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How Retirement Income Needs Change Over Time: New Research and Practical Planning Tools

Understanding Retirement Income Needs is one of the most important—and often misunderstood—aspects of financial planning. Traditional models assume retirees spend the same amount each year, adjusted for inflation. However, recently published research in the Financial Planning Review by David Blanchett challenges this assumption and offers a more realistic framework for how spending evolves throughout retirement, building on and updating his previously impactful research on this topic.

Why Retirement Income Needs Aren’t Constant

Blanchett’s research shows that Retirement Income Needs typically decline over time in inflation-adjusted terms. Rather than following a flat spending pattern, retirees tend to spend more in early retirement and gradually reduce spending as they age.

This aligns with the well-known retirement phases:

  • Go-Go Years: Higher spending driven by travel, hobbies, and active lifestyles
  • Slow-Go Years: Moderate spending as activity levels begin to decline
  • No-Go Years: Lower discretionary spending, with potential increases in healthcare costs

This evolving pattern reflects both lifestyle changes and natural aging, making it critical for financial plans to adapt accordingly.

The “Smile” vs. “Smirk” in Changing Needs

Blanchett introduces two important concepts that reshape how we think about Retirement Income:

  • Retirement Spending Smile: Spending declines early, then increases later due to healthcare or long-term care expenses
  • Retirement Spending Smirk: A more gradual, consistent decline in spending throughout retirement

These models suggest that retirees may not need to maintain constant real income, and incorporating these patterns can potentially increase sustainable withdrawal rates or bequests.

The annual change in retirement income needs modeled as either a smile (average) or smirk (median). Source: Blanchett (2026)
Blanchett modeled the annual change in retirement income needs with either a smile (average) or smirk (median). Source: Blanchett (2026)

Applying Retirement Income Needs in Real Planning

We recently integrated these insights into the ETFMathGuy Retirement Calculator, helping users model more realistic Retirement Income Needs.

Two key inputs make this possible:

  • “Your Baseline Pattern of Annual After-Tax Retirement Income” allows users to reflect expected spending changes across different retirement phases as either a “No Change”, “Smile”, or “Smirk”.
  • “Smile or Smirk Annual Growth Rate Adjustment” helps model whether spending will grow or decline steadily and/or increase later in life based on either an arithmetic mean or median interpretation of the empirical data.

By incorporating these dynamic spending patterns, retirees can build more flexible strategies—often allowing for higher spending earlier in retirement without sacrificing long-term sustainability. Ultimately, Retirement Income Needs are not static—they evolve. Planning for that evolution can lead to better outcomes, greater confidence, and a more enjoyable retirement.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs
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After-Tax Returns and ETFs

Taxes are often the silent drag on after-tax returns—less visible than fees, but far more consequential over time. As Jason Zweig explains in a recent Wall Street Journal article, investors may have “won the battle” on fees, but are still “losing the war” against taxes. Federal taxes alone can consume more than one-third of an investor’s accumulated wealth over decades.

Maximizing after-tax returns for U.S. ETF investors remains a challenge
Maximizing after-tax returns for U.S. ETF investors remains a challenge

Long-term Impact of After-Tax Returns

The long-term impact is substantial. Historically, U.S. stocks returned about 10% annually before taxes, but only around 7% after taxes. Recent years have achieved even higher returns. That gap compounds dramatically, with taxes reducing returns annually. This reinforces a key principle: what matters is not gross return, but after-tax income and gains.

Passive investing—especially through index ETFs—has become a cornerstone of tax efficiency. Broad-market ETFs typically limit capital gains distributions due to their structure, allowing investors to defer taxes until they realize gains. According to Morningstar research, this tax deferral is one of the primary reasons index ETFs often outperform actively managed funds on an after-tax basis. Zweig similarly notes that diversified index ETFs can reduce annual tax burdens for passive investors.

Not all ETFs are tax-efficient

However, investors should not assume all ETFs are tax-efficient. Some high-yield or options-based funds generate significant short-term income, taxed at higher ordinary rates. Vanguard Group research highlights that strategies like asset location—placing tax-inefficient assets in retirement accounts—and tax-loss harvesting can materially improve after-tax outcomes.

State taxes add another important dimension. Investors in high-tax states like California may face lower net returns due to additional income taxes. In contrast, states such as Texas or Florida impose no state income tax, reducing overall tax drag. Additionally, certain investments—like in-state municipal bonds—may offer state tax exemptions, further enhancing efficiency.

Ultimately, successful investing isn’t just about earning returns—it’s about keeping them. By combining low-cost index ETFs with thoughtful tax planning, investors can significantly improve their long-term, after-tax wealth.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs

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ETFs and Emerging IPOs

The ecosystem of exchange-traded funds (ETFs) tracking the S&P 500—notably IVV, VOO, and SPY—remains one of the most efficient ways for investors to gain diversified U.S. equity exposure. These funds, which we have discussed before, often serve as a foundation for many retirement investment portfolios. The S&P 500 passively replicates a float-adjusted, market-cap-weighted index that already reflects about 80% of U.S. market capitalization. However, the definition of “the market” itself is evolving rapidly as mega-scale private firms approach their Initial Public Offerings (IPOs).

S&P 500 ETFs may soon include large private companies with near-term IPOs from SpaceX, OpenAI, and Anthropic
S&P 500 ETFs may soon include large private companies with near-term IPOs from SpaceX, OpenAI, and Anthropic

Big IPOs coming soon

A key emerging issue is the IPOs of currently private companies like SpaceX, OpenAI, and Anthropic. Will they enter the index more quickly than historical precedent? Traditionally, S&P 500 inclusion required at least one year of public trading, sufficient float, liquidity, and sustained profitability. Yet, according to a May 3 Wall Street Journal article by James Mackintosh, index providers are considering changes. Specifically, they may waive profitability requirements and accelerate timelines for “megacap” IPOs. These changes will help meet investor demand for access to high-profile growth companies. Complementary reporting indicates proposals to reduce the waiting period from 12 months to as little as six months and relax earnings criteria entirely for the largest firms.

Such changes would materially affect ETF composition. Because the S&P 500 is market-cap weighted, the rapid inclusion of trillion-dollar entrants could increase index concentration, amplifying the dominance of a small number of firms. The Magnificent 7 already contribute to this issue in today’s top-heavy index structure. More large entrants could raise expected returns if these firms deliver strong growth, but also increase volatility and drawdown risk if valuations prove fragile.

ETF Investors take notice

For ETF investors, the implications may extend to taxation. While ETFs like IVV, VOO, and SPY are generally tax-efficient due to in-kind creation/redemption mechanisms, rapid index turnover—especially around large IPO inclusions—can trigger capital gains distributions in some cases. Additionally, investors in taxable accounts may face indirect tax consequences if funds must rebalance aggressively to incorporate newly eligible megacaps.

In sum, S&P 500 ETFs remain low-cost, core portfolio holdings, but their future risk-return profile may shift. The potential fast-tracking of firms like SpaceX, OpenAI, and Anthropic reflects a broader transition: from a backward-looking index grounded in profitability to a more forward-looking benchmark shaped by scale, narrative, and investor demand.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs
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Part-time work income and our tax alpha calculator

Happy Easter Weekend! Our mission at ETFMathGuy is to educate investors seeking tax-efficient investing and financial plans. So, we continue to provide online access to algorithms that determine tax-efficient retirement income based on our award-winning published research. Today, we are happy to announce that part-time work income is now included, another new feature requested by financial services professionals. Now, retirees and financial advisors may provide additional part-time work income to represent how many individuals and their spouses may wish to transition into retirement with wage income. Therefore, we hope this new feature will better support our users as they navigate this optimal decision-making process.

Adding part-time work income to an optimal retirement income plan

Unregistered users can access these new inputs in the same group of inputs as social security and pension income. Registered users can also add assumptions about part-time work to their plan using the comprehensive profiles page. Accordingly, the retiree and spouse each have three inputs in their financial plan, which appear under Other Income Sources. The image below shows these values for a hypothetical retiree planning to work part-time, earning $50,000 in the plan’s first year, with the amount decreasing by 30% each year for the next five years.

Three inputs to include a transition from part-time work to full retirement. https://apps.etfmathguy.com/calc
Three inputs to include a transition from part-time work to full retirement. https://apps.etfmathguy.com/calc

For this retiree, this plan reduces income by 30% per year, so that in year 2, part-time work income is $50,000 – 0.3*(50,000) = $35,000. This 30% annual reduction occurs until year 6, when there is no longer any part-time income. Similar inputs are available for a spouse, if applicable.

Observing part-time work in the retirement income plan

The image below shows how part-time work income affects a retirement plan using the Common Rule.

Common Rule Withdrawal Strategy with Part-Time Work Income for Retiree and Spouse. Source: https://apps.etfmathguy.com/calc
Common Rule Withdrawal Strategy with Part-Time Work Income for Retiree and Spouse. Source: https://apps.etfmathguy.com/calc

As this image shows, the light blue region now includes part-time work. This bar chart groups these sources of retirement income, as they are all taxed as ordinary income.

New feature summary

In conclusion, retirement plans often need to include part-time work, since not all retirees make an immediate transition from full-time work to retirement. We hope this recent enhancement helps bridge the gap so users can better understand how portfolio longevity or bequests may improve with tax-efficient decision making. Also, Contact Us if there are additional features you wish to see in our tax-alpha retirement income calculator.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs

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Geopolitical Risks and ETFs for diversification

Geopolitical risks—whether from armed conflict, trade disputes, sanctions, or shifting alliances—can quickly ripple through global markets. For investors, the challenge is not predicting every headline, but building portfolios resilient enough to withstand them. Exchange-traded funds (ETFs) offer a practical and efficient way to manage these risks through diversification, liquidity, and targeted exposure to major economic sectors.

As Geopolitical Risks rise, ETFs may offer opportunities for diversification.
As Geopolitical Risks rise, ETFs may offer opportunities for diversification.

Energy and Financial Sectors

Sector ETFs, in particular, allow investors to adjust allocations in response to evolving geopolitical conditions. For example, during periods of conflict or supply disruption, energy prices often rise. An ETF like the Energy Select Sector SPDR Fund (XLE) provides diversified exposure to major U.S. energy producers and services firms. Rather than betting on a single oil company, investors gain broad participation in the sector. ETFs like this help reduce company-specific risk while maintaining exposure to a potential geopolitical tailwind.

Financials also react differently depending on the nature of the crisis. Rising defense spending or inflationary pressures may boost interest rates, supporting bank profitability. The Financial Select Sector SPDR Fund (XLF) offers diversified access to large U.S. banks, insurers, and capital markets firms. In contrast, sanctions or global slowdowns can pressure multinational lenders, underscoring why diversified sector exposure from ETFs is preferable to concentrated stock positions.

Other Sector ETFs

Technology presents a more nuanced case. Heightened tensions—particularly between major economies—can disrupt semiconductor supply chains and global trade. Yet long-term digital transformation often continues regardless of short-term instability. The Technology Select Sector SPDR Fund (XLK) spreads exposure across hardware, software, and IT services leaders, balancing cyclical and structural growth drivers.

Beyond these sectors, investors can use utilities, healthcare, consumer staples, or defense-focused ETFs to dampen volatility further. Defensive sectors such as the Utilities Select Sector SPDR Fund (XLU) and the Consumer Staples Select Sector SPDR Fund (XLP) often hold up during uncertainty because demand remains relatively stable.

Conclusions of ETF investing to manage geopolitical risks

Ultimately, ETFs help address geopolitical risk not by eliminating volatility, but by potentially reducing it through diversification into key sectors. Their transparency, intraday liquidity, and broad diversification allow investors to rebalance efficiently as conditions evolve. In a world where geopolitical shocks can emerge overnight, sector ETFs provide a flexible toolkit for navigating uncertainty without abandoning long-term investment discipline.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs
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Gold and Silver as Safe Haven? Volatility is Back

Investors often turn to gold and silver in times of macroeconomic uncertainty. Market participants often view these precious metals as traditional “safe haven” assets that preserve value when equities falter or inflation worries spike. In early 2026, this narrative took center stage. Both metals surged to multi-year highs amid geopolitical tensions, a soft U.S. dollar, and rising inflation expectations. However, the last week of January 2026 brought a stark reminder that even safe havens can experience intense volatility. In this post, we view this risk through the lens of liquid instruments in exchange-traded funds (ETFs).

📊 Glimpse at GLD & SLV Performance

GLD and SLV are two ETFs that track the spot price performance of gold and silver. SPDR Gold Shares (GLD) is the largest gold ETF. It is widely used to proxy gold price exposure. Similarly, iShares Silver Trust (SLV) is the premier silver ETF, reflecting broader investor positioning in silver. Over the week ending January 31, both ETFs experienced sharp swings. GLD dipped from recent highs, while SLV posted even larger percentage moves. This dip reflected silver’s historically higher volatility and tendency to amplify market sentiment shifts.

📉 Late-January ETF Safe Haven Volatility

Data from the week of January 12–18 shows how sharply these assets have been moving.

  • GLD (Gold) demonstrated an intra-week range of about ~2.35 %. Its annualized volatility of ~13 % over this week indicated relatively contained swings for gold historically—even as spot prices rose.
  • SLV (Silver) exhibited an intra-week range above ~11.5%. Its annualized volatility above ~75 % over this week underscored silver’s tendency for much larger price oscillations.

In other words, silver’s volatility, especially in extreme market episodes, can be much more than that of gold, reinforcing the idea that SLV carries greater short-term risk for traders and investors alike.

📌 Historical Risk Metrics for a Safe Haven

Longer-term risk figures support this short-term pattern.

Gold and Silver as a safe haven? Volatility is back.
Gold, Silver, U.S. Stocks, and Aggregate Bond ETF performance over the last 12 months, as of January 30, 2026. Source: https://www.etfreplay.com/charts
  • Silver ETF SLV has historically shown higher volatility compared with gold ETFs, meaning silver prices tend to swing harder and more often than gold when markets shift sentiment or macro drivers change.
  • Gold ETF GLD’s lower volatility has often made it a preferred choice for risk-averse investors seeking stability.

🧠 What This Means for Investors

The late-January sell-offs and reversals — where precious metals retreated significantly after touching record highs — illustrate that safe-haven status doesn’t equate to smooth performance in every market environment. Sharp reversals driven by shifts in monetary policy expectations or risk appetite can quickly compress profits and widen losses, particularly for more volatile assets like silver.

In short, gold and silver may still play roles as portfolio diversifiers or long-term hedges — but recent prices in GLD and SLV remind us that volatility is very real, and risk metrics matter when evaluating these in a diversified portfolio.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs
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Returns in 2025 for U.S. Stock ETFs: A Strong Year

The U.S. stock market delivered solid returns in 2025. Investors benefited from artificial intelligence enthusiasm, late-year Federal Reserve rate cuts, and strong earnings across several key industries. According to The Wall Street Journal, U.S. stock funds and ETFs returned an average of about 14.6% for the year. Consequently, 2025 marked a third consecutive year of double-digit gains. As we discussed previously, the market performed well despite heightened volatility early in the year,

At the broad market level, the S&P 500 (ticker: IVV) posted a robust 17.8% total return for the year. Large-cap technology and cyclical shares contributed most significantly, according to ETFReplay.com and Yahoo Finance. The Nasdaq-100 (ticker: QQQ) outperformed the broader market. Mega-cap tech names continued to anchor market breadth late into the year as optimism around AI deployment persisted.

Total Returns in 2025 for the S&P 500, Nasdaq, and other U.S. Sectors ETFs. Source: ETFReplay.com
Total Returns in 2025 for the S&P 500, Nasdaq, and other U.S. sector ETFs. Source: ETFReplay.com

Sector Leaders and Laggards

Sector ETF returns in 2025 highlighted both rotation and concentrated leadership:

  • Communication Services (XTL) was the top performer, benefiting from investments in data centers and cloud computing.
  • Technology (XLK) was among the top performers, with total return growth powered by demand for semiconductors, AI infrastructure, and software. Many XLK holdings significantly outpaced the broader market over multiple time horizons.
  • Industrials (XLI) also delivered strong returns as economic activity and capital investment improved, reflecting strength in industrial and transportation names.
  • Financials (XLF) and Healthcare (XLV) logged solid gains, as bank profitability rebounded and health care stocks rallied on earnings beats and defensive positioning.
  • Utilities (XLU) and Consumer Staples (XLP), traditionally defensive sectors, generated positive but more modest returns, with staples lagging as investors favored growth-oriented ETFs.
  • Materials (XLB) and Energy (XLE) posted marginal returns, supported by commodity demand and stable energy prices, but lacked the momentum seen in tech and cyclical sectors.
  • Consumer Discretionary (XLY) saw mixed performance, often tied to retail sentiment and macroeconomic shifts throughout the year.

Market Themes from Returns in 2025

While AI-linked ETFs — including in XLK and QQQ — powered much of the returns in 2025, concerns about valuation and potential “AI bubble” dynamics persisted. Broad macro swings — from tariff-driven drawdowns to four rate cuts by the Federal Reserve — underscored a year of notable volatility even as the market finished strong.

In summary, 2025 rewarded long-term investors with healthy total returns but also demonstrated the importance of sector diversification — as illustrated by the contrasting performance among ETFs like XLK, XLI, XLF, and defensive plays like XLU and XLP.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs

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The Great Social Security Debate: Claim Early or Wait for a Larger Payoff?

The conventional “gold standard” advice for retirement is simple: delay claiming Social Security until age 70. Why? Because for every year you wait past your full retirement age, your benefit grows by 8% annually. Consequently, delaying provides the maximum possible inflation-protected life annuity. This decision can be a powerful hedge against longevity risk. So, it can create a larger safety net should you or a spouse live into your 90s.

Despite this clear benefit, few delay until age 70. In fact, the vast majority of retirees claim their benefits early, often at the minimum age of 62. For many, the choice isn’t financial optimization but necessity. They are being pushed out of the workplace or simply feeling they cannot afford to wait. There are also several tax implications to this decision.

The Great Social Security Debate: Claim Early or Wait for a Larger Payoff?
The debate continues over when a retiree should begin to claim Social Security

Some Arguments for Claiming Social Security Early

For those with adequate savings, a growing school of thought challenges the wisdom of delaying. Critics argue that traditional advice overstates the value of future benefits by using unrealistically low discount rates (0% to 2%). For example, the opportunity cost of a retiree’s potential portfolio growth makes delaying less attractive.

Furthermore, early claiming mitigates several real-world risks:

  • Mortality Risk: Claiming early ensures you collect benefits, reducing the risk of dying before reaching the break-even age.
  • Sequence-of-Returns Risk: Drawing income from your portfolio to delay Social Security can amplify losses during a market downturn.
  • Flexibility: Social Security doesn’t offer lump sums for unexpected needs, meaning a preserved portfolio provides better spending optionality.
  • Behavioral: Retirees are often more willing to spend a guaranteed income stream. However, they may be reluctant to draw down a nest egg. So, early claiming may potentially solve the problem of underspending in the healthiest years of retirement.

A Personalized Decision

So, early claiming can be a rational choice, especially for those with health concerns or a limited nest egg. Ultimately, the best age is unique to you, and you may benefit from running some online calculators. The key is to assess your health, your need for early cash flow, and your portfolio’s size. We suggest you take this information and use an online calculator. For example, you can try Mike Piper’s Open Social Security or our Optimal Retirement Income Calculator.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs

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Research Showcase Presentation at FPA Annual Meeting

On November 3, 2025, I presented at the FPA (Financial Planning Association) research showcase. Ed McQuarrie from Santa Clara University and Philip Goldfeder from Northwestern University also contributed to this work. Our presentation evaluates Roth conversions and early account distributions to boost after-tax retirement and taxable wealth. Our work was motivated by our previously published research and Laura Saunders’ WSJ article “When Paying More Tax, Not Less, Is the Smart Play”. In this post, we highlight the key findings of our presentation.

Research Showcase Presentation at FPA Annual Meeting
Research Showcase Presentation at FPA Annual Meeting

Seeking Tax Alpha

Our presentation at the research showcase considered three alternatives to increase after-tax wealth through tax efficiency from a single-year model. All alternatives assumed a “default” approach, called the Common Rule, which aims to defer taxes for as long as possible. We then considered three alternatives to meet a current-year $300,000 after-tax retirement income need while maximizing after-tax wealth.

  • Common Rule, but also including Roth conversions
  • Optimal Rule, which mixes tax-deferred, tax-exempt, and taxable income sources. This approach uses a general-purpose global non-linear optimization algorithm available in Excel spreadsheets.
  • Optimal Rule, but also including the possibility of further improvements from Roth conversions.

We determined tax alpha as the additional investment returns needed to achieve the same after-tax wealth using the Common Rule. Our financial model included salient elements from the U.S. tax code.

  • Income tax, capital gains tax, Net Investment Income Tax (NIIT), and Income-Related Monthly Adjustment Amount (IRMAA)

Our baseline model assumed a single retiree, age 62, who has not yet started any social security or pension income. We then considered a number of variations of this hypothetical example.

  • Married Filing Jointly, different after-tax income needs, different tax rates for a non-spouse heir, and different cost bases in their taxable account.

Research Showcase Key findings

Consistent with our previously published work, we demonstrated that the tax alpha was significantly higher with the Optimal Rule than the Common Rule with Roth conversions. This is largely due to the capital gain tax triggered to pay the tax liability on the conversion from the taxable account.

Our next key finding was that there was more than one optimal solution. The image below shows that there is a range of distributions from a tax-deferred account and a Roth account that achieves the same after-tax wealth of $5,262,315.

Wealth and Income at Alternative Optimal Solutions, FPA Research Showcase, November 3, 2025, Las Vegas, Nevada.
Wealth and Income at Alternative Optimal Solutions, FPA Research Showcase, November 3, 2025, Las Vegas, Nevada.

We show that these alternative optimal solutions are due to exploiting tax-deferred income up to the 32% income tax bracket, which we assumed as the non-spouse heir’s marginal rate. Other key findings include that, depending on the model’s assumptions, tax alpha can range from 0.26% to 0.91% per year. Additionally, these tax alphas are largely insensitive to inflation rates and market returns, consistent with another previously published article.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs
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The End of the Tax-Deferred Catch-Up Contribution for High Earners

Beginning in 2026, a key break that many older, higher-earning workers have relied upon will disappear. Under new IRS rules implementing the SECURE 2.0 Act, individuals age 50 or older who earned more than $145,000 from a single employer in the prior year must now make their 401(k) catch-up contribution on a Roth (after-tax) basis—meaning the contribution will no longer be tax-deferred. In this post, we discuss the pros and cons of this change. We also provide some suggestions on what you can do to adapt to the change in your catch-up contribution, including using a free online financial planning calculator.

Catch-up contributions for high earners are changing in 2026.
Catch-up contributions for high earners are set to change in 2026.

Benefits from this change in your catch-up contribution

  • Tax-free growth and withdrawals: The employee must make the catch-up contribution with after-tax income. But the retiree doesn’t pay taxes on future growth or qualified withdrawals from the Roth portion. So, using these funds can help avoid pushing a retiree into a higher marginal tax bracket.
  • No required minimum distributions (RMDs): Roth funds offer more flexibility in retirement. Thus, there are no forced distributions, so these funds can continue to grow tax-free longer.
  • Tax certainty: You know the tax cost now, which may reduce surprises later if tax rates rise. This certainty can help avoid other retiree expenses that higher taxable income can trigger, like the Income-Related Monthly Adjustment Amount (IRMAA) surcharge.

Cons from this change in your catch-up contribution

Next Steps

To start, one can check their employer’s retirement plan options to see if a Roth option exists. If your employer’s plan doesn’t currently permit Roth contributions, you can ask your retirement plan administrators to add the option so employees can continue to make catch-up contributions.

Another step is to run some tax projections. ETFMathGuy offers a free calculator to simulate future values of retirement savings. It includes future contributions into a combination of tax-deferred, Roth, and taxable accounts.

Our Free Online Savings Calculator from ETFMathGuy can estimate the effect of the new catch-up contribution rule on your retirement savings
Our Free Online Savings Calculator from ETFMathGuy can estimate the effect of the new catch-up contribution rule on your retirement savings

Big Picture

The shift in 2026 marks a significant change for older, higher-earning workers who count on catch-up contributions for late-stage retirement savings. The removal of tax deferral is a tradeoff—pay tax now, but get more tax-free growth later. For many, the right path will be a mixed strategy, careful planning, and flexibility.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs

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