Things I Wish I’d Known (and Done) Before I Retired

  

It’s hard to believe that I’ve now been “retired” for three years. That said, there are some things that, in hindsight, I wish I had known and/or acted on sooner. And a couple that I actually did - but might easily have overlooked. 

Here they are:

Do More Roth — Sooner

I’ve long been a huge fan of Roth. It’s not hard to look at the federal government’s finances, the current tax brackets, and figure out that the rates aren’t likely to get any lower in the future.

And yes, for the last decade or so of work, I went all Roth, including catch-ups. In fairness, Roth wasn’t an option for most of my retirement savings career. Even so, in those first years, recordkeepers weren’t really ready — and I, like most of my generation, had by then been so thoroughly coached on the advantages of pre-tax accumulations — well, it was easy to shrug off Roth as one of those things of which only the wealthy could afford to benefit.

But — and particularly as I got closer to retirement — the question has always been, where will your income in retirement line up with those brackets? That said, the closer I got to retirement, the easier it was to make that determination — and even more fully appreciate the benefits of tax diversification, particularly as I look ahead to the implications of required minimum distributions (RMD), when taxes on all those previous years of pre-tax savings come due — with a vengeance.

So, if you haven’t been thinking about Roth — and those new catch-up contribution limits are a good opportunity — do so.

Set Up the Roth IRA Before the Rollover

This one still makes me shake my head.

A few months after retirement, I rolled those balances into an IRA: one for a Roth, another for the pre-tax accounts.

Only to “discover” that the five-year clock on the withdrawal of Roth account earnings without penalty starts with the date of the IRA account opening, NOT the date from my 401(k). This turns out not to be a hidden secret — but I never picked up on it.

Now, as it turns out, I won’t need to pull that money out before the five-year clock resets with the rollover Roth IRA. But I could have spared myself a bit of worry if I had opened that Roth IRA earlier — and THEN rolled over to that account after retirement.

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Lesson learned: Open the account early — even if you don’t think you’ll use it right away.

Future You will thank you.

Know That 1099 Income Is … Messy (and It All Counts)

I assumed income in retirement would be simpler (there’s surely less of it) than working-life income.

That assumption did not survive contact with my new status as a 1099 worker. The good news is that, post-retirement, I’ve had several amazing opportunities not only to continue contributing my writing and expertise, but also get paid for it.

The bad news is, I wasn’t really prepared for the financial challenges of estimated tax payments, and, more critically, the financial toll of self-employment tax, wherein I am — even as a Social Security recipient — expected to pay both the employer and employee portions of FICA withholding. From a practical standpoint, that means that that “extra” income — well, less of it goes into my pocket than one might think.

Without withholding, income timing becomes trickier. Estimated tax payments become real (and, oh so large). Cash flow planning requires more attention. And there’s a persistent, low-grade constant uncertainty about whether I’m underpaying, overpaying, or just guessing until April rolls around. Oh, and the IRS has some pretty specific rules around how much estimated tax is due — and when.

And yes, there are financial penalties for guessing “wrong”.

The More You “Make,” the More They’ll “Take”…in Unexpected Ways

I have previously written about the biggest surprise of my retirement[i] — and I continue to struggle with it.

Like most people (I assume), I never gave much thought to post-retirement healthcare insurance. Oh, I’m aware of the funding issues (it’s actually in a more financially precarious position than Social Security), but as post-retirement healthcare has pretty much evaporated in the private sector, I figured we’d deal with it …when we had to.

Turns out, Medicare health insurance premiums are based on income. And if you’ve filed jointly, BOTH of your premiums are based on your adjusted gross income (AGI). Which means that 1099 income counts, and most particularly those withdrawals of pre-tax savings count. Big time.

Together, they can quietly push you into higher income-related premium tiers for Medicare — increasing Part B and Part D premiums in ways that feel disconnected from the original retirement planning conversation …but absolutely aren’t. That’s where those Roth decisions can really pay off.

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The interaction is subtle, but the dollars aren’t.

File for Medicare Before You Need It

Once you start receiving Social Security benefits, you are automatically enrolled in Medicare Part A. But even if you work past age 65 (as I did) and don’t start taking Social Security (like me), you still have to sign up for Medicare — even if you’re still working, have insurance, and don’t plan to use Medicare (this will, of course, confuse your current health care providers, at least momentarily. Everyone assumes when you turn 65, you’re on Medicare). 

There’s a seven-month initial enrollment period that begins three months before the month you turn 65 and ends three months after your birthday month. Now, there are some exceptions to that timing, but — the bottom line is, you’ll likely find it to be less complicated to sign up around your 65th birthday, and then you don’t have to worry that you’ll run afoul of deadlines that can cost you a lot later on.

The bottom line here is that your post-retirement spending plans need to include something for health insurance (more precisely, your Social Security benefit will be reduced by that amount). You can find out more at: https://www.medicare.gov/basics/costs/medicare-costs

The Sixth “Lesson”

Let’s face it, even those of us who have spent our lives thinking about retirement don’t get everything right when it comes to our own.

The irony is that I spent years telling others to plan — and I did - at least sporadically. Ultimately, I focused more on the accumulation side of the retirement equation and less on the spending side.  The good news is, even with the “surprises” noted above, the accumulations appear to have provided a pretty good buffer.   

Retirement is good. Really good, in fact. But it’s even better when you make the easy moves before they become harder ones. If you’re still working and thinking, “I’ll handle that later,” take it from someone three years in:

“Later” comes faster than you think.

-          Nevin E. Adams, JD

[i] See The Biggest Surprise About (My) Retirement

Do Small Businesses (Still) Back Mandatory State-Run IRAs?

  A new report suggests that small business owners broadly support state-run IRA programs — with the strongest backing among newer firms.

Or at least they did.

The just-published survey comes from Pew Charitable Trusts, which has previously (and consistently) chronicled support for these programs among small businesses.  This latest was conducted among employers in three states where that type of legislation has been introduced: Massachusetts, Pennsylvania, and Washington. 

According to Pew, support is strong across the board: 84% of respondents in Massachusetts, 76% in Pennsylvania, and 73% in Washington favor establishing an automated savings program (ASP). The report also highlights bipartisan backing, with majorities of Republican, Democratic, and independent business owners expressing support. 

It further finds “statistically significant” support among newer firms, those with moderate revenues, service-sector businesses, and — perhaps not surprisingly — those that do not already offer a retirement plan. 

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Or Does It?

For starters, the survey combines those who “strongly” support these programs with those who only “somewhat” support them — flattening what may be meaningful differences in intensity. It also excludes “don’t know” or “not sure” responses altogether, effectively removing uncertainty from the results.

And then there’s the timing — each of these surveys was conducted nearly three years ago, in mid-2023.  It seems odd to republish findings with a headline that says “Most Small Business Owners Support…” as a current sentiment, when it’s predicated on perspectives that predate the implementation of these programs.  Consider that Massachusetts didn’t formally adopt one till 2025, Washington only just has — though it’s not slated to be operational till 2027, and Pennsylvania — well, it’s still on the drawing board. 

And then, among the other findings, they further claim (again from three years ago) that members of the state or local chamber of commerce (79%) and the National Federation of Independent Business (75%) support program adoption – an interesting call-out. 

That’s particularly notable in view of the fact that the National Federation of Independent Business (NFIB) has reported[i] nearly the opposite — most recently in Michigan, where just this month they reported that 87% of its members opposed similar legislation.

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So, why “repurpose” three-year-old findings? 

I’ll leave that to your imagination, though it does bring to mind the question: Do small business owners still support these programs? 

The answer, it seems, may depend on who you ask, where you ask, how you ask — and perhaps even …when you ask.

Nevin E. Adams, JD

[i] Michigan’s Small Businesses Caution Against Mandated Retirement Program - NFIB

Brackets, Busts — and Building a Resilient Retirement Plan

 By now, most brackets tied to NCAA March Madness are already busted.

That didn’t take long.

Then again, it never does.

Every March, millions of us confidently — or at least optimistically — predict outcomes in a tournament defined by unpredictability. We study matchups, trends, seeding history, and (too) often assume that the track record of colleges of our youth remains constant — and then watch a 12-seed dismantle our assumptions before the first weekend is out. Though in fairness, alumni affections DO plan a role (well, for those of you whose alma mater makes it into the tournament, anyway).

If that sounds familiar, it should. Because in a lot of ways, retirement planning isn’t all that different. It’s focused (or should be) on projections based on reasonable assumptions — expected returns, steady contributions, rational behavior over time. And then reality intervenes. Markets don’t cooperate. Emergencies emerge. Excrement occurs. Life happens.

And just like that, that “perfect” plan looks a lot like a busted bracket.

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The problem, of course, isn’t that we get it wrong. It’s that we think we won’t.

There’s a certain overconfidence baked into both exercises. In March, it shows up as the belief that this is the year we’ll finally nail the bracket (or that our alma mater will return to its former glory). In retirement planning, it’s the quiet assumption that averages will hold, that risks will materialize neatly and on schedule …

Unfortunately, upsets happen in basketball — and in markets. Call it volatility, sequence risk, or just bad timing, but the effect is the same: outcomes diverge, sometimes sharply, from expectations.

Which is why the real lesson of March Madness isn’t about picking winners.

It’s about surviving uncertainty.

In the tournament, style points don’t matter. Teams advance, or they don’t. A sloppy win counts just as much as a dominant one, and a single bad performance can end a championship run. The best team with the most elegant strategies doesn’t always win.

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Retirement investors face a different structure — but a similar reality. The goal isn’t to “win” every year. It’s to avoid the kinds of losses — particularly at the wrong time — that can permanently alter outcomes. Sequence of returns risk isn’t all that different from a first-round upset: recoverable in theory, devastating in practice.

The teams that make deep runs in March tend to have options — multiple scorers, defensive flexibility, and the ability to adapt when things don’t go according to plan. Retirement plans benefit from the same kind of diversification: across asset classes, across income sources, across strategies that don’t all depend on the same outcome.

Because when (not if) something goes wrong, you need somewhere else to turn.

Preparation for the upset. For the unexpected. For the moments when markets — or participants — don’t behave the way the model said they would or should.

There’s no tomorrow in the NCAA tournament, but the best retirement strategy needs to plan for one. 

-          Nevin E. Adams, JD

The ‘Fiduciary Rule’ that Wasn’t

  After years of anticipation — and months of litigation — the Department of Labor’s latest attempt to expand the definition of fiduciary investment advice is now dead.

That said, and with apologies to Mark Twain, reports of the “death” of the fiduciary rule are somewhat exaggerated. The 2024 version — the so-called Retirement Security Rule — was vacated, which, in legal terms, means we treat it as if it never existed.

But ERISA’s fiduciary framework remains very much alive.

Indeed, for advisors already serving as fiduciaries for retirement plans under the Employee Retirement Income Security Act of 1974, the practical impact of the recent court ruling is minimal. Advisors serving as 3(21) fiduciaries or 3(38) investment managers were — and remain — subject to ERISA’s duties of prudence and loyalty. 

Many advisory firms, frankly, had already adopted procedures and business models that would likely have satisfied even the Obama-era fiduciary rule.

Where the rule would have mattered was around the edges of the retirement advice marketplace, particularly in the increasingly scrutinized area of rollover recommendations.  That’s where the Labor Department — across three administrations — tried, unsuccessfully, to extend its oversight. 

And however well-intentioned those efforts were in terms of protecting rollover decisions, they always struck this writer as something of a stretch.

The Rollover Question

Under the longstanding framework — rooted in a 1975 regulation — an advisor becomes an ERISA fiduciary only if the advice satisfies a five-part test, including that it be provided on a “regular basis.”  As a result, a one-time recommendation to roll assets from a plan to an IRA would likely fall outside that definition.

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The now-abandoned rule sought to change that dynamic by broadening the circumstances under which advice would trigger fiduciary status — basically laying the foundation for a rule that said a single advice recommendation that was the basis for an ongoing relationship could qualify.  With the rule’s demise, that expansion isn’t happening — at least for now. 

So, it’s not as though there is no fiduciary rule — but to fall under its auspices, advice will need to meet the five-part test — as it has for the past 50 years.

A Familiar Regulatory Patchwork

The result is that the retirement advice marketplace continues to operate under a patchwork of standards.

Advice to a plan sponsor about investment options or plan design typically falls squarely under ERISA fiduciary obligations. But recommendations made to participants — particularly those involving distributions or rollovers — may instead fall under securities regulations such as Regulation Best Interest (a.k.a. Reg BI). 

In practice, the same advisor may operate under different regulatory regimes depending on the conversation.  For sponsors and participants, the distinction is rarely obvious.  And therein lies the danger.

Participants — and often plan sponsors — tend to assume the advisor across the table is already acting in their best interests. 

And this is as good a time as any to remind those you serve about the difference(s).

The Industry Has Already Moved

Even so, the demise of the 2024 rule doesn’t necessarily signal a return to the past[i].

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Over the past decade — beginning with the now-vacated Department of Labor Fiduciary Rule — many firms have shifted toward advisory models that emphasize fiduciary relationships, level fees, and reduced conflicts of interest.

In other words, while the regulatory framework remains largely unchanged, many advisors' business practices have already evolved.  And while some corners of the industry (looking at you, insurance) have resisted that shift, retirement-plan advisors largely haven’t.

Not the End of the Story

If the past decade has shown anything, it’s that the debate over fiduciary advice isn’t a single rulemaking — it’s a regulatory cycle.

For now, the practical reality is simple: advisors who were ERISA fiduciaries before remain ERISA fiduciaries today, and those who weren’t haven’t suddenly been “transformed”. 

But there remain rules — and standards — in place and active despite the recent ruling.

The larger question — whether rollover advice should carry fiduciary responsibility — will likely be settled only in the next regulatory round. Or maybe even by Congress.

-          Nevin E. Adams, JD

[i] Indeed, in addition to the five-part test, PTE 2020-02 remains in effect.

What ‘Average’ 401(k) Balances Really ‘Mean’

 Every few months another headline pops up lamenting the inadequacy of the “average” 401(k) balance. The implication is usually the same: Americans aren’t saving enough, retirement is in peril, and the numbers prove it.

The problem isn’t that the math is wrong.

The problem is that the math is answering the wrong question.

I’ve noted before how misleading averages can be — and, frankly, medians aren’t a lot better when it comes to tracking 401(k) savings. The issue isn’t the arithmetic; it’s the reality of how people actually work and save.

Because people change jobs.

And when they change jobs, they change 401(k)s — and 401(k) providers.

They might leave the balance behind with the old employer (something that happens a lot). They might roll it over to an IRA (which probably happens a lot as well), in which case it disappears from 401(k) tracking altogether. Or they might roll it into their new employer’s plan — though that still seems to be the minority outcome.

Regardless of what they do, something important happens at that moment: their 401(k) accumulation effectively resets.

Fast forward 10 years. That old 401(k) left behind at a previous employer has received no new contributions. When someone looks at that account as an accumulation, it appears stagnant — and usually inadequate.

Meanwhile, the 401(k) at the new employer started from scratch. Contributions resumed, of course, but from a starting point of zero. They might be aged 40, mid-career, but THAT 401(k) balance looks like they just started.

In other words, the saver didn’t stop saving. Their savings are split in two (and sometimes more than two, depending on job change. As a result, when each recordkeeper publishes reports on “average” balances — well, they only have part of the picture.

Sometimes far less than half.

The Rare Glimpse of the Full Picture

Over the years, one of the few organizations able to transcend these limitations has been the Employee Benefit Research Institute (EBRI)/Investment Company Institute (ICI). By combining data across multiple recordkeepers and tracking individual participants over time, EBRI has occasionally been able to piece together something closer to the real story.

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When they do, the results look very different from the usual headlines.

In analyses that follow consistent participants — people who remain in the database and continue contributing over time — balances are dramatically higher than the averages typically cited in the press.

In one such analysis, consistent savers had nearly double the average account balance of the broader database, and nearly four times the median balance.

Which makes you wonder about all those conclusions based on averages of inconsistent participants.

Or, put differently, averages that mix savers with non-savers, continuous participants with short-term ones, and workers who may have balances scattered across several plans.

The math is correct — but the conclusion is anything but.

Encouraging Signs in the Latest Data

That context makes the latest quarterly report from Fidelity particularly interesting.

Now, to be clear, Fidelity’s data only reflects account balances within its own system. But because it can track participants who have been saving continuously within its plans, it offers another useful lens on long-term saving behavior.

And the numbers are actually pretty encouraging.

Among participants with 15 years of continuous savings, balances are approaching $700,000. Even those with just five years of continuous participation are nearing $400,000.

What’s especially striking is who’s leading the way.

Gen X.

Yes, that much-maligned “middle child” generation between the Boomers and Millennials appears to be saving more aggressively than either group in these cohorts.

Apparently the forgotten generation has been quietly doing its homework.

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Now, none of this is meant to suggest that 401(k) balances are universally sufficient, or that retirement readiness isn’t a legitimate concern.

But averages — particularly the ones most often cited — are, at best, a blunt instrument for measuring that reality.

They frequently combine savers and non-savers, new participants and long-tenured ones, small plans and large plans, high earners and entry-level workers, those at the cusp of retirement and those just getting started. They split individuals’ savings across multiple accounts and sometimes lose track of them entirely. Oh, and things like compensation level, geography and even gender? Never even acknowledged.

The resulting number is mathematically accurate.

But as a measure of retirement readiness?

It’s nearly useless. Worse, actually — it paints a reality that is, surely for some, disheartening.  

Which brings us back to what actually matters.

Consistent saving.

Because when you look at people who contribute regularly over time — whether through EBRI’s long-term datasets or recordkeeper cohorts like Fidelity’s — the story changes dramatically.

Balances grow. Substantially.

And that suggests something worth remembering the next time someone waves around the latest “average 401(k) balance” headline as proof that the system is failing.

For those who actually use it as intended, the 401(k) was never meant to be the end.

It’s a means to one.

• Nevin E. Adams, JD