Episodi

  • Social Security 2027 COLA Update, #326

    Social Security 2027 COLA Update, #326
    Oct 6 2026
    I break down the upcoming Social Security cost-of-living adjustment (COLA) for 2027, share my predictions on the new numbers, and explain what you should do to prepare. With inflation still affecting retirees, I explain how the COLA is calculated, what it means for your benefits, and the factors that could affect your retirement income next year. This episode has essential tips to help you make the most of the upcoming increases and manage your retirement finances confidently. You will want to hear this episode if you are interested in... [01:10] projected 2027 COLA estimates [03:15] Average COLA increases over recent periods[04:20] How COLA is applied to current and future beneficiaries' benefits[06:24] Expected increase in IRMAA (Income-Related Medicare Monthly Adjustment Amount), its brackets, and projected changes to income thresholds [08:30] Impact for high earners once the wage base is exceeded[09:29] Changes to the earnings test amounts for those reaching full retirement age What is the Projected 2027 Social Security Cost of Living Adjustment? Next week, the Social Security Administration will release the official 2027 COLA. Early estimates put this increase between 3.5% and 3.7%. If the actual figure lands at 3.3% or higher, it will mark the largest single-year raise since 2003. For perspective, the COLA was 2.8% in 2026 and 2.5% in 2025. Over the past five years, retirees have seen a cumulative benefit increase of about 23%, largely spurred by post-pandemic inflation. Why is this important? Because rising prices on essentials, groceries, gas, heating oil, property taxes, and homeowners insurance continue to challenge retirees' budgets. The COLA helps Social Security benefits keep pace with these increases, though it's not always a perfect match. How Social Security Calculates COLA Since 1972, Social Security COLAs have been determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), focusing on the average CPI-W during July, August, and September, compared from one year to the next. Before this system, Congress had to approve benefit increases—a process fraught with political uncertainty. Inflation's ebb and flow have shaped COLA history. While the "3% rule" from the 1970s required at least a 3% CPI-W increase, Congress removed that threshold in 1986. Now, even a 0.1% change will trigger a benefit adjustment. Standout years include 1980 and 1981, with double-digit increases amid soaring inflation. What Retirees (and Future Retirees) Should Do The good news for most is that no action is needed to receive the new COLA. Social Security beneficiaries will be notified by mail in early December with their exact increase or can check their Social Security account online for quicker updates. The adjustment applies to gross benefit amounts—before tax withholding and Medicare premium reductions. For those not yet claiming Social Security (age 62 and under), the COLA is still factored into your eventual benefit. When you do start collecting, your "primary insurance amount" will reflect these cumulative annual increases, thanks to Social Security's method of indexing past wages into current dollars. Medicare Premiums and IRMAA A higher COLA is generally good news but is often offset by rising Medicare Part B premiums. For 2026, the base premium is $202.90 per month, with estimates suggesting a climb to $209.50 in 2027—a 3.4% increase. If your Social Security grows more than your Medicare premium rises, you'll see a net gain, but not always by much. Those with higher incomes may also face the Income-Related Monthly Adjustment Amount (IRMAA), which can tack on an additional $81.10 to $487 per month, depending on your reported income. These surcharges are based on tax returns from two years prior, making proactive tax planning essential. Wage Base and Earnings Limits The Social Security wage base—the maximum income subject to payroll tax—will likely rise to about $190,200 in 2027. Once you surpass this amount in earnings, you no longer pay Social Security tax for the year, which could be a small silver lining for high earners. For those considering early Social Security, remember the earnings test limit: if you collect benefits before full retirement age and your work income exceeds $24,280 (projected to rise by around 3%), your benefits will be reduced. However, after reaching full retirement age (typically 67), these limits disappear. Resources Mentioned Retirement Readiness ReviewSubscribe to the Retire with Ryan YouTube ChannelDownload my entire book for FREE Social Security Administration Connect With Morrissey Wealth Management www.MorrisseyWealthManagement.com/contact Subscribe to Retire With Ryan
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    11 min
  • Year-End Tax Moves For Pre-Retirees To Consider in 2026, #327

    Year-End Tax Moves For Pre-Retirees To Consider in 2026, #327
    Oct 13 2026
    For those actively planning for a secure retirement, smart tax planning is essential—especially as 2026 comes to a close. Tax laws and contribution limits keep evolving, and timely adjustments can help you keep more of your hard-earned money. On the show this week, I share seven critical tax strategies that can boost your retirement savings while minimizing your tax liability. Here's a deeper look at each move and how to integrate it into your financial plan. You will want to hear this episode if you are interested in... [01:41] Maxing out pre-tax retirement plans[04:32] Making after-tax contributions to retirement plans[06:05] In-plan Roth conversion and in-service distribution[09:54] Bunching charitable contributions using a donor-advised fund[10:40] Contributing to 529 plans for state tax deductions[12:24] Setting up a flexible spending account[13:16] Maximizing health savings account contributions[14:50] Year-end deadlines for tax strategies 1. Max Out Pre-Tax Retirement Contributions One of the most effective ways to reduce your taxable income is to contribute the maximum allowable amount to pre-tax retirement accounts like 401(k), 457, 403(b), or SIMPLE IRA plans. Contribution limits are different based on age and plan type—for example, individuals over 50 can contribute up to $32,500 to certain plans in 2026, while those under 50 are capped at $24,500. If you're between 60 and 63, look for special catch-up provisions that allow even higher contributions, up to $35,750 in some cases. Keep in mind that if your income exceeds $150,000 in 2025, portions of your catch-up contributions may have to be made as Roth contributions, meaning they won't reduce your taxable income but instead provide tax-free growth. 2. Consider After-Tax Contributions for Even Greater Savings Many employer-sponsored plans now allow for after-tax contributions beyond the standard limits. The combined contribution ceiling (including employer matches and profit sharing) can reach as high as $80,000 for those over 50. These after-tax contributions aren't deductible in the year you make them, but they set the stage for powerful strategies like the "mega backdoor Roth IRA," which can let you move larger sums into a Roth account for tax-free compounding growth. 3. Use Roth Conversions—Both In-Plan and Beyond If your plan allows it, consider converting after-tax contributions to Roth dollars through an in-plan Roth conversion. This lets future growth happen in the Roth portion, making withdrawals tax-free later. Under certain conditions (like reaching age 59½), you might also have the option to roll out your after-tax funds for a more favorable tax outcome 08:11. Doing the math on current and future tax brackets can help determine if a broader Roth conversion is advantageous—particularly in a year where your income is temporarily lower. 4. Leverage Donor-Advised Funds for Charitable Giving If you make regular charitable contributions yet rarely itemize deductions, a donor-advised fund can be a game changer. By "bunching" multiple years of giving into a single tax year through one of these funds, you may cross the threshold to itemize and get a larger tax deduction. You retain the flexibility to distribute to charities at your own pace in subsequent years. 5. Tap the Power of 529 Savings Plans for Education Expenses For those with college-bound children, contributions to a 529 plan can lead to valuable state tax deductions or credits. While some states limit deductions to their own plans, nine states allow contributions to any 529 plan to qualify. For example, in Connecticut, individuals can deduct up to $5,000 and couples up to $10,000 from their state income taxes when contributing. This can add up to hundreds of dollars in annual savings, especially when those funds were already earmarked for tuition. 6. Take Advantage of Flexible Spending Accounts (FSAs) If you're not enrolled in a high-deductible health plan but still incur significant out-of-pocket health costs, check if your employer offers a Flexible Spending Account. With a $3,400 per-person limit, couples can shield up to $6,800 of medical expenses from taxes each year. Be mindful of the "use-or-lose" rule—funds must be spent within a short time frame or risk forfeiture. 7. Max Out Health Savings Accounts (HSAs) with High-Deductible Plans For those on high-deductible health plans, HSAs offer triple tax advantages: contributions are tax-deductible, growth is tax-free, and qualified withdrawals are untaxed. Unused balances roll over indefinitely and can eventually be used for non-medical expenses in retirement with standard tax treatment, effectively functioning as another retirement account. Get a Head Start for Year-End Deadlines Many of these strategies require action before the end of the calendar year. By incorporating the appropriate tax moves, you can take control of your retirement planning and optimize ...
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    16 min
  • What Happens To My HSA When I Enroll In Medicare? #324

    What Happens To My HSA When I Enroll In Medicare? #324
    Sep 22 2026
    How much have you thought about Health Savings Accounts (HSAs) and what happens to them once you enroll in Medicare? Whether you're nearing age 65, wondering if you can keep contributing to your HSA, or curious about how you can use your HSA funds in retirement, this episode covers it all. I explain the rules around HSA contributions after enrolling in Medicare, the types of medical expenses you can pay for tax-free, and what happens to your HSA if there's still money in it after you pass away. You will want to hear this episode if you are interested in... [01:51] Ineligibility to contribute to HSAs after enrolling in any part of Medicare [03:02] When to stop HSA contributions[05:46] Automatic Medicare enrollment when collecting Social Security or some retirement benefits [08:00] Contrast between using IRA vs HSA to pay medical expenses [09:39] Using HSA for family expenses[14:27] Using the HSA post-65 for medical or other expenses What Changes With Medicare? One of the most important things to keep in mind is that once you enroll in any part of Medicare, you are no longer eligible to make HSA contributions. Continuing to contribute after enrolling in Medicare results in excess contributions, which are subject to a 6% excise tax each year the excess remains in the account. This penalty also applies to any income generated by those excess contributions, so immediate corrective action is necessary if you find yourself in this situation. Importantly, Medicare Part A coverage can be retroactive for up to six months if you delay enrollment. Because of this, it's recommended to stop contributing to your HSA at least six months before signing up for Medicare to avoid accidental over-contributions. Letting your employer know and possibly switching away from a high-deductible health plan before enrolling in Medicare can help prevent mistakes. Can You Still Contribute If You're Working Past 65? Some individuals continue working beyond age 65 and may wonder if they can keep adding to their HSA. The answer depends on two main factors: your (or your spouse's) participation in a qualified employer-sponsored health plan, and whether you are receiving Social Security or railroad retirement benefits. If you're still working and covered by a group plan with at least 20 employees, you can delay Medicare enrollment and keep contributing to your HSA. However, as soon as you start receiving Social Security or railroad benefits, you're automatically enrolled in Medicare Part A, meaning you must halt HSA contributions—even if you're still working. Carefully timing your Social Security enrollment can help maximize your HSA benefits. Making Tax-Free Withdrawals: Qualified Expenses After 65 Once you turn 65, your HSA is yours for life, even though contributions must stop. Withdrawals for qualified medical expenses remain tax-free—these include doctor's visits, prescription drugs, dental and vision care, hospital stays, Medicare Part B, Part D, and Medicare Advantage premiums, but not Medigap premiums. For example, if you and your spouse spend $500 monthly on Medicare premiums, you could take $6,000 out of your HSA tax-free each year. Long-term care costs, including insurance premiums and care expenses, can also be paid with HSA funds within certain annual limits based on your age. These limits increase with age, reaching $6,200 per year for those 71 and older as of 2026. What Happens to Your HSA After You Die? Upon death, if your spouse is the named beneficiary of your HSA, the account simply becomes theirs—with all tax advantages preserved. For any other named beneficiary, the HSA must be cashed in and its balance treated as ordinary income, losing its tax-preferred status. If no beneficiary is named, the HSA passes to your estate, triggering potentially higher taxes and delays in distribution. Resources Mentioned Retirement Readiness ReviewSubscribe to the Retire with Ryan YouTube ChannelDownload my entire book for FREE Connect With Morrissey Wealth Management www.MorrisseyWealthManagement.com/contact Subscribe to Retire With Ryan
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    16 min
  • What If I Retire Right Before A Market Crash? #325

    What If I Retire Right Before A Market Crash? #325
    Sep 29 2026
    What should you do if the stock market crashes right after you retire? In this episode, I discuss what happens if you experience a major market decline in your early retirement years, explain the concept of sequence of return risk, and share a few strategies to safeguard your hard-earned nest egg and maintain peace of mind. You will want to hear this episode if you are interested in... [01:20] What to do if the stock market crashes right after retiring[04:09] Sequence of return risk explained[07:14] Preparing for market declines in retirement[13:43] Tax strategies during market decline[15:24] Roth conversions and retirement planning[16:54] Market declines are recurring and necessary for capturing market returns Risks Retirees Face Retiring at a market peak brings risks. When still working, a market downturn lets you buy investments at lower prices. You have time on your side—and a regular paycheck. In retirement, however, your portfolio often becomes your primary income source. After years of building a $1.5 million nest egg, imagine seeing it drop by 25%, to $1.125 million, just months after retiring—without paychecks to replenish it. Your portfolio potentially shrinks, and you're withdrawing money from a diminished resource, hampering its ability to recover as markets eventually rebound. Understanding Sequence of Return Risk A key concept is sequence of return risk, which refers to the danger that poor investment returns strike early in retirement. Two retirees may earn the same average annual return, but if one encounters downturns at the start of retirement while the other faces them later, their financial outcomes can be drastically different. Early losses, combined with withdrawals, can irreparably harm a portfolio, making recovery much harder—even if average returns are the same. Five Steps to Safeguard Your Retirement Portfolio How can you prepare for, and withstand, a major market correction right after retiring? Here are my five key steps: 1. Hold Short-Term Reserves Every retiree should allocate a portion of their portfolio to short-term bonds, cash, or money market funds. This "bucket" provides a buffer, covering your withdrawals during market downturns so you don't have to sell stocks at a loss. Depending on your risk profile, aim to set aside 5 to 10 years' worth of expected withdrawals in these safer assets. 2. Regularly Review Your Asset Allocation As you approach retirement, your investment mix should grow more conservative. Adjusting your asset allocation—perhaps settling on a portfolio of 60% stocks and 40% bonds or cash—can help limit losses. Ask yourself: How much of a decline can you stomach? Even diversified portfolios can lose 25% in significant downturns, which, on a $2 million portfolio, means a $500,000 drop. 3. Stay Flexible with Retirement Spending Categorize your expenses into essentials (housing, food, insurance) and wants (travel, memberships). If markets fall and portfolio withdrawals become a high percentage of your assets, consider temporarily reducing want-based spending. This flexibility buys time for markets to recover and helps your assets last longer. 4. Tax-Smart Withdrawal Strategies If you hold both taxable and tax-advantaged accounts, be strategic. In a downturn, withdrawing from taxable accounts—especially if they contain holdings at a loss or long-term capital gains taxed at lower rates—may minimize your tax burden compared to pulling from traditional IRAs or 401(k)s. 5. Consider Roth Conversions in Down Markets A market drop can be an opportunity: converting pre-tax IRA assets to Roth IRAs at lower prices means a lower tax bill and the chance for future tax-free growth as values recover. Should You Delay Retirement During a Market Crash? Ensure your financial plan, reviewed with a professional, can weather market shocks before taking the leap 16:25. Stock market declines are inevitable but have historically been followed by recovery and growth—especially for those who avoid panic and keep a steady course. A stock market crash immediately after retirement is daunting, but it doesn't have to ruin your plans. By building robust short-term reserves, adjusting your asset allocation, retaining spending flexibility, employing smart withdrawal strategies, and seizing opportunities like Roth conversions, you can navigate downturns with confidence. Remember: market declines are normal, and with a well-constructed plan, your retirement can weather any storm. Resources Mentioned Retirement Readiness ReviewSubscribe to the Retire with Ryan YouTube ChannelDownload my entire book for FREE Connect With Morrissey Wealth Management www.MorrisseyWealthManagement.com/contact Subscribe to Retire With Ryan
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    19 min
  • 5 Tax Mistakes To Avoid In Your Initial Retirement Years, #323

    5 Tax Mistakes To Avoid In Your Initial Retirement Years, #323
    Sep 15 2026
    As you transition into retirement, tax planning might not be at the top of your to-do list—but overlooking it can lead to costly mistakes. This week, I break down the five biggest tax pitfalls new retirees face, from unexpected taxes on Social Security benefits to costly Medicare premium surcharges and missed Roth conversion opportunities. I'm also sharing a few of my favorite strategies to avoid unnecessary state taxes and manage your retirement distributions with confidence. You will want to hear this episode if you are interested in... [01:45] Without planning, your risk of unnecessary taxes and penalties increases[04:25] Managing taxes on Social Security benefits[08:32] Understanding Medicare Part B premiums[10:25] Understanding and strategizing state-specific tax breaks for retirees[13:15] Roth conversions and required distributions[14:09] Planning retirement account distributions Smart Tax Planning Can Save You Money Without proactive tax management, retirees can encounter unexpected tax bills, costly penalties, and unnecessarily complex financial situations. These are the five biggest tax mistakes that people make in the initial phase of retirement—find out how you can avoid them to enjoy your golden years with peace of mind. 1. Failing to Withhold Taxes on Social Security Benefits Many retirees are surprised to discover that Social Security benefits can be taxable. In fact, most will owe some federal tax on these benefits. The IRS calculates the taxable portion based on your combined income—that's your adjusted gross income, non-taxable interest, plus half of your Social Security benefit. Depending on your filing status and total income, between 50% and 85% of your Social Security can be taxable. 2. Accidentally Triggering IRMAA Premiums If you're on Medicare, your income affects your monthly premiums for Part B and Part D. Exceeding certain income limits results in an "Income-Related Monthly Adjustment Amount" (IRMAA)—an unwelcome increase in premium costs. For singles, the first threshold is $109,000, and for joint filers, it's $218,000. Exceeding these levels can raise your premiums by hundreds of dollars per month. One pitfall is making large IRA withdrawals or cashing out retirement accounts in a single year, inadvertently pushing your income above an IRMAA threshold. By spreading withdrawals over several years or strategically withdrawing from different account types (pre-tax, Roth, or brokerage accounts), you may be able to avoid higher premiums. 3. Paying Unnecessary State Income Taxes Where you live has a significant impact on your tax liability in retirement. Some states, like Florida, Texas, and Nevada, have no state income tax. Others offer exemptions for certain types of retirement income, such as pensions or Social Security. However, states without income tax may offset this advantage with higher property or sales taxes. Research the tax landscape of your home state and potential destinations if you're considering relocating. Even if you aren't moving, understanding thresholds for tax exemptions or reduced rates based on income can help you plan withdrawals to minimize your state tax exposure. 4. Waiting Too Long to Make Roth Conversions Roth IRAs provide the benefit of tax-free withdrawals in retirement, making them a powerful planning tool. If you have significant pre-tax IRA balances, converting some of this money to a Roth during your retirement's early years—especially before claiming Social Security—can make sense. Those years often bring lower income, keeping your conversion tax rate modest. Unfortunately, many retirees delay Roth conversions until it's too late. Once required minimum distributions (RMDs) kick in during your 70s, Roth conversions become less practical and may push you into higher tax brackets. 5. Mismanaging Retirement Account Distributions Without a distribution plan, retirees risk withholding too little or too much tax from IRA and 401(k) withdrawals. Setting proper withholding ensures compliance with the IRS "safe harbor" rules—generally, withholding 90% of current-year liability or 100–110% of last year's taxes, depending on your income. You can meet this requirement with quarterly estimated payments or through withholdings on distributions, even waiting until year-end if needed. Careful tax planning with a financial advisor or CPA will help you project your taxable income and avoid penalties. And, when doing Roth conversions, it's always preferable to pay taxes from outside funds, maximizing the amount that becomes tax-free. Resources Mentioned Retirement Readiness ReviewSubscribe to the Retire with Ryan YouTube ChannelDownload my entire book for FREE Social Security Administration Form W-4V (Rev. January 2026)Request to lower an Income-Related Monthly Adjustment Amount (IRMAA) | SSA Connect With Morrissey Wealth Management www.MorrisseyWealthManagement.com/contact Subscribe to Retire With ...
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    18 min
  • 4 Best Options To Pay For Long-Term Care, #321

    4 Best Options To Pay For Long-Term Care, #321
    Sep 1 2026
    Long-term care coverage is an essential, yet often misunderstood, aspect of retirement planning in the United States. Although many people will require some form of long-term care as they age, most are unprepared for the high costs and limited coverage options available. On the show this week, I'm debunking common myths like the notion that Medicare will fully cover all long-term care costs and taking a deep dive into the four main ways retirees can pay for these expenses. You will want to hear this episode if you are interested in... 00:00 Understanding the options for long-term care help03:10 The difference between Medicare and Medicaid05:07 Spouse asset protection options09:15 Understanding hybrid policy benefits13:24 Hybrid vs. traditional long-term care19:25 Long-term care insurance application process Understanding Medicare's Limitations There is often a misconception that Medicare covers long-term care. In reality, it's split into two primary parts: Part A, which covers some costs for hospital stays, and Part B, which addresses preventative care such as doctor visits and certain procedures. While Medicare may pay for medically necessary hospital stays—such as those following an injury like a broken hip—it stops covering the costs when ongoing care is no longer deemed medically necessary. Extended or custodial care, where you need help with daily living activities but do not require intensive medical treatment, is not included under standard Medicare coverage. This leaves retirees exposed to significant out-of-pocket expenses once hospital-based care ends. The Four Main Options for Long-Term Care Coverage There are four primary payment strategies for long-term care. Each option has its benefits and limitations, and selecting the right one depends heavily on individual circumstances. 1. Medicaid Medicaid is a needs-based program designed for individuals with low income and limited assets. To qualify, applicants must pass specific income and asset thresholds, which, for single individuals, often means owning less than $2,000 in assets. Married couples have more leeway—the "community spouse" can usually retain a higher amount of assets and income. Medicaid planning may involve establishing a qualified income trust or transferring assets into an irrevocable trust. It is important to note that most states enforce a five-year look-back period for asset transfers, meaning that gifts or transfers must occur at least five years before the Medicaid application to be effective. 2. Self-Insuring Self-insuring is also an option, which involves setting aside personal assets, such as retirement savings or home equity, to pay for potential care needs. This method offers autonomy but carries risk, especially given the high and regionally variable costs of care. Depending on where you live, full-time nursing care can average over $15,000 per month, and home care or assisted living can still cost tens of thousands of dollars per year. Planning ahead is critical, particularly for couples, to ensure one spouse's care does not financially imperil the other. 3. Hybrid Long-Term Care Policies Hybrid long-term care insurance policies have emerged that combine life insurance with long-term care coverage. These products provide either long-term care benefits or a death benefit to your estate, ensuring that money paid into the policy is not "lost" if long-term care is never needed. Hybrid policies tend to offer flexible payout options and the potential for locked-in premiums, but they may provide less coverage per premium dollar when compared to traditional policies. 4. Traditional Long-Term Care Insurance Traditional long-term care insurance remains an option for those prioritizing higher benefit payouts. While these policies can stretch benefit pools further, they don't usually offer death benefits, and their premiums are not guaranteed—they can increase over time and may eventually become unaffordable. Underwriting is also stringent: many applicants over 70 are denied coverage, and certain medical conditions result in automatic disqualification. Making the Right Choice for You and Your Family You need to balance protecting personal assets, securing a spouse's future, and managing premium costs. Retirees should honestly assess their health, financial circumstances, and family situation. Consulting a financial advisor or insurance professional can help tailor a long-term care strategy that minimizes risk while supporting a comfortable and dignified retirement. Planning now, rather than later, ensures you are prepared for whatever the future may bring—and that you and your loved ones have peace of mind. Resources Mentioned Retirement Readiness ReviewSubscribe to the Retire with Ryan YouTube ChannelDownload my entire book for FREE Connect With Morrissey Wealth Management www.MorrisseyWealthManagement.com/contact Subscribe to Retire With Ryan
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    22 min
  • 5 Year Roth IRA Rule People Get Wrong, #322

    5 Year Roth IRA Rule People Get Wrong, #322
    Sep 7 2026
    Roth IRAs are a powerful retirement tool, much loved for their promise of tax-free growth and withdrawals. But embedded in the rules for Roth IRAs are two little-understood 5-year rules. Misunderstanding these can trip up even savvy savers, potentially exposing your hard-earned gains to taxes and early withdrawal penalties. This week I'm giving you an expert breakdown to clarify how the rule works and bust some common misconceptions. You will want to hear this episode if you are interested in... [01:13] Tax-deferred growth and conditions for tax-free distributions [05:39] Taxes on stock gains withdrawal[07:05] New individual 5-year clock for each conversion based on year of conversion [08:24] Roth IRA conversion rules explained[10:48] Example of an IRA with breakdown of sources, including contributions, conversions, and growth[11:15] Understanding Roth IRA withdrawal rules Roth IRA Basics Roth IRAs allow you to contribute after-tax money, grow investments tax-deferred, and take distributions tax-free if you follow the rules. The key requirements to keep withdrawals tax- and penalty-free are: You must be age 59½ or older, andYour Roth IRA must have been open for at least 5 years If you don't follow these rules, your distributions could be subject to taxes and a 10% penalty. Missing one of these crucial steps can create an unnecessary tax bill, undermining the Roth's greatest benefit. Exceptions to the 10% Early Withdrawal Penalty There are a few exceptions to the 10% penalty for taking early Roth IRA distributions before 59½, including: Up to $10,000 for a first-time home purchaseQualified higher education expenses$5,000 for birth or adoption within a yearIf the account owner dies or becomes disabledUnreimbursed medical expenses above 7.5% of AGIHealth insurance premiums while unemployedCertain federal disaster relief, IRS levies, or military service These exceptions only waive the penalty, not the income tax that might apply if you withdraw earnings instead of contributions. Understanding the Two 5-Year Rules The 5-Year Rule for Contributions Think of the first 5-year rule as a clock that starts with your initial Roth IRA contribution. No matter how many subsequent contributions you make, or which custodian holds your account, this clock never resets. If you make your first contribution for 2025—even if you do so in April 2026—your 5-year period begins on January 1, 2025. Once you hit five years and have reached age 59½, you can withdraw earnings tax- and penalty-free. Without those two factors in place, withdrawing earnings could mean income taxes or penalties—no matter your age. For example, someone who opens a Roth at age 58 and is 59½ a year later must still wait until their account has been open for five years before gains are tax-free. The 5-Year Rule for Roth Conversions Each Roth conversion also triggers its own 5-year clock, but with different consequences if violated. This rule exists because conversions move money from tax-deferred accounts (like a traditional IRA) into a Roth, and the IRS waives the usual 10% penalty on early withdrawals for the converted funds. To prevent people from converting and immediately withdrawing, you must let converted amounts "season" for five years, or else withdrawals before then will be penalized if you're under age 59½. Each conversion starts its own separate 5-year clock. If you convert $200,000 at age 50, you can withdraw that amount at 55 without penalty—but earnings on that conversion are still taxable and possibly penalized unless you're at least 59½. The Backdoor Roth: Another Clock to Watch Backdoor Roth contributions, a strategy typically used by high earners, are technically a form of Roth conversion and start their own 5-year clocks for withdrawals. Every backdoor contribution, even if done yearly, has its own timeline before the money is fully eligible for tax-free, penalty-free withdrawal. The main 5-year clocks, one for contributions, one for each conversion, are crucial to maximizing the Roth IRA's benefits. Once you're 59½, your account has been open five years, and any conversions are past their five-year marks, you can safely access your Roth savings tax- and penalty-free. Resources Mentioned Retirement Readiness ReviewSubscribe to the Retire with Ryan YouTube ChannelDownload my entire book for FREE Connect With Morrissey Wealth Management www.MorrisseyWealthManagement.com/contact Subscribe to Retire With Ryan
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    12 min
  • Are Bonds Still A Good Investment For Your Retirement Portfolio, #320

    Are Bonds Still A Good Investment For Your Retirement Portfolio, #320
    Aug 25 2026
    On the show this week, I'm helping you understand why bond prices have been dropping, what actions investors should take, and whether bonds still have a place in a retirement portfolio. I discuss the different types of bonds and how interest rates impact bond prices. I also dig into the importance of maintaining a diversified portfolio and the role bonds can play in reducing overall volatility during retirement. You will want to hear this episode if you are interested in... [02:03] Types of Bonds and issuers[03:21] Risks of investing in junk bonds[04:39] Why have bond prices declined this year? [09:52] Deciding on bond investments[11:10] Investing in bonds for retirees[12:47] Bonds as a source of income and volatility reduction Why Bond Prices Are Down and What Actions to Consider There are several fundamental types of bonds—government, corporate, agency, and municipal—and they all have different levels of risk. Bonds are also classified based on their credit ratings, ranging from top-rated "investment grade" (BBB or higher) to "junk" or high-yield bonds (below BBB). I share more about the increased risk and potential reward of high-yield bonds, and why defaults can lead to stressful and lengthy processes for investors. Why Have Bonds Declined in 2026? Why have bond prices declined even though the economy is not in recession? There is an inverse relationship between bond prices and interest rates. When interest rates rise, as has been the case in 2026, bond prices fall. Even a seemingly small increase is sufficient to push bond prices down and reduce the total return for many bond funds. Rising rates mean many bond funds have seen negligible or negative total returns this year. The Broader Factors Influencing Interest Rates There are several drivers behind the upward movement in interest rates. First, expectations that the Federal Reserve will hike rates to curb inflation have affected investor behavior. Second, growing government deficits and the issuance of more national debt lead investors to demand higher yields as compensation for greater risk. Third, technology companies, especially those investing heavily in AI, have issued substantial new debt, pushing rates even higher as they compete with Treasuries for investor capital. Much like the stock market, the bond market is subject to various economic forces and investor sentiment, making timing extremely difficult. The Case for Keeping Bonds in Your Retirement Plan Despite the recent decline in prices, bonds remain an important part of a retirement portfolio. Historically, bonds have exhibited significantly less risk and volatility than stocks, especially during market downturns. Keeping some portion of assets in bonds provides stability, reduces overall portfolio fluctuations, is a reliable source of income when the stock market underperforms. By maintaining a portion in bonds, retirees create a safety net and source of funds for income needs without being forced to sell equities during downturns. Resources Mentioned Retirement Readiness ReviewSubscribe to the Retire with Ryan YouTube ChannelDownload my entire book for FREE Morningstar.com S&P Global RatingsMoody's Vanguard Total Bond Market ETF State Street SPDR Long-Term Treasury ETF Long-Term Treasury ETF Short-term Treasury bond funds Connect With Morrissey Wealth Management www.MorrisseyWealthManagement.com/contact Subscribe to Retire With Ryan
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    14 min