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Winter 2026
Mark D. Hasenauer
TD Wealth – Planning & Goals Based Advice Leader
Ashley W. Weeks
Editor-in-Chief TD Wealth – Wealth Strategist
Featured Articles
INVESTMENTS, SECURITIES AND ANNUITIES |
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NOT A DEPOSIT |
NOT FDIC-INSURED |
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY |
NOT GUARANTEED BY THE BANK |
MAY GO DOWN IN VALUE |
Since debuting in the late 90s, tax-free Roth accounts have been heralded as the holy grail of retirement by many, while detractors suggest the benefits don't outweigh upfront tax costs.
Among financial pundits we often hear two entrenched camps regarding Roth retirement accounts. Proponents point out that Roth contributions and conversions allow investments to grow tax-free, reduce the burden of required minimum distributions, and hedge against future tax increases. Critics counter that the upfront deduction for Traditional retirement accounts is far more valuable during working years, and often retirees are subject to much lower tax rates in retirement, even with required minimum distributions.
So who is right in the Roth vs. Traditional debate?
The "right" answer is based entirely on individual circumstances, and the decision isn't all or nothing. Below we outline key considerations during each phase of life to help determine the optimal retirement account mix.
Roth vs. Traditional – Contributions During Working Years
The standard Roth analysis suggests if your taxes will be higher when withdrawing retirement funds than at the time contributions are made, paying tax upfront and contributing to a Roth account will ultimately put more dollars in your pocket. Conversely, a lower tax rate in retirement will shift the benefit toward a Traditional retirement account and the upfront deduction on contributions.
❖ ROTH ELIGIBILITY
Individuals who participate in a workplace retirement plan with a Roth option (like a Roth 401k) can contribute to the workplace Roth plan regardless of income. However, there are income limits for contributing directly to a Roth IRA depending on filing status.
❖ EARLY CAREER STRATEGY
Individuals who are just starting out in their career may have a very low current tax rate without the need for a deduction. For this cohort, contributing at least some retirement savings to a Roth account could be incredibly beneficial.
❖ MID TO LATE CAREER STRATEGY
As income grows and tax rates increase throughout one's career, the benefit of an upfront deduction is amplified when a lower tax rate is expected in retirement. Contributing to a Traditional retirement account often makes the most sense during peak earning years.
The biggest challenge is anticipating the likely tax rate in retirement.
Roth advocates cite the national debt and solvency issues with Social Security as reasons why tax rates could increase in the future. Additionally, Roth accounts are not subject to required minimum distributions (RMDs), which can force retirees into higher tax brackets and increase Medicare premiums. However, in many cases retirees find that they still have a lower tax rate with RMDs than they experienced during peak earning years.
Roth vs. Traditional – Conversations in Early Retirement
The years right after retirement can be a prime opportunity to convert pre-tax Traditional retirement funds into a Roth IRA.
Unlike direct Roth IRA contributions, there are no income or dollar limits on Roth conversions. The amount converted is taxed as ordinary income, but once funds are in the Roth account investment growth can be tax-free and the account is exempt from RMDs during the owner's life.
❖ MAXIMIZE LOWER TAX RATES AFTER RETREMENT
Most individuals will enjoy a lower tax rate right after retirement because they will no longer have earned income from wages and may not have reached RMD age. Consider a Roth conversion "ladder" in early retirement where conversions take place over several years and the amount converted keeps taxable income in a modest bracket. This can be especially appealing prior to filing for Social Security where up to 85% of benefits can be taxable.
❖ MEDICARE PREMIUMS COULD BE IMPACTED
One pitfall to consider is that the taxable income from Roth conversions might increase Medicare premiums. Medicare looks at a participant's tax return from two years prior in assessing increased premiums. In 2026, individual tax filers with a modified adjusted gross income (MAGI) over $109,000 and joint filers with a MAGI over $218,000 based on their 2024 tax return will pay increased premiums. Roth conversions prior to age 63 will avoid this complication.
Given the various tax thresholds and calculations involved, it often makes sense to utilize financial planning software and speak with a tax professional when refining a Roth conversion strategy in early retirement.
Roth vs. Traditional – Later Retirement and Legacy Planning
The utility of a Roth conversion may diminish in later retirement years. Social Security, pension income, and RMDs are income items that can crowd out space in lower tax brackets for conversions.
While you cannot perform a Roth conversion with your RMD, it's notable that the RMD age has increased to 75 for those born in 1960 or later. The prospect of increased Medicare premiums may also be a limiting factor in the conversion analysis. However, there are a few other considerations that older retirees should evaluate:
❖ CONSIDER THE "WIDOW'S PENALTY"
Losing a spouse is often accompanied by another unpleasant surprise; higher taxes for the survivor who must use single tax brackets going forward. Dubbed the "widow's penalty" this can be especially punitive with Traditional retirement funds for those in RMD status. A survivor can assume ownership of a deceased spouse's Traditional IRA but will still be subject to taxable RMDs at age 73 or 75. However, Roth IRAs avoid this defect. A survivor who assumes ownership of a deceased spouse's Roth IRA will not be subjected to RMDs and can typically withdraw funds from the Roth account tax-free if desired.
❖ BENEFICIARY PLANNING WITH RETIREMENT FUNDS
Other than a surviving spouse, most retirement account beneficiaries are now forced to withdraw the inherited funds within 10 years of the owner's death. In the case of Traditional retirement funds, this compressed withdrawal period can bump beneficiaries into higher tax brackets, especially if beneficiaries are in their peak earning years. However, inherited Roth funds are not taxable and will typically not complicate the beneficiary's tax situation.
With legacy planning, Roth accounts can be the superior option for mitigating the "widow's penalty" and simplifying taxes for beneficiaries.
In 2026, a married couple with up to $98,900 of taxable income could have a long-term capital gains tax rate of zero.
Many investors are familiar with the concept of tax-loss harvesting at year's end. This strategy proposes selling underperforming investments to recognize a loss that can offset the taxable gains realized from selling winners. Tax-loss harvesting primarily seeks to reduce taxable income.
Far fewer investors are familiar with the inverse strategy that is appropriately named Tax-Gain Harvesting. Instead of decreasing taxable capital gains, tax-gain harvesting seeks to increase realized long-term capital gains ("LTCG") in years when an investor can exploit the zero percent LTCG tax bracket.
While it may be difficult to utilize this zero percent bracket during working years, the reduction in taxable income that accompanies retirement can make this a viable strategy after leaving the workforce.
Below we outline the basics of how capital gains taxes are calculated and when a "tax-gain harvesting" strategy could be advantageous.
Tax-Gain Harvesting: Understanding Long-Term Capital Gains Taxes
To execute a tax-gain harvesting strategy it is important to understand how long-term capital gains ("LTCG") taxes are calculated. A taxable gain occurs when an asset is sold for more than the original purchase price or tax basis.
LTCG rates typically apply to gains from selling assets held longer than a year, and from qualified dividends in taxable accounts. This means investments held in retirement accounts (like an IRA) are not eligible for LTCG tax treatment. In 2026 there are three progressive LTCG rates that are applied based on taxable income.
2026 Long-Term Capital Gains Rates
A common area of confusion involves how ordinary income (not from capital gains), like wages or Traditional IRA distributions, can impact the LTCG rate. LTCG income stacks on top of ordinary income when determining total taxable income and the resulting LTCG rate. This means ordinary income can crowd out space for the zero percent capital gains bracket.
A taxable gain from selling an asset held for less than a year is a "short-term capital gain" which is taxed as ordinary income (not the preferential LTCG rate).
Tax-Gain Harvesting: Applying the Strategy
Because ordinary income can crowd out the zero percent LTCG rate, the opportunity for tax-gain harvesting is greatest in low-income years. Investors who utilize this strategy typically calculate their tax position near year's end and realize (sell) eligible long-term gains to the extent they have capacity in the zero percent bracket. Consultation with an experienced tax advisor is strongly encouraged.
What exactly is the benefit of tax-gain harvesting?
If a retiree will ultimately need to liquidate appreciated taxable investments to support themselves, a strategic approach can save taxes. Realizing gains in the zero percent bracket frees up cash for retirement at no tax cost.
Unlike realized losses, there is no wash-sale rule for realized gains. Realized gains can immediately be reinvested in the same holdings with an increased tax basis if desired. Increasing the tax basis will reduce the tax cost when the position is subsequently liquidated for spending needs in the future.
Timing considerations
Retirees may experience their lowest tax rates early in retirement. Income later in retirement from Social Security, pensions, and required minimum distributions could eliminate capacity in the zero percent LTCG bracket for a tax-gain harvesting strategy.
It is important to remember that a tax-gain harvesting strategy is centered on capital gains in taxable accounts and not retirement accounts.
Tax-Gain Harvesting: Strategic Opportunities
Tax-gain harvesting can be an appealing strategy for investors with long-term unrealized capital gains in years where taxable income is low enough to utilize the zero percent LTCG tax bracket. Specific applications include:
❖ Rebalancing a Taxable Portfolio
Harvesting gains can allow a taxable portfolio to be rebalanced according to the investor's risk tolerance. Investors often seek reduced volatility as they enter retirement which can require selling riskier holdings. Maximizing gains in the zero percent LTCG bracket can allow this rebalancing to occur with limited tax costs.
❖ Increasing Tax Basis
When a portfolio's allocation already reflects the correct risk tolerance, gains can still be harvested in the zero percent LTCG bracket and reinvested to increase tax basis. There is no restriction on reinvesting realized gains into the same securities and maximizing tax basis can reduce future taxes when selling again.
❖ Bolstering Liquidity
An important part of retirement planning is maintaining adequate cash and liquidity to cover spending needs and hedge against sequence risk. Harvesting gains in the zero percent LTCG bracket is a tax-efficient way to raise cash and bolster liquidity for retirement while taking some gains off the table.
Tax-Gain Harvesting – 2026 Example
Assume in 2026 a recently retired married couple (filing jointly) have $70k in income from pensions. Also assume this couple will have itemized deductions of $40k, resulting in a taxable income of $30k ($70k pension income less $40k itemized deductions).
In this scenario, the couple could realize up to $68,900 of long-term capital gains in a taxable portfolio and pay 0% tax on those capital gains: 2026 taxable income limit for 0% LTCG rate ($98,900) less taxable income before capital gains of $30k.
Over multiple years this strategy can unwind significant tax exposure from unrealized gains in taxable investment accounts.
As temperatures fall the mind drifts to sunny days ahead. Before you know it, a deposit is made for a summer European vacation. Don't omit health insurance from the packing list!
It may come as a surprise that standard Medicare provides no coverage outside the United States in most situations. For older travelers this presents a significant and often overlooked risk. A number of retirees have endured this lesson the hard way when a medical event happens abroad.
While planning for summer travel can soothe winter fatigue, it is important to account for the possibility that things might not go exactly as anticipated. Not surprisingly, emergency room visits spike during vacation and holiday periods, often due to increased exertion and deviation from one's routine.
The good news is that there are several health coverage options for Medicare participants planning international travel.
Health Insurance Options for Medicare Enrollees Traveling Abroad
There are primarily two options for Medicare participants seeking health coverage when traveling abroad: dedicated travel insurance or enhanced Medicare coverage offered through private insurance companies.
❖ Travel Insurance:
Perhaps the most flexible and comprehensive solution is to purchase a tailored travel insurance policy from a reputable company. In addition to robust medical coverage options, travel insurance can also prevent economic losses from a trip disruption or cancellation. Quotes are readily available based on the ages of participants, trip costs, and location.
The most important factor when shopping for travel insurance is the reputation of the insurance provider.
❖ Private Medicare Coverage Options:
Medicare Advantage and Medigap Policies Original Medicare has certain coverage gaps and out-of-pocket costs. For this reason, many Medicare participants purchase enhanced Medicare coverage through private insurance companies with either a Medicare Advantage plan or Medigap insurance.
Medicare Advantage enrollees should contact their plan provider to ascertain coverage restrictions. Routine medical care abroad is generally not covered; however, Medicare Advantage Plans can cover international emergency care within limits.
Most Medigap plans include foreign travel emergency health coverage subject to a lifetime limit of $50,000, however cost sharing via coinsurance may apply. Again, it is vital to verify coverage with the plan provider before embarking.
A staggering number of Americans have left money in forgotten retirement accounts.
Perhaps the greatest contributor to the recent surge in forgotten workplace retirement accounts is the frequency with which Americans change jobs and the prevalence of automatic enrollment in workplace plans. Regardless of the cause, there are several resources available to assist in locating abandoned retirement accounts.
By recent estimates there are more than 31 million forgotten retirement accounts holding over $2 trillion in assets!
How to locate abandoned retirement accounts?
- The Department of Labor has established the Retirement Savings Lost and Found Database where individuals can search for forgotten workplace retirement accounts: https://lostandfound.dol.gov/
- In some situations, dormant retirement accounts may be transferred to a state's unclaimed property division. It is prudent to search the unclaimed property databases for any state where you previously worked or resided.
- Inquire directly with former employers and plan administrators.
Avoid "misplacing" retirement savings by having a plan to consolidate workplace retirement accounts when changing employers.
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