Retirement Archives | Peterson Wealth

Intermountain Health 401(k) Benefits Explained

Posted on April 25, 2026April 23, 2026 by Daniel Ruske, CFP®

For caregivers at Intermountain Health, a 401(k) can be one of the most significant tools available for building toward retirement. When this account is treated as part of a larger financial strategy, it becomes easier to connect routine savings decisions to future income needs.

That shift in perspective can change how the account is used while you are still working. Small choices made consistently, from contribution levels to investment selections, can add up in ways that matter for years to come.

Understanding Your Intermountain Health 401(k)

For many employees at Intermountain, the 401(k) now stands at the center of long-term retirement plans, especially with the pension freeze scheduled to take effect on December 31st, 2026.1 After that date, affected workers will stop earning new pension accruals, so future growth will lean more heavily on the workplace account built through ongoing deferrals and company support.

That makes the 401(k) worth understanding on its own terms. This plan by Intermountain Health gives eligible workers a payroll-based way to build healthcare savings through pre-tax or Roth contributions, possible company funding, and tax-advantaged growth over time.

A clearer grasp of how the 401(k) works can help you make better choices, whether you are new to the organization, directly affected by the freeze, or thinking ahead to future retirement benefits. The more familiar you are with participation rules, company contributions, and vesting, the easier it becomes to connect this workplace plan to the bigger decisions you will make over time.

General Rules and Plan Features

Once you know the role this 401(k) may play, the next step is understanding how participation and company funding actually work. Several of the rules most likely to shape your decisions are worth knowing upfront:

Rules for those affected by the pension freeze: The pension plan is set to freeze on December 31st, 2026, and affected workers will stop earning new pension benefits after that date. Your earned benefits remain in place while future accumulation moves to a 401(k)-based program.

General eligibility rules: Eligible workers generally can begin participating on the first day of the payroll period on or after becoming employed and reaching age 18. Rehired qualified employees are generally immediately eligible to participate again.

Automatic enrollment: Workers hired or rehired on or after January 1st, 2020, who are age 18 or older and eligible to contribute are generally automatically enrolled at 1% thirty days after hire or rehire unless they elect otherwise first. The first salary deferral for an automatically enrolled worker is generally taken in the first payroll period after that thirty-day window ends.2

Changing your contribution rate: Participants who are automatically enrolled may change their deferral election or stop participating at any time. Workers who did not enroll when first eligible may generally enroll later and begin contributing with the next payroll period.

Pre-tax and Roth contributions: Participants may generally contribute a percentage of eligible compensation through payroll deductions. Those contributions can be made on a pre-tax basis, a Roth basis, or a combination of both.

Matching contributions: Intermountain matches employee contributions up to a maximum of 4% of eligible compensation, beginning on January 1st or July 1st following the employee’s one-year anniversary.3

Additional 2% company contribution: Intermountain also makes a separate employer contribution equal to 2% of eligible pay for participants who were added to the 401(k) defined contribution plan after the pension plan was closed.3

Vesting: Your own pre-tax contributions, Roth contributions, and rollover amounts are always 100% vested. Employer contributions credited on or after April 1, 2023, generally become fully vested after 3 years of vesting service.2

Portability: The plan accepts rollover contributions, which can help this remain one of your longer-term retirement accounts if your employment changes later. Your balance can stay invested in the plan until you qualify for and elect a distribution.

How to Make the Most of Intermountain Health 401(k) Benefits

Once you understand how the Intermountain 401(k) works, the next step is putting it to work more intentionally while you are still employed. That means focusing less on plan mechanics and more on the decisions that can improve long-term savings over time.

The best use of this account usually comes from steady habits, rather than one big move. Contribution levels, investment selections, and periodic reviews all shape how much flexibility this plan may give you later, especially as workers take on more responsibility for building their own retirement income.

Contribution Decisions That Can Strengthen Long-Term Results

Good contribution habits often do more to improve long-term results than people realize. A few practical decisions are worth revisiting regularly:

Capture the full match when possible: If you are eligible for matching dollars, contributing enough to receive the full available company match can materially improve long-term accumulation.

Review your percentage instead of setting it once: A contribution rate that felt manageable two years ago may no longer reflect your current income, expenses, or goals. Raising your deferral rate by even 1% at a time can be a practical way to build momentum without making your paycheck feel dramatically different.

Make the most of your annual contribution limits: For 2026, employees can contribute up to $24,500. Employees aged 50 and older can generally contribute an extra $8,000 in 2026, bringing the usual combined employee limit to $32,500. For those ages 60 through 63, the higher catch-up limit remains $11,250 in 2026, which can push total employee contributions to $35,750.4

Choose pre-tax, Roth, or a mix with intention: Intermountain allows eligible participants to make pre-tax contributions, Roth contributions, or a combination of both through payroll deductions. A traditional contribution may be more appealing if reducing current taxable income is the priority, while Roth contributions may be worth a closer look if you expect your tax picture to be similar or higher later on.

Investment and Allocation Decisions Inside the Plan

Saving into the plan is only part of the job. Your investment mix deserves periodic attention, especially if your current allocation was chosen years ago and no longer fits your timeline, expected retirement date, or comfort with market swings.

A sound allocation usually starts with when you expect to use the money. Someone who may rely on this 401(k) sooner may need a different balance of growth and stability than someone with a much longer runway, and diversification can help reduce the risk that one weak area does too much damage at the wrong time.

Cost awareness matters too. Two portfolios with similar holdings can produce different long-term results if one carries meaningfully higher expenses, so regular reviews can help keep the account aligned with your goals, your broader benefits picture, and other future income sources such as Social Security or individual retirement assets.

How the Intermountain 401(k) Fits Into a Bigger Retirement Plan

Your 401(k) should be evaluated based on the role it needs to play within your full retirement income structure. For some Intermountain employees, that means considering it alongside pension benefits, Social Security, individual retirement accounts, and other retirement income.

That role can shift depending on when you plan to retire and how you expect to spend your money. One person may need the 401(k) to help bridge the gap before pension or Social Security income begins, while another may want to preserve more of it for later years, larger expenses, or added flexibility if costs rise.

Looking at the 401(k) in isolation can lead to decisions that feel reasonable in the moment but do not fit as well once the rest of the plan comes into view. A stronger approach is to measure this account against your expected income needs, other available assets, and the timing of each benefit so the pieces work together in a more deliberate way.

Planning Issues Employees Should Not Ignore

Once the 401(k) is viewed as part of a broader income plan, a few larger decisions start to matter more. Those planning issues are worth thinking through before you make major retirement moves:

Taxes on contributions and withdrawals: Pre-tax savings may help reduce taxable income now, while Roth savings may create more flexibility later. The right balance depends on how your current earnings compare with the tax picture you expect in retirement.

Healthcare and Medicare timing: Healthcare costs can shape how much you may need to draw from your 401(k), especially in the years when employer coverage ends and Medicare begins. Employees nearing retirement often need to coordinate coverage decisions, premium costs, and out-of-pocket expenses with the income this account may be asked to provide.

Withdrawal timing and income sequencing: The order in which you draw from your 401(k), taxable assets, and other income sources can affect both annual taxes and how long your portfolio lasts. Proper sequencing can help create a smoother income pattern over time.

Inflation risk: A large 401(k) balance may look strong today, though its real spending power can erode over time if future living costs rise faster than your income plan can keep up.

Separation and rollover decisions: Leaving Intermountain can create important choices about whether to stay in the plan, roll assets elsewhere, or begin distributions when eligible. Those decisions can affect taxes, investment oversight, and future withdrawal flexibility.

Intermountain Health 401(k) Benefits FAQs

1. How does the pension freeze affect the role of the 401(k)?

Once pension accrual stops for affected employees after December 31st, 2026, the 401(k) becomes an even more important source of future retirement accumulation. That shift places more weight on your contribution rate, company contributions, and long-term investment decisions.

2. Should Intermountain employees increase their 401(k) contributions after the pension freeze?

That depends on your income needs, budget, and overall retirement picture, though many employees may benefit from revisiting their savings rate as the 401(k) takes on a larger role. Even small increases made consistently can make a meaningful difference over time.

3. How should employees choose investments inside the Intermountain 401(k)?

Your investment choices should reflect your expected retirement timeline, risk tolerance, and the role this account will play in your broader plan. A well-diversified allocation with reasonable costs and regular review is usually more helpful than leaving the account untouched for years.

4. Should I choose pre-tax or Roth contributions in the Intermountain 401(k)?

That choice depends largely on your current tax bracket and what you expect your tax situation to look like later. Some employees prefer the current-year tax break of pre-tax contributions, while others like the future tax-free withdrawal potential of Roth contributions.

5. What happens to my Intermountain 401(k) if I leave the company?

Your own contributions are always yours, and the plan may continue to be part of your long-term retirement strategy after employment ends. Depending on your situation, you may be able to leave assets in the plan, roll them to another qualified account, or begin distributions when eligible.

How Our Team Can Help You Make the Most of Your Intermountain 401(k)

Understanding your Intermountain Health 401(k) matters because the choices tied to this plan can influence far more than your current savings rate. They can shape how prepared you are for retirement, how efficiently you save, and how well your broader financial plan holds up over time.

Peterson Wealth Advisors works with Intermountain Health employees regularly, so we understand how these benefits connect to real planning decisions. We help you look at your 401(k) in the context of pension changes, Social Security, taxes, investment strategy, and retirement timing.

Whether you are still working through your options or getting closer to retirement, we can help you turn those decisions into a coordinated plan. To see how your Intermountain benefits fit into your broader retirement strategy, schedule a complimentary consultation with our team.

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When to Take Social Security in Utah: A Guide for Salt Lake City Pre-Retirees

Posted on April 24, 2026April 23, 2026 by Daniel Ruske, CFP®

Retirement is a long road, and Social Security benefits are a major guardrail. Start too early, and you lock in a smaller check for decades. Wait too long without a plan, and you can create pressure in the years when you’re trying to live more and worry less.

Here in Utah, the decision also connects to taxes, Medicare timing, and the way you plan to draw from your other accounts. In Salt Lake City, especially, where the cost of living can shift fast, a smart claiming decision fits the life you’re building and the realities you face.

How Social Security Claiming Ages Really Work

Your full retirement age is determined by your birth year and serves as a reference point in the Social Security rules. It’s when you qualify for your “unreduced” retirement benefit under the program’s formulas, and it affects several other moving parts, too. The Social Security Administration (SSA) provides a retirement age calculator based on your birth date, which makes it easy to pin down your full retirement age.1

Starting early triggers an adjustment that doesn’t disappear later. Social Security allows you to start as early as 62, yet the trade-off is a smaller benefit for as long as you receive it. The SSA explains that early claiming can reduce your benefit by as much as 30% versus your full amount, depending on your birth year and how early you start.2

Waiting past that reference point can raise what you receive each month, up to age 70. The SSA describes delayed retirement credits as an increase earned for each month you wait beyond full retirement age, and the increase stops once you reach 70. The SSA has explained that delaying can add about 8% per year beyond full retirement age for many people.3

All of that can make the decision feel like a race to the biggest monthly check, yet the better question is what you’re trying to protect. A higher payment later can help with longevity and inflation pressure, while an earlier start can support your flexibility when work or savings plans shift. Ultimately, “best” often depends on your household setup, tax picture, and how long you expect the benefit to be in your life; so, looking only at the lifetime benefits number on paper can miss the real-world trade-offs you’ll experience.

Social Security in Utah: What Salt Lake City Residents Need to Know

In Utah, Social Security can be part of your taxable income at the state level, and credits can soften the impact depending on your situation. Utah has a Social Security benefits credit tied to the amount of taxable Social Security included in your adjusted gross income, and the worksheet shows how the credit is calculated from that starting point.4

Utah also has a separate retirement credit with its own eligibility rules, and you generally can’t double-dip. The Utah State Tax Commission explains that the retirement credit is available for certain taxpayers based on birth date, and it also states you may not claim it if you claim the Social Security benefits credit. That “either/or” choice is one reason local planning matters: the right fit depends on how your whole return is likely to look.5

The state income tax rate itself is another piece of the math. Utah’s income tax rate is presently 4.5%.6 Knowing the current rate helps you estimate how claiming Social Security benefits may affect your overall taxes each year.

Local cost of living shapes the conversation too, especially in Salt Lake City, where housing and day-to-day expenses can shift quickly from neighborhood to neighborhood. The “right” claiming age needs to also account for what your real expenses look like where you live, not just what a general calculator assumes.

Claiming at 62: When Early Benefits May Make Sense

Choosing to start Social Security early can be a practical move when your plan calls for income sooner rather than later. Some people claim to steady the household budget after leaving work, while others do it to reduce pressure on savings during a market dip. The decision has real pros and cons, and it tends to work best when it supports a clear purpose in your overall plan. If you’re considering benefits at 62, here are the key situations to think through:

Cash flow needs and income gaps: A paycheck ending can create a timing gap even when your long-term plan is healthy. Claiming early may help cover the basics while you restructure spending, downshift work, or wait on other income to start. The goal is to avoid turning a short-term gap into a long-term habit of pulling too much from savings.

Health considerations and longevity expectations: Your health history and your view of longevity belong in the conversation. Some people value having extra liquidity now, while they’re active and able to use it, even if that means accepting a smaller check later. The right question is not “What’s the perfect strategy?” It’s “What risk feels more manageable in my real life?”

The long-term impact of permanent benefit reductions: Early claiming comes with a smaller payment that typically lasts for life. That can be completely workable, yet it needs to be understood as a long-term trade, not a temporary haircut. A smaller benefit can limit flexibility later if expenses rise, one spouse lives longer than expected, or you want to reduce withdrawals from other accounts.

How early claiming interacts with continued or part-time work: Work after claiming can change the picture. Earnings rules before full retirement age may temporarily reduce what you receive in certain cases, which can surprise people who expected a clean, predictable deposit. Planning ahead helps you decide whether early claiming truly supports your plan, or it simply shifts where the pressure shows up.

Waiting Until Full Retirement Age: The Middle-Ground Strategy

Waiting until full retirement age (FRA) is often appealing for a simple reason: it avoids the permanent reduction tied to early claiming, while still letting you start benefits well before 70. For many households, that timing lines up with a natural transition, like work slowing down, travel ramping up, or a spouse retiring a year or two later. This is also where retirement planning starts to feel less theoretical, since you can coordinate benefits with the rest of your income sources and tax strategy in a more deliberate way. Here are the main angles to weigh:

Avoiding early filing reductions: Waiting until full retirement age can keep your baseline benefit higher than if you start earlier. That higher baseline can matter when inflation persists, your spending changes, or you simply want more breathing room later. It can also reduce regret for people who worry they’ll “lock in” too small a benefit too soon.

Effects on spousal and survivor benefits: For many households, this isn’t just about one person’s check. The claiming age of the higher earner can influence what a surviving spouse may receive later, so the decision often deserves a household view. A coordinated approach can protect the spouse who is likely to outlive the other, even when both of you feel healthy today.

Coordinating FRA with retirement timing and other cash sources: This is where your broader plan matters most: pensions, brokerage accounts, part-time work, and required withdrawals can all affect the trade-offs. The goal is to align the start date with your real spending needs and your tax picture, rather than picking a date in isolation. A good plan can also help you avoid claiming out of habit or fear.

Why FRA often serves as a planning checkpoint rather than a final decision: Full retirement age can be a clean milestone for reassessing. Your health, your work plans, and your savings may look different at 66 or 67 than they did at 62. Treating FRA as a checkpoint keeps you in control, meaning you’re able to adjust based on what’s real in your life at the time, not what you guessed years earlier.

Delaying Until 70: Maximizing Lifetime Income

Reaching full retirement age gives you a solid baseline, and delaying beyond it can be a deliberate way to raise what you’ll rely on later. This approach tends to appeal when you want more dependable retirement income in the later decades, even if it means leaning on other resources in the early years. Here’s what to weigh if you’re thinking about holding off until 70:

How delayed retirement credits increase monthly benefits: Social Security adds delayed retirement credits for each month you wait past full retirement age, and the increase stops at 70. The increase can be as significant as 8% per year for many people.

Longevity risk and lifetime income protection: A larger benefit later can act like a personal pension, one that adjusts with inflation and lasts as long as you do. This matters most when life expectancy runs longer than you assumed, or when market returns disappoint at the wrong time. The “win” is having a stronger backstop that keeps you from pulling too hard from investments late in life.

Survivor benefit advantages for married households: The bigger check often becomes the survivor check, so delaying can strengthen what remains for the household after one spouse is gone. This is one reason higher earners frequently consider delaying, even when they feel healthy now.

Inflation-adjusted income considerations: Social Security has cost-of-living adjustments, so starting from a higher base can compound over time. A smaller start can still work fine, yet it leaves less room if expenses rise later, especially health costs, housing, or family support. A delayed start is one way to increase the size of future inflation adjustments in dollar terms.

Why delaying is not strictly a mathematical decision: People don’t live in spreadsheets. A strategy that looks best on paper can feel wrong if it forces you to drain savings too quickly, disrupts your work exit, or creates stress around short-term money needs.

How Work Income Can Change the Equation

Claiming while you’re still earning can reshape your results. Before full retirement age, Social Security applies an earnings test if your wages exceed certain limits, and part of your benefit may be withheld during the year. The SSA publishes the annual limits and explains the $1-for-$2 and $1-for-$3 withholding rules (with a different limit in the year you reach full retirement age).7

Those withheld amounts are not “lost,” even though it can feel that way when deposits shrink or pause. If benefits are withheld due to earnings, your monthly benefit can be recalculated at full retirement age to account for months you didn’t receive payments.

Work after full retirement age changes the rules. The earnings test no longer applies once you hit full retirement age, so wages won’t trigger withholding under the retirement earnings test framework. This can matter if you’re stepping into consulting, picking up seasonal work, or keeping a role you genuinely enjoy.

Late-career pay can also complicate claims planning. Bonuses, commissions, severance, and one-time payouts can push you over the earnings limit in ways that don’t show up in a simple monthly budget. A clean approach is to line up your start date with what you expect your W-2 to show, rather than what you expect your calendar to feel like.

Coordinating Social Security With Other Retirement Income Sources

Think of retirement income like a three-part mix: guaranteed income (Social Security/pensions), flexible income (investments), and tax control (how you sequence withdrawals). Your claiming decision changes all three. If you claim early, you may rely less on your portfolio at first, but you also lock in a smaller, inflation-adjusted base for life. If you delay, you’re often asking your investments to carry more weight in the early years in exchange for a bigger backstop later.

The coordination work happens in the in-between years. Many households have a window, often between retirement and required distributions, where they can be more strategic with IRA withdrawals, Roth conversions (when appropriate), and capital gains planning.

Start Social Security too soon, and you can shrink that window. Starting too late, without a bridge, you can create unnecessary stress. The goal is not to “optimize a spreadsheet.” The goal is to create reliable, repeatable monthly cash flow while minimizing avoidable taxes and protecting long-term purchasing power.

Medicare Timing and Health Coverage Considerations

A Social Security decision can accidentally turn into a health coverage decision if you don’t watch the dates closely. Medicare eligibility usually begins at 65, and the enrollment rules don’t always line up with when you want to start Social Security. The cleanest approach is to line up coverage first, then decide how Social Security fits around it. Here are the key points to think through:

The distinction between Social Security and Medicare enrollment: You can apply for Medicare even if you’re not ready to apply for Social Security retirement benefits. Automatic enrollment happens in some cases when you’re already receiving Social Security before 65, yet many people must actively sign up.

Risks of delaying Medicare while still working: Employer coverage can allow a later Medicare signup without penalties in some situations, depending on the size and structure of the plan. If you or your spouse is working with group coverage, it may allow you to wait without a late penalty. However, violating the rules can get expensive, and late enrollment penalties can add up quickly.

How healthcare costs influence claiming decisions: Premiums, deductibles, prescriptions, and long-term care are real budget items, not footnotes. A higher Social Security check later can make those payments easier to absorb without increasing portfolio withdrawals. Health costs also shape your lifestyle choices, like travel, hobbies, and family support feel different when medical spending is predictable.

Spousal and Survivor Benefit Planning

For married couples, Social Security is best viewed as one coordinated plan. Your claiming ages don’t just affect your own checks; they shape your household income today and the options that remain later, including what’s available if one spouse lives much longer than expected.

Spousal benefits can add meaningful income, but the details matter. The SSA explains that a spousal benefit can be as much as half of the worker’s primary insurance amount, and it can be reduced if the spouse starts before full retirement age. That’s why it’s worth looking at timing alongside work plans, taxes, and what you need your income to do in the first years of retirement.8

Survivor benefits are where the “household view” really pays off. The SSA’s survivor materials explain that a surviving spouse can receive up to 100% of the worker’s benefit, and the worker’s claiming decision can influence how strong that survivor income will be. A smoother plan aims to support life now, while also protecting the spouse who may eventually be living on one check.9

Salt Lake City Pre-Retirees Taking Social Security FAQs

1. Is Social Security taxable in Utah?

Utah generally taxes Social Security to the extent it’s included in your adjusted gross income (AGI), then offers a credit that may reduce the state tax impact depending on your circumstances. Utah’s Social Security benefits credit is based on the taxable portion included in AGI, and it comes with eligibility rules and phaseouts.

2. Can I work while collecting Social Security in Utah?

Yes. Social Security allows you to work while receiving retirement benefits, yet an earnings test can apply before full retirement age, potentially withholding some benefits if earnings exceed the annual limit. That said, withheld amounts aren’t lost; your benefit is just recalculated later to credit months withheld.

3. Does delaying Social Security always result in higher lifetime benefits?

Delaying increases the monthly amount through delayed retirement credits up to 70, which can raise the baseline check and the dollar value of inflation adjustments over time. Higher lifetime totals depend on how long you collect benefits and what else is happening in your household plan, like taxes, work income, and whether a survivor will depend on the higher check.

4. How does Social Security affect Utah’s retirement income tax credits?

Utah has a Social Security Benefits Credit and a separate Retirement Credit, and you generally can’t claim both on the same return. Utah’s credit pages spell out the limitation directly, including how it applies when you file jointly.

5. Should married couples in Utah coordinate when they claim?

Yes, coordination often matters more than picking the “best” age for each person separately. The higher earner’s claiming choice can influence the survivor’s benefit later, and the timing of each person’s claim can shape the household’s tax picture and spending flexibility.

How We Help Salt Lake City Families Make Smarter Social Security Decisions

Choosing when to take Social Security in Utah isn’t just about the biggest check; it’s about building a retirement income plan that can handle longevity, taxes, market volatility, Medicare timing, and the needs of your household. The right start date is the one that supports steady cash flow today while protecting flexibility and purchasing power for the years ahead.

That’s where planning becomes practical. At Peterson Wealth Advisors, we help Salt Lake City families coordinate Social Security with investment withdrawals, tax strategy, and healthcare timing, so you’re not making a permanent decision based on a temporary fear or a generic rule of thumb. We model multiple claiming paths and stress-test them against real-world scenarios, including early retirement, rough markets, and survivor-income needs.

If you’d like help seeing your best options clearly, we’d welcome the chance to talk. Schedule a complimentary consultation call with our team, and we’ll walk through how your claiming decision fits into a retirement plan designed to keep you steady: no guesswork, no pressure.

Resources:

Understanding the Intermountain Health Pension Freeze: What It Means for You

Posted on April 23, 2026April 23, 2026 by Daniel Ruske, CFP®

Recent news from Intermountain Health has changed the way many will think about retirement. For those who counted on a pension as part of their long-term picture, this is a real shift, even if the benefits you have already earned are still there.

That does not mean your plan is broken. However, it does mean the path forward may look different from what it did in the past. A frozen pension can still be part of a strong retirement strategy when you understand what is staying in place, what is changing, and how the rest of your income will need to carry more weight.

When Will the Intermountain Health Pension Freeze Take Effect?

The pension freeze takes effect on December 31st, 2026. Intermountain formally announced that currently employed participants can keep earning benefits through the end of 2026. After that date, additional accruals stop.1

Intermountain said earned benefits remain secure in a pension trust. The company attributed the change to several factors, including lower government reimbursement, market volatility, and inflationary pressure. Furthermore, the decision was presented as necessary for achieving future stability and protecting the retirement security of its current and former employees.1

Who Is Affected by the Intermountain Pension Freeze?

The effective date matters, though your current status matters just as much. Here is where the freeze lands for different groups:

Currently employed participants: If you are one of the Intermountain Health caregivers still participating in the pension, the benefit you have already earned stays yours through the freeze date. You can keep earning pension accruals through December 31st, 2026. If you remain employed after that date, pension growth stops, though you can still keep building for retirement through the 401(k) plan if you are eligible to participate.

Retirees and former workers with vested benefits: This group is not losing what has already been earned. The change does not impact retirees or former caregivers who already possess a vested pension benefit or are currently receiving payments.

Future hires and newer employees: Intermountain closed the pension to new participants in 2020, so newer employees have generally been building retirement through the 401(k) structure instead of the traditional pension plan.2 That means this freeze mainly changes the path for people who were still accruing benefits under the older pension design.

What the Pension Freeze Means for Your Retirement Income

Your pension can still be part of your future retirement income. It will just be based on what you have earned by the end of 2026 rather than years worked after that point. For many employees, that changes how future accumulation gets built.

If you stay with Intermountain after December 31st, 2026, you may still contribute to the 401(k) if eligible. This shift away from the pension places more pressure on your retirement income to come from workplace deferrals, employer-backed 401(k) features, personal savings, and the timing of Social Security.

Key Retirement Income Decisions After the Freeze

Once future pension growth has a hard stop, a few decisions start carrying more weight. The reason they matter more now is straightforward:

How much of the gap your 401(k) needs to cover: When pension accruals stop, the 401(k) usually has to do more of the long-term work. Intermountain’s plan generally matches employee contributions up to 4% of eligible compensation, with matching contributions beginning on January 1st or July 1st following the employee’s one-year anniversary. For participants added to the defined contribution program after the pension plan closes, Intermountain also provides a separate 2% employer contribution, which can make the account even more valuable once future pension benefits stop growing.3

When to claim Social Security: A frozen pension can increase the importance of getting this timing decision right. Delaying the start of benefits until age 70 can increase your monthly payment by 8% annually past your full retirement age.4 Conversely, claiming earlier provides access to income sooner, but at a lesser amount. The tradeoff deserves a closer look when one source of future growth has been capped.

How to evaluate a future pension election: Some participants may later compare a monthly pension with a lump sum, depending on plan rules and eligibility. That choice can affect cash flow, flexibility, taxes, and how much responsibility shifts to your investment accounts, which is why it deserves more than a one-number comparison.
How the pieces fit together: Pension income, the 401(k), healthcare costs, taxes, and Social Security timing all affect one another. A decision that looks fine on its own can work very differently once those moving parts are lined up side by side.

Practical Moves to Strengthen Your Plan Around the Freeze

When part of your long-term plan changes, it’s often helpful to do a broader review of the pieces around it. There are other useful moves that can help you make the transition with more confidence:

Confirm what your pension is actually projected to pay: A current estimate helps turn the frozen benefit into a real planning number instead of a rough assumption. That makes it easier to see how much income may still need to come from your 401(k), Social Security, and other assets.

Revisit how your 401(k) is invested: Once the workplace account takes on a larger role, investment choices deserve more attention. Allocation, diversification, fund costs, and overall risk level all matter more when this account may be carrying a bigger share of future income needs.

Use the contribution window well: The years leading up to and following the freeze may be a good time to revisit your savings rate, especially if your cash flow has improved or there are opportunities for additional catch-up contributions. Even modest increases in deferrals can have a meaningful effect when the pension is no longer adding new value each year.

Revisit the retirement timeline regularly: A freeze can change the income picture without changing the retirement date itself. Periodic reviews can help you see whether your projected pension, 401(k), and Social Security strategy are still lining up the way you intended.

Intermountain Health Pension Freeze FAQs

1. Does the Intermountain pension freeze mean I am losing my pension?

No. The freeze means future accruals stop after December 31st, 2026, for affected current participants. Benefits already earned remain in place.

2. Who is affected by the freeze?

Currently employed participants who are still earning pension benefits are affected. Current retirees and vested former workers keep what they already earned, and future hires were generally already outside the pension after the plan closed to new participants in 2020.

3. What does the pension freeze mean for my retirement timeline?

Your timeline may stay the same, though your income plan should be updated and reviewed. A frozen pension means less future growth from that benefit, so your 401(k), savings rate, and Social Security timing may need a closer look.

4. Should I increase my 401(k) contributions after the freeze?

For many people, that is worth reviewing. When future pension accrual stops, the 401(k) typically has to do more of the heavy lifting for retirement accumulation.

5. Should I take my pension as a lump sum or monthly income?

That depends on your broader income structure, tax picture, and comfort level managing assets. A direct rollover may keep a lump sum tax deferred if that option is available under plan rules.

6. How should Social Security fit into this decision?

Social Security should be coordinated with the pension and your 401(k) withdrawals. Delaying benefits can raise the monthly amount you receive for life, which may matter more after a pension freeze.

Turning a Pension Change Into a Retirement Plan

The Intermountain pension freeze changes how future income will be built, though it does not erase the value that has already been earned. For affected families, the real work now is deciding how the frozen pension, 401(k), Social Security, and personal savings will fit together.

That kind of work is hard to do well in pieces. Pension choices touch taxes. Social Security timing affects withdrawal strategy. Healthcare costs shape how much portfolio income you may need. One decision can change the value of the next.

Peterson Wealth Advisors works with Intermountain families regularly, and we help turn these moving parts into one coordinated retirement income plan. If you want to see how your pension, 401(k), and Social Security decisions fit together, schedule a complimentary consultation with our team.

Resources:

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/

Planning to Live: A New Vision for Retirement With Meaning and Momentum

Posted on January 14, 2026January 14, 2026 by Alex Call, CFP®

When most people think of retirement, they imagine the finish line . . . the end of a career, the end of responsibility, the end of a routine. But I see it differently. Retirement is not the end at all. It’s a new beginning. A third of your life may still be ahead of you. It’s not about retiring from something; it’s about retiring to something more meaningful.

When I sit down with clients and build out a 30-year retirement plan, the shift is tangible. They begin to realize that retirement isn’t a short phase. It’s potentially 30 years of purpose, contribution, and joy.

Seeing Retirement as a New Chapter

Education is the first step. I take time to walk clients through what retirement really looks like, both financially and emotionally. When they see the plan laid out, it clicks: this is a big part of life, not a postscript.

For many of our clients, retirement becomes a sacred opportunity to serve. Senior missions, humanitarian work, and community service become not only possible but deeply fulfilling. Others find themselves drawn to family, traveling frequently to spend quality time with children and grandchildren.

Some of the happiest retirees I know are the ones who come back to me two or three years after retiring and say, “I don’t know how I ever found time to work.” They’re busy, but they’re fulfilled. They’re giving back, they’re traveling, and they’re using their time intentionally.

Preparing for Retirement in the Final Stretch

So what should you focus on in the 5 to 10 years leading up to retirement? There are three key areas: emotional, structural, and financial.

Define What You’re Retiring To

It’s easy to say you’re retiring from a job. But what’s harder—and far more important—is deciding what you’re retiring to.

I encourage clients to think beyond the honeymoon phase of retirement. After the initial freedom and excitement wears off, what brings lasting purpose? Whether it’s serving others, spending more time with loved ones, or finally pursuing that long-postponed passion project, this clarity makes all the difference.

Unfortunately, there’s no script. Everyone has to write it themselves. But those who find a sense of mission tend to thrive.

Adjust Your Investment Strategy

Many people nearing retirement are still heavily invested in the stock market, sometimes 100% in equities. That’s probably fine in your 40s, but in your early 60s, it’s most likely time to shift to a more conservative strategy.

Our proprietary Perennial Income Model™ helps clients do just that. By segmenting retirement into six distinct five-year periods, the model provides predictable income early in retirement from conservative investments, while allowing later segments to grow. This structure protects you from having to sell in a down market and gives you peace of mind that your income is secure.

Know Your Retirement Budget

One of the most important, but often overlooked, steps is estimating your retirement spending. You won’t get it exactly right—no one does the first time—but having a solid estimate gives you a benchmark to measure against.

With a clear budget, we can determine if your current savings, pensions, and Social Security will support your lifestyle or if adjustments are needed.

Retirement With Purpose and a Plan

At the heart of our philosophy at Peterson Wealth is the belief that structure leads to freedom. With a clear financial plan, you can spend your time and money with confidence—supporting missions, donating to causes, traveling with family, or even helping a grandchild through college.

You’ve worked hard to get here. Now it’s time to live with intention. Retirement isn’t about slowing down. It’s about waking up with the freedom to do what matters most to you.

Whether you’re five years out or retiring this year, we’re ready to help you define and prepare for the next chapter—one filled with clarity, confidence, and purpose.

Ready to plan not just for retirement, but for a life well-lived? Schedule a retirement consultation with a Peterson Wealth Advisor today.

The One Big Beautiful Bill: What Retirees Need to Know About the New Tax Law

Posted on August 6, 2025August 21, 2025 by Zach Swenson, CFP®

If you’ve turned your television on in the last 6 months, you’ll know there’s been a lot of discussion on the latest tax bill barreling through Congress. The massive 800-page bill has officially been passed. Some of the questions you might be asking are: What does this mean for me? What stays the same? What’s going to change? How does this affect my retirement plan? In this blog, we’ll give you a preview of some of the critical provisions most likely to impact your current or future retirement planning strategies.

Permanent Extension of Lower Tax Brackets

Under the original Tax Cuts and Jobs Act of 2017 (TCJA), tax brackets were set to revert to their previous levels. Under the Big Beautiful Bill, the tax brackets under the TCJA are made permanent. This extends favorable tax rates for middle and upper-middle-income retirees. Not only does it affect your marginal tax brackets, but it has implications on any Roth conversions you might do, how you manage your Required Minimum Distributions, and even how you look at recognizing capital gains.

Permanent Increase to the Standard Deduction

The standard deduction under the TCJA has also been made permanent. This increases the amount of income shielded from taxation for single and married taxpayers. Below is a chart showing the difference between the standard deduction before the TJCA and now.

Pre-Tax Cut & Jobs Act	Now (2025)	Difference
$6,350 (Single)	$15,750 (Single)	$9,400
$12,700 (Married)	$31,500 (Married)	$18,800

Temporary Bonus Senior Deduction

Under the Big Beautiful Bill, individuals 65 or older will also receive an additional $6,000 deduction per person. This applies whether you take the standard or itemize your deductions. It is subject to an income phase-out of $75,000 (single) and $150,000 (married filing jointly).

This bonus deduction does not change how Social Security is taxed. That remains the same under this new law. Also, you do not need to have claimed your Social Security benefits to receive this deduction.

Example: For a married filing jointly couple both over the age of 65 who take the standard deduction, your standard deduction would be $34,700 ($31,500 standard plus $1,600 for each filer over the age of 65), then they also get the new bonus senior deduction, which is $6,000 per individual age 65 and older. This makes their total deductions $46,700.

Charitable Deduction Changes

Under the new tax law, an additional deduction was created for charitable donations for those claiming the standard deduction. This means that you can deduct up to $1,000 (single) or $2,000 (Married Filing Joint) for cash contributions made to qualified charitable organizations starting in 2026. This deduction is a welcome addition for those who are charitably inclined but don’t meet the threshold to itemize on their return.

Another change is for those who itemize their deductions. There is now a 0.5% AGI floor for deducting their charitable donations. For example, if you have an Adjusted Gross Income of $100,000 in 2026, you must donate at least $500 to charity before you can claim any charitable donations on your taxes. You need to be aware of this hurdle when itemizing your charitable donations.

Increased temporary SALT Deduction

The additional SALT (State and Local Tax) deduction offers relief for residents of high-tax states. Under the TCJA, this deduction was limited to $10,000. From 2025 to 2030, the expanded SALT deduction rises to $40,000. This $40,000 limit will increase by 1% for inflation through 2029. This deduction will most likely benefit those living in states like California or New York with upper-middle-class incomes. There is a phase-out for individuals with a modified Adjusted Gross Income exceeding $500,000, regardless of whether they file as single or married.

For example, if you itemize, with state taxes of $15,000 and property taxes of $10,000, you can now deduct the full $25,000 as an itemized deduction as long as you’re under the phaseout. Before, under the TCJA, you were limited to the $10,000 cap.

Estate & Gift Tax Exemption Set at $15 Million

Under the TCJA, the estate tax exemption was set to sunset from $13,900,000 to roughly $5 million. Under this new law, that exemption is permanently increased to $15 million per individual, or $30 million per couple. Portability, or the ability for one spouse to use the remaining estate tax exemption from their deceased spouse, also remains intact.

While most individuals will not have an estate that exceeds $30 million, this increased exemption is not a suitable replacement for an estate plan. Make sure you have a competent attorney who can help you put the necessary provisions in place to make a smooth transition of assets for you and your family.

Healthcare updates under the Big Beautiful Bill

The One Big Beautiful Bill expands the definition of a High-Deductible Health Plan (HDHP), which individuals must have to be able to contribute to a Health Savings Account. With the new rules, all “Bronze” and “Catastrophic” plans offered on Affordable Care Act exchanges qualify as HDHPs.

Additionally, the Affordable Care Act (ACA) subsidies that were extended post-COVID are ending in 2025. This affects retirees under 65 receiving subsidies under these marketplace plans. Don’t hesitate to get in touch with your financial advisor to revisit what income thresholds are affected by this change. You may also want to consider making adjustments to your healthcare plan and review your timeline for Roth conversions.

Conclusion

The One Big Beautiful Bill does provide at least one promising thing to retirees – clarity. With many of the Tax Cuts and Jobs Act provisions being made permanent, including tax brackets, an enhanced standard deduction, and the new changes to charitable giving, the future looks bright for those entering retirement. If you’d like to discuss how these new provisions will affect your retirement plan in greater detail, contact one of our retirement planning specialists at Peterson Wealth Advisors.

Information on these provisions is discussed in greater detail in a previously recorded webinar on our website. Watch the webinar here.

The Retirement Income Challenge: Creating Security and Income for Retirement

Posted on February 20, 2024August 21, 2025 by Scott M. Peterson, ChFC®

Most of us sacrifice and save for four decades in preparation for what we hope will be a comfortable retirement. We are laser-focused during our working years on accumulating as much as possible, and by the time we retire, many of us have refined the art of wealth accumulation in our IRAs, 401(k)s, and a variety of other investment accounts. We feel pretty confident in our retirement preparation and then something happens that shatters our confidence…we retire. We quickly come to the realization that successfully investing and managing the distribution part of retirement takes a completely different skill set than accumulating money in retirement accounts.

Besides the universal question of how to invest, there are questions regarding distributions, taxes, risk, and keeping our income up with inflation that will all have to be addressed as we transition from accumulating to distributing our retirement accounts. All these questions bleed into the single, overarching question that every retiree needs to figure out: How am I going to create an inflation-adjusted stream of income from my investments that will last for the rest of my life?

The Need for a Retirement Income Plan

The quality of the next 30 years of your life is dependent upon the decisions that you make at retirement and the plan you put in place. There is so much on the line, and mistakes made at the beginning of retirement are not forgiving. There are no do-overs. A well-thought-out retirement income plan will provide discipline, order, safety, and peace of mind. A sound retirement income plan will allow you to focus on your retirement dreams and not be obsessed with the daily movement of markets, interest rates, or how current events will impact your retirement.

A retirement income plan should be unique to you and your specific needs. So, copying your retired neighbor’s retirement income plan won’t work. Following some generic, “rule of thumb” withdrawal advice from your financial advisor won’t get it done, and buying an annuity that will never keep up with inflation over a long retirement will only serve to crush your future purchasing power. And finally, decades of investing have already taught you the futility of market timing and betting your future on guessing the direction of the stock market.

Now that I have shot down all the popular attempts to create retirement income streams, and before I show you how a professional retirement income plan is created, let’s address what it is that we need a retirement income plan to do.

A Successful Retirement Income Plan Must Address Five Objectives

It must be goal specific.
It must create a framework for investing.
It must create a framework for distributing.
It must create a framework to reduce risk.
It must create a framework for reducing taxes.

Goal Specific

A retirement income plan that is goal-driven provides detailed objectives. It is a date-specific, dollar-specific blueprint that will guide you throughout retirement. A date-specific, dollar-specific plan defines how much income will be needed during retirement, and when it will be needed. Its objective is to deliver future income to the retiree with the least amount of risk, after all risks have been considered. A properly structured retirement income plan matches your current investment strategy with your future income needs. Like any goal-driven program, the performance toward reaching the goal must be monitored to maintain discipline and allow for adjustments if the goal is to be realized.

Create a Framework for Investing

Retirees must find the proper investment mix of low-volatility fixed-income investments and higher-yielding, more volatile equities.

Fixed-income investments such as bank deposits and certain types of bonds can provide a haven to draw income from when the stock market takes its occasional dive. As valuable as these types of investments can be in the short term, they are a long-term liability that will never keep up with inflation.

On the flip side, retirees need to own some equities in their portfolios. Owning higher yielding equities is a logical way to keep ahead of inflation over the long run. But we all know that short-term volatility and unpredictability afflict all who own equities. Creating a retirement income plan that takes advantage of the opposing nature of fixed-income and equities is an essential component in creating a long-lasting retirement income plan.

It’s just commonsense to invest the money we’ll need in the short-term into fixed-income type investments and invest the money we don’t think we will need for a while into stock-related investments. But, most retirees and their advisors don’t invest this way. Unfortunately, the failed practices of chasing last year’s returns and making investment decisions based upon guessing the future direction of the stock market continue to be the prevalent methods used to determine investment allocations, even though these methods have proven to be extremely unreliable.

Following a plan that allocates retirement savings by determining short versus long-term income needs liberates the retiree from having to time the markets or beat the stock market average by superior investment selection. With an investment plan that matches current investments with future income needs, the retiree only needs to concentrate on maintaining discipline and following the plan.

Create a Framework for Distributing

When it comes to withdrawals from investments at retirement, I have noticed two types of personality traits. The first trait is manifested in individuals I will call the “entitled spenders” who think to themselves, “I have been saving all my life for retirement, and I am now retired, so I am going to spend however much I want on whatever I want.” The second type I will call the “paranoid savers”. These people are those who think, “I may have a lot of money, but it has to last a long time. And who knows what the future might bring?” These types of individuals are often afraid of spending any of their retirement funds at all.

The “entitled spenders” sabotage their retirement by spending too much, too early, as they burn through all their retirement savings in the first ten years of possibly a thirty year retirement. The “paranoid savers” likewise harm their retirement by living below their privilege by denying themselves many of the simple pleasures and opportunities of retirement. Ironically, both the spenders and the savers would greatly benefit from the same date-specific, dollar-specific retirement income plan, a plan that outlines how much money can and should be withdrawn from investment accounts and when.

Quite literally, the million dollar question is, “How much can/should I withdraw from my investments each year?” You must be able to answer this question if you’re going to have a sustainable income stream throughout retirement, and if you’re going to be able to enjoy your retirement experience to the fullest.

A sustainable withdrawal rate can be created through determining the answers to three important questions:

How much income will I need to pull from my investments to sustain my retirement lifestyle?
When will retirement savings need to be converted into retirement income?
How should retirement accounts be invested until they are needed to be converted into income?

Again, having a retirement income plan that includes date-and-dollar specifics should drive your withdrawal decisions. Adjustments in either the timing of withdrawals, the withdrawal amounts, or how retirement funds are invested between now and the future income date will impact your future income stream.

Create a Framework to Reduce Risk

A viable retirement income plan must recognize and minimize risks where possible. Retirees are particularly susceptible to three kinds of risks:

Inflation risk
Stock market risk
Behavioral risk

Inflation Risk

When it comes to inflation, you must ask yourself the following, “How do I invest to maintain my purchasing power and stay ahead of inflation?”

Inflation is the gradual but lethal loss of purchasing power. Currently, we are going through a period of high inflation but historically, the long-term inflation rate has averaged 3%. At just a 3% inflation rate, $1.00 will only be able to purchase $0.41 worth of goods and services at the end of a 30-year retirement. Unless you are willing to reduce your lifestyle and spending habits by about 60% during your retirement, inflation must be dealt with. Fortunately, the risk of inflation can be mitigated by investing in inflation-beating equities. The retirement income plan I will show you later in this blog helps by deliberately designating a portion of a portfolio toward long-term inflation protection.

Stock Market Risk

How do I maintain investment discipline throughout retirement and not make major mistakes during periods of market volatility? Market corrections are part of the investment cycle and should be planned for. Successful investors follow plans and are patient, while unsuccessful investors follow the breaking news and daily movements of the stock market and are prone to panic. Informed investors manage stock market risk by being diversified and patient because they understand every bear market is eventually followed by a bull market. Having a plan in place is the antidote to panic. Knowing what you own, and why you own it, goes a long way towards helping you stay the course during periods of market turbulence.

Behavioral Risk

Two related questions come to mind when considering the behavioral aspects of a retirement income plan:

How do I protect myself from my older self when my financial judgement is clouded by age?
How do I provide the less financially savvy spouse with a plan to follow that will provide for his or her financial needs after my death?

Retirement is not a time for investment experimentation. It’s not a time to be tossed about by every headline on the nightly news or story on the internet. It isn’t a time to change your investments based on irrational exuberance or equally irrational fear. A goal-specific income plan goes a long way toward helping to navigate the emotional roller coaster of investment management now, and especially as you age. It can also be a valuable tool to provide guidance to a spouse upon your death. A date-specific, dollar-specific retirement income plan helps protect your future from perhaps its greatest threat — you.

Create a Framework for Reducing Taxes

From which accounts, or combination of accounts, should I withdraw retirement income from to give myself the most tax-efficient income stream? Should I withdraw from my IRA, my Roth IRA, or my non-retirement accounts? How do I go about managing my Required Minimum Distributions?

Tax-saving opportunities rarely happen by accident. Rather, they come about through careful planning. This is especially true with retirees. Keeping retirees in lower tax brackets throughout retirement can be done by managing withdrawals from pre-tax versus after-tax investment accounts. In other words, the retiree can take income from IRA accounts until they reach the top of a tax-bracket and then take the balance of their needed income for the year from an after-tax account. This is an easy concept to visualize but a little more difficult to implement. What adds to the complexity is that implementing this plan has to integrate with the framework for investing and the framework for distribution sections that I just mentioned. At this point, it might sound daunting to bring all of this together. As we create the income plan in the next section, you will be able to see how all these components can integrate with each other.

Retirement Income Plan Creation

Now that I have explained the retirement income challenge, and what your retirement income plan must address, let me demonstrate how a professional retirement income plan is structured. In 2007, we created our proprietary retirement income plan that we call the Perennial Income Model™. It has helped hundreds of retired families successfully navigate their retirements during the volatile years since its inception. The Perennial Income Model is goal-based and creates the essential frameworks for investing, distributing, reducing risk, and reducing taxation, as previously mentioned.

Allow me to introduce the Lee family who we will build a retirement income plan for. Tony and Kathy Lee are both 65 and are ready to retire. They have accumulated $1,000,000 in their 401(k) and their after-tax brokerage accounts. They want to know how they should invest the million dollars and how much income they should expect to receive from that sum of money. They feel a retirement income plan spanning 25 years should be sufficient, and they would like to pass the full $1,000,000 to their children upon their deaths, if possible.

When it comes to making investment decisions, the most important consideration is an investment’s time horizon. In other words, how long will the money be invested? The Perennial Income Model matches the Lee’s current investment portfolio with their future income needs by dividing their money into various investments that have different objectives based upon when a particular segment of their money will be called upon to provide future income. Therefore, the Perennial Income Model will divide the $1,000,000 they have accumulated for retirement into six different accounts. The first five of these accounts are responsible for creating retirement income for five different five-year periods of the Lee family’s retirement. I will refer to the accounts that cover the five-year period of income as segments. So, Segment 1 is responsible for providing the income for the first 5 years of retirement, Segment 2 for years 6-10 of retirement, Segment 3 for years 11-15 of retirement, and so on… until 25 years of retirement are covered.

The sixth segment, or Legacy Segment, is designed to create a fund that will replace the original investment of $1,000,000 to the Lee family at the end of 25 years. This provides money for their heirs or can serve as an insurance policy should they live longer than 25 years or experience large end-of-life expenses like nursing home costs. The accompanying chart shows the retirement income plan being built for the Lee family — I will walk you through it to make sure it all makes sense to you.

The Perennial Income Model Walk-Through

The underlying principle of the Perennial Income Model is matching current investment portfolios with future income needs. Therefore, the money that the Lee’s depend on to provide income in the short-term is invested in conservative investments that provide safety from volatile markets. The money that won’t be needed to create income for a prolonged period is invested into more aggressive investments that keep up with inflation. Segment 1 will provide income for the first five years of retirement. It will be invested into a conservative account that will systematically distribute $4,329 monthly to the Lee’s checking account.

Segment 1’s primary responsibility is safety of principle because it’s sending out a monthly payment immediately; so, this segment is the most conservatively invested. We assume only a 1% rate of return on the money invested in Segment 1. Certainly, in today’s environment retirees can, and should, expect a higher return than 1% on their conservative money. We also expect to outperform the conservative assumptions for the other segments as well. By choosing to underestimate performance, we avoid creating a false sense of security and unrealistic income expectations. Obviously, if the Perennial Income Model works with the conservative assumptions we are using, it will work better as investment performance exceeds these assumptions.

Segment 2 will take over the role of providing monthly income to the Lees once Segment 1 runs out of money at the end of the fifth year. Since the money from Segment 2 will not be needed for at least five years, it can be more aggressively invested than Segment 1, but it can’t be significantly more aggressive. A prolonged bear market could last longer than five years, so the bulk of this money should also avoid volatile investments. That’s why only a 5% return is assumed during the five years it’s invested before being turned into income in year 6.

Segment 3 will be invested for ten years before it will be called upon to create income for years 11-15. Because the money in this segment won’t be used for ten years, Segment 3 is moderately invested in a 50% stock/50% bond portfolio. A conservative 6% return is assumed for this segment.

You can see from the chart, Segment 4 assumes a 7% growth rate and Segment 5 and the Legacy Segment assumes an 8% growth rate. We use these higher growth assumptions because these segments are more aggressively invested. Investments that will not be needed for fifteen years and beyond must invest into a diversified portfolio of equities to keep up these higher growth assumptions. History has shown us that, in the long run, equities have always beaten inflation and have given us superior returns. It’s understood these inflation-fighting segments will experience occasional bouts of volatility that the stock market imposes with regularity. But given the long-term nature of these segments, short-term volatility is inconsequential. The key to making the stock market work for you is to maintain discipline and stay invested during periods of volatility. Following the Perennial Income Model will provide the discipline that is needed.

Harvesting

At first glance, the Perennial Income Model appears to become more aggressively invested as the retiree ages and gets into the latter segments of the plan. Having 80–90-year-old retirees with all their money invested in long-term, aggressive equity portfolios doesn’t make any sense. Fortunately, this is not how this retirement income plan works when the income model is properly managed and “harvested.” In financial terms, the process of harvesting is transferring riskier, more volatile investments into a conservative and less volatile portfolio once the target, or goal, of each segment is realized. The target, or goal of each segment is the number found in the dark green box associated with each segment.

For an example of harvesting, let’s look at Segment 4. You can see that the initial investment in Segment 4 is $127,476 and we know that if this initial investment grows by the assumed growth rate of 7%, it will reach its target, or goal amount by the projected fifteenth year. Segment 4 is invested in a moderate growth portfolio (70% stocks, 30% bonds). According to a study done by Vanguard, the historical return of a moderate growth portfolio has averaged an annualized return of 9.4% since 1926. So, it would be plausible, if history simply repeated itself, that the investment portfolio in Segment 4 would reach its goal of $363,172 before year 15 (at a 9% growth rate, the segment reaches its target in 12 years). Once the target is reached, no matter what year that happens, the investment needs to be harvested and preserved. That means the equities in the segment that have reached their target goal must be moved into more stable and conservative investments.

We have found, the key to successful outcomes is to begin with conservative growth assumptions and then maintain the discipline to harvest portfolios in the segments when they reach their targets.

Five Insights to Point Out:

Notice the account balance stays roughly the same throughout retirement (see the far-right column of the chart). People often assume that as segments are liquidated, the overall portfolio balance is going down, but that’s not the case. Recall that as the early segments are being liquidated, the later segments are invested and growing.
Notice that the retirement income plan is projected to automatically increase the Lee’s income every fifth year by an annualized 2.6% rate to help offset the effects of inflation.
To keep things simple and to help you to understand how the Perennial Income Model works, I have not incorporated any other sources of income such as Social Security or pensions into our example. But, for tax planning purposes, projected Social Security, pension, and other sources of taxable income should be incorporated into the retirement income stream projections. Once the income stream is created by adding all sources of income, thoughtful consideration should be made to determine which type of account (IRA, Roth IRA or after-tax account) should be allocated into the various segments for maximum tax efficiency.
Assumed growth rates are purposefully overly conservative. Historically, the S&P 500 has averaged more than 10%, and the largest assumed growth rate used in the most aggressive segment is only 8%. If you feel that these assumed growth rates are not realistic, you can always adjust the income plan to run at lower or higher growth assumptions. The Perennial Income Model uses conservative growth assumptions within the retirement income plan in hopes that the target for each segment is reached prior to the date it’s needed to provide income.
Please look at the bottom line of the chart. Based upon these conservative assumptions, the Lee family will receive $1,674,433 of income during their 25-year retirement and leave $1,000,000 to their heirs.

Conclusion

I end with the question that all new retirees and those approaching retirement need to ask themselves, “Will I outlive my money, or will my money outlive me?” Without knowing anything about your finances, I can tell you that you will be much more likely to have your money outlast you if you follow a plan. Your retirement income plan should be goal-based and should serve as a guide to your financial decision-making for the rest of your life. It should drive your investments, withdrawals, and even influence your spending and gifting decisions.

The Perennial Income Model appeals to those seeking a logical, goal-based roadmap for investment management during retirement. It reduces the retirees’ need to be anchored to the daily movements of the stock market which, in turn, will provide them with greater peace of mind and will make them less vulnerable to making the irrecoverable investment mistakes that so many retirees make.

Retirees that follow the Perennial Income Model understand why they are invested, when they will need a specific portion of their investments to provide future income, how much they can safely withdraw, and how their dollars will need to be invested to accomplish their goals. They will also realize a more tax-friendly way to navigate retirement. The Perennial Income Model is designed to provide a secure stream of income in the short-term, while providing an inflation-adjusted stream of income for the retiree’s future.

Hopefully, you can now see that there is so much more to planning retirement income streams than buying an annuity and more to consider than following generic and overly simplistic rule of thumb guidelines to manage your finances during retirement.

My hope is that this blog has opened your eyes to a better way to invest during retirement and that you might be able to incorporate some of the ideas found in this blog so you might face your financial future with confidence and have the peace of mind to free you to pursue your retirement dreams.

The Perennial Income Model is explained in greater detail in my book “Plan On Living”. You can get a complimentary copy of my book and get a better understanding of the services that we offer by visiting here.

The Best Way to Create a Retirement Income Plan

Posted on May 16, 2023September 24, 2025 by Scott M. Peterson, ChFC®

Scott Peterson was a guest writer on the popular White Coat Investor blog—a blog esteemed amongst physicians and other high-income professionals. Scott’s blog outlines our proprietary process for investing, The Perennial Income Model™. The article also presents a retirement income plan creation example of a couple who have accumulated $1 million for their retirement.

Click here to read Scott’s blog in its entirety on WhiteCoatInvestor.com.

Reduce Your Taxes Throughout Retirement With the Perennial Income Model™

Posted on November 2, 2022August 21, 2025 by Scott M. Peterson, ChFC®

“You must pay taxes. But there is no law that says you gotta leave a tip.” -Morgan Stanley

How can any retiree make a good decision about reducing taxes in retirement, or any financial professional recommend a proper course of action, without first mapping out, and projecting a future income stream?

The answer is . . . they can’t. Retirees often end up making only short-term, immediate tax-saving decisions, while missing out on more advantageous, long-term tax reduction opportunities because neither they nor their advisor project income streams across a full retirement. Focusing only on the current tax year ends up costing retirees many thousands of dollars because they fail to recognize, and then to organize, their finances to take advantage of long-term opportunities to reduce taxes.

A comprehensive retirement income plan must consider a lifetime tax reduction strategy that focuses on how today’s decisions to withdraw money from the various types of accounts will impact their tax liability years into the future. The Perennial Income Model™ is the ideal tool to help retirees recognize and organize long-term tax-saving opportunities to keep more of their wealth.

Three retirement account tax categories

Before looking at strategies to maximize your lifetime tax savings, you must first understand the categories of retirement accounts and the tax implications of each. How your investments are taxed depends on the type of account in which they are held. There are three categories of accounts to consider:

Tax-deferred retirement accounts

The money in IRAs/401(k)s and a variety of other company-sponsored retirement saving plans are 100% taxable upon withdrawal unless you use the Qualified Charitable Distributions exception (to be explained). Non-IRA annuities can likewise be lumped into this category with the exception that only the interest earned on the non-IRA annuity is taxed upon withdrawal, not the entire value of the annuity.

Tax-free retirement accounts

The funds in Roth IRAs and Roth 401(k)s can be withdrawn tax-free.

Non-retirement accounts (after-tax money)

Investments that are individually owned, jointly owned, or trust owned have their dividends and interest taxed annually. They are also subject to capital gains taxation in years when investments are sold at a profit.

Three strategies to reduce your taxes in retirement

At Peterson Wealth Advisors we use our Perennial Income Model to provide the organizational structure to recognize and benefit from major opportunities to reduce your taxes. Let’s consider three of these tax-saving strategies that can benefit you in retirement:

1. Managing investment income according to tax brackets

Thankfully, your retirement income stream can come from a mix of tax-deferred, tax-free, and non-retirement accounts used in combination to lower your tax liability. Even though income stemming from tax-deferred accounts is 100% taxable, Roth IRA funds can be withdrawn tax-free and money coming from non-retirement accounts hold investment dollars that can oftentimes be withdrawn with limited tax consequences.

The key is to determine which of the above categories of accounts should be tapped for future income needs . . . and when. Tax-efficient income streams that are thoughtfully mapped out at the beginning of a retirement, as we do with the Perennial Income Model, can be extremely effective to help minimize your lifetime tax burden. With advanced planning, you can avoid the costly mistakes of conventional wisdom: paying almost zero tax from retirement date to age 72, then paying high taxes and higher Medicare premiums until death. The Perennial Income Model shows us that it is better to pay minimal taxes from retirement date to age 72, along with how to be able to pay minimal taxes and minimal Medicare premiums from age 72 to death. When you structure your retirement income streams from a variety of tax locations within your portfolios, thoughtfully planned out, you can experience a higher standard of living while still paying very low tax rates.

2. Qualified Charitable Distributions

The most overlooked, least understood, and one of the most profitable tax benefits recognized by forecasting income streams through the Perennial Income Model comes from the use of Qualified Charitable Distributions. A Qualified Charitable Distribution, or a QCD, is a provision of the tax code that allows a withdrawal from an IRA to be tax-free if that withdrawal is paid directly to a qualified charity. Our clientele consists of retired people who regularly donate generous sums to charities. By simply altering the way contributions are made to charity, you can make the same charitable contribution amounts and reduce your taxes at the same time.

The ability to transfer money tax-free from an IRA to a charity has been around for a while, but the doubling of the standard deduction from the 2018 Tax Cuts and Jobs Act, was the catalyst that brought this valuable benefit to the forefront. With larger standard deductions, only 10% of taxpayers itemize deductions. Here is the catch: you only get a tax benefit from making charitable contributions if you itemize your deductions, and with the higher standard deduction, fewer of us will be itemizing. So, a 65-year-old single taxpayer, with no other itemized deductions, could end up contributing up to $13,000 and a 65-year-old couple could end up contributing up to $27,000 to charity and it would not make any difference on their tax returns, or their tax liability, because both generous charitable contribution amounts were lower than the standard deduction. So, they will just end up taking the standard deduction. Another way of saying this is that these charitable donors will not receive a penny’s worth of tax benefit for giving so generously to charity.

Doing a direct transfer of funds to a charity by doing a QCD versus the traditional writing a check to a charity, can restore tax benefits lost to charitable donors. QCDs are only available to people older than age 70 1/2, they are only available when distributions come from IRA accounts, and a maximum of $100,000 of IRA money per person is allowed to be transferred via QCD to charities each year.

3. Roth IRA Conversions

Converting a tax-deferred IRA into a tax-free Roth IRA can be a valuable tool in the quest to reduce taxes during retirement. Unfortunately, few retirees get it right deciding when to do a Roth conversion, deciding how much of their traditional IRA they should convert, or even deciding if they should convert any of their traditional IRAs at all. Without a projection of future income that the Perennial Income Model provides and the subsequent projection of future tax liability, it is virtually impossible to determine whether a Roth IRA conversion is the right course of action. Perhaps the greatest unanticipated benefit that we have observed since creating the Perennial Income Model is its ability to clearly estimate future cash flows and subsequent future tax obligations for our retired clients. Given this information, the decision whether to do a Roth conversion becomes apparent.

As advantageous as Roth IRA conversions can be, they are not free! The price you pay to convert a traditional IRA to a Roth IRA comes in the form of immediate taxation. 100% of the conversion amount is taxable in the year of the conversion. For this reason, investors must carefully weigh whether doing a Roth conversion will improve their bottom line.

Too much of a good thing usually turns a good thing into a bad thing. So, it is with Roth conversions. Excessively converting traditional IRAs into Roth IRAs without fully considering the tax consequences, can cause some investors to pay more tax than they otherwise would if they didn’t do a Roth conversion in the first place. So, it’s important to recognize when, and when not, to do a Roth conversion.

The Perennial Income Model™ as a tax planner

We first designed the Perennial Income Model to provide the structure to reinforce rational decision-making. It started with a focus on helping retirees match their current investments with their future income needs. Now, we see that the Perennial Income Model’s role is much bigger, including providing the benefit of reducing your taxes throughout the entirety of your retirement.

The Role an Emergency Fund Plays for Retirees

Posted on September 29, 2022August 21, 2025 by Daniel Ruske, CFP®

An emergency fund is a portion of money set aside to be used as a buffer in the event of an emergency or for an unforeseen expense. During the accumulation phase of life, or the years in which a household is reliant on a paycheck and actively saving toward retirement, an emergency fund provides a safety net to balance the budget during events such as loss of work, an expensive medical bill, or a car repair. In every personal finance textbook, you will find details on how to best manage an emergency fund. However, most of these texts focus on the accumulation phase of life. They aren’t focused on applying these beneficial principles to retirees. So, let’s go over the details of an emergency fund for retirees.

How much should I have in an emergency fund?

There is a rule of thumb that is used when determining how much a household should have in an emergency fund. The guidance is to have at least three to six months’ worth of expenses set aside. This can be a good benchmark to measure yourself against. But the problem with a rule of thumb is that everyone’s individual situation is different and may require more customization.

Calculating an emergency fund during retirement is different than during accumulation. For instance, the risk of losing your job when you’re retired is zero percent. However, in most cases, this does not completely eliminate the risk of income loss. You must determine, based on your own cash flow risks, what amount is right. For example, a retiree with multiple rentals and a history of renter turnover will require more cash on hand than a retiree whose only income source is from Social Security and a steady pension.

Where should you invest your emergency fund? How much cash should I have on hand?

The goal of an emergency fund is not to earn the highest return possible. It is to have the funds accessible when needed. A common place for an emergency fund to be kept is in a savings or money market account. You can do this at your preferred bank or credit union. Online banks that pay higher interest rates can also be a good choice. Any of these options will work, as long as your money is easily accessible.

Do not keep your entire emergency fund in hard cash. Having a limited amount on hand in your home is reasonable. However, there are added risks in having large sums of cash in your home.

Investing excess savings

Once you have determined the amount for a comfortable emergency fund, you may need to add or subtract from your current account. If you need to increase your emergency fund, the best way to do this is by adding a portion of your monthly income to the fund until you have the desired balance. Anytime you use your emergency fund, immediately work toward increasing it back to the desired amount.

It can also be common for retirees to accumulate large sums of cash in savings accounts. These are much greater than an adequate emergency fund requires. During the accumulation phase, the guidance is to put 15 – 20% of our income away into savings. In retirement, this mindset changes. Keeping extra savings in the bank, in excess of your emergency fund, can be a missed investment opportunity. This will hamper your ability to keep your investments up with inflation. If you have a balance in your bank account on top of your emergency fund needs and what you might reasonably spend in a short period of time, consider investing these funds for a greater opportunity for growth. You should also consider reducing income from sources such as taxable retirement accounts to avoid paying taxes on this unspent income just to have it accumulate in the bank.

A good question to ask yourself if you are in this situation is “when do I plan on spending this money?” If it is more than five years out, investing the funds in a diversified portfolio will result in greater growth opportunities. Talk to your advisor to determine the right investment allocation.

Conclusion

Though the amount and use of an emergency fund slightly change for individuals moving from the accumulation phase to the retirement phase of life, it is still an important part of a retiree’s financial household. Having too little or too much in savings for a rainy day could cost you thousands of dollars over the course of your retirement. Talk to one of Peterson Wealth Advisors’ Certified Financial Planners with your questions about an emergency fund for retirees and start your retirement income planning with our Perennial Income Model.