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Mega Backdoor Roth 2026: Is It Worth It for High Earners? | Sure Horizon Retirement Advisors

Tue, 15 Sep 2026 17:45:46 GMT

A mega backdoor Roth is a strategy that lets you put after-tax dollars into your 401(k) beyond the normal employee deferral limit, then convert those dollars to Roth so they grow tax-free for the rest of your life. In 2026, the employee deferral limit is $24,500, but the total that can flow into your 401(k) from all sources is $72,000, and that gap is the space the strategy fills. It is worth it if your plan actually allows it, you have already funded the basics, and you have cash left over that would otherwise go into a taxable brokerage account.

What is a mega backdoor Roth, in plain English?

Let me define the terms first, because this is one of those strategies where the name does more harm than good. A regular backdoor Roth is a small maneuver involving an IRA, worth about $7,500 a year in 2026. A mega backdoor Roth happens inside your 401(k) at work, and it can be worth five or six times that amount. Same word, completely different plumbing .

Here is the basic idea. Most people think of a 401(k) as having one limit, the amount they can defer out of their paycheck. In 2026 that number, which the code calls the 402(g) limit, is $24,500, plus $8,000 more if you are 50 or older, or $11,250 if you happen to be 60, 61, 62, or 63. But there is a second, much larger limit sitting above it. Internal Revenue Code Section 415(c) caps the total of everything that goes into your 401(k) in a year, meaning your own deferrals plus the company match plus any profit sharing plus any after-tax money, at $72,000 for 2026. Catch-up contributions sit on top of that number rather than inside it, so a 50-year-old is really working with $80,000 of total room.

Now do the arithmetic that makes this interesting. Suppose you defer the full $24,500 and your employer puts in $12,000 between the match and profit sharing. That is $36,500 of the $72,000 used, which leaves $35,500 of unused room. The mega backdoor Roth is simply the act of filling that remaining room with after-tax contributions from your paycheck, and then immediately converting those after-tax dollars into Roth money. Because you already paid tax on them, the conversion itself generally costs you nothing, and from that moment forward the growth is tax-free.

That is the whole thing. It sounds exotic, but it is really just using a part of your 401(k) that most people never notice is there.

How does the money actually move?

The mechanics matter, because this is where the strategy either works beautifully or creates a headache. There are three steps, and each one depends on your specific plan document.

Step one is the after-tax contribution. Your plan has to offer a contribution type that is neither pre-tax nor Roth, but plain after-tax. This confuses people constantly, because Roth contributions are also made with after-tax dollars. They are not the same bucket. Roth deferrals count against the $24,500 limit and grow tax-free. Old-fashioned after-tax contributions do not count against the $24,500 limit; they count against the $72,000 limit, and if you leave them alone, they grow tax-deferred rather than tax-free, which is a mediocre outcome. The after-tax bucket is only useful because of what you do next.

Step two is the conversion. You need a way to turn those after-tax dollars into Roth dollars. Plans handle this one of two ways. Some offer an in-plan Roth conversion, sometimes called an in-plan Roth rollover, which moves the money from the after-tax source into the Roth 401(k) source without it ever leaving the plan. Others offer an in-service distribution, which lets you roll the after-tax money out to a Roth IRA while you are still employed. Either route works. A growing number of plans offer an automatic version, usually called automatic in-plan Roth conversion or daily Roth conversion, where the recordkeeper sweeps every after-tax contribution to Roth within a day or two of the payroll hitting.

Step three is doing it fast. This is where people get it wrong. Your after-tax contributions are already taxed, so converting them is tax-free, but any investment earnings those dollars generate before the conversion are pre-tax money, and converting them creates taxable income in the conversion year. If you contribute after-tax in January and convert in December, you might have a few hundred dollars of growth that shows up as ordinary income on a 1099-R. Not catastrophic, but avoidable. If your plan converts each pay period automatically, the earnings are close to zero, and the whole thing is clean. If you have to call and request the conversion manually, do it every paycheck or, at minimum, every month, and park the after-tax contributions in a money market or stable value option until they convert so they don't generate much in the meantime.

Does your plan even allow it?

This is the first question to ask, and for a lot of people it ends the conversation right there. The mega backdoor Roth is not a tax loophole you can elect on your own. It is a plan design feature, and your employer has to have built it in.

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You need both pieces. A plan that permits after-tax contributions but has no conversion mechanism leaves you with money that grows tax-deferred and comes out partly taxable later, which is generally worse than a taxable brokerage account holding index funds. A plan that permits in-plan Roth conversions but has no after-tax source has nothing to convert. Roughly half of large employer plans support the full combination, and it is far more common in tech, so if you are a senior person at a big technology company, there is a reasonable chance it is sitting right there in your benefits portal under a name you have scrolled past a hundred times.

The fastest way to find out is to open your plan's Summary Plan Description and search for the words "after-tax," then search for "in-plan Roth" or "in-service withdrawal." If the language is ambiguous, call the recordkeeper and ask two specific questions: does the plan accept employee after-tax contributions above the deferral limit, and does it allow in-plan Roth conversion or in-service distribution of those after-tax amounts? Ask those two questions exactly, and you will get a clear answer. Ask "do you offer the mega backdoor Roth," and there is a good chance the person on the phone has no idea what you mean.

One more wrinkle worth knowing. After-tax employee contributions are included in the ACP test, a nondiscrimination test that compares what highly compensated employees contribute against what everyone else contributes. If too few rank-and-file employees use the after-tax feature, the plan can fail the test, and the fix is to refund money to the higher earners after year-end. Some plans manage this by capping after-tax contributions at a percentage of pay well below the theoretical maximum. If your plan tells you you can only contribute 10 percent of pay after tax, that is usually why. It is not a mistake, and it is not negotiable, so plan around the cap rather than fighting it.

How much room do you actually have?

Run the numbers before you decide anything, because the answer is often smaller than the headline suggests. Start with $72,000 for 2026. Subtract your own elective deferrals, whether pre-tax or Roth, which will be $24,500 if you are maxing out. Subtract everything your employer contributes, including the match, any true-up, any profit sharing, and any non-elective contribution. What remains is your theoretical after-tax room, and then you apply whatever percentage-of-pay cap your plan imposes.

A quick hypothetical, and I want to be clear this is an illustration and not a projection of anyone's actual results. Say you earn $400,000 in salary and bonus, you defer the full $24,500, and your company matches 6 percent on the first portion of eligible pay for a total of $14,000. That is $38,500 of the $72,000 consumed, leaving $33,500. If your plan caps after-tax contributions at 10 percent of eligible pay and your eligible pay is $350,000, your cap is $35,000, which is higher than your remaining room, so the 415(c) limit binds and you can do the full $33,500. Change the plan cap to 6 percent, and your ceiling drops to $21,000. Same person, same salary, very different answer, entirely because of plan design.

Two more things go into that calculation. If you are 50 or older, your catch-up contribution does not eat into the $72,000, so it does not reduce your after-tax room. And if you worked at two employers this year, the $24,500 deferral limit follows you personally across both plans, but the $72,000 limit generally applies per employer for unrelated employers, which occasionally creates more room than people expect.

Is it actually worth doing?

Here is where I want to be honest rather than promotional, because the mega backdoor Roth gets written about as though it is free money, and it is not. It is a real benefit with a real cost, and the cost is liquidity.

The benefit is straightforward and it compounds. Money in a taxable brokerage account throws off dividends and interest every year that you pay tax on, and for a senior executive that tax is likely at a 20 percent qualified dividend rate plus the 3.8 percent net investment income tax, with ordinary rates on bond interest. Then you pay capital gains when you sell. Money converted to a Roth pays none of that, ever, as long as you follow the distribution rules. The gap between those two outcomes over fifteen or twenty years is substantial, and the longer the runway, the bigger it gets.

Roth money also does something specific for people in your situation that has nothing to do with the growth rate. It gives you a pool of retirement income that does not show up as income. That matters more than most people realize once you retire. Required minimum distributions on a large pre-tax 401(k) can push you into a higher bracket in your seventies whether you need the money or not. Medicare premiums are set by IRMAA surcharges based on your modified adjusted gross income from two years prior, and the brackets are cliffs, meaning one dollar of extra income can raise your premium for a full year. A Roth bucket you can draw from without generating income lets you manage those thresholds deliberately instead of watching them happen to you.

And for high earners, there is the simple access problem. In 2026, direct Roth IRA contributions phase out between $153,000 and $168,000 of modified adjusted gross income for single filers, and between $242,000 and $252,000 for married couples filing jointly. If you are the executive we are describing, you are well past both. The regular backdoor Roth gets you $7,500. The mega backdoor version can get you five times that or more. For a lot of people it is the only meaningful way to build Roth assets at this stage of a career.

Now the cost. Once the money goes into the 401(k), it is retirement money. Access before 59 and a half generally means penalties and complications, and even the Roth conversion piece carries its own five-year clock for penalty-free access to converted amounts. If you plan to retire at 55 and bridge to Social Security, buy a second home, or pay your kid's tuition, taxable brokerage dollars are the ones you can actually spend without friction. I wouldn't push someone into the last ten thousand dollars of after-tax contributions if it left them short of a comfortable cash position and a taxable account they can access.

There is also an opportunity cost question that is worth thinking through rather than assuming. If you have a concentrated position in company stock, or high-interest debt, or you are not yet funding an HSA, those may deserve the marginal dollar first. The mega backdoor Roth is a great use of surplus savings. It is not a great use of money that should be solving a bigger problem.

Who should do this, and in what order?

Think of it as the last item on a list, not the first. Before you get here, you want the full employer match captured, because that is an immediate return nothing else matches. You want high-interest debt gone and a real emergency reserve in place. You want your HSA funded if you are on a high deductible plan, since it is the only account in the code with a triple tax advantage. You want a clear-eyed decision about pre-tax versus Roth on your regular deferrals, which for someone in the top bracket today usually still favors pre-tax, though it depends on what you expect your retirement income to look like. And you want a plan for any concentrated company stock, because a 40 percent position in one ticker is a bigger risk to your retirement than a tax inefficiency.

If you've handled all that and still have money piling up in checking every month, the mega backdoor Roth is close to the best thing you can do with it. The ideal candidate has strong cash flow, a plan that supports automatic conversion, at least ten years before they will touch the money, and a taxable account already sufficient for any pre-retirement needs.

The person who should probably skip it is someone whose plan requires a phone call for every conversion, who is likely to forget, and who would end up with a tax-deferred after-tax bucket and a confusing set of basis records. Done badly, this strategy is worse than doing nothing. Done automatically, it is nearly effortless.

What are the common mistakes?

The most frequent one is contributing after-tax dollars and never converting them. People turn on the after-tax election, feel good about it, and never complete step two. Years later they have a sizable after-tax source with a meaningful amount of tax-deferred earnings attached, and every dollar they take out comes pro rata, part tax-free basis and part taxable earnings. The fix is to convert, and the cost is the tax on whatever earnings accumulated. The prevention is to elect automatic conversion the same day you elect the contribution.

The second is front-loading the deferral and losing the match. If your plan does not offer a true-up, hitting the $24,500 deferral limit in June means no match for the rest of the year. That is a direct loss, and it also changes your 415(c) math. Check whether your plan trues up before you accelerate anything.

The third is confusing the buckets. Electing Roth 401(k) deferrals when you meant to elect after-tax contributions is easy to do in a benefits portal, and it produces a completely different result. Read the labels carefully, and confirm on your next pay statement that the money landed in the source you intended.

The fourth is ignoring the plan cap. People calculate their 415(c) room, elect a contribution percentage that would get them there, and then find their contributions cut off in October because the plan limits after-tax to a percentage of pay. Ask for the cap up front and spread the contributions across the full year.

The fifth is forgetting about it when you leave. When you separate from the company, you need to handle the after-tax source and its earnings deliberately in the rollover, with the basis going to a Roth IRA and any pre-tax earnings going to a traditional IRA or being converted intentionally. That is a well-established process, but it only works if someone tells the recordkeeper how to split the distribution. Nobody will do it for you.

What should you actually do next?

Pull up your Summary Plan Description this week and look for the two features. If they are both there, log into the recordkeeper and check whether automatic in-plan Roth conversion is available, and turn it on. Then work out your real number for the rest of the year: $72,000 minus your deferrals to date, minus projected employer contributions, held against whatever percentage cap your plan imposes. Set the after-tax election at a level that spreads evenly across the remaining paychecks, and verify on the next pay stub that the money went where you expected.

If your plan does not offer these features, it is worth asking. Human resources and benefits teams at large companies field these requests, and after-tax contributions with automatic Roth conversion have become a fairly standard competitive feature. You will not get an answer this year, but plan designs do change, and the people who ask are the reason they change.

And if you are not sure whether the marginal dollar belongs here at all, that is the right question to be asking. The mega backdoor Roth is a very good tool for surplus savings in the last stretch of a high-earning career. The work is figuring out whether the money in front of you is actually surplus.

Key takeaways

A mega backdoor Roth uses after-tax 401(k) contributions plus a Roth conversion to build tax-free retirement money well beyond the normal deferral limit.
For 2026, the employee deferral limit is $24,500, the total annual additions limit under Section 415(c) is $72,000, and the space between them, after subtracting employer contributions, is your after-tax room.
Catch-up contributions of $8,000 at age 50 and older, or $11,250 at ages 60 through 63, sit on top of the $72,000 limit rather than inside it.
The strategy requires two separate plan features: employee after-tax contributions, and either in-plan Roth conversion or in-service distribution. Both must be present.
Convert quickly, ideally automatically each pay period, because earnings that accumulate in the after-tax bucket before conversion become taxable income when converted.
Plan-level ACP testing often caps after-tax contributions at a percentage of pay below the theoretical maximum, so confirm your actual cap before you plan around the full number.
The main cost is liquidity. This money is locked into retirement accounts, so fund your cash reserve and taxable account needs first.
Roth dollars are valuable for more than tax-free growth. They create retirement income that does not count toward RMD pressure or Medicare IRMAA thresholds.
Beginning in 2026, catch-up contributions must be made as Roth contributions if your prior-year FICA wages from that employer exceeded $150,000, which is a separate rule but one most executives reading this will be subject to.

Frequently asked questions

What is the difference between a backdoor Roth and a mega backdoor Roth? A backdoor Roth involves contributing to a traditional IRA and converting it to a Roth IRA, which is capped at the IRA contribution limit of $7,500 for 2026, plus $1,100 if you are 50 or older. A mega backdoor Roth happens inside a 401(k), uses after-tax plan contributions rather than IRA contributions, and can move tens of thousands of dollars per year depending on your plan and your employer's contributions. They are separate strategies, and you can do both in the same year.

How do I know if my 401(k) allows a mega backdoor Roth? Check your Summary Plan Description for two specific features: employee after-tax contributions that are separate from pre-tax and Roth deferrals, and either an in-plan Roth conversion or an in-service distribution of after-tax amounts. If the document is unclear, call your recordkeeper and ask about those two features by name rather than the mega backdoor Roth, an informal term many service representatives will not recognize.

Do I pay tax when I convert the after-tax money to Roth? You generally pay no tax on the contributions themselves, because you already paid tax on those dollars. You do pay ordinary income tax on any investment earnings that accumulated in the after-tax bucket between the contribution and the conversion. This is why converting immediately, or at least frequently, matters so much, and why many people hold after-tax contributions in a conservative option until the conversion occurs.

Does the mega backdoor Roth reduce my current tax bill? No. After-tax contributions provide no current deduction, so your taxable income stays unchanged this year. The benefit is entirely future-facing: tax-free growth, tax-free qualified withdrawals, and retirement income that does not raise your adjusted gross income. If your goal is to lower this year's taxes, pre-tax deferrals and an HSA do that, and this strategy does not.

Can I still do this if I am over the Roth IRA income limits? Yes, and that is much of the point. The income phase-outs that apply to direct Roth IRA contributions, which for 2026 run from $153,000 to $168,000 for single filers and $242,000 to $252,000 for joint filers, do not apply to after-tax 401(k) contributions or to Roth conversions. High income does not disqualify you from this strategy. Only your plan's design can.

What happens to the money if I leave the company? When you separate, you can roll the after-tax basis to a Roth IRA and any associated pre-tax earnings to a traditional IRA, or convert those earnings and pay the tax deliberately. Any amounts already converted to Roth inside the plan roll to a Roth IRA. The important step is telling the recordkeeper how to split the distribution, because the sources need to be directed separately and the default handling is not always what you want.

Do I need to worry about a five-year rule? Yes, and there are two. Your Roth IRA has a five-year clock that starts with your first contribution to any Roth IRA and governs whether earnings come out tax-free. Amounts converted to Roth have their own five-year clock for penalty-free access to the converted principal before age 59 and a half. Neither is usually an obstacle for someone who is ten years from retirement, but they are worth understanding before you plan to spend the money early.

About Jeff Kikel

Jeff Kikel is the founder of Sure Horizon Retirement Advisors and the President and Chief Investment Advisor, a fee-based wealth and retirement planning firm that helps senior professionals and executives turn a career's worth of equity compensation and savings into a confident, well-planned retirement. Jeff writes and speaks in plain language because he believes people make better decisions when they actually understand what is happening with their money. His approach is simple: explain the tradeoffs honestly, keep the focus on the long term, and always circle back to what you should actually do next.

If you are a high earner trying to figure out where the next dollar of savings should go, and whether your 401(k) has room you are not using, Sure Horizon Retirement can help you map it out alongside your equity compensation and your retirement timeline. You can learn more at w ww.surehorizonretirement.com.

This article is for educational purposes only and is not investment, tax, or legal advice. Every situation is different, and the rules and dollar limits referenced here can change. Please consult a qualified financial or tax professional, and review your own plan documents, before making contribution or conversion decisions.

Sources

10 Must-Read Books for a Happy, Purposeful Retirement

jeff@t-werx.com (Jeff Kikel) — Thu, 20 Feb 2025 20:53:52 GMT

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Affiliate Disclosure: This post contains affiliate links. As an Amazon Associate, we earn from qualifying purchases.

Introduction

Retirement is supposed to be the best time of your life, right? You finally get to sleep in, travel, and maybe even pick up that hobby you’ve been talking about for 30 years. But let’s be honest—sometimes retirement feels more like, “What do I do all day?” than, “I’m living my best life!”

The good news? You’re not alone. And even better news? There are some amazing books that can help you figure it all out—from getting your money in order to finding a new purpose and even planning your next adventure.

These books won’t just sit on your coffee table and collect dust. They’ll give you ideas, advice, and maybe even a few laughs. Ready?

Let’s jump in!

Lifestyle & Purpose (Finding Joy & Identity in Retirement)

The Joy of Not Working – Ernie J. Zelinski

This book is a game-changer if you’re worried you’ll get bored in retirement. Zelinski shows you how to enjoy your free time without feeling guilty. It’s like permission to nap, take up painting, or just sit on the porch with a cup of coffee and not feel bad about it.

https://amzn.to/3XbcUOZ

How to Retire Happy, Wild, and Free – Ernie J. Zelinski

Same author, different vibe. This book is all about having fun in retirement. It will help you find hobbies, make friends, and avoid the trap of spending your days watching reruns of old game shows. Retirement should feel like freedom—not like you’re grounded.

https://amzn.to/3X5dCgD

Financial Security (Making Sure You Don’t Outlive Your Wallet)

The 5 Years Before You Retire – Emily Guy Birken

If you’re not retired yet, this book is a must-read. Birken breaks down all the money stuff you need to know without making you feel like you need a finance degree. It’s like having a smart friend explain it all over lunch.

https://amzn.to/4k9S1O1

Your Complete Guide to a Successful & Secure Retirement – Larry Swedroe & Kevin Grogan

Worried about the stock market or taxes? This book helps you figure out your money so you can sleep at night. Think of it as a road map to make sure you don’t run out of gas halfway through retirement.

https://amzn.to/3EN5Phs

Health & Wellness (Staying Fit Without Becoming a Gym Rat)

The Blue Zones: 9 Lessons for Living Longer – Dan Buettner

Ever wonder how some people live to 100 and still seem happy? This book dives into the secrets of the world’s longest-living people. Spoiler: It involves good food, moving a little every day, and enjoying a glass of wine now and then. Sounds pretty good, right?

https://amzn.to/4i9ZUl1

Younger Next Year – Chris Crowley & Henry Lodge

Getting older doesn’t mean you have to slow down. This book is full of simple tips to keep you active and feeling good. It might even inspire you to dust off that bike or take a few extra laps around the block.

https://amzn.to/3CWHiWH

Travel & Adventure (Because You’ve Earned That Bucket List)

1,000 Places to See Before You Die – Patricia Schultz

This book is perfect if you’ve got the travel bug. It’s packed with ideas for trips, from little weekend getaways to once-in-a-lifetime adventures. Even if you just flip through it with a cup of coffee, it’ll get you dreaming.

https://amzn.to/3QsX6mZ

Lonely Planet’s Best Road Trips USA

The open road is calling! This book is full of road trip ideas, scenic drives, and small-town diners that serve pie so good you’ll want to move there. Retirement means you can finally take the long way home.

https://amzn.to/437rc7m

Mindset & Personal Growth (Staying Sharp & Embracing the Next Chapter)

The Second Mountain – David Brooks

The first part of life is about climbing the career ladder. The second part? Finding meaning and giving back. This book will inspire you to think about what’s really important in this new season of life.

https://amzn.to/4i2zZeI

This Chair Rocks: A Manifesto Against Ageism – Ashton Applewhite

Getting older isn’t something to fear—it’s something to own. Applewhite challenges all the negative stuff we hear about aging. After reading this, you might just start rocking those gray hairs like a badge of honor.

https://amzn.to/4b8V0SS

Conclusion

Retirement is your time to write your next chapter—with fewer alarms and more sunsets. These books will help you find your rhythm, enjoy your days, and maybe even pick up a few new hobbies along the way.

Want more tips to help you enjoy retirement without money stress? Check out our resources under books on this site. If you are a gold member, you get FREE PDF access to all the books in our library.

Jeff Kikel is the President and Founder of Freedom Day Wealth Management and The President of Sure Horizon Retirement Advisors. Known as the "Stress-Free Retirement Guy," Jeff shares his knowledge on this site as well as through his YouTube Shows, "The Stress-Free Retirement Project" and "The Cents of Things". He is also the author of 10 books on personal finance and business. Jeff lives with his wife and business partner, Crystal, in Cedar Park, TX.

#retirement #bookreviews

Top 5 Underrated U.S. Travel Destinations for Retirees

jeff@t-werx.com (Jeff Kikel) — Thu, 20 Feb 2025 19:28:39 GMT

Where to Go Now That You Finally Have the Time

You finally made it. The kids are grown, the work emails have stopped, and you've got time to breathe. And maybe, for the first time in a while, you're asking yourself—where should we go?

Sure, there's always Florida or Vegas. But what if you're craving something different? A place with fewer crowds, easy to get around, great food—and a little charm?

These five spots are perfect for retirees. They're easy, beautiful, and a little off the radar. I've been to some myself, and others are recommended by clients who came back raving. So, let's plan your next trip.

Traverse City, Michigan – Wine, Water, and Cherry Pie

The first time I went to Traverse City, I thought it would be just cherries and lake views. Instead, we left wondering if we should buy a vineyard and retire early. We flew into Detroit and combined this trip with a stop by The Henry Ford Museum ( www.TheHenryFord.org )

The town, nestled on the shores of Lake Michigan, offers a serene escape. The pace is unhurried, the locals are welcoming, and the view is the kind that invites you to sit back and unwind.

We climbed Sleeping Bear Dunes once. It's not easy, but standing at the top, looking over the lake, I forgot about my sore legs (an excellent excuse for a massage at a local spa). If hiking's not your thing, the Pierce Stocking Scenic Drive gives you those same views from the comfort of your car.

We nearly got into trouble on the Old Mission Peninsula Wine Trail . Chateau Chantal is a favorite, but Brys Estate had a view that made us order a second glass. There's something about sipping wine with that lake breeze—it just works.

And the food? Dinner at Trattoria Stella , tucked inside an old asylum, sounds strange but is one of the best Italian meals we've had. And you can't leave without pie from The Cherry Hut . Trust me.

The best time to visit: Late spring to early fall. Avoid July unless you like crowds and festival energy.

St. George, Utah – Red Rocks and Blue Skies

We met a couple from Denver who planned to visit St. George for a week five years ago. They bought a place and never left.

It's red rocks everywhere. The kind of place that looks like Mars but with golf courses. It's sunny almost every day, and the air feels clean—like you're breathing better just by being there.

Exploring Snow Canyon State Park , we discovered a landscape that felt like nature's best-kept secret. Lava tubes, petrified dunes—it's all here, without the crowds of Zion , offering a unique and thrilling experience.

Tuacahn Amphitheater is something else. We saw a musical under the stars, with the canyon walls glowing red behind the stage. It felt like nature was part of the show.

And the food? Cliffside Restaurant is all about the view. We watched the sunset over the desert while cutting into a perfect ribeye.

Breakfast at Bear Paw Cafe ? Pancakes the size of your head.

 Best time to visit: Spring or fall. Summer is hot—and I mean hot (it's a desert).

Santa Fe, New Mexico – Art, Adobe, and Green Chile

As I said before, my wife Crystal is originally from New Mexico, so we have visited Santa Fe multiple times. It has also been around for 400 years, but we seem to find new things to explore every time we go there.

Halfway through a bowl of green chile stew at The Shed , I realized retirement should taste like this.

Santa Fe is warm adobe buildings, art on every corner, and the smell of roasting chiles drifting through the air. It's slow-paced—you stroll, you eat, you soak it in.

The Plaza is the heart of it all. The last time we were there, we picked up turquoise earrings from a woman (the artist) sitting under the Palace of the Governors . Then we grabbed a coffee and sat under a 400-year-old portico, watching the world go by.

The Georgia O'Keeffe Museum , though small, is a powerhouse of inspiration. Her desert paintings take on a new life when you're standing under that same sky. Then there's Canyon Road , a half-mile stretch lined with art galleries. We stumbled upon one that had a cow sculpture made entirely of bottle caps, a testament to the city's artistic richness.

Dinner at Tomasita's ? Enchiladas smothered in red chile. Coyote Cafe's rooftop margaritas hit just right, especially with the sunset.

 Best time to visit: Fall. Cool weather, fewer tourists.

Door County, Wisconsin – Water Views and Cherry Blossoms

I was eating Swedish pancakes at Al Johnson's when I looked up—there were goats on the roof.

Door County feels like the Midwest's answer to Cape Cod. It has small towns, lighthouses, boats on the water, and cherry orchards everywhere.

Peninsula State Park is perfect for a slow walk along the water. In the fall, the trees explode with color. We took the ferry to Washington Island and sat on smooth white stones at Schoolhouse Beach , listening to the waves.

The fish boil at White Gull Inn is a must. They cook the fish over an open fire, then toss kerosene on it, and the flames shoot up like a volcano. It sounds odd, but the meal is simple and perfect.

Wilson's Ice Cream Parlor has been there for over 100 years. Their root beer float tastes like childhood. Wild Tomato makes pizzas with fresh ingredients—the kind you think about long after you've gone home.

Best time to visit: May for cherry blossoms or September for fall colors. Winter is cold, and most businesses close from October to April.

Sedona, Arizona – Red Rocks and Relaxation

A woman at the vortex told me it healed her arthritis. I don't know about that, but my knees did feel better after the spa.

Sedona is red rocks that glow at sunset, art galleries with driftwood sculptures, and spas that smell like lavender.

Cathedral Rock is iconic. We didn't hike it but sat at the base and watched the light change. That was enough.

Tlaquepaque Arts Village feels like a little European town. It has cobblestone paths, fountains, and a shop selling turquoise jewelry that made my wife seriously consider our budget.

Dinner at Elote Cafe ? Get the fire-roasted corn. The Hudson does burgers with a view that stretches forever.

Best time to visit: Spring or fall. Summer is too hot.

Your Next Adventure Awaits

So, where's your next trip? Cherry pie by the lake? Red rocks and spas? Retirement is your time. Pick a place, pack a bag—you've earned it.

Door County Tourism . https://www.doorcounty.com

Greater Zion Convention & Tourism Office . https://greaterzion.com

Santa Fe Tourism . https://www.santafe.org

Traverse City Tourism . https://www.traversecity.com/

Visit Sedona . https://visitsedona.com

The 5 Biggest Retirement Planning Mistakes (And How to Avoid Them)

Mon, 17 Feb 2025 21:18:54 GMT

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Retirement Planning: It's Easier to Mess Up Than You Think

Have you ever woken up at 3 AM, staring at the ceiling, thinking, "How on earth am I going to retire?" You know you should be doing something—but what, exactly? And when? And how much is enough?

It's like that nagging feeling you forgot to lock the front door. Except instead of a door, it's your entire future.

If that sounds familiar, you're not alone. A lot of folks in their 50s and early 60s feel the same way. They've been working hard their whole lives, raising kids, paying the mortgage—but now retirement is getting real. And it's kind of terrifying.

I've been helping people plan for retirement for over 30 years, and let me tell you—I've seen some mistakes. Big ones. Costly ones. The kind that make people lie awake at night, wondering if they're going to run out of money.

But here's the good news: You don't have to make those mistakes. Today, we're going to chat about the five biggest ones I see all the time—and how you can avoid them. No jargon. No fancy talk. Just real-world advice, like we're sitting at my kitchen table, having coffee.

Mistake #1: Not Having a Defined Income Plan

Let me tell you about Dave and Lisa. Good people. Hard workers. They retired with what looked like plenty of savings—about $800,000. They figured they'd pull a little out every month, and it would be fine.

But here's what happened. The first few years of retirement were great. They took a cruise, helped their daughter with a down payment on a house, and fixed up their kitchen. Then Dave called me. He was nervous. "Jeff," he said, "I just checked our accounts, and we're down to $700,000. We've only been retired for five years. What are we doing wrong?"

What Dave and Lisa didn't have was a plan—a real plan for how to turn their savings into a steady, predictable paycheck in retirement.

Here's the thing: Retirement isn't about having a big pile of money. It's about knowing how to pay yourself from that pile for the next 30 years .

A 2023 Gallup poll found that 59% of Americans worry they won't have enough money in retirement (Newport, 2023). That fear? It often comes from not knowing how the money will actually work.

How to Avoid This:

T hink of your retirement income like a three-legged stool:

Social Security : Your foundation, but usually not enough on its own.
Savings & Investments : This is where you create that paycheck.
Pensions or Annuities : If you're lucky to have them, they give you a steady check.

What We Did For Dave and Lisa

When Dave and Lisa came to me, we sat down and built their Stress-Free Retirement Blueprint . First, we looked at their budget. Their essential expenses—mortgage, utilities, insurance, food—came to $7,000 a month . The fun stuff—dinners out, travel, hobbies—was another $1,200 a month .

We needed to cover the essentials no matter what, so we decided to start their Social Security at 67, which they had both just reached. That brought in $5,275 per month . To fill the remaining gap of $1,725 , we took $300,000 from Dave's 401(k) and bought a Single Premium Income Annuity that paid them that amount every month for life, with a 20-year guarantee in case something happened to them early.

For the fun money, we set aside $72,000 in a 5-year Treasury bond ladder —that gave them $14,400 per year (or 1,200 a month) for the next five years . At the end of 5 years, this bucket would be empty.

The rest— $328,000 —we kept in a growth portfolio. After five years, it only needed to earn 4.04% annually to replenish their discretionary spending.

Now? They sleep at night.

Mistake #2: Underestimating Healthcare & Long-Term Care Costs

A few years back, I worked with a couple—Bill and Mary. Bill was strong as an ox. He had never been sick a day in his life. Then he had a stroke.

Mary called me in tears. "Jeff, the home care is costing us $6,000 a month. We can't afford this." They had money, but they never planned for something like this. Who does?

The truth is that healthcare costs in retirement are brutal . Fidelity estimates that a typical couple retiring today will need $315,000 to cover medical costs (Fidelity, 2023). And that doesn't even touch long-term care like nursing homes or home health aides. Those can run over $100,000 a year .

How to Avoid This:

Understand Medicare : It doesn't cover everything.
Get a Supplement : Helps fill the gaps.
Think About Long-Term Care Insurance : It can save you money later.
Save for Health Costs : Even $300 a month into a health fund can help.

What we did for Bill and Mary

We set up a 5-year bond ladder from Bill's 401(k) to cover the $6,000 per month for home care. This became the healthcare fund that they knew they could rely on for the next five years. Then, we converted $75,000 from their taxable account into an asset-based long-term care policy . That way, if Mary needed care later, she'd be covered—or if not, their kids would inherit the money.

The rest— about $500,000 —stayed in a growth portfolio to support Bill's future needs. If Bill lives beyond 5 years, we plan to use a reverse mortgage to help preserve their cash and leverage some of their home equity.

Mistake #3: Claiming Social Security Too Early (or Too Late)

Susan was 62 and had just retired after 35 years as a teacher. She was ready to start collecting Social Security. Her friends had all done it the moment they turned 62. "Better grab it while it's there," they said. "Who knows if it will run out?"

She was nervous. She had savings, but it wasn't as much as she hoped. She worried about the stock market. She worried about inflation. She worried she might run out of money in her 80s. So, collecting Social Security right away felt safe—like flipping on a safety net.

But when Susan and I sat down, we ran the numbers.

Starting Social Security at 62 meant her check would be 30% smaller for the rest of her life. That safety net? It would always feel a little short. Her monthly check would be significantly larger if she waited until her full retirement age of 67 . And if she waited until 70 , it would be even bigger . For Susan, that extra income later in life would be critical.

How to Avoid This:

Be Patient (If You Can) : Every year you wait, your monthly check grows.
Consider Your Health : Taking it earlier might make sense if you have health concerns.
Think About Your Spouse : Spousal benefits can be complicated but might increase household income.

What We Did for Susan

After weighing her options, Susan decided she could wait. Together, we built her Stress-Free Retirement Blueprint . We set aside five years' worth of low-risk investments to cover her living expenses. That money would give her the confidence to wait until she was 67 to start Social Security .

When she turned 67 , she started receiving her full benefit—an extra $800 per month compared to what she would have gotten at 62 . Over her lifetime, this would add up to over $200,000 more in income.

But the best part? Her investments stayed more intact because she didn't have to pull as much from her savings in those early years. We projected that her estate would likely be $300,000 larger by the end of her life.

Susan told me later, "Jeff, I sleep better knowing I'll have that bigger monthly check. I don't feel rushed or scared anymore."

Mistake #4: Not Accounting for Inflation & Market Volatility

Mark and Lisa had diligently saved their entire lives. When they came to me, they were just a few years from retirement. Their biggest fear? "We don't want to lose everything if the market crashes."

I get it. After all, the news loves to remind us of every dip in the market. And when you retire, those dips feel personal—because you depend on that money.

But there was something Mark and Lisa hadn't thought about: Inflation .

At just 3% inflation , prices double roughly every 24 years (Bureau of Labor Statistics, 2024). Today's $100 grocery bill could be $200 when you're in your 80s.

Mark looked me in the eye and said, "But we can just stay conservative, right? We don't want to risk it."

The problem is playing it too safe is its own risk . If your money isn't growing, it's shrinking. Slowly, silently. And you might not notice until it's too late.

How to Avoid This:

Stay Invested : Keeping some money in growth investments (like stocks) helps you beat inflation.
Have a Safety Buffer : Cash or bonds can cover your short-term needs, so you don't have to sell investments when the market is down.
Balance Is Key : You don't need all risk or all safety—you need both.

What We Did for Mark and Lisa

We built their Stress-Free Retirement Blueprint . We set aside five years' worth of expenses in safe investments like bonds and cash. That gave them a cushion so they wouldn't have to touch their stocks during a market dip.

With that safety net in place, they felt comfortable keeping a healthy portion of their portfolio in growth investments . We even shifted some money from ultra-conservative accounts into stocks only after they understood the plan.

A year later, Mark called me. The market had a rough month, and he said, "You know what? I didn't panic. I knew we had that safe money. We let the stocks ride. I finally feel like we're going to be okay."

Mistake #5: Not Planning for Lifestyle & Purpose

John was 62 when he retired. The first few months were great. He slept in, played golf, and worked on his yard. But by the time we met a year later, he was restless.

"Jeff, I thought retirement would be all freedom and fun. But I'm kind of bored. And Jane and I are getting on each other's nerves a little."

That's more common than people realize. Retirement can feel like falling off a cliff if you don't know what you're retiring to.

The National Institute on Aging found that social isolation can increase health risks, including heart disease and depression (National Institute on Aging, 2023). We need purpose. We need connection.

How to Avoid This:

Make a Plan Beyond Money : What will you do every day?
Talk to Your Spouse : Retirement is a team sport.
Find Purpose : Hobbies, volunteering, part-time work, travel—what excites you?

What We Did for John and Jane

We guided John and Jane through our Retirement Bucket List Exercise . It wasn't just about vacations. We had them list at least 10 things in each category :

Places to Go
Things to Do
Hobbies to Try
Volunteer Work (or a Part-Time Job)
Relationships to Build or Strengthen
Health & Fitness Goals
Learning & Personal Growth

At first, it was hard. But once they started dreaming, they got excited. By the end, they had over 80 ideas .

Now? They take trips together. John volunteers at a food bank twice a month. Jane picked up painting. They both joined a hiking club. Their days are full, and their relationship is stronger than ever.

John told me, "Jeff, this list changed everything. We finally feel like we're living again."

You Don't Have to Do This Alone

Retirement doesn't have to be scary. But it does need a plan. Avoiding these five mistakes could be the difference between barely getting by and truly enjoying your retirement years.

That's why I created the Stress-Free Retirement Blueprint . It's not just about investments. It's about helping you feel confident—knowing your income is secure, your healthcare is covered, and your future is mapped out.

If you want to dive deeper into these ideas, I wrote a book just for you. It walks you through these common mistakes and how to avoid them—step by step. It is available on Amazon or the PDF is available for members on this site in the "Books" section.

Click Below

�� 10 Critical Mistakes in Retirement Planning (and How to Fix Them)

We also have a Masterclass available on our "Stress Free Retirement Project" Community. The community is FREE to join.

Visit the community at: www.Stress-FreeRetirement.com

Let's get you on the path to a stress-free retirement—because you deserve it.

Fidelity. (2023). Retiree health care costs estimate. Fidelity. https://www.fidelity.com/viewpoints/retirement/retiree-health-care-costs
Social Security Administration. (2024). Retirement benefits. https://www.ssa.gov/benefits/retirement/
Bureau of Labor Statistics. (2024). Consumer Price Index Summary. U.S. Department of Labor. https://www.bls.gov/news.release/cpi.nr0.htm
National Institute on Aging. (2023). Social isolation, loneliness in older people pose health risks. U.S. Department of Health and Human Services. https://www.nia.nih.gov/news/social-isolation-loneliness-older-people-pose-health-risks

How to Build a Retirement Plan that Lasts

jeff@t-werx.com (Jeff Kikel) — Tue, 24 Sep 2024 20:50:11 GMT

An Introduction to the Sure Horizon Retirement Income Strategy™

Getting Started

So you've been dreaming about retirement-lazy mornings with coffee, no more work deadlines, and maybe some travel to check off that bucket list. But let's face it-the "freedom" of retirement isn't free. It takes careful planning to make sure your financial nest egg doesn't run out before your travel bucket list does.

Building a retirement plan that lasts is like assembling IKEA furniture: it looks easy, but if you don't have all the right pieces (and follow the instructions), you'll end up with something wobbly and unstable. But don't worry - you won't need an Allen wrench for this one. With a little forethought and the right strategy, your retirement will be a sturdy, well-built masterpiece.

I will take you through step by step how we build plans for clients here at Sure Horizon Retirement Advisors. Plus I will share some of my favorite free tools with you along the way. Who doesn’t love free?

Assessing Your Current Financial Situation

Before we can build a retirement plan that lasts, we need to know what tools and materials we're working with.. In retirement planning, this means taking a good, hard look at your current financial situation.

Step 1: Your financial inventory

No matter where you are on your retirement journey, you need to take stock of what you already have. This isn't the time to dream about what you think you should have. We're talking about cold, hard numbers. You need to know:

Your net worth : This is just a fancy way of saying "what you own minus what you owe." If the idea of calculating your net worth sounds like high school algebra, don't worry. It's easier than it sounds. You add up your assets (savings, investments, real estate) and subtract your liabilities (mortgage, debt). Boom. Net worth.

Need some help? Our Retirement Planning Toolkit includes a Net Worth Worksheet that makes this process a lot easier.

Step 2: Identify Your Income Sources

Next, you need to figure out where your money will come from in retirement. Spoiler alert: It won't come from your 9-to-5. We're talking about:

Social Security: It's there, but will it be enough? Probably not, which is why it's important to know what your Social Security benefits will be and when you should file for them. .
Pensions: If you're lucky enough to have one, congratulations! But not everyone has a golden ticket in the form of a pension.
Investments & Savings: Whether it's a 401(k), an IRA, or your secret stash under the mattress, you need to know what's available and how to turn it into usable income.

Step 3: Understanding the Components of a Retirement Plan That Lasts

All right, now that we've dug through the financial garage and figured out what we have to work with, it's time to talk strategy.. The key to a winning retirement plan is making sure your money doesn't run out while you're still busy living your best life.

Enter: The Sure Horizon Retirement Income Strategy(™) . Fancy name? Sure. I was taught the basics of this strategy early in my career and have gone on to add my own spin to it. But here's where the magic happens. We're talking about a strategy built on three major pillars:

Guarantees: The Safety Net.

First things first-you want to know you won't run out of money, right? That's where the guarantees come in. We're talking about things like Social Security, pensions (if you have one), and annuities. Think of these as your retirement safety net-the reliable income that will always be there, no matter what.

Social Security: This is your monthly check from Uncle Sam. Sure, it won't make you rich, but it's a steady, reliable stream that will help cover some of your essential expenses.
Pensions and annuities: If you're one of the lucky ones with a pension, treat it like gold. And if you don't have one? Don't panic. You can create your own "pension" with annuities, which basically turn your savings into a guaranteed paycheck for life.

Action Tip: If you're not sure how much guaranteed income you'll need, the Retirement Planning Toolkit has a handy worksheet to help you estimate your essential expenses and match them with guaranteed income sources. After all, no one wants to be playing Survivor: Retirement Edition when the money runs out. If you haven’t already done so, download a copy here. (Link)

Flexibility: The Joker

If life has taught us anything, it's that it's unpredictable. That's where flexibility comes in. You need to have some wiggle room in your retirement plan to cover the "extras"-you know, things like travel, hobbies, or unexpected expenses (hello, new roof).

Bond Ladder : Typically for our clients, we build a 5 year bond ladder with one bond maturing each year (usually in January). Every 5 years we re-build this ladder from our Growth Pool and do it all over again.
Dividend Paying Stocks: For most of our clients in or around retirement, we have build a high yielding/dividend paying portfolio. These stocks are typically in 3 major areas: Collateralized Loan Obligations (CLO’s), Business Development Corporations (BDCs) and Senior Loan Credit Funds . The common thread is that all of these throw of a majority of their income in the form of dividends. As a result they tend to be a nice stabilizing force in client portfolios that pays well.
Part-time work or side hustles : You may want to keep working a little bit, either because you need the income or because you just like to stay busy. No shame in that

Case in point: Imagine you're cruising through retirement, but you decide to take a fancy vacation in Italy. Your guaranteed income will cover the basics, but the trip? That's coming out of your flexible income bucket. With a little careful planning, you can sip wine in Tuscany without worrying about paying the bills back home.

Growth: Keeping the Party Going

Finally, there's growth. Retirement isn't all about playing it safe - you need to keep some of your money growing, because inflation is a sneaky little thief that will erode your purchasing power if you're not careful. That means keeping a portion of your portfolio invested in growth assets like stocks. The good news with our strategy is that you now have 5 years to let these assets grow without needing them. Every year you can do this lessens your overall risk.

Stocks and real estate : Think of these as the long-term growth drivers in your plan. You don't need to go all-in on risky investments, but a little exposure to stocks and maybe even real estate can help your money keep up with inflation.

Protect against inflation: If you don't grow your money, inflation will eat away at your savings. We're not saying you need to become a Wall Street wizard, but keeping some of your assets growing is key to making sure your retirement fund doesn't shrink over time.

In summary, the Sure Horizon Retirement Income Strategy is your roadmap to a long, stress-free retirement. By balancing guaranteed income, flexible savings, and growth investments, you'll build a plan that can handle whatever life throws your way. And hey, if things get tough, don't worry-we've got the tools to help.

Conclusion: Wrapping Up Your Retirement Plan

Building a retirement plan that lasts isn’t about magic formulas or crystal balls. It’s about having a solid strategy that balances security, flexibility, and growth. Sure, there are risks along the way – from healthcare surprises to market ups and downs – but with the right plan, you can handle them like a pro.

Your retirement should be about enjoying life, not stressing over finances. And with the Sure Horizon Retirement Income Strategy, you’ve got the tools to build a future that not only lasts but thrives. From assessing your current financial situation to keeping an eye on healthcare costs, and making sure your investments are working for you, it’s all about staying prepared and flexible.

Remember, retirement is a journey, not a destination. The key is to review, adjust, and rebalance as life throws its little curveballs your way. And don’t forget – you’re not alone on this journey. Our Retirement Planning Toolkit is here to guide you every step of the way.

If you would like to learn more about this strategy, check out my latest book, The Retirement Income Equation: Proven Strategies for a Secure, Flexible, and Prosperous Retirement , available on Amazon.com.