A 67-year-old man retired this year with roughly $2.3 million spread across a 401(k), a Roth IRA and a taxable brokerage account. His three adult children have started arguing among themselves—and with him—about whether he should travel more, help fund his grandchildren’s college education or hold onto the money in case he needs long-term care later in life.
None of those are unreasonable priorities, but they’re also not his children’s decision to make. At 67, one of the biggest retirement planning milestones ahead is required minimum distributions (RMDs), which under current law generally begin at age 73 for someone his age. That gives him several years to decide how he’ll draw from his retirement accounts in a tax-efficient way before mandatory withdrawals begin.
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Why Does The Timeline Matter So Much?
Required minimum distributions are generally based on the value of eligible retirement accounts and IRS life expectancy tables. As the IRS life expectancy factor declines with age, RMDs generally become a larger percentage of the account balance over time.
Waiting until age 73 to think about withdrawals can leave fewer opportunities to manage future tax bills. For some retirees, strategies such as partial Roth conversions during lower-income years before RMDs begin can reduce future required withdrawals, although Roth conversions are generally taxable in the year they’re made.
The right strategy depends on the retiree’s income, tax bracket, spending needs and estate-planning goals, which is why planning several years before RMDs begin can provide more flexibility than waiting until withdrawals become mandatory.
Should He Listen To His Kids?
Travel, helping grandchildren and preserving money for potential long-term care are all reasonable goals, but they compete for the same pool of assets.
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Before making gifts or increasing discretionary spending, he should first determine how much income his portfolio needs to generate throughout retirement, taking into account his expected expenses, life expectancy, taxes and healthcare costs.
If he ultimately decides to help family members financially, the 2026 federal annual gift tax exclusion is $19,000 per recipient. Gifts within that exclusion generally don’t require the donor to file a federal gift tax return, although larger gifts may require a return even if no gift tax is ultimately owed because of the lifetime exemption.
Once he understands how much he can comfortably afford to give, decisions about gifts become part of a retirement plan rather than a reaction to family pressure.
What About Long-Term Care Costs?
His children’s instinct to preserve money for possible long-term care isn’t unreasonable, even if the discussion feels premature.
Depending on the type, location and duration of care, long-term care expenses can reach well into six figures over a person’s lifetime. Deciding whether to self-fund those costs, purchase long-term care insurance or reserve a portion of the portfolio for future healthcare expenses is an important retirement-planning decision.
Addressing that question with actual projections and professional guidance can reduce uncertainty for everyone involved.
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Building A Plan That Isn’t Driven By Family Pressure
Retiring with $2.3 million puts him in a strong financial position, but it doesn’t eliminate the need for careful planning. Decisions made under pressure from well-meaning family members may not fully account for taxes, healthcare costs, inflation or how long the money may need to last.
A financial advisor can help him develop a retirement-income strategy that coordinates withdrawals, taxes, gifting and healthcare planning based on his own goals rather than competing opinions from family members.
Advisor.com’s matching service connects consumers with financial advisors based on their financial circumstances and retirement-planning needs. Building a withdrawal strategy years before RMDs begin can provide more flexibility than waiting until mandatory distributions arrive.
Six years from now, when his first required minimum distribution is due, he’ll either have a thoughtful plan already in place or be making important tax decisions under a much tighter timeline. That outcome depends on the planning he does today—not on which of his children’s opinions is the loudest.
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