For decades you earn and save. Then, almost overnight, you have to decide where your income comes from — and that’s a different skill entirely.
Hello, my dear reader,
Let me leave you this month with a question worth sitting with…
What if the biggest tax decision you make for retirement isn’t made after you retire — but years before?
Here’s the idea at its heart: tax diversification. Most people spend their working lives pouring money into one kind of account — usually a Traditional 401(k) or IRA, where contributions are made pre-tax and the bill comes due on withdrawal. It’s a fine instinct. But it quietly concentrates all of your future taxes into a single bucket.
There are really three kinds of buckets, and each is taxed differently. Traditional accounts are generally taxed when the money comes out. Roth accounts can offer qualified tax-free withdrawals later, having been funded with money already taxed. And ordinary taxable accounts follow their own rules again. Three buckets, three sets of rules — and the mix you build over time decides how much flexibility you’ll have later.
Because that’s what diversification really buys: flexibility. When you hold money across different tax categories, you gain the ability to choose where your income comes from each year in retirement — managing how much taxable income you create, how it interacts with Social Security, and how future RMDs land. With everything in one bucket, you lose that lever.
And here’s the deeper shift worth seeing now rather than later: in retirement, you stop being only an earner and saver and become something new — the person deciding where your income comes from and when you take it. That’s a different skill than the one that got you here, and the groundwork for it is laid years in advance.
“Am I building only a bigger balance — or also the flexibility to decide how it’s taxed when I finally need it?”
Retirement planning isn’t only about accumulating enough money.
It’s also about understanding how that money will be taxed when you eventually need it — and giving yourself options long before that day.
Always with you, Pri ✨
Educational content only. This information is not tax, financial, investment, or retirement advice. Tax rules and individual circumstances vary. Consult a qualified professional before making financial or tax decisions.
