stock Returns During Conflict

Contributed by: Nicholas Boguth, CFA®, CFP®

Wars are an awful part of humanity. The loss and destruction that comes from them is tragic. For this reason, the thought of a war starting can make investors want to act – maybe even sell their investments and stock up on cash under the mattress or gold bars in the safe.

It can feel like things are about to take a turn for the worse when a war or a conflict breaks out, but in times of stress it is important to lean on history and data as a guide to help determine the next best course of action.

See below for stock returns 3 months and 12 months after some key conflicts of the past 100 years. Does the data surprise you?

The average 12 month return after the beginning of these conflicts is POSITIVE 8.5%. Most of these you might remember from experience, maybe some better than others, but each of these conflicts came with their own unique set of fears. Some hit close to home, some happened overseas, some felt like escalations into something bigger, but all of these were world-altering events for the coming decades.

Despite that, on average, stocks continued to climb through the turmoil. The global economy and the global stock market are HUGE and complex machines that are going to grind forward no matter what is going on in the world. Some time periods will be a slower grind than others, but there are centuries of data that show time and time again stocks persevere, problem-solve, innovate, and grow their way through time.

The only way to participate in that growth, is to participate in that growth. Selling your stock investments is giving up whatever returns are coming next, for better or worse, and often not a winning strategy. During times of fear and stress, it is a better idea to lean on the diversification of your portfolio, your cash reserves, and your financial advisor to help guide you down your financial path and LIVE YOUR PLAN. Please reach out if you have any questions about yours.

Nicholas Boguth, CFA®, CFP® is a Senior Portfolio Manager and Associate Financial Planner at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Boguth, CFA®, CFP® and not necessarily those of Raymond James.

The Surprising Tax Trap for Surviving Spouses - Understanding the Widow’s Penalty

Contributed by: Nick Defenthaler, CFP®, RICP®

Several years ago, after starting a new relationship with a newly widowed client, I received a confused phone call from her. She had received a communication from Medicare stating that her Part B & D premiums would increase significantly from the prior year. To make matters worse, she also noticed, while filing her most recent tax return, that she was now in a much higher tax bracket. What happened? Now that her husband was deceased, she was receiving less in Social Security and pension income. Her total income had decreased, so why would she have to pay more tax and Medicare premiums? Unfortunately, she was a victim of what’s known as the “widow’s penalty.”

Less Income and More Taxes – What Gives?

Simply put, the widow’s penalty is when a surviving spouse ends up paying more taxes on less income after the death of their spouse. This happens when a widow or widower starts filing as a single filer the year after their spouse’s death.

When the first spouse dies, the surviving spouse typically sees a reduction in income. While the surviving spouse will continue to receive the greater of the two Social Security benefits, they will no longer receive the lower benefit. In addition, it’s also very likely the surviving spouse will either completely or partially lose income tied only to the deceased spouse (ex. employment income, annuity payments, or pensions with reduced or no survivor benefits).  Depending on how much income was tied to the deceased spouse, the surviving spouse’s fixed income could see a sizeable decrease. However, the surviving spouse starts receiving less income and is subject to higher taxes.

With some unique exceptions, the surviving spouse is required to start filing taxes as single instead of as married filing jointly in the year following their spouse’s death. In 2026, that means they will hit the 22% bracket at only $50,401 of taxable income. Married filers do not reach the 22% bracket until they have more than $105,700 of taxable income. To make matters worse, the standard deduction the widow will receive will be almost cut in half. In 2026, for a married couple (both over 65), their standard deduction will be $35,500. A single filer (over the age of 65), however, will only have a $18,150 deduction! Unfortunately, even with less income hitting the tax return, widowed tax filers commonly end up paying higher taxes due to the compression of tax brackets and the dramatic standard deduction decrease for single filers.

Another recent layer of complexity that can perpetuate the issue of the ‘widow’s penalty’ is the new ‘additional senior deduction’ that went into effect in 2025 and expires at the end of the tax year 2028. If a married couple is over the age of 65 and has an Adjusted Gross Income (AGI) of $150,000 or less, they will receive an additional $12,000 deduction that can offset income. For single filers, the deduction amount is only $6,000 and starts to phase out once AGI exceeds $75k. If one spouse passes away, not only will this deduction be reduced, but it’s possible the surviving spouse sees a dramatic decrease or complete elimination of the $6k deduction they’d receive because of the dramatically different income thresholds that apply to this new deduction.

Tax brackets are not the only area in which surviving spouses are penalized. Like the client in my story above, many surviving spouses see their Medicare premiums increase even though their income has decreased because of how the income-related monthly adjusted amount (IRMAA – ONCE BLOG IS UPDATED ON WEBSITE CREATE HYPERLINK) is calculated (click HERE to visit our dedicated Medicare resource page). Specifically, single filers with a modified adjusted gross income (MAGI) of more than $109,000 are required to pay a surcharge on their Medicare premiums, whereas there is no surcharge until a couple that is married filing jointly reaches $218,000 of income. This means that a couple could have an income of $130,000 and not be subject to the Medicare IRMAA surcharge, but if the surviving spouse now has income over $109,000, their premium will increase by almost $1,200 per year. In this same example, the widow could now be in the 24% bracket (as compared to the 12% bracket with $130k of income filing jointly) and be paying almost $12,000 MORE between increased Medicare premiums (IRMAA charges), federal and state of Michigan tax!

Proactive Planning

Short of remarrying, there is no way to avoid the widow’s penalty. However, if your spouse has recently passed away, there may be some steps you can take to help minimize your total tax liability.

For most widows, the year their spouse dies will be the last year they will be allowed to use the higher married filing jointly tax brackets and standard deduction. In some cases, it can make sense to strategically realize income during the year of death to minimize the surviving spouse’s lifetime tax bill. A surviving spouse might do this by converting savings from a Traditional IRA to a Roth IRA while they are still subject to the married filing jointly rates.

For example, let’s say I was working with a couple (we’ll call them John and Mary), and after several years in a long-term care assisted living facility, John sadly passed away at age 85. Because John and Mary did not have long-term care insurance, they incurred substantial out-of-pocket medical expenses, resulting in a significant medical deduction in the year of John’s passing. Several months after her husband’s passing, Mary suggests we convert over $100,000 from her IRA to a Roth IRA. Because this was the last year she could file jointly on her taxes along with the significant medical deduction that was only present the year John passed, Mary paid an average tax rate of 10% on the $100,000 converted. Mary is now filing single and finds herself in the 24% tax bracket, so converting the funds at a much lower rate may be beneficial depending on each individual’s situation.

I believe the widow’s penalty should be on every married couple’s radar. While it’s possible that while both spouses are living, their tax rate will always remain the same, as we’ve highlighted above, unless both spouses pass away within a very short period of time from one another, higher taxes and Medicare premiums are likely inevitable. However, proper planning could help to dramatically reduce the impact this penalty could have on your plan.

Nick Defenthaler, CFP®, RICP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Nick specializes in tax-efficient retirement income and distribution planning for clients and serves as a trusted source for local and national media publications, including WXYZ, PBS, CNBC, MSN Money, Financial Planning Magazine and OnWallStreet.com.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Center for Financial Planning, Inc is not a registered broker/dealer and is independent of Raymond James Financial Services Investment advisory services are offered through Center for Financial Planning, Inc. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Nick Defenthaler, CFP®, RICP® and not necessarily those of Raymond James.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

These examples are hypothetical illustrations and are not intended to reflect any actual outcome. they are for illustrative purposes only. Individual cases will vary. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Prior to making any investment decision, you should consult with your financial advisor about your individual situation.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.

7 Ways the Planning Doesn't Stop When You Retire

Contributed by: Sandra Adams, CFP®

Most materials related to retirement planning are focused on “preparing for retirement” to help clients set goals and retire successfully. Does that mean when goals are met, the planning is done? In my work, there is often a feeling that once clients cross the retirement “finish line” it should be smooth sailing from a planning standpoint. Unfortunately, nothing could be further from the truth. For many clients, post-retirement is likely when they’ll need the assistance of a planner the most!

Here are 7 planning post-retirement issues that might require the ongoing assistance of a financial advisor:

1. Retirement Income Planning - An advisor can help you put together a year-by-year plan including income, resources, pensions, deferred compensation, Social Security and investments. The goal is to structure a tax-efficient strategy that is most beneficial to you.

2. Investments - Once you are retired, a couple of things happen to make it even more important to keep an active eye on your investments: (1) You will probably begin withdrawing from investments and will likely need to manage the ongoing liquidity of at least a portion of your investment accounts and (2) You have an ongoing shorter time horizon and less tolerance for risk.

3. Social Security - It is likely that in pre-retirement planning you may have talked in general about what you might do with your Social Security and which strategy you might implement when you reach full retirement age (which is 67). However, once you reach retirement, the rubber hits the road, and you need to navigate all of the available options and determine the best strategy for your situation – not necessarily something you want to do on your own without guidance.

4. Health Insurance and Medicare - It’s a challenge for clients retiring before age 65 who have employers that don’t offer retiree healthcare. There’s often a significant expense surrounding retirement healthcare pre-Medicare.

For those under their employer healthcare, switching to Medicare is no small task – there are complications involved in “getting it right” by ensuring that clients are fully covered from an insurance standpoint once they get to retirement.

5. Life Insurance and Long-Term Care Insurance - Life and long-term care insurances are items we hope to have in place pre-retirement. Especially since the cost and the ability to become insured becomes incredibly difficult, the older one gets. However, maintaining these policies, understanding them, and having assistance once it comes to time to draw on the benefits is quite another story.

6. Estate and Multigenerational Planning - It makes sense for clients to manage their estate planning even after retirement and until the end of their lives. It’s the best way to ensure that their wealth is passed on to the next generation in the most efficient way possible. This is partly why we manage retirement income so close (account titling, beneficiaries, and estate documents). We also encourage families to document assets and have family conversations about their values and intentions for how they wish their wealth to be passed on. Many planners can help to structure and facilitate these kinds of conversations.

7. Planning for Aging - For many clients just entering retirement, one of their greatest challenges is how to help their now elderly parents manage the aging process. Like how to navigate the health care system? How to get the best care? How to determine the best place to live as they age? How best to pay for their care, especially if parents haven’t saved well enough for their retirement? How to avoid digging into your own retirement pockets to pay for your parents’ care? How to find the best resources in the community? And what questions to ask (since this is likely foreign territory for most)?

Since humans are living longer lives, there will likely be an increased need and/or desire to plan. In an emergency, it could be difficult to make a decision uninformed. A planner can help you create a contingency plan for potential future health changes.

While it seems like the majority of materials, time, and energy of the financial planning world focuses on planning to reach retirement, there is so much still to do post-retirement. Perhaps as much OR MORE as there is pre-retirement. Having the help of a planner in post-retirement is likely something you might not realize you needed, but something you’ll certainly be glad you had.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandra D. Adams and not necessarily those of Raymond James.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

How Unexpected Life Events Impact Retirement

Contributed by: Sandra Adams, CFP®

The older I get, the more I realize that we should expect the unexpected. As I work with clients in the prime of their retirement planning years who are suddenly experiencing life events that weren’t “part of the plan,” this resonates more than ever.

What kinds of things am I talking about?  How about a young pre-retiree who experiences a terminal illness or becomes a caregiver for a spouse or family member? Or someone who experiences the loss of a spouse, experiences divorce after a very long marriage, but before retirement? Or even someone who, only a few short years before their planned retirement, suddenly loses their long-time job due to a layoff?

Losing a job is just one of many unexpected, pre-retirement events that can potentially throw savings goals and plans off course. Some may add that a prolonged or very negative stock market decline can also hinder retirement and, in most cases, be unexpected. As the old saying goes, you should always “expect the unexpected”.

What can you or should you do now to make sure that you can keep your retirement strategy on track, even if one of these unexpected events sneaks into your life?

1. Plan Early and Update Often. Although many folks don’t like to think about it, start digging into how much income you will need in retirement. If your income projection is significantly less than what you are bringing home now, what will change in retirement to make you need less income? Will you have significantly less debt? Will the activities you plan to do in retirement cost significantly less? Be realistic. Take stock regularly of where you are toward your savings goals versus your needs, so you stay on track and can update your strategy if you are not moving toward those goals.

2. Save, Save, and Then Save a Little More. When times are good, and while you can, stretch yourself to meet your savings goals. There is a delicate balance between spending to enjoy your life now and saving for your retirement. It makes sense to set significant retirement savings goals (especially if you didn’t start as early as you wanted to). And making it a habit to save more – even one percent each year – will help you reach or exceed your retirement savings goals. Other ways to get ahead can include allocating a portion of your annual raise or any bonus you might receive to retirement savings. Aim to save, save, and save a little more to put yourself in a position to absorb the unexpected.

3. Take Control of What You Can Control. While you cannot control what happens to the markets, your job (for the most part), or your health (other than eating right and exercising), there are things you can control. You can control your savings rate: be disciplined about saving, save regularly, and continue saving more over time. You can save in the right places: You can attempt to max out your savings within your employer retirement savings plans on a tax-deferred basis, you can have a liquid cash emergency reserve fund of at least 3-6 months of expenses “in case” something unexpected comes up, and you can have an after-tax investment account and/or ROTH IRA (if your income tax bracket allows) in case a life event causes an earlier-than-expected retirement or a temporary unemployment situation. You can keep debt under control and plan to have as much debt paid off as possible going into retirement. Reducing fixed costs during retirement allows you to use your cash flow for wants versus needs, and provides you with greater flexibility if an unexpected event occurs.

4. Put Protections and Guardrails in Place. Planners like to call this “risk management”. We are talking about protection for contingencies, so they don’t sink your retirement ship. Having a reserve or emergency savings account is a good first step. But what else might you put in place? It’s important to have the right insurance – disability, life, and long-term care. Continuing education and networking are also important protections – WHAT? Keep up your credentials and training so that if your current job is phased out, you are prepared to jump back on the horse and get re-employed quickly. Many folks become complacent and, if something unexpected happens with their company or their role, are completely unprepared to seek new employment. Unfortunately, the U.S. Government Accountability Office estimates that older workers wait more than 40 weeks to become re-employed, so being prepared can make all of the difference.

5. Seek Good Advice. This is not a time to DIY. There are way too many things that can go wrong when it comes to a potential early retirement transition. Seeking the advice of a trained professional can help you find the best course of action. In most cases, assessing your specific situation and making the best possible decisions, especially when it comes to things like pensions, Social Security, and which accounts to tap for retirement income, can make a huge difference.

“The more things change, the more things stay the same” – Jean-Baptiste Alphonse Karr

When we do an initial financial plan for a client, we like to say that something will very likely change when the client walks out the door, and we will need to adjust the plan. Life happens. A financial plan must be fluid and flexible. And so must you, as someone who is planning for retirement. Unexpected events that happen just as you are reaching for the golden doorknob to retirement can be frustrating. But if you have expected the unexpected, planned for the contingencies, and have some spending flexibility built into your plan, you will be on your way to a long and successful retirement.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Opinions expressed in the attached article are those of Sandra D. Adams and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax, and if taken prior to age 59 ½, may be subject to a 10% federal tax penalty. Roth 401(k) plans are long-term retirement savings vehicles. Like Traditional IRAs, contributions limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Center Clients Donate $1.7 Million in Tax-Savvy Qualified Charitable Distribution Strategy in 2025

Contributed by: Lauren Adams, CFA®, CFP®

We are proud to announce that The Center assisted clients in donating $1,670,000 to charities using the Qualified Charitable Distribution (QCD) strategy in 2025!

The QCD strategy allows clients with assets in an IRA account and who are over age 70.5 to donate funds directly from their retirement account to a charity. Giving directly from an IRA to charity results in those dollar amounts not being included in taxable income for that year. That usually results in a lower tax bill for our clients and can also have positive downstream effects like lowering the amount they may pay for Medicare premiums and the portion of Social Security that is taxable to them, depending on their situation and income level. For those 73 or older, QCDs also count towards the distributions they need to take each year for their Required Minimum Distribution.

Now there are some caveats for QCDs – you need to be at least 70.5. Also, the charity has to be a 501(c)(3). And there are limits on how much you can give each year through this method – but that number is actually quite high at $111,000 per person per year right now.

The Center’s mission is to improve lives through financial planning done right, and we are so proud to be able to help clients make such a positive impact on the world (bonus points for it being in a tax-savvy manner!).

Did you know that QCDs are only one of many charitable giving strategies that our team helps clients deploy? Check out this video to learn more about ways our clients make their charitable dollars stretch further for the causes they care about while also potentially lowering their tax burden.

As always, we recommend you work with your tax preparer to understand how these strategies affect your individual situation. If you want to explore these strategies and more, contact your Center financial planner today!

Lauren Adams, CFA®, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.

Any opinions are those of Lauren Adams and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Important Information for Tax Season 2025

Contributed by: Andrew O’Laughlin, CFP®, MBA

As we prepare for tax season, we want to keep you informed about when you can expect to receive your tax documentation from Raymond James.

2025 Form 1099 Mailing Schedule

• January 31 – Mailing of Form 1099-Q and Retirement Tax Packages.

• February 15 – Mailing of original Form 1099s.

• February 28 – Begin mailing delayed and amended Form 1099s.

• March 15 – Final mailing of any remaining delayed original Form 1099s.

Additional Important Information

Important Update for Qualified Charitable Distribution (QCD) 1099-Rs

If you are over 70.5 and have sent distributions from your IRA to charitable organizations, this will likely apply to you!

Qualified Charitable Distributions will be reported on a second 1099-R if you also have normal distributions. If you sent any QCDs in the 2025 calendar year, you can expect to receive a 1099-R with a new distribution code, Code Y, to identify Qualified Charitable Distributions (QCDs).

• The first Form 1099‑R will report your normal IRA distributions without Code Y (distributions that are not considered QCDs)

• The second Form 1099‑R will report Code Y, to designate the taxpayer’s QCDs.

The second 1099-R is not a duplicate of the first 1099-R. It is important that you provide both documents to your tax preparer.

Clients can view their forms in Client Access under My Accounts → Documents → Tax Reporting. Those enrolled in electronic delivery will receive an email when documents become available.

Please note that Raymond James does not validate whether a distribution qualifies as a QCD or whether receiving institutions are IRS‑recognized charitable organizations. Taxpayers are responsible for confirming QCD eligibility and ensuring proper reporting on their tax returns.

If you have any questions, please do not hesitate to reach out to us. We would be happy to assist!

Delayed Form 1099s

In an effort to capture delayed data on original Form 1099s, the IRS allows custodians (including Raymond James) to extend the mailing date until March 15, 2026, for clients who hold particular investments or who have had specific taxable events occur. Examples of delayed information include:

• Income reallocation related to mutual funds, real estate investment, unit investment, grantor and royalty trusts, as well as holding company depositary receipts.

• Processing of original issue discount and mortgage-backed bonds.

• Expected cost basis adjustments including, but not limited to, accounts holding certain types of fixed income securities and options.

If you do have a delayed Form 1099, we may be able to generate a preliminary statement for you for informational purposes only, as the form is subject to change.

Amended Form 1099s

Even after delaying your Form 1099, please be aware that adjustments to your Form 1099 are still possible. Raymond James is required by the IRS to produce an amended Form 1099 if notice of such an adjustment is received after the original Form 1099 has been produced. There is no cutoff or deadline for amended Form 1099 statements. The following are some examples of reasons for amended Form 1099s:

• Income reallocation.

• Adjustments to cost basis (due to the Economic Stabilization Act of 2008).

• Changes made by mutual fund companies related to foreign withholding.

• Tax-exempt payments subject to alternative minimum tax.

• Any portion of distributions derived from U.S. Treasury obligations.

What Can You Do?

You should consider talking to your tax professional about whether it makes sense to file an extension with the IRS to give you additional time to file your tax return, particularly if you held any of the aforementioned securities during 2025.

If you receive an amended Form 1099 after you have already filed your tax return, you should consult with your tax professional about the requirements to re-file based on your individual tax circumstances.

And Don’t Forget…

As you complete your taxes for this year, a copy of your tax return is one of the most powerful financial planning information tools we have. Whenever possible, we request that you send a copy of your return to your financial planner, associate financial planner, or client service associate upon filing. Thank you for your assistance in providing this information, which enhances our services to you.

We hope you find this additional information helpful. Please call us if you have any questions or concerns about the upcoming tax season.

Andrew O’Laughlin, CFP®, MBA; is the Director of Client Services at Center for Financial Planning, Inc.® He has the CERTIFIED FINANCIAL PLANNER™ certification.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.