By Scott Schewe, Certified Financial Planner® | Shareholder, Director of Financial Planning – KerberRose
National Retirement Security Month is an opportunity to review not only how you are saving for retirement, but also how you plan to use those savings in the years ahead. A successful retirement strategy has two important components: Accumulation & Distribution
Part 1: Accumulating Your Retirement Savings
How much you will have for your future is dependent on a number of things. How much you save, how often you save, and how you choose to invest that savings.
Choosing the Right Account
Where you save and invest can be just as important as how much you save. Three common account types are Traditional IRAs, Roth IRAs, and Brokerage Accounts, each offering different tax advantages and flexibility.
- A Traditional IRA may allow you to deduct contributions today, depending on your circumstances. Investments grow tax-deferred, and withdrawals are generally taxed as ordinary income.
- A Roth IRA is funded with after-tax dollars, so contributions are not deductible. However, qualified withdrawals are generally tax-free, including investment earnings. Roth IRAs also do not require distributions during the original owner’s lifetime.
- A Brokerage Account does not provide the same tax advantages as an IRA, but it offers greater flexibiity. There are generally no age-based restrictions on accessing the funds. The trade-off is that dividends, interest, and realized capital gains may be taxable.
Understanding how these accounts work together can help create a more tax-efficient retirement strategy and provide greater flexibility when it’s time to access your savings.
The Value of Starting Early
One of the most powerful concepts in retirement planning is the time value of money. Money invested today has the opportunity to earn returns, and those returns can generate additional returns through compounding. The earlier you start, the more time your money has to work for you.
Consider investing $200 per month at an average 7% annual return, compounded monthly:
| 10 Years | 20 Years | 30 Years | |
| Total contributed | $24,000 | $48,000 | $72,000 |
| Investment growth | $10,617 | $52,829 | $171,994 |
| Ending balance | $34,617 | $100,829 | $243,994 |
Assumes a hypothetical 7% annual return compounded monthly. This example is for illustrative purposes only and does not reflect the performance of any specific investment. Actual results will vary.
After 30 years, $72,000 contributions could grow to nearly $244,000. The difference demonstrates the power of compounding and why starting early can be one of the most valuable retirement decisions you make.
Key Takeaway
While the amount you save matters, when you start saving and where you save can be just as important. Combining consistent contributions with a thoughtful mix of account types can help maximize long-term growth potential while creating greater tax flexibility in retirement.
Part 2: Creating a Retirement Distribution Strategy
Saving and investing is only half the equation. Once retirement begins, the focus shifts from accumulation to distribution. How and when you withdraw money can have a meaningful impact on your taxes and the longevity of your assets.
Required Minimum Distributions
Traditional IRAs are generally subject to Required Minimum Distributions (RMDs) beginning at age 73 (age 75 for those born after 1960). RMDs are generally taxable as ordinary income. Roth IRAs are not subject to RMDs during the original owner’s lifetime.
Roth Conversions
The years between retirement and the start of Social Security and RMDs may provide a valuable planning opportunity. If taxable income is temporarily lower, converting a portion of a Traditional IRA to a Roth IRA may allow you to pay taxes at a potentially lower rate today while creating a source of potentially tax-free income for the future.
Charitable Giving
For individuals age 70½ or older, a Qualified Charitable Distribution (QCD) allows funds to be transferred directly from an IRA to a qualified charity. A QCD can satisfy all or part of an RMD while generally excluding the distribution from taxable income (always confirm with the organization that you are donating to can accept a QCD gift).
Beginning in 2026, taxpayers who take the standard deduction may also deduct up to $1,000 of qualifying charitable contributions ($2,000 for married couples filing jointly), subject to applicable requirements.
Key Takeaway
A thoughtful withdrawal strategy can be just as important as a disciplined saving strategy. Coordinating distributions, Roth conversions, and charitable giving opportunities may help improve tax efficiency and support long-term retirement goals.
Make Retirement Security a Priority
Retirement planning is about more than accumulating the largest possible account balance. It is about understanding how much you save, how long your money has to grow, how different accounts are taxed, and how you will ultimately use those assets to support your income in retirement.
National Retirement Security Month serves as a timely reminder to review your strategy and make sure your retirement savings, and distribution plans are working together to support your financial goals. Taking the time to evaluate your approach today can help improve your financial confidence tomorrow.
Before implementing any strategy, it’s important to consult with your Tax and Financial Advisor to determine what is appropriate for your individual circumstances.
*Please be aware, as a supporting organization of the Community Foundation for the Fox Valley Region, the Appleton Education Foundation is not eligible to receive Qualified Charitable Distributions (QCDs) or any other direct transfer from an IRA during a donor’s lifetime. If you would like to support public education with
a QCD, AEF staff members can steward your gift to directly benefit the Appleton Area School District (AASD). AASD is eligible to receive QCDs. (Appleton Education Foundation is eligible to be the beneficiary of retirement accounts upon a donor’s passing.)
