401(k)
Published March 14, 2026 by Harbor Point Advisors
You already know something is wrong.
You've watched your 401(k) balance grow for decades and somewhere in the back of your mind a question keeps surfacing. How much of this is actually mine?
The honest answer is that you don't know yet. Because the IRS doesn't send you a bill until you start taking the money out. And by then, the options you had to manage the damage are mostly gone.
This is the conversation your advisor should have been having with you for the last ten years. The fact that they haven't isn't an accident. Most advisors are compensated to keep your money in the market. Moving it out, repositioning it, reducing the taxable balance they manage, that's not in their interest. It might be in yours. But it's not in theirs.
There is a way out. It's called the Strategic Rollout. And for the right person it is one of the most important financial moves available.
A Strategic Rollout means moving money out of tax-deferred accounts over several years rather than all at once, paying taxes over time and repositioning after-tax dollars into another vehicle. It considers your tax bracket, retirement income, future RMDs, and overall picture. It is an educational framework, not individualized tax advice.
What Is a Strategic Rollout?
A Strategic Rollout is a deliberate, multi-year framework for moving money out of tax-deferred accounts, paying taxes over time, and repositioning after-tax dollars into a max-funded IUL. Under current tax law, policy loans are generally not taxable while the policy stays in force.
The key word is strategic. This isn't about cashing out your 401(k) all at once and writing the IRS a check for 40% of everything you've spent a lifetime building. That's not a strategy. That's a surrender.
A Strategic Rollout is about looking at your current tax bracket, your projected retirement income, your future RMD obligations, and your complete financial picture, and finding a potential path from a fully taxable environment into a life insurance policy whose cash-value access is generally not taxable under current tax law if the policy stays in force. Typically five to ten years depending on the size of the account and your specific situation.
The goal is simple but powerful. Pay the taxes now, on your terms, at a rate you control. Rather than letting the IRS dictate the timing and the amount through forced RMDs later when your options have run out.
Planning withdrawals before RMDs begin may give you more choice about timing and annual amounts. Once RMDs begin, required withdrawals can affect taxable income whether or not you need the money. Whether acting earlier helps depends on your income, taxes, account balance, timeline, and goals.
Why Waiting Is the Most Expensive Decision You Can Make
Here's the number most people don't think about until it's too late.
According to recent IRS data, Americans currently hold over $7 trillion in traditional IRAs and trillions more in 401(k)s. Every dollar of that money is pre-tax. The government has never collected on it. And they are absolutely going to.
The question is not whether your 401(k) will be taxed. It will be. The only question is when, at what rate, and whether you had any say in the matter.
Right now you have control. You can choose how much to convert in a given year. You can manage your taxable income to stay within a bracket that makes sense. You can time the moves around your business income, your deductions, and your overall picture.
Once RMDs begin at 73 that control is gone. The IRS tells you how much to withdraw. Your income spikes whether you planned for it or not. And if tax rates increase between now and then, every dollar you delayed converting costs you more than it would have today.
Most Americans are sitting on a tax bill that is growing larger every single year they wait. The advisors managing those accounts rarely bring this up because solving it means moving money out of their hands. That is a conflict of interest that costs families real money.
Chunking means moving a tax-deferred balance in calculated pieces over several years instead of all at once. Each annual amount is taxed, and the after-tax dollars can be redirected into a max-funded IUL. The size and timing of any withdrawal require individualized tax and financial analysis.
How the Chunking Strategy Works
I use a concept with my clients called chunking. The idea is straightforward but the impact is significant.
Rather than moving everything at once, you move it in calculated pieces over time. Each year you convert a chunk of your tax-deferred account, pay the taxes on that amount at your current rate, and redirect the after-tax dollars into a max-funded IUL, where cash value may receive credited interest under the policy terms.
Here's what that looks like with real numbers. Say you have $800,000 in a 401(k) and you're in the 24% federal tax bracket. Converting the entire balance at once could push you into the 37% bracket and cost you over $300,000 in taxes in a single year. That's the nuclear option. Nobody should do that.
But converting $80,000 to $100,000 per year over seven to ten years, carefully managed to stay within your current bracket, can spread that tax hit across multiple years. The after-tax dollars can move into a max-funded IUL each year, where cash value may receive credited interest. Your tax and policy results depend on your situation and the policy terms.
By the time RMDs arrive at 73 there is significantly less money left in the tax deferred account. Smaller required distributions. Less taxable income. Lower Medicare premiums. Less of your Social Security becoming taxable. The ripple effect of a well-executed Strategic Rollout touches every corner of your retirement picture.
You didn't eliminate the tax bill. You managed it. On your terms, at a rate you chose, with a destination that works in your favor for the rest of your life.
Offsetting the Tax Hit
Business owners may have deductions or planning tools to consider alongside a rollout. Depreciation, business-expense optimization, and retirement-plan restructuring can be possible elements. Whether any deduction applies or affects a withdrawal's tax cost depends on the facts and qualified tax advice.
Here's where it gets even more powerful for business owners.
A well-executed Strategic Rollout isn't just about moving money. It's about using the tax code to offset the cost of moving it. Depending on your situation there may be deductions available that you haven't fully utilized. Depreciation strategies, business expense optimization, retirement plan restructuring, and other advanced planning tools can be layered into the rollout to reduce or in some cases completely neutralize the tax impact of converting in a given year.
When it comes together correctly, you may be moving money from a fully taxable environment into a life insurance policy whose cash-value access is generally not taxable under current tax law if the policy stays in force. Whether tax planning can offset the cost of that move depends on your facts and qualified tax advice.
What This Looks Like in Real Life
Consider a business owner who spreads withdrawals over several years instead of making one large move. In this example, after-tax dollars are directed into a max-funded IUL while the tax-deferred balance is reduced. That is an illustration, not a client outcome or a projected result for you.
A business owner comes to me in her mid-50s. She has $900,000 sitting in a traditional 401(k). She's had a strong decade. Her business is profitable. And she's starting to feel the weight of knowing that nearly a million dollars of her retirement savings has a tax bill attached to it that she has never fully reckoned with.
Her previous advisor never brought it up. Not once in ten years of annual reviews did anyone sit across from her and say, here is what your 401(k) is actually going to cost you in retirement. Here is what your RMDs are going to look like at 73. Here is what happens to your Medicare premiums, your Social Security taxation, and your tax bracket when those forced withdrawals start hitting your return every year.
She didn't know what she didn't know. That's not her fault. That's a failure of the advice she was receiving.
Over the next eight years we move her money in calculated annual chunks, staying within a tax bracket that makes sense for her income each year. The after-tax dollars go directly into a max-funded IUL. Her cash value may receive credited interest, and policy-loan access is generally not taxable under current law while the policy stays in force. Her death benefit and living benefits remain subject to the policy terms.
By the time she retires, this example assumes a lower 401(k) balance and potentially lower RMDs. The IUL is intended to provide cash-value access that is generally not taxable under current law if the policy stays in force, but tax rates, policy performance, and her results can differ.
She didn't get lucky. She got a plan.
Is a Strategic Rollout Right for You?
No. A Strategic Rollout depends on your tax situation, account balances, timeline, and goals. It may prompt a useful discussion if you have significant tax-deferred assets and are approaching retirement, but it is not a universal strategy or a substitute for personal advice.
Not everyone is a candidate and I'll always be straight with you about that. It depends on your current tax situation, your balances, your timeline, and your goals.
But if you have a significant balance in tax deferred accounts, if you're within ten to fifteen years of retirement, and if the idea of handing the IRS an open-ended claim on your life savings doesn't sit right with you, this conversation is worth having.
The tax bill is coming either way. The only question is whether you control how it arrives.
What's Next
In the next post we're going to talk about legacy. What actually happens to your money when you're gone, what your family inherits along with it, and how to make sure a lifetime of building wealth doesn't get handed to the IRS before your kids see a dollar of it.
If you want to explore what a Strategic Rollout could look like for your specific numbers, reach out. Twenty minutes, no pressure, no obligation, just clarity.
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.