Insights
Published March 24, 2026 by Harbor Point Advisors
If you have been following along in this series, you have seen the full picture now.
The 401(k) was built on the idea that you would be in a lower tax bracket in retirement. That turned out not to be true for most people. The taxes you deferred did not go away. They grew right along with your account. And now the government gets to decide when you start paying, how much you take out, and there is a penalty if you do not comply.
Add in market risk, sequence of returns risk, and RMDs that kick in whether you need the money or not, and you start to understand why so many people who did everything right still end up with less than they expected.
The question is not whether you have a problem. The question is whether you still have time to do something about it.
Most people do. But the window does not stay open forever.
A Rollover Is Not an Answer
Rolling a 401(k) into an IRA does not by itself change its tax-deferred status. A rollover changes where the account sits, while the IRS still has a claim on the money, so it does not resolve the underlying tax issue.
When people change jobs or retire, the standard advice is to roll your 401(k) into an IRA. CNBC says it. Your HR department says it. Most advisors say it.
And it is not wrong exactly. It is just not solving anything.
A rollover just changes the address of your tax liability. The money is still in a tax-deferred account. The IRS still has a claim on every dollar. You have not escaped the trap. You have just redecorated it.
A strategic rollout is completely different. It is a deliberate, phased process of getting that money out of the tax-deferred system, settling up with the IRS in a controlled way, and moving what is left into a policy where, under current tax law, withdrawals up to basis and policy loans are generally not taxable while it stays in force. Not deferred. Done right.
Why Doing It Now Almost Always Wins
The Roth conversion window is the period when you may have time to move money out of tax-deferred accounts in a deliberate, phased way. The goal is to settle taxes in a controlled manner before the opportunity to act becomes more limited.
Here is the question I ask every client sitting on a meaningful IRA or 401(k).
Do you think taxes are going to be lower, the same, or higher in the future?
Nobody says lower. And they are probably right. The national debt is at historic levels. Tax rates from 2017 are set to sunset. Congress is not known for making things cheaper. The math points in one direction.
So here is the problem with waiting. Every year you leave that money in a tax-deferred account, you are gambling that future rates will be more favorable than today's rates. If you are wrong, you pay more. On a bigger pile. With less time to recover.
Think about the oil filter analogy. You can pay a little now to change it out, or you can wait and pay to replace the engine later. Same outcome either way. Very different price tag.
The strategic rollout is changing the filter while you still can.
How It Works in Practice
A phased rollout uses room within your current tax bracket rather than taking everything out in one year. You can repeat the process over several years, moving money gradually and paying taxes in controlled increments. This avoids pulling everything out at once, which could increase income and push you into a higher bracket.
Nobody is suggesting you pull everything out in one year. That would spike your income, slam you into the top bracket, and hand the IRS exactly what they were hoping for.
The strategy is to find the room inside your current tax bracket and use it.
Let's say you are married filing jointly and your taxable income this year puts you comfortably in the 22% bracket. You look at where the next bracket starts and figure out how much room you have. Maybe it is $40,000 worth of room. Maybe it is $80,000. You pull that amount out of the tax-deferred account, pay the tax at today's rate, and move the after-tax dollars into a properly designed policy where cash value may grow. Under current tax law, withdrawals up to basis and policy loans are generally not taxable while the policy stays in force.
You do that again next year. And the year after. Over a five to ten year window, you systematically move the money out, pay the tax in controlled increments at the lowest rates you are likely to ever see, and end up on the other side in a completely different position.
George Witt did exactly this. He had $600,000 in IRAs heading into retirement. He pulled $150,000 a year for five years, paid the tax, and repositioned everything into a policy where, under current tax law, withdrawals up to basis and policy loans are generally not taxable while the policy stays in force. By the time he was done, he was accessing more than $50,000 a year through policy withdrawals and loans. That was over three times what his after-tax IRA distributions would have been if he had just left things alone.
The Third Piece Most People Never Hear About
Mortgage interest, charitable contributions, business deductions, and deductions from rental properties or other assets may sometimes offset part of a rollout's tax liability. A tax strategist can help identify deductions that could reduce what you owe during those rollout years.
Paying the tax during a rollout sounds painful. And it can be, depending on how much is in the account.
But sometimes you can offset a good portion of that tax liability with new deductions. Mortgage interest. Charitable contributions. Business deductions. If you have rental properties or other assets that generate deductions, a good tax strategist can sometimes find ways to reduce what you owe during the rollout years significantly.
And here is something almost nobody thinks about. If you pull money out of an IRA in January, do not assume the tax can wait until the following April; the timing depends on your situation. Money moved into a policy may build cash value, and under current tax law, withdrawals up to basis and policy loans are generally not taxable while the policy stays in force.
That is not a loophole. That is just understanding how the timing works and using it intelligently.
What the Other Side Looks Like
A completed strategic rollout may reduce uncertainty around taxes, required distributions, and access to money. Its value is greater clarity about the assets you have and the choices available to you, not a promise of a particular tax or income result.
The families I have sat with who completed a strategic rollout describe the same feeling on the other side.
Relief.
Not because they paid less tax than they would have otherwise, though most of them did. But because the uncertainty is gone. The IRS is no longer a silent partner in their retirement account. The RMD clock is no longer ticking. They know exactly what they have, exactly what they can access, and exactly what their family will receive when they are gone.
That clarity is worth a lot. It changes how people make decisions. It changes how they sleep.
If you are between 45 and 65 and you have a meaningful amount in tax-deferred accounts, this conversation is worth having sooner rather than later. The brackets you are in today may be the lowest you will ever see. The window is open right now.
Reach out and we will pull up the numbers together. No obligation. Just a clear picture of where you are and what your options actually look like.
Adam Stevens | Harbor Point Advisors | Beyond the 401(k) (406) 539-3423 | adam@harborpointadvisors.org
This article is educational and general in nature. It is not tax, legal or investment advice and does not account for your circumstances. Indexed universal life insurance is a life insurance product, not an investment. Policy charges, cost of insurance, caps, participation rates and spreads affect results, and cash value can decline in a year when the index credit is zero. Policy loans and withdrawals reduce the death benefit and available cash value, and a lapse or surrender with a loan outstanding can create a taxable event. Any guarantee is subject to the claims-paying ability of the issuing insurance company. Tax treatment reflects current law, which can change. Talk with a qualified tax, legal or financial professional about your own situation.
Harbor Point Advisors. Bozeman, Montana. (406) 539-3423. Serving clients nationwide.
Harbor Point Advisors is an insurance agency. Adam Stevens is a licensed insurance professional, license number 3004330767, NPN 22297129. Not a registered investment adviser or broker-dealer.
This article is educational and is not individualized investment, tax, or legal advice.