Alek Johnson, CFP®, Author at Peterson Wealth

Giving to Others While You Live: The Meaningful Impact of Gifting Today

Posted on February 5, 2026February 17, 2026 by Alek Johnson, CFP®

When you think about why giving matters, it isn’t only about the inheritance you’ll leave behind someday. It’s about what your support can do for the people and causes you care about right now—while you’re here to see the difference. Lifetime gifts aren’t just transfers of money; they’re moments, memories, and opportunities that ripple through your family, your community, and beyond.

This piece looks at how to give in ways that balance practicality with personal meaning. You’ll see how to match your resources with your energy and relationships, adopt strategies that keep generosity sustainable, and put up guardrails that protect your own plan.

Why Giving Is Important During Your Life

Proper support at the right time can change everything: a down payment that makes homeownership possible or a contribution that clears high-interest debt. A trip that becomes the anchor of family stories. When you choose to give during your lifetime, you see those results firsthand, and you get to explain the “why,” deepening trust and connection in the process.

Timing often makes all the difference. A gift during someone’s thirties—when they’re building a career, raising kids, or paying off student loans—can have far more weight than the same amount arriving decades later. That boost can redirect their financial path, relieve stress, and open doors at exactly the stage when opportunity matters most.

For a lot of people, giving is measured less in dollars and more in the sense of fulfillment it brings. Money has the power to create lasting experiences—not only for those you help, but for yourself too. Giving while you’re healthy and active lets you create memories together: experiences that often outlast the dollars themselves and become part of how your family remembers you. That’s a form of giving back that lives on in stories and traditions.

Lifetime giving also allows you to target real, immediate needs. Whether it’s covering tuition before a deadline, paying down medical bills that weigh on someone’s mind, or stepping in for opportunities that can’t wait, you’re able to direct your support with precision. Being present to encourage, celebrate, and guide is so important—often even more cherished than the money itself.

Finally, lifetime generosity has another benefit: it teaches. When you give with purpose, others learn how to handle money with responsibility, gratitude, and awareness. Your example becomes a guidepost for children, grandchildren, and even peers who see what it means to use resources thoughtfully. In this way, giving to others in need is more than a single act of kindness; it sets a standard that can influence decisions long after you’re gone.

Gifting Strategies and Tax Considerations

A few key rules shape how gifts are treated for tax purposes, and knowing them up front keeps things simple. The federal system distinguishes between lifetime and estate transfers and provides exclusions that keep most families clear of actual tax. Nevertheless, here are some high-level factors that are worth familiarizing yourself with:

Gift Tax Basics

The federal gift tax covers assets given during your lifetime, whereas the estate tax applies to what’s passed on after death. Rates are progressive, starting at 18% and topping out at 40% for very large gifts.1 In most cases, the giver (not the recipient) pays the tax. Gifts to family or friends aren’t deductible, but contributions to qualified charities can be, if properly documented.

Annual Gift Tax Exclusion

In 2026, you can still only give up to $19,000 per recipient, without dipping into your lifetime exemption or filing paperwork.2 Married couples can combine exclusions to give up to $38,000 per recipient. Gifts can be cash, investments, or property. Staying within this limit keeps records clean and avoids extra filings.

Lifetime Gift and Estate Tax Exclusion

Larger gifts reduce your lifetime exemption, which is set at $15,000,000 per person in 2026 ($30 million for couples).3 This exemption also applies to your estate at death, so it’s important to track usage over time. If you expect to transfer significant wealth, keeping a running tally ensures you know how much exemption remains.

Reporting Requirements

Gifts beyond the annual exclusion—or certain elections like 529 plan front-loading—require IRS Form 709. Filing doesn’t always mean tax is due; it simply records how much of your lifetime exemption you’ve used. Married couples electing gift-splitting also do so on this form. Accurate reporting avoids complications later, both for you and your executor.

Please Note: Recent legislation—the One Big Beautiful Bill (OBBB)—eliminated the 2026 “sunset”. As of January 1, 2026, the newly established exclusion amount will be indexed annually for inflation.4

Additional Gifting Strategies

Once you understand the rules, certain tactics can make your generosity go further. Some approaches allow funds to grow over time, while others let you meet specific needs directly without reducing your exclusion amounts. Here are strategies worth considering, depending on your goals and the needs of those you want to help:

Funding 529 College Savings Plans

A 529 plan provides tax-advantaged growth for education. Contributions count toward the annual exclusion, but you may “front-load” up to five years at once. The main advantage is compounding: an early contribution allows earnings to grow for years, covering tuition, books, or housing. Most plans offer investment choices that can be adjusted to fit the student’s expected timeline. The five-year election does require Form 709, even if no tax is owed, but the benefit is a large boost to education funding when it matters most.

Paying Education Expenses Directly

Qualified tuition payments made directly to the school are outside the gift tax system altogether, no matter the amount. This leaves your annual exclusion intact for additional support such as living expenses or supplies. It’s a simple way to maximize flexibility while helping a student at a crucial moment. Having both routes available—a 529 contribution and direct payments—gives you tools to adapt based on timing and urgency.

Paying Medical Expenses Directly

Payments made directly to hospitals, clinics, or insurers for another person’s qualified care are unlimited and tax-free. This approach can be so important when a loved one faces surgery, long-term treatment, or unexpected medical bills. You can also combine direct payments with an annual exclusion gift in the same year, making it one of the most efficient ways to provide relief exactly when it’s needed most.

Gifting Non-Cash Assets

Transfers of appreciated stock, real estate, or other property come with unique tax implications. Your cost basis carries over to the recipient, meaning future sales may create taxable gains. For example, a stock purchased at $10,000 that is now worth $50,000 would pass along the $10,000 basis. If the same asset is instead transferred at death, a step-up in basis generally applies, resetting to fair market value and often eliminating built-in gains. Families often gift assets with modest appreciation while holding highly appreciated ones for estate transfer. Some assets, such as IRAs and 401(k)s, don’t receive a step-up, so knowing the property type and timing helps avoid tax surprises.

Donor-Advised Funds (DAFs)

A DAF allows you to give cash or appreciated assets, claim a charitable deduction right away, and later suggest grants to the nonprofits you want to support. It offers flexibility, tax advantages, and a meaningful way to bring children or grandchildren into charitable giving. For families who value steady giving to others in need, a DAF can become a long-term hub for charitable activity.

Charitable IRA Transfers (QCDs)

For those age 70½ or older, substantial annual gifts can be directed from an IRA to a qualified charity. With qualified charitable distributions (QCDs), you can satisfy your required minimum distributions (RMDs) by giving directly to charity. The amount won’t be included in your taxable income, which makes them an effective way to reduce taxes while supporting the organizations you care about.

Charitable Remainder Trusts (CRTs)

For larger estates, a CRT offers both income and tax advantages. You can transfer appreciated assets into the trust, receive a partial charitable deduction, and set up an income stream for yourself or other beneficiaries for a set period of time. At the end of the trust term, the remainder goes to a designated charity. This strategy reduces estate taxes, helps avoid immediate capital gains on appreciated assets, and creates a structured legacy of support for organizations you value.

Best Practices for Intentional Giving

You want your gifts to help the people you care about without putting your own path at risk. A handful of practical habits make that far more likely. They’re simple, they’re steady, and they keep your generosity aligned with the bigger picture you’re building:

Start with a Plan: Clarify what you’re trying to accomplish and how the gift supports it. Connect amounts and timing to your retirement income strategy, cash reserves, and near-term goals. A clear plan highlights the importance of timing and purpose. When everyone understands “what this gift is for,” follow-through gets easier, and expectations stay healthy.
Be Generous, Not Vulnerable: Test gifts against real-life scenarios like a market drop or a health event. If a large transfer today would jeopardize your flexibility next year, scale the amount or stage it over time. Widows and widowers in particular may feel pulled to give quickly; pausing to stress-test the decision protects future choices.
Be Fair, Not Necessarily Equal: Every child or grandchild’s situation is different. Tailoring gifts to real needs often does more good than dividing the same amount across the board. Clear communication reduces friction and assumptions. Again, when you can clarify the “why,” fairness is easier to see even when amounts differ.
Consider Avoiding Gifting Around Holidays or Birthdays: Linking large checks to emotionally charged moments can create pressure and assumptions. A neutral time and place keeps focus on purpose and avoids an annual “is there a check?” ritual. Treat memorable days as celebrations, not financial checkpoints, and you’ll sidestep awkward expectations next year.
Involve Advisors When Needed: When gifts get large or involve property, tap tax and financial professionals to set up the right paperwork and structure. Coordinating details like Form 709, gift-splitting, or a 529 front-load keeps everything clean. Good records today spare your loved ones administrative headaches later and keep your plan on track.

Giving to Others While You Live FAQs

1. Are there different tax implications when gifting cash vs. assets like stock or property?

Yes. Cash is straightforward under the annual exclusion. With appreciated assets, your cost basis usually carries over to the recipient, which can create taxable gain if they sell. That’s different from a step-up in basis at death, so many families gift assets with modest appreciation and keep highly appreciated positions for later estate transfer.

2. Do my spouse and I have to file jointly to give $38,000 per recipient?

No. Each person has a separate annual exclusion. As a couple, you can give up to $38,000 to the same person in 2026, even if you don’t file a joint tax return. Follow gift-splitting rules and keep records so your tax preparer can file correctly if needed.

3. Does a loan without interest count as a gift?

It can. Family loans come with rules that may impose interest and require tax reporting. If you intend to forgive the loan later, that forgiveness may be treated as a gift at that time. Written terms and professional guidance help you avoid unintended outcomes and keep relationships clear.

4. Can a 529 plan be used for more than one student?

Most plans allow you to change the beneficiary. You can generally move the benefit among siblings or cousins in the same generation without tax. Shifting to a person in an older generation may bring tax consequences, so speak with a tax professional before you make that switch. This flexibility lets you adapt as kids’ education paths evolve.

5. What should I know about charitable gifting from my IRA to meet RMD requirements?

A qualified charitable distribution (QCD) can satisfy required minimum distributions when sent directly to a qualifying 501(c)(3) organization from your IRA. The transfer must go straight to the organization to count. Gifts to family members do not qualify. If you’re considering this route, coordinate timing and documentation with your tax preparer and the receiving organization, so everything is handled properly.

6. Can I give in increments up to the annual exclusion, or must it be one lump sum?

You can give in stages throughout the year and still stay within the annual limit. Many families prefer monthly giving to spread support and reinforce purpose over time. Track totals by recipient for the calendar year so you know whether a Form 709 filing will be needed. This rhythm also keeps conversations ongoing and reduces pressure on any single date.

We Help People with Giving to Others During Their Lives

Your giving should consider your values and intentions, rather than simply the size of your bank account. Our approach starts by mapping out your retirement income, reserves, and upcoming plans so each gift fits without creating unwanted tradeoffs. From there, we work with you to choose amounts and timing that feel right and accomplish what you care about most, whether you’re helping with education, health costs, or shared experiences.

When taxes or paperwork enter the picture, we coordinate the details so you can stay focused on the impact. That includes annual exclusion gifts, lifetime exemption tracking, 529 plan front-loading, direct tuition or medical payments, and record-keeping that keeps future filings clean. If gifts involve investments or real estate, we talk through basis, timing, and options so you’re comfortable with each move and the recipient understands what comes next.

If you’re giving to people and also to your favorite charities, we help you decide which dollars go where for the biggest effect. Some goals call for immediate cash support; others benefit from targeted non-cash transfers or education-focused strategies. Matching the tool to the goal is how you turn intention into results you can see and celebrate.

If you’re ready to take the next step, start with a simple question: “Who could this help the most right now?” Whether the answer points to a family member, a friend, or a cause close to your heart, you can design a giving strategy that fits your season of life. Schedule a complimentary consultation with our team, and we can discuss how our advisors can help you create a plan that supports your giving during your life and beyond.

Resources:

1) https://www.kiplinger.com/taxes/gift-tax-exclusion

2) https://www.morganlewis.com/pubs/2025/10/irs-announces-increased-gift-and-estate-tax-exemption-amounts-for-2026

3)https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax

4) https://taxfoundation.org/research/all/federal/one-big-beautiful-bill-act-tax-changes/

Smart Year-End Tax Moves

Posted on January 29, 2026 by Alek Johnson, CFP®

The final stretch of the year gives you a short window to make choices that still count on this year’s paperwork. Many of the best decisions are timing decisions, and they can shape what lands on your return when the calendar closes on December 31st.

A smart approach starts with clearly understanding your options. From there, you are looking for a few clean actions that fit your accounts, your cash flow, and your records; filing season feels straightforward, and your return reflects choices you made on purpose, not ones you made under pressure.

The Three Account Buckets That Drive Most Decisions

Year-end decisions get easier when you sort your accounts into three buckets, each with its own rules and tradeoffs:

Tax-deferred accounts

This bucket includes accounts like 401(k)s, 403(b)s, and traditional IRAs. Contributions generally reduce your taxable income in the year you make them, and the money can grow without annual taxation on interest, dividends, or growth while it stays inside the account.

The tradeoff happens at distribution time: money coming out is typically 100% subject to income taxes. Any money coming out before age 59½ can also trigger a 10% early-withdrawal penalty.

Required minimum distributions (RMDs) also apply to this bucket starting at age 73 or 75, depending on your birth year, and there is an exception for someone still working past those ages if they have a 401(k) they are actively contributing to.

Tax-free accounts

Accounts like Roth 401(k)s and Roth IRAs are funded with after-tax dollars, so contributions do not reduce taxable income today. The benefit shows up later: qualified withdrawals can be tax-free, including growth. The same age 59½ guideline can still apply to avoid the 10% penalty on growth, yet these accounts are not subject to RMDs, which means the money can remain invested for life if that fits your plan.

Taxable accounts

Taxable brokerage accounts work more like a bank account, a high-yield savings account, or a CD from a tax standpoint. They are funded with after-tax dollars, and the main benefit is flexibility: you can take money out at any point, for any reason, without the age 59½ restriction. The tradeoff is that interest, dividends, and capital gains are taxable in the year they are earned.

How Your Tax Return Gets Built

A clear way to think about your year-end choices is to follow the same path the IRS uses on paper:

Add up all sources of income: Start by totaling wages, salaries, rental income, dividends, and interest to reach gross income.
Subtract “above-the-line” adjustments to reach AGI: Certain items reduce income before you ever decide whether to itemize. Examples may include, but are not limited to, IRA contributions, 401(k) contributions, HSA contributions, and student loan interest. This step gets you to Adjusted Gross Income (AGI), a number that drives many thresholds inside the tax return.
Choose your deduction path: Compare itemized totals to the standard deduction, then subtract whichever is higher to arrive at taxable income. This is where many year-end actions either help or don’t help, depending on which route you end up taking.
Apply brackets and rates, then credits: Federal brackets range from 10% to 37%, and your final result also depends on your state’s income tax rules. The bracket calculation applies to taxable income, and then credits such as child and education credits reduce the bill dollar-for-dollar. The result is what you owe or what you get back.

Why Itemizing Has Been Harder, and the Updates That Can Change the Math

Itemizing has been harder for many households simply due to how often the standard deduction wins the comparison. That reality changes the way many people experience generosity on their return: you can still give faithfully, yet the giving may not change the tax calculation in years when the standard deduction is larger than the itemized total. This is why timing strategies show up so often at year-end: the goal is to line up deductions in a way that makes itemizing possible in the years it makes sense.

Recent legislative changes have also changed how taxpayers need to weigh their options. One change is a new age-based deduction: individuals over 65 can receive an additional $6,000 deduction (or $12,000 for married couples). The deduction has income-based phaseouts ($75k–$175k for single filers; $150k–$250k for married couples), and it is received in addition to either the standard deduction or itemized deductions.

Another update is the state and local taxes (SALT) cap. The cap increased from $10,000 to $40,000, which can make state tax deduction totals more meaningful for households with larger property taxes and other state and local taxes. That higher cap can increase the odds of itemizing pencils out.

The following will happen starting in 2026:

For those who do not itemize, an extra $1,000 charitable donation deduction per person, or $2,000 for a couple, as an add-on when taking the standard deduction
Charitable donation deductions will only be available for the portion above 0.5% of AGI. For example, a $100,000 AGI would mean donations must exceed $500 before any deductible amount begins.

Bunching: One Timing Change That Can Create More Deduction Power

A common year-end idea is simple: move the timing of your donations so that your itemized total clears the hurdle in one year, then take the higher standard deduction the next. This approach does not require you to give more, and it does not require you to change what you support. It focuses on when you write the checks:

Bunching Example 1

A household has about $14,000 each year from other itemized items, and then they give $12,000 each year. That puts them at $26,000 of total itemized deductions in 2024 and $26,000 again in 2025. In the example, both years end up below the standard deduction, so they take the standard deduction twice. Over the two years, their combined deductions total $60,700.

Bunching Example 2

The household keeps the same total generosity across two years, but they change the timing. They give double their normal amount in 2024 (i.e., $12,000 x 2 = $24,000) and $0 in 2025. In 2024, they still have the $14,000 of other deductions, so $14,000 + $24,000 = $38,000, which is high enough to itemize that year. In 2025, they take the standard deduction. The two-year result in this case is $69,500 of total deductions (one year itemizing and one year taking the standard deduction), which is $8,800 more than Example 1, without increasing charitable giving.

Donor-Advised Funds (DAFs): Take the Deduction Now, Give on Your Timeline

A donor-advised fund (DAF) is a charitable account where you contribute, take the deduction in that year if you are itemizing, and then decide later which organizations receive grants. This is a timing tool for charitable contributions when you want more control over when the deduction lands versus when the charities receive the money.

A DAF really helps in a specific situation: you want to bunch deductions into one year, yet you do not want to change the steady monthly or annual support your organizations rely on. A DAF lets you “front-load” the contribution for deduction purposes, then send grants out over time.

Funding a DAF can be done with cash, and it can also be done with appreciated stock. In the example discussion, the account can remain invested while you decide when to distribute grants, which can support year-end planning without forcing you to rush the “where should it go?” decision before the calendar closes.

Donating Appreciated Shares: A Cleaner Way to Give From Taxable Accounts

If you hold shares in a taxable account that have gone up in value, donating those shares can be more tax-efficient than selling the shares and donating cash. The key difference is what happens to the gain.

When you sell, the gain becomes taxable. When you donate the shares directly, you can often avoid triggering that gain in the first place. This strategy can be a meaningful lever in strong market years, especially when you already plan to give, and you want to keep more dollars working for you instead of turning a donation into an avoidable tax event.

This approach also pairs cleanly with a DAF. You can contribute shares to the DAF, take the deduction in the year you contribute (when itemizing applies), then send grants out later. For many households, this is simply a better use of investments you already own, rather than selling first and creating a taxable gain you did not need to realize.

Qualified Charitable Distributions (QCDs): The IRA-to-Charity Move That Can Lower Taxable Income

A qualified charitable distribution (QCD) is a direct transfer from an IRA to a qualified charity. The amount sent to the charity is excluded from income, which can reduce what shows up as taxable for the year.

A QCD can help in a few ways at once. It can lower taxable income, it may reduce how much of your Social Security becomes taxable, and it can create a tax benefit even in years when you are not itemizing. QCDs also count toward required minimum distributions, so dollars that would have been forced out of your IRA can be directed to charity instead.

The rules have to be followed closely for the transaction to be treated correctly:

You must be older than 70½ at the time of the transfer
The distribution must come from an IRA (not a 401(k) or 403(b))
The money must go directly from the IRA to the charity
The 2025 limit is $108,000 (indexed for inflation)
The reporting must be handled correctly so it is not treated as taxable income

For many retirees, this is one of the most practical year-end tools available, and it can create real tax savings when it fits your giving habits and your account structure.

Roth Conversions: A Powerful Lever, With a Real Cost

A Roth conversion is not a “must-do.” It’s a decision that can be great in the right tax situation and completely wrong in another. It involves taking pre-tax money (often from traditional IRAs) and moving some or all of it into a Roth account so the dollars can grow tax-free going forward.

That move matters most when your goal is long-term flexibility in retirement. The tradeoff is that a conversion increases the amount of income you’re recognizing in the conversion year, which can change where you land in a tax bracket and what you pay in total for that year. The same conversion can look cheap in one year and expensive in another.

Roth Conversion Example

Picture a year where your income drops, maybe you retire mid-year, take unpaid time off, or step away for family, yet your spending plan stays the same. You need $12,000 per month in your normal working years, and $7,000 per month during that lower-income year. When your income is higher, and you’re in the 22% bracket, converting $44,000 creates a $9,680 federal tax cost. When your income is lower, and you’re in the 12% bracket, converting the same $44,000 creates a $5,280 cost. Timing is the lever here: doing the conversion in the lower-income year lowers the federal tax cost by $4,400.

Please Note: State taxes can matter too. Converting in a state with no income tax and then moving to a higher-tax state could reduce the state-side bite on the conversion. Sometimes the state side becomes the difference-maker in multi-year planning.

When You Need to Think Twice

Conversions deserve a “whole-picture” check before you commit, especially if any of these are true:

You expect a better tax window later: Converting in a high-income year can be less appealing if you anticipate lower income and lower rates in a future year.
You’d be forced to use retirement dollars to pay the tax: Paying the tax from the conversion itself reduces how much ends up in Roth, which can weaken the long-term benefit.
You plan to use the funds soon: The move often fits best when the converted dollars can remain invested for many years.
You’re close to, or already in, RMD years: The required distribution generally needs to happen first, and that can narrow your conversion flexibility for the year.
Other costs move with reported income: Increasing reported income can affect items tied to the tax return, including credit phaseouts, Social Security taxation, Medicare premiums, and marketplace subsidy calculations.

Tax-Loss Harvesting: Using Down Markets Intentionally

Market declines can feel discouraging, but they can also create planning opportunities. Tax-loss harvesting uses losses inside taxable accounts to reduce the tax impact of gains and create flexibility for future years.

The benefit comes from how losses are treated on your return. Realized losses can offset realized gains dollar for dollar. If losses exceed gains, up to $3,000 can be used against other income, and remaining losses can be carried forward into future years. This creates flexibility across multiple tax years, especially when markets move unevenly or when you plan to sell appreciated holdings later.

Please Note: The wash sale rule is the guardrail. Selling at a loss and repurchasing the same or a substantially identical investment within 30 days before or after the sale disqualifies the loss. Staying invested requires careful replacement choices during that window.

Year-End Tax Moves FAQs

1. If I do bunch, should I consider using a donor-advised fund?

A donor-advised fund can support bunching while preserving consistency in giving. You take the deduction in the funding year and decide on grants later.

2. When does a Roth conversion usually not make sense?

Several situations warrant caution: when you’re in a high bracket now and expect a lower bracket later, when you don’t have outside funds to pay the tax, when you’ll need the money soon, or when the added income creates collateral issues (credit phaseouts, Medicare premiums, Social Security taxation, marketplace subsidy impacts, and more).

3. What is the wash sale rule, and why do people trip over it?

The wash sale rule prevents you from claiming a loss if you buy the same or substantially identical security within 30 days before or after the loss sale. That creates a practical 61-day window to watch (i.e., 30 days preceding the sale, 30 days following the sale, and the sale day itself).

4. If my losses are bigger than my gains, do I get any extra benefit?

Yes. After offsetting gains, you can deduct up to $3,000 per year against ordinary income, and remember, you can carry forward additional losses to future years.

5. What does a donor-advised fund actually do?

A donor-advised fund is an account designed to hold your charitable dollars until you decide where and when to grant them. You contribute (cash or even appreciated shares), receive the deduction in the contribution year, and then decide on the giving schedule afterward.

6. If I am subject to required minimum distributions (RMDs), can I use a qualified charitable distribution (QCD)?

Yes, when you meet the age rule, and you’re giving to qualified charities. A QCD is an IRA-to-charity transfer that can count toward your RMD and keep the transferred amount from being included in taxable income. The transfer has to go directly from the IRA to the charity, and it must come from an IRA rather than a workplace plan.

How We Help People Make Smart Year-End Tax Moves

Year-end planning works best when decisions are connected instead of isolated. Bunching, charitable strategies, Roth decisions, and investment-related moves all affect one another, and the order you apply them can matter just as much as the moves themselves.

Our financial advisory team helps you look at the full picture: your accounts, your income timing, your giving goals, and how each decision shows up on your return today and in future years. The focus stays practical, grounded, and tailored to your situation rather than built around generic rules.

If you want help evaluating which year-end moves actually fit your numbers, you can schedule a complimentary consultation call. That conversation is simply about clarity, like what matters now, what can wait, and how to approach the final weeks of the year with confidence.

Why Retirees Need A Retirement Balance Sheet

Posted on October 28, 2025October 29, 2025 by Alek Johnson, CFP®

There are numerous factors that come into play when it comes to retirement, from daily expenses to the accounts that fund your future plans. Viewing all these elements in one place can reduce confusion and spotlight what truly matters. A concise balance sheet offers this unified perspective by capturing your current financial snapshot.

This blog walks you through creating your unique retirement balance sheet, exploring both its financial and emotional benefits while pointing out common mistakes to avoid. You’ll also find answers to frequently asked questions and information on where to get help if you need expert guidance.

Why a Retirement Balance Sheet Matters

Many people think of a “balance sheet” as strictly for businesses, yet it can also meaningfully impact personal finances. A retirement balance sheet gathers all of your retirement accounts, savings, and debts into a single document, allowing you to compare what you own to what you owe at a glance. This snapshot of your net worth can guide everyday decisions and keep you organized.

Another reason this approach matters is the control it provides. Without a central list, retirees may lose track of older accounts or hold too much cash in places with a low interest rate. That makes it tougher to manage certain debts or decide whether to shift money around. By unifying each piece of your finances, you create order and reduce stress.

Breaking Down the Components of a Retirement Balance Sheet

Creating or updating your retirement balance sheet doesn’t have to be complicated. Keeping a few key elements in mind will help you create a document that is both accurate and easy to reference. The components below can provide a clear snapshot of where you stand.

Assets

This category covers everything with economic value, including checking and savings accounts, IRAs, 401(k)s, brokerage accounts, real estate, and any investment portfolio that could generate retirement income during your years of retirement.

You may also choose to include certain “specialty” accounts here. For example, health savings accounts (HSAs) can be used to pay qualified medical expenses—potentially tax-free—during retirement. They can also cover non-qualified medical expenses after you turn 65 without incurring a penalty, though any amounts taken out will be taxed as ordinary income. Given that healthcare costs can escalate with age, seeing your HSA balance alongside other assets can help with future planning.

A good rule of thumb for personal property is to include only items that could realistically be sold for more than $5,000. This might consist of larger collectibles or valuable art. By doing this, your balance sheet doesn’t get cluttered with everyday possessions like a couch or TV.

Always use realistic market values rather than guesses, and note whether each account is taxable, tax-deferred, or tax-free. That way, you can plan how to distribute your retirement assets in line with your broader retirement strategies.

Liabilities

When it comes to liabilities, list your mortgages, car loans, credit card balances, or any other unpaid debts. Include the payment schedule, remaining balances, and the interest rate for each.

Some retirees keep a mortgage on purpose if the interest rate is low enough to make other investments more attractive, while others choose to pay it off for peace of mind. In either case, outlining these liabilities helps you decide how to handle them over the long term.

Net Worth

Once you’ve listed all assets and liabilities, subtract the total you owe from the total you own, and you’ll have your net worth. This number is a basic measure of wealth, especially once you factor in how much is quickly accessible (liquid), versus how much is tied up in real estate or other less liquid items.

It’s important to understand that this figure doesn’t define your retirement success. That said, it can serve as a baseline for how you might distribute or invest your retirement assets over time.

Best Practices for Creating or Updating Your Balance Sheet

Updating or creating a retirement balance sheet doesn’t have to be complicated. However, there are a few guidelines to remember so that your final document is accurate and easy to reference.

Consistent Updates and Realistic Figures

Plan to review your balance sheet each year to reflect any financial shifts. Some people pick an important date—like a birthday or the start of the new year – to pencil in new figures. Retirement finances can shift faster than expected, whether you’re opening new accounts, selling property, or paying down debt more quickly. An annual review keeps your numbers fresh and prompts you to spot any new developments.

Also, use realistic valuations for your assets. While you may think your home is worth a particular amount, your estimate might be higher than market reality. The same is true for collectibles or artwork: getting a professional appraisal could be beneficial if you’re unsure of actual worth. This approach helps avoid unintentionally inflating (or understating) your balance sheet.

Key Separations and Proper Labeling

Avoid mixing day-to-day income and expenses with your asset and liability totals. A balance sheet is meant to capture net worth at a single point in time rather than track ongoing cash flow. Maintaining a separate budget or cash-flow statement can help you manage monthly finances without distorting your overall snapshot. Generally speaking, a balance sheet compares what you own to what you owe.

Finally, label ownership carefully. If you hold assets in a trust or jointly with a spouse, ensure it’s documented. Retirement can bring significant estate-planning considerations, and you want to be clear on who officially owns what. A well-organized balance sheet helps settle matters more quickly should anything happen to you or a spouse.

It may also be helpful to note beneficiary designations for each account (especially retirement accounts). While your will or trust might outline certain wishes, the beneficiary listed on an IRA, 401(k), or life insurance policy typically supersedes what’s in your will. Confirming this information in your balance sheet can avert future confusion.

Benefits of Maintaining an Updated Retirement Balance Sheet

Maintaining an updated balance sheet offers several advantages that can enhance your retirement plan. Here are a few ways this document can help maintain stability and growth over the course of your golden years:

Smarter Financial Decision-Making: When you see exactly which accounts you have and how they fit together, you’ll be better equipped to make decisions about your retirement investment portfolio or personal debts. For example, you may realize you have three different 401(k)s from old employers that could be merged for more efficiency. Or maybe your holdings are too conservative or too aggressive. A balance sheet keeps it transparent, so it’s easier to adjust.

Improved Cash Management: Some retirees discover they hold far more cash than they realized, spread out in multiple bank accounts earning minimal interest. By pinpointing these positions, you can move extra funds to a higher-yield option or decide to invest them based on how you’re planning for retirement. Even a difference of two or three percentage points can have an enormous impact over many years.

Identifying Red Flags: Sometimes, retirees uncover old retirement strategies or outdated accounts that were forgotten. You might also notice mismatches in titling—maybe you have a joint brokerage account that should have been titled in a trust or an old 401(k) lacking a designated beneficiary. The balance sheet can be the prompt to fix those oversights before they cause chaos. In rarer cases, you might stumble across a high-interest debt that needs attention right away.

Enhances Tax and Estate Planning: A thorough balance sheet benefits your conversations with tax professionals and estate attorneys. It can help with decisions around Roth conversions, for instance, if you see you have significant amounts in pre-tax accounts. You might also realize certain assets that should be retitled to reduce taxes or to pass directly to heirs.

Tracking Financial Progress: As the years pass, you can compare each new version of your balance sheet to older ones. It can be a confidence booster if your net worth is rising or staying stable. If it’s dropping faster than anticipated, you can look deeper into the reasons—maybe your spending is higher, or your investment returns are lower than expected. This annual review can highlight areas to work on so your plan remains steady over your retirement years.

Additional Emotional and Psychological Benefits

Maintaining an updated balance sheet can lead to greater clarity and less stress at home. When your financial picture is organized, the mental load often feels lighter. There are many emotional and psychological benefits, including:

Overall Peace of Mind: Money questions can cause tension, especially if you’re unsure how much you’ve saved. With a well-organized balance sheet, you can see everything in one spot. It’s a simple way to reduce the background worries that might creep in when you’re unsure of your resources.

Improved Spousal Communication: Not every couple is equally engaged or informed about finances. A balance sheet gives both of you a single page to look at, making it easier to discuss the path forward. This practical tool can encourage open dialogue, minimize confusion, and promote healthier financial harmony.

Clarity in Your Goal-Setting: Planning any next step—travel, charitable giving, a new hobby—can feel more relaxed when you know where you stand. A balance sheet helps shape realistic objectives that match your actual resources. Whether you aim to leave an inheritance or spend more on experiences, you can lay out a plan without second-guessing how it fits your broader picture.

Confidence in Your Debt Strategy: If you keep a mortgage into retirement, you’ll know the exact principal balance and your monthly obligation. Seeing that in the context of your assets helps you decide whether it’s better to pay off the loan or hold on to your cash for flexibility. The same applies to car loans or home equity lines of credit (HELOCs). You can base your retirement income choices on facts, not assumptions.

Common Pitfalls to Avoid

Many retirees create a balance sheet once and then forget about it. Others overlook key details that can derail an otherwise solid plan. Here are a few pitfalls to watch for:

Failing to update during major life events: If you move to a new house, inherit money, or go through a divorce, your financial picture can change significantly. Failing to revise your balance sheet could mean missing out on smart choices—or discovering a problem too late.

“Best-Case” Valuations: Relying solely on “best-case” valuations—like your property’s top asking price or the most optimistic growth projection—can set you up for disappointment. Aim for realistic or even slightly conservative estimates so your plan remains solid under various market conditions.

Misclassifying Taxable vs. Tax-Deferred vs. Tax-Free Accounts: For retirement planning, it’s important to list which accounts are subject to current taxes (taxable), which are deferred (traditional IRAs/401(k)s), and which are tax-free (Roth IRAs). Mixing these can blur the real after-tax value of your retirement assets and cause confusion about required distributions.

Mistaking recurring income for balance sheet assets: A pension payout or Social Security check is monthly income, not an asset to list under personal property. This misunderstanding can inflate your net worth and lead to unrealistic assumptions about what you truly have.

Including Hypothetical Windfalls as Assets: Things like inheritances or potential lawsuit settlements might feel like “money in the bank,” but they’re not guaranteed or immediately accessible. Adding them to your balance sheet prematurely can give a false impression of security and lead to overspending or under-saving.

Ignoring inflation and potential growth when viewing a snapshot: A balance sheet shows your finances at a single moment in time. It doesn’t reflect what your savings or property values might look like five years from now, especially if you’re invested for growth. Keep that context in mind so you don’t make decisions purely on the current snapshot.

Frequently Asked Questions

Should you classify CDs as short-term or long-term assets?

Most retirees should list Certificates of Deposit as short-term assets on their balance sheet. While you might face a penalty for early withdrawal, you can still convert a CD to cash sooner than you could liquidate something like property.

Listing CDs under short-term assets also helps illustrate that these funds might be used for emergencies or near-term projects. It’s still good to track maturity dates, but if the question is, “Could I realistically get to that money within a reasonable window?” then a CD is more short-term.

Is it better to pay off your mortgage or keep it during retirement?

A mortgage might be manageable for some retirees if the interest rate is low. They might prefer to park extra cash in investments with the potential for higher returns.

Others feel better walking into their golden years without a monthly house payment. It truly depends on your personal numbers, including tax implications, if you’d be selling stocks or withdrawing from an IRA to pay off the debt.

How can you determine the actual values of different assets?

If you have a brokerage account, the value is whatever the most recent statement shows. A formal appraisal or a real estate comparative market analysis can be helpful for tangible assets like a house.

Real estate values can shift quite a bit based on local trends, so it’s good to have a ballpark figure you can trust. If you own collectibles, consider having them appraised if they’re worth more than a few thousand dollars.

We Can Help You with Your Retirement Balance Sheet

A personal balance sheet provides a snapshot of your retirement assets and liabilities. It’s an organized record of your financial standing, allowing you to see opportunities and potential concerns. With these details at your fingertips, you can make informed decisions about debt, taxes, and how you’ll spend your retirement years.

Even though a balance sheet is created for one point in time, it’s wise to update it regularly. The stock market fluctuates, property values shift, and personal circumstances can change more than expected. By treating your balance sheet as a living record, you avoid the pitfall of relying on outdated information.

If you’d like help creating or refreshing your balance sheet, our team of financial advisors can provide the personalized insights you need. We offer a full range of financial services—from helping you shape your investment portfolio to clarifying debt strategies—so that every asset and liability fits into your broader plan more effectively.
No one wants to be caught off guard when an account runs out of money in retirement. By staying proactive and keeping your information current, you’ll stay in control and face the future with more clarity. To learn how our team can help, we invite you to schedule a complimentary consultation and explore next steps for building a stable and confident retirement.

Early Retirement Health Insurance Options

Posted on July 1, 2022February 25, 2026 by Alek Johnson, CFP®

Entering retirement can be both thrilling and intimidating at the same time. The thought of “hanging up the cape” and permanently leaving the workforce behind can be viewed as unburdening and relieving to one individual, but completely frightening to another. Regardless of the viewpoint you have on retirement, it will undoubtedly come with new challenges and troubles to overcome. Among the different problems to solve for retirement, one of the biggest challenges is that of early retirement health insurance options.

For those age 65 and older, or certain younger individuals with disabilities, Medicare has you covered. Medicare is the country’s health insurance program managed by the federal government. Once you enroll, there is very little management that you have to do throughout retirement.

But what about those who retire earlier than age 65? An early retirement is certainly achievable, but requires careful planning, especially when it comes to your healthcare. This article will enlighten you on the different healthcare options available for early retirees, with a focus on the Marketplace. If you are not familiar with what the Marketplace is, don’t worry, we will get to the details soon.

Health Insurance Options for Early Retirees

If neither you nor your spouse will be covered through an employer plan, fear not! There may be more options than you think. Below is a summary of a few options. I highly recommend speaking with your financial advisor about which route makes the most sense for you.

COBRA

A law that allows employees and their dependents to keep their group coverage from their former employer’s health plan. This coverage can last for 18 months after termination from the employer, but beware, this can be very costly.

Medicaid

Though unlikely for some retirees to qualify due to the low-income requirements (i.e., in Utah, coverage is available for those with household incomes up to 138% of the federal poverty level), this may be the cheapest option for those who do qualify. However, many doctors don’t accept Medicaid, so you may have to change your primary providers if you qualify for coverage.

Christian Healthcare Ministries

This is not traditional insurance, but rather a Christian-based method of sharing the costs with others around you. Each member pays a monthly premium, and those funds are used to help other members cover their healthcare costs.

The Marketplace

Finally, we have the Marketplace, which tends to be the route most early retirees take. For this reason, I want to expound upon how the Marketplace insurance really works.

The Marketplace – What is it?

In March of 2010, the Affordable Care Act (sometimes called Obamacare) was passed with the goal of making health insurance more affordable. The law provides individuals and families with government subsidies (otherwise known as premium tax credits). This helps lower the costs for households with an income between 100% and 400% of the federal poverty line. As a reference, in 2022, 400% of the federal poverty level for a retired couple is $73,240. The federal government operates the Health Insurance Marketplace, or “the Marketplace” for short. This is an online service that helps you enroll for health insurance. You can access the Marketplace at HealthCare.gov.

How does the Marketplace work?

First and foremost, I recommend you work with a trusted, licensed health insurance agent to help you navigate the waters of the Marketplace. Especially if you’ve only ever received health insurance through your employer. There is no additional cost to you to use an agent – they will be compensated by the insurance company directly. You can then tell the agent any specifics you are looking for with your coverage (such as certain doctors, hospitals, etc.). They can help narrow the available plans down to your liking.

That being said, let’s look at how this actually works.

You can enroll in health insurance during open enrollment, which generally runs from November 1st to December 15th. This is for coverage starting January 1st of the following year. You also have the option to enroll during a special enrollment period. This is based upon major life events, such as a change in household or residence.

You’ll be rewarded with a special enrollment period when you’re looking for health insurance options as an early retiree. Don’t feel like your retirement date needs to line up with the open enrollment period. During this special enrollment, you’ll have a 60-day window to enroll through the Marketplace.

During enrollment, you will fill out an application with basic personal information. Included with this application, you will give them your best estimate of what your income will be for the coming year. The Marketplace uses your Modified Adjusted Gross Income – MAGI – to define “income.”

When evaluating early retirement health insurance options, it’s important to understand how Marketplace subsidies work. The Health Insurance Marketplace bases eligibility on your projected income for the upcoming coverage year — not your prior year’s income. This distinction is especially important when considering health insurance options for early retirees, since retirement often significantly reduces taxable income.

For 2026 coverage, if your projected household income falls between approximately 100% and 400% of the federal poverty level (FPL), you may qualify for a federal premium tax credit to help lower the cost of your insurance premiums. If your income exceeds 400% of FPL, you generally will not qualify for a subsidy and must pay the full premium yourself.

The temporary subsidy enhancements created under pandemic-era legislation — which allowed households above 400% of the poverty level to receive assistance — expired after 2025. Unless new legislation is passed, Marketplace subsidy eligibility for 2026 and beyond follows the original Affordable Care Act structure. Because of this, managing your projected retirement income carefully can play a significant role in keeping your early retirement health insurance costs affordable.

What happens if your income isn’t exactly what I put on the application?

The answer is that you will reconcile any differences when you file your taxes.

If your income was less than what you projected, you’ll get a credit as you qualified for more of a subsidy throughout the year. If your income was more than what you projected, you will have to pay some of that subsidy back. Generally, this isn’t that big of an issue unless you projected your income to be less than 400% of the poverty level, but it was actually more. In this case, you are required to pay back the entire subsidy. Even if your income was only $1 more than the threshold.

For this reason, I suggest consulting with your financial advisor to pinpoint what your income will be through your early years of retirement. I also suggest you speak with your advisor about potential planning strategies available to control your Modified Adjusted Gross Income, as there are certain strategies that can help you qualify for a subsidy while enjoying the income you desire throughout retirement. For an example of how this might work, Mark Whitaker wrote an article in 2020 describing a case study that explored these strategies.

As far as the plans that are available, the Marketplace ranks them in four different categories. These categories are Bronze, Silver, Gold, and Platinum. The Bronze plans typically tend to have the lowest premiums, but they are also the most catastrophic plans. This means they have high deductibles and out-of-pocket maximums. Gold and Platinum plans typically tend to be better plans as far as coverage, but have higher premium costs. Again, working with an agent can help you navigate which plan is best for you.

Frequently Asked Questions About Early Retirement Health Insurance Options

Choosing the right early retirement health insurance option can significantly impact your long-term retirement plan. Below are answers to common questions about health insurance options for early retirees and how to manage coverage before Medicare eligibility.

1. What are the best early retirement health insurance options before Medicare?

If you retire before age 65, you’ll need coverage until Medicare eligibility. The most common early retirement health insurance options include:

COBRA continuation coverage from your former employer
ACA Marketplace (Affordable Care Act) plans
Coverage through a spouse’s employer plan
Part-time employment with health benefits
Private individual insurance plans

For many early retirees, the ACA Marketplace is the most flexible and potentially affordable option, especially if income qualifies for premium tax credits.

2. How do health insurance options for early retirees work with the ACA Marketplace?

Marketplace plans determine subsidy eligibility based on your projected income for the upcoming year, not your prior year’s earnings.

For 2026 coverage, households with income between approximately 100% and 400% of the federal poverty level (FPL) may qualify for premium tax credits. If income exceeds 400% of FPL, subsidies generally are not available under current law.

Because retirement often reduces taxable income, careful income planning can significantly lower health insurance premiums.

3. Can early retirees qualify for government subsidies?

Yes — many early retirees qualify for premium tax credits through the ACA Marketplace.

Subsidy eligibility depends on:

Projected Modified Adjusted Gross Income (MAGI)
Household size
Federal poverty level thresholds

Strategically managing withdrawals from retirement accounts (such as IRAs, Roth IRAs, and brokerage accounts) may help maintain income within subsidy-eligible ranges.

4. Is COBRA a good health insurance option for early retirees?

COBRA allows you to continue your employer-sponsored coverage for up to 18 months (sometimes longer in certain circumstances).

However:

You pay the full premium (including the employer portion)
It is usually more expensive than Marketplace options
It is temporary and not a long-term pre-Medicare solution

COBRA can serve as a short-term bridge to Medicare or to the next Marketplace enrollment period.

5. How much does health insurance cost in early retirement?

Costs vary widely depending on:

Age
Location
Plan type (Bronze, Silver, Gold)
Income (which affects subsidy eligibility)

Without subsidies, premiums for early retirees can be substantial. With subsidies, however, coverage may be significantly reduced — especially for households near the lower end of the income range.

This is why income planning is one of the most important factors when evaluating early retirement health insurance options.

6. What happens when I turn 65?

Once you turn 65, you become eligible for Medicare.

Many early retirees structure their health insurance decisions as a bridge to Medicare, choosing options that provide stable coverage until Medicare enrollment begins. Planning ahead helps avoid coverage gaps and late enrollment penalties.

7. What is the biggest mistake early retirees make with health insurance?

One of the most common mistakes is failing to coordinate retirement income planning with Marketplace subsidy rules.

Large IRA withdrawals, Roth conversions, or capital gains in a single year can push income above the subsidy threshold — dramatically increasing premium costs.

Proactive tax planning can help maintain eligibility and reduce overall healthcare costs during early retirement.

What Health Insurance is Available for Early Retirees?

There is more to the Marketplace and the other health insurance options for the early retiree mentioned than can be discussed in this article. Hopefully, this provides you with a framework of the options you have as an early retiree. Early retirement is achievable for those who are prepared and understand how their healthcare needs can be met.

Learn more about how we can help you prepare for retirement with our Perennial Income Model™, or schedule a free consultation.