Quick Read – Holding $500,000 in taxable bonds inside a brokerage account costs this couple roughly $7,000 annually in unnecessary federal and state taxes. – A SECURE 2.0 rule effective January 2026 requires earners over $150,000 to route all age-50 catch-up contributions into a…
th 401(k). – Their $2.6M traditional 401(k) could hit $5.9M by age 73, forcing $220,000+ RMDs that trigger Social Security taxes and Medicare surcharges. – A dual-income couple in their mid-50s walked into a fee-only planner’s office last spring with a printout that looked enviable: $3.6 million spread across two traditional 401(k)s, a joint brokerage account, and a pair of small Roth IRAs. They were maxing every contribution, both employers matched generously, and they planned to stop working at 62
The planner spent an hour on the statements and handed back a number they had not expected: roughly $24,000 a year in federal and state tax friction that the portfolio did not need to be paying. All of it came down to geography, with no need to earn less, save more, or take on additional risk. The story tracks closely with the kind of post that lands weekly on the Bogleheads forum and the Reddit personal finance threads: high earners with seven-figure balances who assumed maxing the plan was enough, only to discover the IRS was quietly clipping the compounding.
Where the $24,000 Actually Goes Two mistakes account for almost the entire leak. The first is asset location. The couple holds roughly $500,000 in taxable bonds and bond funds inside their joint brokerage, throwing off interest income at a 10-year Treasury yield environment near 4.56%.