What Questions Should Retirees Be Asking … BEFORE They Retire?
Matt Wilson, Keen Wealth’s Chief Investment Officer and President, recently hosted an excellent webinar on Tax Planning Through the Four Stages of Retirement. In addition to providing a thorough overview of the tax issues that seniors should be prepared for, Matt also wanted to remind folks that the best time to ask questions about retirement is before you retire.
And I’m glad that several of our webinar attendees took Matt up on that offer!
On today’s show, we discuss three follow-up questions to Matt’s webinar that touch on not just taxes but also the value of working with a financial advisor on a holistic plan for retirement.
1. “I have RSUs vesting through my employer, and I also participate in a non-qualified pension plan. As I approach retirement, what should I be doing with both of these?"
Restricted Stock Units (RSUs) are a form of corporate compensation where you are awarded stock that you cannot access until a specific vesting period. The RSU’s value on vesting day is treated as ordinary income subject to FICA taxes, and any future growth or decline in their value will be subject to short-term or long-term capital gains taxes, depending on how long you hold them
Many employers allow RSU holders to sell a portion of their shares to pay the IRS but that’s often not enough to cover what you’ll owe, especially if you’re a high earner. Depending on the specifics of a company’s plan, it’s often beneficial to sell a portion of RSUs as they vest, ahead of retirement, both to lower your tax bill and to diversify your holdings. Your advisor and tax pro should be able to work out strategies to offset the potential tax hit from selling, such as maximizing pre-tax 401(k) contributions or harvesting capital losses.
As for the non-qualified pension plan, often called a Supplemental Executive Retirement Plan (SERP), these are designed to provide extra benefits to highly compensated employees who have maxed out traditional qualified plans like a 401(k). Generally, participants are required to choose an irrevocable distribution schedule (such as a 1-year, 5-year, or 10-year payout) for their accrued benefits.
On the tax side, be aware that if you select a payout schedule of 10 years or longer, you usually will be taxed in your state of residence when you receive the payments. If you choose a shorter payout, you will be taxed in the state where the income was originally earned.
It’s also important to understand that "non-qualified" means these funds are not safely segregated from the business the way a 401(k) is. That means if the company were to fail, your benefits could be used to pay off creditors. So, while a longer payout schedule might be beneficial from a tax standpoint, it could carry a higher risk depending on the stability of your soon-to-be former employer.
2. “When I inherit life insurance proceeds from a parent's policy after they pass away, does that money count as taxable income? Does it affect how much of my Social Security gets taxed? And what about the money I invest from that inheritance going forward?”
The initial death benefit received from a term life insurance policy is tax-free to the beneficiary and will not affect your Social Security benefits.
However, once you start to deploy that money, you’re going to face the same tax issues you would when investing any of your cash. For example, invest your inheritance in a standard brokerage account and interest, dividends, or capital gains generated will be taxable. Any additional investment income you earn will also be factored into the calculation that determines whether or not a portion of your Social Security benefits is taxable.
Some insurance companies might also offer you the death benefit as a series of annuity payments rather than a lump sum. In that case, the principal would be tax-free, but any earnings generated by the insurance company over the course of the payout schedule will be taxed as ordinary income as you receive the payments.
3. “I've been doing smaller Roth conversions each year, starting at age 59, and I know the government uses a two-year ‘look-back’ for Medicare premiums. Should I skip doing a Roth conversion at age 63 entirely, or is there a specific income threshold that I should stay under?"
This listener is trying to avoid a run-in with IRMAA – and rightfully so!
Medicare looks at the previous two years of your income to determine if your premiums are subject to an Income-Related Monthly Adjustment Amount. If your income is above the limits that the government sets every year, you have to pay a surcharge on your Medicare Part B and Part D premiums.
And those income limits are strict. For 2026, the first threshold is $109,000 for single filers and $218,000 for joint filers. Report $1 over those limits and you’ve triggered IRMAA. The first surcharge would increase a married couple’s premiums by about $82 per month per person. High earners could end up paying hundreds of dollars per month in additional surcharges.
With the caveat that we don’t know everything about this listener’s financial situation, they could probably calculate how much they can convert up to the IRMAA limit, leave some wiggle room, and keep topping off that Roth account. If they go that route, I sure hope a professional advisor helps them crunch the numbers!
Finally, remember that while the government does not consider a voluntary Roth conversion a “life-changing event,” retirement is. If you’re fully retired but facing IRMAA because you earned high wages in your final two working years, you can usually file an appeal with Medicare and avoid the surcharge.
Rely on Keen Wealth
We’re all living through some anxious moments right now, and I know many folks are worried about more than just tax regulations. When world events and market movements start to affect your money, it can be difficult to know what information you should trust and what potential moves are in your best interest.
I believe that it’s times like these when my team at Keen Wealth does their absolute best work, helping folks maintain perspective and continue making positive progress towards their retirement goals.
Please don’t let today’s headlines influence your long-term planning. Make an appointment to meet with Keen Wealth before you click or swipe to a major money mistake.
And if you want some clear, no-nonsense analysis of where the global economy could be headed in the coming months, join our mailing list and we’ll let you know when Matt Wilson is ready for his Q2 Market Outlook webinar.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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