Q: I just heard that despite the fact that I never paid into Social Security during my federal government career, I now qualify for benefits based on my spouse’s work record. I always thought I would get nothing, so I never filed for Social Security. But, I have now! What exactly did I miss along the way?

A: Your situation is a great opportunity to make a public service announcement.

For decades, there were two Social Security rules – the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) – that effectively reduced or completely erased Social Security benefits for people who earned government pensions. But, back in late 2024, Congress passed a law to repeal both of these rules. A lot of federal pensioners who were once locked out of Social Security, suddenly became entitled to some benefits.

In your case, the elimination of GPO is the reason for your new Social Security spousal benefit. Since your spouse receives Social Security, you are now eligible to get a spousal benefit of up to 50% of their full-retirement-age benefit. And, if your spouse dies first, you will now also receive a survivor benefit. That is, you’ll get to keep 100% of their current benefit.

But, there is a small nuance that might make you feel a little bit of regret.

Social Security technically requires you to file to receive any benefits. People who had previously filed – and automatically had their benefits reduced or eliminated by these now-defunct rules – have received retroactive payments going all the way back to January 2024. 

But, since you never actually filed for Social Security – presumably because you rightly assumed you weren’t eligible – you are now only able to receive up to six months of retroactive benefits, not all the way back to the start of 2024. It feels a bit wrong, but it’s way better than nothing, I suppose.

Q: I’m 57 and just received a notice from my 401(k) provider saying I’ve reached my $24,500 pre-tax contribution maximum limit. I normally make a pre-tax age-50 catch-up contribution, too. They are now telling me that my remaining 401(k) contributions have to go into a new Roth side of my 401(k). What changed?

A: There is a new rule in effect that started this year, even though Congress passed the law in late 2022. It took this long to formally implement the change.

First, some background will help for other readers. In 401(k) plans, the basic employee contribution limit is currently set at $24,500. But, because you’re over age 50, you also get to do a “catch-up” contribution of another $8,000. So, your total maximum contribution for 2026 is actually $32,500.

But, here’s the big change this year.

If your wages were over $150,000 last year, your age-50 catch-up contribution now has to be made as a Roth contribution. That means you won’t receive a tax deduction today on that extra $8,000. Of course, your first $24,500 can still be contributed on a pre-tax basis.

Now, this forced Roth contribution might not be all that bad. Today’s 22% and 24% federal tax brackets span a really wide range of income. As a high earner, the fact that you’re building a pool of Roth money that can grow tax-free for the rest of your life, might work out to be a good thing. Sometimes Congress takes away a tax break today and accidentally gives you a pretty good tax break tomorrow.

Q: I turned 73 this year and I know that I am able to donate money to charities right from my IRA. Since I now have to take required distributions, I’m wondering if there is an optimal amount I should be donating in terms of tax planning. How should I think about this?

A: Before answering your question, let’s first talk about the concept of charitable intent. If you need or want your IRA money for yourself, paying taxes is a perfectly okay thing to do. In other words, tax planning alone shouldn’t drive your decision to donate money that you need or want.

But if you do want to donate money, then a “Qualified Charitable Distribution” from your IRA – also known as a QCD – is a really tax-smart way to give it away.

As you know, once you reach 70½, you can start to donate money from your IRA to qualified charities. Then, in the year you turn 73, you’ve got required minimum distributions – or RMDs – to satisfy. The good thing is your IRA donations can count toward your annual RMD amount. And, your IRA donations are excluded from your taxable income. Remember, your IRA donations are funded with tax-deferred money that will never get taxed if it’s given to a charity.

Now that I’ve covered the basics of QCDs, let’s move onto your main question of how much you should give away from a tax planning perspective.

First, the most obvious thing to consider is your marginal federal tax bracket. If a larger QCD keeps your taxable income from spilling into a higher tax bracket, that’s definitely a good thing. But, frankly, with tax brackets being so big and with marginal tax rates so flat nowadays, it might take some large donations to make a real difference.

Second, watch out for the Medicare IRMAA thresholds. These income-related surcharges increase your Medicare premiums once your income crosses certain levels. Since a QCD reduces your income, a carefully-sized donation might help to keep you below one of those Medicare IRMAA thresholds. In some cases, this type of analysis can be more valuable than tax bracket management.

Third, higher-income retirees should also keep an eye on the 3.8% Net Investment Income tax. While your IRA distributions are not considered investment income, lowering your income through QCDs can affect whether this special add-on tax will hit you or not.

Finally, the new $6,000 senior deduction for those who are at least age 65 is another thing to consider. This new deduction – it started last year – phases out as your income rises. Again, because QCDs work to lower your income, they may also help you preserve some or all of the senior deduction.

So, the optimal IRA donation is all about understanding the tax code as well as the size and sources of your income. First start with the amount you genuinely want to give away. Then, work with your tax professional or investment advisor to test out different IRA donation amounts to see their full impact. You might find it interesting (and frustrating) to see just how complex the tax code really is!

Congress has a way of taking a relatively good idea and making it tough to like. That’s the case with the new Trump Accounts. In today’s highly-politicized world, slapping a sitting president’s name on a savings account for children was unnecessary. In the end, however, people should judge these new accounts by what they actually do, not what they are called. It’s a safe bet that the name will very change in the future.

Think of a Trump Account as a “starter” retirement account for kids. Together, parents, grandparents and others can contribute up to $5,000 per year (with inflation adjustments in the future.) But, unlike other retirement plans, the child doesn’t need to have any earned income to contribute to a Trump Account.

The investment choices are very, very narrow. During their childhood years, the money can only be invested in select, low-cost stock index funds. No individual stocks and no bonds or cash. This money is invested for long-term growth.

These accounts are not flexible. The money can’t be touched before age 18. At that point, Trump Accounts turn into a regular IRA owned by the child. All the same IRA rules apply. Technically, the contributions (from most sources, except employers and charities) will be considered after-tax money, but all of the built-up investment returns will be tax-deferred money. It’s kind of like a mix of a Roth and a regular IRA, in this way.

Speaking of Roth IRAs, the child could later convert some or all of the account into a Roth IRA after age 18. That could make sense, especially while they are in a low tax bracket. Naturally, this takes careful tax planning.

Now, turning age 18 does not suddenly make the money easy to spend. Withdrawals before age 59½ generally face the usual 10% early-withdrawal penalty (on the tax-deferred portion.) There are some exceptions allowed, including college costs and providing for a downpayment for a first home. But, for the most part, this is still meant to be money for retirement.

That’s why the goal matters. If you really want to help save for college, a 529 plan is probably the better first choice. If you really want to help your child have easy access to money during early adulthood, a UGMA/UTMA custodial account is likely a better fit. Trump Accounts are meant for very long-term retirement savings. And, upon deeper analysis, they aren’t necessarily better than plain-old custodial accounts.

Opening a Trump Account involves some paperwork, of course. Generally, a legal guardian or parent makes the election using IRS Form 4547 through either your IRS online account, the dedicated Trump Accounts website or filing that IRS form with your tax return. It’s not too hard, but getting started is certainly different than opening a normal investment account.

It should be mentioned that babies born from 2025 through 2028 can receive a one-time $1,000 federal contribution. You have to make the election on the IRS form. It’s literally free money, unless you count the cost of the added federal government debt!

To start, you can only open an account in one place – an account run by Robinhood. Soon, though, other custodians like Schwab, Fidelity and Vanguard will accept rollovers of Trump Accounts. This will allow people to keep things under one roof.

Yes, it’s unfortunate that Congress gave these accounts a bad name. But, try hard to not let it get in the way of looking at Trump Accounts. Let’s all just start calling them “530(A) accounts”, the actual section of the tax code that brought them into existence.