NUA or Roth Conversions Before RMDs? A California Case Study

Part 1 of 4 · The couple

Should I Take an NUA Distribution or Convert to Roth Before RMDs?

Picture being retired, with a pension and Social Security that already pay for most of the life you want. The portfolio is not something you need to spend. And yet the account statements carry a question that gets more pressing every year: what happens when the government starts requiring withdrawals you do not need?

For many retirees in their early 70s, that question arrives with two tools attached. One is a Roth conversion: paying tax now, in a lower bracket, to reduce required withdrawals later. The other, for anyone who holds former-employer stock inside a 401(k), is a net unrealized appreciation (NUA) distribution, which can change how the growth on that stock is taxed. Each one works differently, each one has its own timing rules, and they compete for the same limited room in the same tax brackets.

To show how those pieces interact, I want to walk through a hypothetical couple. Tom and Linda Whitaker are not real people. Their names, numbers, and circumstances are illustrative, built to reflect some of the questions retirees with concentrated employer stock and large pre-tax balances may face. The goal is not to tell you what to do. It is to show how a decision like this gets tested, and why looking at one year, or one spouse, or one generation in isolation can point in the wrong direction.

Important note: This is a hypothetical illustration, not a forecast or a representation of actual client performance. The projections use stated assumptions, including a constant portfolio return of about 6.2% a year, and actual investment returns, inflation, taxes, health care costs, and other factors will vary. A favorable result under these assumptions does not establish that any strategy would be appropriate or successful for a real household.

This post starts with a baseline: what happens if Tom and Linda do nothing at all. Each strategy is then compared against that same baseline, so the differences come from the decision being tested rather than from changing assumptions.

This case study was prepared in fall 2026, while a 2026 NUA distribution was still possible in the example. Federal tax rules and thresholds discussed below are based on tax year 2026 rules available as of October 2026.

Who Are Tom and Linda?

Tom is 70 and Linda is 67. They live in Santa Rosa, in the house they bought in 1998, and both retired in 2021. Tom spent most of his career at a large, long-established public company that offered both a traditional pension and a 401(k) with company stock. Linda worked for a smaller firm and rolled her 401(k) into an IRA when she retired.

Their retirement income already comes close to covering what they spend. They are not worried about running out of money. What they are starting to notice is the other side of the ledger: Tom's first required minimum distribution is three years away, his 401(k) still holds a large block of company stock, and their two adult children live in very different tax situations.

Here is the shape of the years ahead. The rest of the post keeps coming back to these dates.

What Do Tom and Linda Own?

See the full breakdown

Account	Owner	Balance	Tax treatment
401(k): employer stock	Tom	$350,000	Pre-tax (cost basis $90,000)
401(k): diversified funds	Tom	$2,250,000	Pre-tax
Traditional IRA (rollover)	Linda	$400,000	Pre-tax
Roth IRA	Tom	$90,000	Tax-free
Roth IRA	Linda	$60,000	Tax-free
Joint brokerage account	Joint	$500,000	Taxable (about $350,000 cost basis)
Cash	Joint	$100,000	Taxable
Invested total		$3,750,000
Home in Santa Rosa (paid off)	Joint	$1,400,000
Total net worth		about $5,150,000

Hypothetical balances as of January 1, 2026.

A few things stand out before any projection is run.

The employer stock is the piece that makes this case different from a standard Roth conversion analysis. Inside the 401(k), every dollar of it, basis and growth alike, would eventually come out as ordinary income. Outside the 401(k), under the right conditions, most of it could be taxed differently.

What Is Net Unrealized Appreciation?

Net unrealized appreciation is the growth in value of employer stock while it sits inside an employer retirement plan. Federal tax law allows that growth to be taxed differently if the stock leaves the plan in a specific way: as part of a lump-sum distribution of the entire balance from the relevant employer plans, within a single tax year, after a qualifying triggering event such as separation from service or reaching age 59½.

When that happens, the shares can move in kind to a taxable brokerage account while the rest of the plan rolls to an IRA. For Tom, the tax picture would split like this:

NUA tax treatment example for Tom's employer stock. Federal treatment under tax year 2026 rules as of October 2026. Growth after the distribution is taxed as long-term or short-term gain depending on how long the shares are held after leaving the plan.

A few details shape whether that split may be worth it, under federal rules as of October 2026:

• The NUA portion may qualify for long-term capital gains rates of 0%, 15%, or 20% federally, regardless of how long the shares are held after the distribution, instead of ordinary income rates of up to 37%.
• The NUA portion is generally excluded from the 3.8% net investment income tax. Growth after the distribution is not.
• California has no lower capital gains rate. When the shares are sold, California generally taxes the gain as ordinary income, at rates up to 13.3%.
• The NUA portion generally does not receive a step-up in basis at death. It is treated as income in respect of a decedent, so the $260,000 of NUA does not receive the normal basis adjustment. Growth on the shares after the distribution may receive a basis adjustment at death, subject to how the shares are owned and other applicable rules; for a California married couple, community property generally receives a full basis adjustment at the first spouse's death. If Tom or Linda still hold the shares when they die, the children would generally owe long-term capital gains tax on the NUA when they sell.
• The entire plan balance generally must come out within a single tax year. For NUA treatment, the entire balance from the relevant employer plans generally must be distributed within a single tax year after a qualifying triggering event, such as separation from service, reaching age 59½, disability, or death. Other retirement accounts, such as IRAs, are not part of this requirement. In this illustration, Tom does the NUA distribution in 2026, so the entire distribution must be completed within the 2026 calendar year, and the plan administrator's processing time makes the practical cutoff earlier than December 31.

This illustration assumes Tom meets the qualifying-event requirements (he separated from service in 2021 and is over 59½) and has taken no distributions from the plan since then that would prevent NUA treatment. Whether a lump-sum distribution in a later year would also qualify depends on facts like these; this case study tests only 2026.

The rules are more detailed than this summary. For a fuller explanation, see NUA Strategy for Company Stock in a 401(k).

What Income Do They Have in Retirement?

Tom and Linda's income comes from three sources, all already being paid:

Hypothetical amounts in 2026 dollars. Social Security benefits are assumed to rise 2.5% a year.

Two details matter for later. The pension does not rise with inflation, so it buys a little less every year. And when one spouse dies, the household keeps only the larger Social Security benefit and 75% of the pension, so the survivor's income drops even though many expenses do not.

California does not tax Social Security benefits. Up to 85% of their benefits may be included in federal taxable income, but none of it is subject to California income tax. More on that in Social Security Taxation and California.

How Much Do They Spend?

Their spending comes to about $135,000 in 2026, in three layers.

Living expenses: about $8,100 a month, or $97,000 a year. This covers everything except home costs and health care.

Home costs: about $27,000 a year. A paid-off house in Sonoma County still costs money every year:

Health care: about $11,300 a year for the two of them in 2026. Both are on Original Medicare. The projection estimates Part B, Part D, and out-of-pocket costs, and sets Part B and Part D premiums from their income, so higher income in one year can raise premiums two years later under IRMAA. IRMAA thresholds and premiums after 2026 are not yet known, so the projection estimates them, starting from the 2026 thresholds (the first tier begins at $218,000 for married couples filing jointly) and raising them each year with inflation. Health care costs are assumed to rise 5% a year. The IRMAA lookback is covered in more depth in IRMAA and the Two-Year Lookback.

What Assumptions Does the Projection Use?

In short: a 60/40 portfolio plus the employer stock, returning about 6.2% a year, 2.5% inflation, 5% health care inflation, and a plan that runs until each of them reaches 95.

See all the assumptions

Assumption	Value
Asset allocation	60% stocks / 40% bonds in every account, except the employer stock (100% stock) and cash
Portfolio return	About 6.2% per year, nominal, every year: one blended rate for the whole portfolio, based on the planning software's asset-class return assumptions, applied to every account, including the employer stock
General inflation	2.5%
Health care inflation	5.0%
Social Security cost-of-living adjustment	2.5%
Pension cost-of-living adjustment	None
Home appreciation	3.0%
Property tax growth	2.0% (Prop 13 cap)
Withdrawal order	Taxable account first, then pre-tax, then Roth
Life expectancy	Tom to 95 (end of 2051), Linda to 95 (end of 2054)
Survivor spending	Living expenses fall about 15% after the first death
Long-term care	Not included

Tax brackets, standard deductions, and IRMAA thresholds start at tax year 2026 levels as of October 2026 and rise 2.5% a year in the projection. Thresholds and premiums for future years are not yet known; these are estimates.

Every account, including the employer stock, earns the same blended return in every scenario, so the analysis does not assume a different investment return simply because the tax strategy changes. The risk is not the same across scenarios, though. Holding the shares keeps a concentrated single-stock position, now in a taxable account, for years; selling them diversifies it. That concentration risk remains significant, this projection does not model it, and each strategy section notes where it matters.

A note on the 6.2% return. Every projected number from here on assumes every account earns the same blended return of about 6.2%, every single year. Expecting that kind of straight-line growth in real life is entirely unrealistic. No portfolio grows that way, and a single stock can move far more than a diversified portfolio. These projections also do not deduct advisory fees or fund expenses, which would lower every projected balance in this post. The straight-line projection is still useful for comparing strategies, because every scenario faces the same assumptions. None of the results in this post should be read as establishing that any strategy would perform as shown under actual market conditions.

Part 2 of 4 · The baseline

What Happens If We Do Nothing?

The baseline leaves everything as it is. No NUA distribution. No Roth conversions. Tom's 401(k), employer stock included, stays pre-tax, and required distributions begin when the law requires them.

The tables below are in future dollars: each year's figures include inflation up to that year.

See the numbers

Year	Pension and Social Security	RMDs	Spending	Income taxes	Surplus reinvested
2026 Tom 70, Linda 67	$123,199	$0	$135,339	$9,989	−$22,129
2028 Tom 72, Linda 69	$130,643	$0	$142,790	$10,311	−$22,459
2029 Tom 73, Linda 70	$132,534	$117,396	$146,679	$48,226	$55,025
2031 Tom 75, Linda 72	$136,460	$132,386	$157,732	$54,359	$56,755
2032 Tom 76, Linda 73	$138,497	$161,907	$162,118	$62,393	$75,894
2041 Tom 85, Linda 82	$159,277	$266,795	$215,335	$108,173	$102,565
2051 Tom 95, Linda 92	$188,482	$396,898	$300,063	$179,427	$105,891
2052 Linda 93	$127,903	$343,519	$251,940	$194,781	$24,701
2054 Linda 95	$132,289	$358,893	$266,980	$209,273	$14,929

Hypothetical baseline projection in future dollars, before advisory fees and fund expenses. Spending includes living expenses, home costs, and health care. Income taxes are federal and California. A negative surplus is drawn from the taxable account. 2026 Social Security is slightly lower because Tom's benefit begins after his birthday month.

The low-tax window: 2026 to 2028

For three years, Tom and Linda live in a tax situation many retirees may not see again. Their income is mostly the pension and Social Security, a small shortfall of about $20,000 to $22,000 a year comes from the taxable account, and their combined federal and California income tax is about $10,000 a year. In 2026, for example, spending and taxes come to about $145,000 against about $123,000 of income, which is a little below the $127,000 annual rate because Tom's Social Security begins after his birthday month. They sit in the 12% federal bracket and are assumed to pay standard Medicare Part B and Part D premiums, with no IRMAA surcharge.

That is the window both strategies are trying to use. Room in the 12%, 22%, and 24% brackets that goes unused in 2026, 2027, and 2028 does not carry forward.

What Happens When RMDs Start at 73?

Tom was born in 1956, which makes 73 his required beginning age under SECURE 2.0 (as of October 2026). Linda, born in 1959, also begins at 73, in 2032.

Projected federal and California income taxes, in future dollars. Hypothetical baseline projection.

Tom's first RMD is $117,396, but the projection needs only about $62,000 from the portfolio that year. The RMD is based on Tom's own 401(k), about $3.11 million at the end of 2028 in future dollars, divided by the IRS life-expectancy factor of 26.5 for age 73. Linda's IRA is not included until her own RMDs begin in 2032. The rest of the RMD, beyond what they spend, is withdrawn, taxed, and reinvested in the taxable account. In the baseline, that pattern repeats every year for the rest of the plan, and about $2.2 million in total is withdrawn and taxed without being spent.

The bracket moves with it. Their federal taxable income rises from about $81,000 in 2028 to about $213,000 in 2029, moving them from the 12% to the 22% bracket, and to the 24% bracket from 2032 once Linda's RMDs begin.

Medicare follows two years later. Because IRMAA generally uses tax-return information from two years earlier, their 2029 income would be used to set their 2031 premiums. Using the projection's estimated future thresholds, their combined health care cost rises about 26% that year instead of the usual 5%, with further jumps in 2037 and 2047 as RMDs push income into higher IRMAA tiers.

What Happens to the Surviving Spouse?

The illustration assumes Tom dies at the end of 2051, at 95, and that Linda lives three more years, to 95. That is when the projection shows something that a married couple's tax return does not.

Hypothetical baseline projection, future dollars.

Linda's Social Security and pension income falls by about a third, as she keeps only the larger Social Security benefit and 75% of the pension. But the RMDs keep coming, now from accounts that are all hers, and she files as a single taxpayer, with brackets roughly half as wide. Her combined income tax rises from about $179,000 to about $195,000 even though the household's income is lower. Her own estimated Medicare premium rises about 29%, because single-filer IRMAA thresholds are also about half the joint ones.

This is sometimes called the "widow's penalty," an informal planning term rather than a provision of the tax code. It does not depend on Tom living to 95. If he died earlier, Linda would face the single-filer brackets for longer. This case study does not model an earlier death, but more years as a single filer would generally mean more years in the higher brackets.

What Will Our Children Inherit?

Tom and Linda's two children are both married and established in their careers. One lives in the Bay Area and earns a high income. The other lives in a state without an income tax. Their parents' estate would be split equally.

Over time, the RMDs move money out of the pre-tax accounts and into the taxable account. In the baseline, the taxable account overtakes the pre-tax accounts in 2046. By the end of 2054, the projection shows:

See the ending balances

Account type	End of 2054 (future dollars)	Today's dollars	Tax to the children
Pre-tax 401(k) and IRA	$3,032,106	$1,518,715	Ordinary income, generally within 10 years
Roth IRAs	$849,852	$425,672	Generally tax-free
Taxable account and cash	$7,996,528	$4,005,283	Step-up in basis at death
Home	$3,203,099	$1,604,361	Step-up in basis at death
Total	$15,081,584	$7,554,030

Hypothetical baseline projection. Today's dollars remove 2.5% annual inflation. No federal or California estate tax is assumed: the projected estate is below the federal exemption for a married couple under federal law as of October 2026, and California has no estate tax.

The pre-tax accounts are the only part of the estate that carries an income tax bill with it. Under the SECURE Act, adult children who inherit them generally must withdraw everything within 10 years, and because Linda had already started RMDs, annual withdrawals may also be required during those years. Those withdrawals stack on top of the children's own income.

To keep the comparison simple, the case study applies an assumed effective marginal rate, for modeling purposes, to each child's inherited pre-tax money: 41.3% for the child in California (32% federal plus 9.3% California) and 24% for the child in a state without an income tax. Actual taxes are progressive, so the real cost would depend on each child's income and on how the withdrawals are spread across the 10-year window.

Each child inherits half of the $3,032,106 in pre-tax accounts at the end of 2054, or $1,516,053 in 2054 dollars (about $759,000 in today's dollars). Assumed effective marginal rates for modeling purposes; actual taxes are progressive and would depend on each child's income, deductions, and the timing of withdrawals within the 10-year window.

Together, the children would owe about $990,000 of income tax on money their parents did not need to spend. Under the simplified rates used in this illustration, the child in California would pay about 1.7 times as much as the other child, because of both the assumed California tax and the higher federal bracket assumed for that child. That gap matters for the Roth decision: a dollar converted at Tom and Linda's 12% or 22% rate today is not taxed again later at the children's rates.

One California note on the house: under Proposition 19 (as of October 2026), a qualifying parent-to-child transfer of a principal residence may keep some or all of its favorable Prop 13 property-tax treatment if the statutory requirements are met, including principal-residence and value-limit requirements. Otherwise the property is generally reassessed at market value.

What Does the Baseline Tell Us?

Doing nothing is not a neutral choice. It is a plan with its own outcomes, and those outcomes become the yardstick for every strategy that follows.

Baseline scorecard

Measure	Future dollars	Today's dollars
Lifetime federal income tax, 2026 to 2054	$2,380,624	$1,540,037
Lifetime California income tax	$714,516	$456,937
Estimated IRMAA surcharges	$357,560	$217,578
First RMD (2029)	$117,396	$109,014
Linda's income taxes as survivor, 2052 to 2054	$606,127	$311,065
Invested assets at the end of 2054	$11,878,485	$5,949,669
After-tax inheritance, child in California	$6,914,663	$3,463,401
After-tax inheritance, child without state income tax	$7,176,940	$3,594,770
Children's estimated tax on inherited pre-tax accounts	$989,983	$495,860

Hypothetical baseline projection. IRMAA surcharges are estimated as Medicare premiums above the standard premium, grown at 5% a year. After-tax inheritance includes each child's half of the home, taxable account, Roth IRAs, and pre-tax accounts after the assumed tax rates.

In the baseline, the tax cost of Tom and Linda's savings is not concentrated in any one year. It is spread across three groups of taxpayers: the couple from 2029 onward, Linda alone after Tom's death, and their children after hers. Any strategy worth considering has to be judged on all three, not only on the tax bill in the year it is carried out.

Part 3 of 4 · The strategies

Should I Take the NUA Distribution and Hold the Stock?

This strategy uses only the NUA rule. In 2026, Tom takes a lump-sum distribution of his entire 401(k). The employer stock moves in kind to a joint taxable brokerage account, the rest of the 401(k) rolls to an IRA, and the $90,000 cost basis is taxed as ordinary income in 2026. Tom and Linda then hold the shares for the rest of their lives. There are no Roth conversions.

Everything else matches the baseline. The small shortfalls in 2026 through 2028 are assumed to come from their existing brokerage account and cash, not from the employer stock.

The cost: a higher tax bill in 2026

Projected federal and California income taxes, in future dollars. Hypothetical projection. Medicare premiums are not included here; the estimated 2028 IRMAA increase is described below.

The basis income lifts their federal taxable income from about $78,000 to about $184,000 for 2026, moving them from the 12% to the 22% federal bracket for the year, and their combined federal and California income tax rises by about $29,000. It also lifts their modified adjusted gross income to about $231,000. Because IRMAA generally uses tax-return information from two years earlier, their 2026 income would be used to determine their 2028 premiums. The 2028 thresholds and premiums are not yet known, so the projection estimates them; under those estimates, the income lands about $2,000 above the first IRMAA tier, and their 2028 premiums rise by about $2,500 for that one year. In 2027 and 2028, dividends on the stock, now held in a taxable account, add about $1,200 a year in tax.

Across the three low-tax years, the up-front cost comes to about $34,000.

The payback: smaller RMDs, slowly

With the stock out of the 401(k), Tom's pre-tax balance is $350,000 smaller from the start, and so is every required distribution that follows. His first RMD falls from $117,396 to $101,592, and RMDs stay about 11% to 13% smaller for the rest of the plan.

The savings start small. In 2029 they are about $600, because the shares now produce taxable dividends every year in the brokerage account, which offsets much of the lower RMD. The savings grow as the RMDs grow, to about $10,000 a year by 2051. Invested assets pass the baseline in 2042, a year after the break-even.

The survivor: a smaller penalty, not a lower bracket

Linda's income taxes as a survivor, from 2052 to 2054, fall from about $606,000 to about $574,000. She still lands in the 35% federal bracket. The remaining pre-tax accounts, about $2.7 million at that point, still produce RMDs large enough to place a single filer in the same bracket as in the baseline. NUA and hold shrinks the widow's penalty but does not change its shape.

The children: where most of the difference shows up

Two things change for the children. The pre-tax accounts they inherit are smaller, about $2.7 million instead of $3.0 million, which reduces the income tax on them by about $110,000 combined. And they inherit the employer stock.

Growth on the shares after the 2026 distribution may receive a step-up in basis at death, subject to how the shares are owned and other applicable rules. The $260,000 of NUA generally does not, because it is treated as income in respect of a decedent. Each child inherits $130,000 of NUA and generally owes long-term capital gains tax on it when they sell:

Illustrative tax on each child's $130,000 of NUA	Child in California	Child without state income tax
Federal long-term capital gains rate	15%	15%
State income tax	9.3%	None
Net investment income tax	3.8%	Not assumed
Assumed effective marginal rate	28.1%	15%
Estimated tax	$36,530	$19,500

Federal rates for tax year 2026 as of October 2026. California has no lower capital gains rate, so the gain is taxed as ordinary income. The 3.8% net investment income tax is included for the child in California as a conservative assumption. Assumed effective marginal rates for modeling purposes, based on each child's assumed bracket. Each child's actual tax could differ, for example with a 0% or 20% federal rate, with or without the net investment income tax, a different California rate, capital losses, or a different filing status.

Hypothetical projection in 2054 dollars, after the NUA adjustment. Assumed effective marginal rates for modeling purposes; actual taxes are progressive and would depend on each child's income and the timing of sales and withdrawals.

The gain to each child is larger than the tax saving alone, because lower lifetime taxes leave about $198,000 more in invested assets by the end of 2054.

What the projection does not show

Holding the shares for life means keeping $350,000 in a single company's stock for as long as 28 years. In the projection, it grows at the same steady rate as everything else, about 6.2% a year. A single stock may not. If the shares fell sharply, holding them could leave the family with less than the projection shows, a risk this case study does not model. For what happened to the largest companies of 1990 over the decades that followed, see Should I Sell My Company Stock? What 30 Years of Market Leaders Show.

Holding the shares is also not what earns the long-term capital gains treatment on the NUA. Under federal rules as of October 2026, the NUA portion is generally treated as long-term gain whenever the shares are sold, even shortly after the distribution. That raises the question the next two scenarios test: what happens if Tom and Linda sell the shares right away, or gradually?

NUA and hold compared with the baseline

Measure	Baseline	NUA and hold	Change vs. baseline
2026 income taxes	$9,989	$39,072	+$29,083Worse
Lifetime federal income tax, 2026 to 2054	$2,380,624	$2,297,470	−$83,154Better
Lifetime California income tax	$714,516	$685,929	−$28,587Better
Estimated IRMAA surcharges	$357,560	$344,484	−$13,076Better
First RMD (2029)	$117,396	$101,592	−$15,804Better
Linda's income taxes as survivor, 2052 to 2054	$606,127	$574,479	−$31,648Better
Invested assets at the end of 2054	$11,878,485	$12,076,368	+$197,883Better
After-tax inheritance, child in California	$6,914,663	$7,046,695	+$132,032Better
After-tax inheritance, child without state income tax	$7,176,940	$7,296,839	+$119,899Better
Children's estimated tax on inherited pre-tax accounts and NUA	$989,983	$935,933	−$54,050Better

Hypothetical projection in future dollars, before advisory fees and fund expenses. Shortfalls in 2026 through 2028 are assumed to come from the existing brokerage account. The children's tax includes the NUA adjustment described above.

In this projection, NUA and hold produces a better projected result than doing nothing on the modeled long-term tax and inheritance measures, but the advantage is modest and slow to arrive: about 2% more after-tax wealth for each child, paid for with a larger tax bill now and about 15 years of waiting. Much of it depends on two things the projection holds fixed: both spouses living into their 90s, and the employer stock earning the same return as a diversified portfolio. Neither assumption is certain, and a different outcome for either one could change the result.

Should I Take the NUA Distribution and Sell the Stock Right Away?

This strategy takes the same lump-sum distribution in 2026 as NUA and hold, but sells all of the employer stock in the same year and reinvests the proceeds in the taxable account, diversified like the rest of the portfolio. The $90,000 basis is taxed as ordinary income and the $260,000 of NUA as a long-term capital gain, both in 2026. The shares are assumed to be sold late in the year, after about $21,500 of further growth, which is taxed at ordinary rates because it was held less than a year. There are no Roth conversions.

The cost: one very large tax year

Projected federal and California income taxes, in future dollars. Hypothetical projection. The sell-right-away figure is adjusted by hand to remove the 3.8% net investment income tax on the NUA portion, which the planning software applied, and to tax the short-term growth at ordinary rates.

Federally, the NUA is taxed at the 15% long-term capital gains rate for tax year 2026, and it is generally excluded from the 3.8% net investment income tax. California is where the bill grows. It has no lower capital gains rate, so the basis, the NUA, and the growth are all taxed as ordinary income in one year, and their California tax rises from about $1,200 to about $34,000.

The same income lifts their modified adjusted gross income to about $515,000 for 2026. Because IRMAA generally uses tax-return information from two years earlier, that income would be used to set their 2028 premiums. Using the projection's estimated 2028 thresholds, their Medicare premiums rise from about $6,400 to about $20,400 for that one year, a higher IRMAA tier than in NUA and hold. Across 2026 to 2028, taxes and Medicare premiums come to about $116,000 more than in the baseline.

The payback: the same smaller RMDs, later break-even

The 401(k) is the same as in NUA and hold, so the RMDs are too. Tom's first RMD is $101,594 instead of $117,396. Because their taxable account is smaller after the 2026 tax bill, it produces less taxable income each year, so the yearly tax savings start a little larger than in NUA and hold, from about $4,000 in 2029 to about $16,000 by 2054. They have more to repay, though. Counting taxes and estimated IRMAA together, selling right away breaks even with the baseline in 2046, when Tom is 90 and Linda is 87, five years later than NUA and hold.

Why the children receive less

By 2054, selling right away has paid about $134,000 less in taxes and estimated IRMAA than the baseline, and about $9,000 less than NUA and hold. Yet each child receives less than in either one.

The difference is timing. About $116,000 leaves the portfolio in 2026 through 2028 and does not compound for the next 26 to 28 years. At the projection's steady return of about 6.2%, that money would have grown to far more by 2054 than the tax savings that come later. Invested assets end about $166,000 below the baseline and about $364,000 below NUA and hold. A total of lifetime taxes counts a dollar paid in 2026 the same as a dollar paid in 2054, and in a long projection those are not the same.

Selling right away does leave the children no NUA to pay tax on, and the inherited pre-tax accounts are the same size as in NUA and hold, which reduces the children's tax on them by about $110,000 combined compared with the baseline.

What the projection does not show

Selling right away removes the single-stock risk on day one. The projection gives that no value, because the employer stock earns the same steady return as everything else. If the stock fell sharply while Tom and Linda held it, the comparison with NUA and hold could look very different. This case study does not model that scenario.

The California bill also depends on selling everything in one year. Spreading the sale across several years may keep more of the gain out of the highest California brackets. That is the next scenario.

Sell right away compared with the baseline

Measure	Baseline	Sell right away	Change vs. baseline
2026 income taxes	$9,989	$109,708	+$99,719Worse
Lifetime federal income tax, 2026 to 2054	$2,380,624	$2,288,511	−$92,113Better
Lifetime California income tax	$714,516	$690,620	−$23,896Better
Estimated IRMAA surcharges	$357,560	$339,576	−$17,984Better
First RMD (2029)	$117,396	$101,594	−$15,802Better
Linda's income taxes as survivor, 2052 to 2054	$606,127	$560,878	−$45,249Better
Invested assets at the end of 2054	$11,878,485	$11,712,297	−$166,188Worse
After-tax inheritance, child in California	$6,914,663	$6,901,181	−$13,482Worse
After-tax inheritance, child without state income tax	$7,176,940	$7,134,298	−$42,642Worse
Children's estimated tax on inherited pre-tax accounts	$989,983	$879,915	−$110,068Better

Hypothetical projection in future dollars, before advisory fees and fund expenses. The 2026 federal tax is adjusted by hand by −$8,373 for the net investment income tax on the NUA portion and the short-term growth, and the 2054 balances include that amount grown at an assumed 5.5% a year after tax.

In this projection, selling right away trades a large tax bill now for lower taxes later, and on these assumptions the trade does not pay off for the children. What it buys is a diversified portfolio from 2026 onward, which a straight-line projection cannot value. The next scenario tests the middle path: selling the shares gradually.

Should I Take the NUA Distribution and Sell Over Five Years?

This strategy starts exactly like NUA and hold: the same lump-sum distribution in 2026, the shares moved in kind to a taxable account, and the $90,000 basis taxed as ordinary income in 2026. From 2027 through 2031, Tom and Linda then sell one-fifth of the original shares each year and reinvest the proceeds in their diversified taxable account. Each sale realizes $52,000 of the NUA plus the growth on those shares since the distribution, both as long-term capital gains under federal rules for tax year 2026. There are no Roth conversions.

The cost: five smaller tax bills instead of one

Year	NUA and hold	Sell over five years	Difference
2027 Tom 71, Linda 68	$11,496	$25,937	+$14,441
2028 Tom 72, Linda 69	$11,603	$27,259	+$15,656
2029 Tom 73, Linda 70	$47,587	$63,062	+$15,475
2030 Tom 74, Linda 71	$50,526	$67,147	+$16,621
2031 Tom 75, Linda 72	$53,675	$71,534	+$17,859

Projected federal and California income taxes, in future dollars. Hypothetical projection. 2026 is the same in both strategies ($39,072). The 2029 to 2031 figures are adjusted by hand to remove the 3.8% net investment income tax on the NUA portion, which the planning software applied.

Each year's sale adds about $56,000 to $76,000 of gain. Federally, it is taxed at the 15% long-term capital gains rate, and California taxes it as ordinary income. Over the five years, that comes to about $80,000 more in income taxes than NUA and hold.

From 2029, the gains stack on top of Tom's RMDs. Their modified adjusted gross income reaches about $325,000 in 2029 and $341,000 in 2030, which, using the projection's estimated thresholds, raises their Medicare premiums in 2031 and 2032 by about $4,500 a year. Counting taxes and estimated IRMAA together, the cost compared with the baseline keeps building until 2033 and reaches about $118,000.

Why spreading the sale does not help here

Spreading a sale across years can help when it keeps gains in a lower bracket. For Tom and Linda, three things work against it:

• The federal rate does not change. The gains are taxed at 15% whether they are realized in one year or five, because even the single large year in selling right away stays below the 20% threshold for tax year 2026.
• More gain is taxed. The shares keep growing while they are held. Over five years, Tom and Linda realize about $328,000 of gain, compared with about $282,000 when selling right away.
• Estimated IRMAA applies twice. Selling right away raises Medicare premiums in one year. Selling over five years raises them in two.

Paying the tax later does help, but not by enough to offset these. In this projection, each child receives about $10,000 less than with selling right away, and about $156,000 to $173,000 less than with NUA and hold.

What the projection does not show

Selling gradually reduces the single-stock position step by step. By the end of 2031, the portfolio is fully diversified. That is a middle ground between holding the shares for life and selling everything in 2026, and the projection gives it no value because the stock earns the same steady return as everything else.

The timing tested here is also only one option. Selling over 2027 and 2028 only, the two years before RMDs begin, would keep the gains out of the RMD years, although the larger gain in each of those years would raise Medicare premiums two years later. That variation is not modeled in this case study.

Sell over five years compared with the baseline

Measure	Baseline	Sell over five years	Change vs. baseline
2026 income taxes	$9,989	$39,072	+$29,083Worse
Lifetime federal income tax, 2026 to 2054	$2,380,624	$2,307,338	−$73,286Better
Lifetime California income tax	$714,516	$692,800	−$21,716Better
Estimated IRMAA surcharges	$357,560	$342,067	−$15,493Better
First RMD (2029)	$117,396	$101,592	−$15,804Better
Linda's income taxes as survivor, 2052 to 2054	$606,127	$561,006	−$45,121Better
Invested assets at the end of 2054	$11,878,485	$11,692,200	−$186,285Worse
After-tax inheritance, child in California	$6,914,663	$6,891,141	−$23,522Worse
After-tax inheritance, child without state income tax	$7,176,940	$7,124,255	−$52,685Worse
Children's estimated tax on inherited pre-tax accounts	$989,983	$879,903	−$110,080Better

Hypothetical projection in future dollars, before advisory fees and fund expenses. Federal tax in 2029 to 2031 is adjusted by hand by −$4,434 for the net investment income tax on the NUA portion, and the 2054 balances include that amount grown at an assumed 5.5% a year after tax.

Across the three NUA strategies, this projection favors holding the shares, then selling right away, then selling gradually. The gap between the two selling strategies is small, and the order depends on the steady 6.2% return and on both spouses living into their 90s, assumptions that may not hold for a real household.

Should I Convert to Roth Up to the Top of the 22% Bracket?

This strategy leaves the employer stock inside the 401(k) and uses Roth conversions instead. Each year, Tom and Linda convert enough from their pre-tax accounts to fill their taxable income to the top of the 22% federal bracket ($211,400 for married couples filing jointly in tax year 2026, indexed in later years). The tax on each conversion is paid from the taxable account, so the full converted amount reaches the Roth IRAs. There is no NUA distribution.

The cost: three large conversion years

Year	Converted to Roth	Baseline taxes	Roth, fill 22% taxes	Difference
2026 Tom 70, Linda 67	$121,805	$9,989	$46,726	+$36,737
2027 Tom 71, Linda 68	$123,933	$10,324	$49,036	+$38,712
2028 Tom 72, Linda 69	$127,741	$10,311	$55,491	+$45,180
2029 Tom 73, Linda 70	$30,236	$48,226	$53,092	+$4,866
2030 Tom 74, Linda 71	$28,464	$51,340	$54,317	+$2,977
2031 Tom 75, Linda 72	$26,764	$54,359	$55,639	+$1,280

Projected federal and California income taxes, in future dollars. Hypothetical projection. Conversions continue as small top-ups of $6,663 in 2032 and $2,580 in 2033, and stop after that.

The conversions are largest from 2026 to 2028, when the 22% bracket has the most room: about $122,000 to $128,000 a year. Their combined income tax rises to about $47,000 to $55,000 a year, compared with about $10,000 in the baseline. Once Tom's RMDs begin in 2029, the RMDs fill most of the bracket on their own, so the conversions shrink to small amounts and end in 2033. In total, about $468,000 moves from pre-tax accounts to Roth IRAs.

The conversions also raise their modified adjusted gross income above the first IRMAA tier from 2026, so, using the projection's estimated thresholds, Medicare premiums rise by about $2,500 to $2,800 a year in 2028 through 2030. Counting taxes and estimated IRMAA together, the added cost compared with the baseline builds to about $138,000 by 2031.

The payback: smaller RMDs for the rest of the plan

Every dollar converted is a dollar that no longer generates required distributions. Tom's first RMD falls from $117,396 to $104,425, and by 2051 the couple's RMDs are about $54,000 a year smaller than in the baseline. From 2032 onward, their taxes and Medicare premiums are lower every year, by about $7,000 at first and about $37,000 a year by 2054.

The savings repay the up-front cost in 2041, when Tom is 85 and Linda is 82, the same year as NUA and hold. The difference is the size of the savings after that. By 2054, lifetime taxes and estimated IRMAA are about $416,000 lower than in the baseline, compared with about $125,000 for NUA and hold.

The survivor: a lower bracket

This is the first strategy that changes Linda's bracket as a survivor. With smaller pre-tax accounts producing smaller RMDs, her federal taxable income after Tom's death stays in the 32% bracket instead of reaching 35%. Her income taxes from 2052 to 2054 are about $108,000 lower than in the baseline.

Some of the widow's penalty remains. Her bracket still rises from 24% to 32% after Tom's death, because she files as a single taxpayer while the RMDs continue.

The children: the largest projected gain so far

By 2054, the Roth IRAs hold about $3.1 million instead of about $850,000, and the children generally inherit them free of income tax. The pre-tax accounts are smaller, and the taxable account is smaller too, because it paid the conversion taxes along the way.

Each child receives about $296,000 more than in the baseline if they live in California, and about $260,000 more if they live in a state without an income tax. The gain is larger for the child in California because their assumed effective marginal rate on inherited pre-tax money (41.3%) is well above the couple's approximate marginal rate on the conversions (about 31%: 22% federal plus 9.3% California). For the other child, whose assumed effective marginal rate (24%) is lower than the couple's conversion rate, the result is still positive, because the conversions also lower the couple's own taxes on every RMD for the rest of their lives.

Is it worth staying under the first IRMAA tier?

Many retirees size their conversions to stay below the first IRMAA tier. In this projection, crossing it costs less than it may seem. The conversions lift their modified adjusted gross income about $35,000 to $58,000 above the first tier in 2026 through 2028, which raises their Medicare premiums by about $2,500 to $2,800 a year in 2028 through 2030, about $8,000 in total.

Staying under the tier would have meant converting about $265,000 in those three years instead of about $373,000, leaving more in the pre-tax accounts to produce RMDs later. Compared with a $416,000 reduction in lifetime taxes and estimated IRMAA, the $8,000 is small. That does not make IRMAA irrelevant. Higher tiers carry larger surcharges, and the trade-off depends on how far above a tier the income lands and for how many years.

What the projection does not show

The result depends on tax rates staying roughly where the projection assumes. Brackets, IRMAA thresholds, and California rates are held at tax year 2026 levels, indexed for inflation. If future rates were lower than today's, converting now would look less favorable; if they were higher, more favorable. A Roth conversion also generally cannot be reversed once it is done.

The projection also assumes the taxable account can pay the conversion taxes, about $59,000 to $70,000 a year from 2026 to 2028. Paying the tax from the converted amount instead would leave less in the Roth IRAs and reduce the benefit.

Roth, fill 22% compared with the baseline

Measure	Baseline	Roth, fill 22%	Change vs. baseline
2026 income taxes	$9,989	$46,726	+$36,737Worse
Lifetime federal income tax, 2026 to 2054	$2,380,624	$2,134,508	−$246,116Better
Lifetime California income tax	$714,516	$622,686	−$91,830Better
Estimated IRMAA surcharges	$357,560	$279,298	−$78,262Better
First RMD (2029)	$117,396	$104,425	−$12,971Better
Linda's income taxes as survivor, 2052 to 2054	$606,127	$498,536	−$107,591Better
Invested assets at the end of 2054	$11,878,485	$12,300,450	+$421,965Better
After-tax inheritance, child in California	$6,914,663	$7,210,391	+$295,728Better
After-tax inheritance, child without state income tax	$7,176,940	$7,437,169	+$260,229Better
Children's estimated tax on inherited pre-tax accounts	$989,983	$855,990	−$133,993Better

Hypothetical projection in future dollars, before advisory fees and fund expenses. No hand adjustments: Roth conversions are not subject to the net investment income tax.

In this projection, Roth conversions do more than any NUA strategy, because they reduce the pre-tax balance that drives every later tax bill: the couple's RMDs, Linda's taxes as a survivor, and the children's inherited accounts. The next scenario tests whether combining an NUA distribution with these conversions does even better.

Should I Take the NUA Distribution and Convert to Roth?

This strategy combines two of the earlier ones. In 2026, Tom takes the NUA distribution and sells the shares, as in selling right away. In every year, the couple also converts to Roth up to the top of the 22% bracket, using the same rule as the previous strategy. The only difference from Roth conversions alone is the NUA distribution.

The NUA crowds out the first year of conversions

The $90,000 basis is ordinary income, so in 2026 it fills most of the 22% bracket on its own. That leaves room to convert only about $30,000 in 2026, compared with about $122,000 without the NUA. Their 2026 income taxes come to about $122,000, and the NUA lifts their modified adjusted gross income to about $516,000, which, using the projection's estimated 2028 thresholds, raises their 2028 Medicare premiums to about $20,400.

From 2027, the conversions are about the same size as in Roth conversions alone, and they continue as small top-ups through 2035. In total, about $420,000 is converted, compared with about $468,000 without the NUA.

Lowest cumulative tax, but not the most for the children

Over the full projection, this strategy is projected to pay about $462,000 less in income taxes and estimated IRMAA than the baseline in future dollars, the lowest of the six scenarios under these assumptions, and about $45,000 less than Roth conversions alone. In today's dollars, its advantage over Roth conversions alone disappears: the two are within about $5,000, and Roth conversions alone come out slightly lower. The $260,000 of NUA is taxed at federal capital gains rates instead of ordinary income rates, and the smaller pre-tax accounts lower Linda's taxes as a survivor by about $130,000.

Yet each child receives about $66,000 less (in California) and about $91,000 less (without a state income tax) than with Roth conversions alone. The reason is the same one that held back selling right away: the added taxes and Medicare premiums reach about $222,000 by 2031, compared with about $138,000 for Roth conversions alone, and that money does not compound for the decades that follow.

Which result matters more depends on the goal

If the priority is the strongest position for a surviving spouse, this combination comes out ahead in this projection, and it also has the lowest cumulative tax in future dollars. If the priority is the largest after-tax inheritance, Roth conversions alone do in this projection. Neither answer is right for every household. It depends on which outcome matters most, how long each spouse lives, and how tax law changes, which is why these strategies are usually weighed together in a coordinated plan rather than chosen one at a time.

NUA + Roth compared with the baseline

Measure	Baseline	NUA + Roth	Change vs. baseline
2026 income taxes	$9,989	$121,531	+$111,542Worse
Lifetime federal income tax, 2026 to 2054	$2,380,624	$2,091,162	−$289,462Better
Lifetime California income tax	$714,516	$616,802	−$97,714Better
Estimated IRMAA surcharges	$357,560	$283,198	−$74,362Better
First RMD (2029)	$117,396	$92,521	−$24,875Better
Linda's income taxes as survivor, 2052 to 2054	$606,127	$475,976	−$130,151Better
Invested assets at the end of 2054	$11,878,485	$12,050,234	+$171,749Better
After-tax inheritance, child in California	$6,914,663	$7,143,926	+$229,263Better
After-tax inheritance, child without state income tax	$7,176,940	$7,346,139	+$169,199Better
Children's estimated tax on inherited pre-tax accounts	$989,983	$763,268	−$226,715Better

Hypothetical projection in future dollars, before advisory fees and fund expenses. The 2026 federal tax is adjusted by hand by −$7,942 for the net investment income tax on the NUA portion and the short-term growth, and the 2054 balances include that amount grown at an assumed 5.5% a year after tax.

Part 4 of 4 · The comparison

Which Strategy Comes Out Ahead?

Here are all six scenarios side by side. Each one uses the same household, the same assumptions, and the same baseline, so the differences come only from the decision being tested.

All six scenarios compared

Measure	Baseline	NUA and hold	Sell right away	Sell over five years	Roth, fill 22%	NUA + Roth
2026 income taxes	$10K	$39K	$110K	$39K	$47K	$122K
Peak up-front cost	n/a	$34K	$116K	$118K	$138K	$222K
Break-even year	n/a	2041	2046	2047	2041	2043
Cumulative income taxes and estimated IRMAA, 2026 to 2054 (future dollars)	$3.45M	$3.33M	$3.32M	$3.34M	$3.04M	$2.99M
Same, in today's dollars	$2.21M	$2.15M	$2.17M	$2.18M	$2.00M	$2.01M
Linda's income taxes as survivor, 2052 to 2054	$606K	$574K	$561K	$561K	$499K	$476K
Linda's modeled federal marginal bracket as survivor	35%	35%	35%	35%	32%	32%
After-tax inheritance, child in California	$6.91M	$7.05M	$6.90M	$6.89M	$7.21M	$7.14M
After-tax inheritance, child without state income tax	$7.18M	$7.30M	$7.13M	$7.12M	$7.44M	$7.35M
Change for each child vs. baseline	n/a	+$132K / +$120K	−$13K / −$43K	−$24K / −$53K	+$296K / +$260K	+$229K / +$169K

Hypothetical projection in future dollars, before advisory fees and fund expenses. Peak up-front cost is the largest cumulative increase in income taxes and estimated IRMAA compared with the baseline. Bold marks the best projected result in each row. Figures for the strategies that sell the NUA shares include the hand adjustments described in their sections. Cumulative tax totals add future-dollar payments without discounting them to present value, so they are not a present-value comparison of tax costs; the today's-dollars row removes 2.5% annual inflation.

In this projection, the strategies that shrink the pre-tax accounts, Roth conversions with or without NUA, do the most for the couple, for Linda as a survivor, and for the children. The NUA strategies on their own do less, and selling the shares, right away or over five years, leaves the children with slightly less than doing nothing.

Two patterns run through all six. The lowest cumulative modeled tax cost and the largest inheritance are not the same thing, because when a tax is paid matters as much as how much is paid. And every strategy that helps does so by accepting a larger tax bill in the next few years in exchange for smaller ones in the decades after.

Why Do These Decisions Need to Be Made Together?

Every strategy in this case study changes the same few numbers: how much taxable income lands in each year, how close it comes to a bracket or an IRMAA tier, and how much pre-tax money is left for RMDs, a surviving spouse, and the children. An NUA distribution uses bracket room that a Roth conversion could have used. A conversion raises income that Medicare looks back at two years later. And a choice that lowers lifetime tax may still leave the family with less, depending on when the tax is paid.

That is why looking at one decision in isolation can point in the wrong direction. For Tom and Linda, the NUA rules on their own suggested a clear tax benefit, yet in this projection selling the shares without Roth conversions left the children with slightly less than doing nothing, and the largest gains came from strategies built around Roth conversions. A household with different income, a different stock position, or different priorities could see a very different ranking.

Important Disclosures About These Projections

Tom and Linda Whitaker are hypothetical. They are not clients, and their situation is a composite created for illustration. This case study was prepared in fall 2026, and its dates and timing assumptions reflect that. The projections in this post were produced with RightCapital financial planning software using the assumptions described above. They are hypothetical, do not reflect actual investment results, and are not guarantees or predictions of future results. They assume a steady annual return of about 6.2%, a single blended rate applied to every account, which real markets do not deliver, and they are shown before advisory fees, fund expenses, and transaction costs, all of which would reduce the projected results. Taxes are estimated using simplified federal and California rules for tax year 2026, and future tax law may differ. Estimates of the children's taxes on inherited accounts use assumed effective marginal rates for modeling purposes, not progressive tax calculations, and are not projections of any person's actual tax liability. Investing involves risk, including the loss of principal. A concentrated position in a single company's stock carries additional risk. Your own results would depend on your circumstances and could differ materially. Tax rules are complex and individual circumstances vary. Readers should consult their tax professional regarding the tax treatment of NUA, Roth conversions, inherited retirement accounts, and any resulting state or federal tax consequences.

Read the full RightCapital disclosure

1 No Warranties. RightCapital makes no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on www.rightcapital.com (the "Platform"). The Platform uses simplified assumptions derived and/or obtained from historical data that are used to create assumptions about potential investment returns.

2 Advice. RIGHTCAPITAL DOES NOT PROVIDE LEGAL, TAX, ACCOUNTING, INVESTMENT OR FINANCIAL ADVICE. RIGHTCAPITAL DOES NOT PROVIDE RECOMMENDATIONS FOR ANY PRODUCTS OR SECURITIES. Your financial professional may not provide tax or legal advice. The appropriate professionals should be consulted on all legal and accounting matters prior to or in conjunction with implementation of any strategy. Use prospectus for any discussions about securities.

3 Data. Data provided by you or your financial professional for your assets, liabilities, goals, accounts, and other assumptions are key inputs for the calculations at RightCapital. The information should be reviewed periodically and updated whenever there is a change in information or circumstances.

4 Monte Carlo Simulation methodology. RightCapital generated Monte Carlo simulations calculating the results of your plan by running the projection 1000 times. Some sequences of returns will give you better results, and some will give you worse results. These multiple trials provide a range of possible results. RightCapital considers a trial to be "successful" if at the end of the planning horizon your invested assets are greater than zero. The percentage of trials that were successful is the Probability of Success of your plan, with all its underlying assumptions.

5 Asset classes used in Monte Carlo simulation. RightCapital uses only a few asset classes. The default return and volatility assumptions of the asset classes are estimated based on the historical return data of indices, which serve as proxies for their respective asset classes. They are not returns of actual investments. The historical return data used to derive returns for all asset classes are: Large Growth, Large Value and Other: S&P 500 Total Return Index, 12/1975 to 12/2025. Mid Cap: Russell Midcap Index, 12/1995 to 12/2025. Small Cap: Russell 2000 Index, 12/1980 to 12/2025. International Equities: MSCI EAFE Index, 12/1975 to 12/2025. Emerging Markets: MSCI Emerging Market Index, 12/1987 to 12/2025. Real Estate: MSCI US REIT Index, 12/2009 to 12/2025. Government: 10 Year Treasury Bond, 12/1999 to 12/2025. Municipal: Bloomberg Municipal Bond Index, 12/1999 to 12/2025. Corporate and International Bonds: Bloomberg US Aggregate Bond Index, 12/1999 to 12/2025. High Yield: ICE BofA US High Yield Index, 12/1999 to 12/2025. Cash: 3 Month Treasury Bill, 12/1999 to 12/2025. Note: The S&P 500 Total Return Index is made up of both large cap growth and large cap value stocks. This index return and volatility data is used for both large cap growth and large cap value asset classes in the RightCapital system as it is an appropriate benchmark for both. RightCapital uses the S&P 500 total return index as the best proxy for any unclassified assets labeled as "Other."

6 Return and volatility assumptions used in Monte Carlo simulations.

Asset class	Total return	Volatility
Large Growth	6.7%	15.76%
Large Value	6.7%	15.76%
Mid Cap	7.0%	17.12%
Small Cap	6.9%	19.69%
International Equities	7.8%	16.55%
Emerging Markets	7.8%	21.63%
Real Estate	8.2%	17.24%
Government	4.0%	7.38%
Municipal	3.8%	4.65%
Corporate	5.2%	4.17%
High Yield	6.1%	8.89%
International Bonds	4.0%	4.17%
Cash	3.1%	0.54%
Other	6.7%	15.76%

7 Tax and Inflation assumptions used in Monte Carlo simulations. Starting federal and state standard deductions, exemptions and the tax brackets used in projections are as of 2026. The following inflation assumptions are used in the projection: General inflation 2.5%; Education inflation 5%; Tax inflation 2.5%; Social Security inflation 2.5%; Health inflation 5%.

8 Assumption and calculation limitations of Monte Carlo Simulations.

8.1 Your resources and goals may be different from the estimates that you provided. The report is intended to help you in making decisions on your financial future based, in part, on information that you have provided and reviewed including, but not limited to, your age, income, assets, liabilities, anticipated expenses and retirement age. Some of this information may change in unanticipated ways in the future and those changes may make this RightCapital projection less useful.

8.2 Inherent limitations in RightCapital financial model results. Investment outcomes in the real world are the results of a near infinite set of variables, few of which can be accurately anticipated. Any financial model, such as RightCapital, can only consider a small subset of the factors that may affect investment outcomes and the ability to accurately anticipate those few factors is limited. For these reasons, investors should understand that the calculations made in this report are hypothetical, do not reflect actual investment results, and are not guarantees of future results.

8.3 Results may vary with each use and over time. The results presented in this report are not predictions of actual results. Actual results may vary to a material degree due to external factors beyond the scope and control of this report. As investment returns, inflation, taxes, and other economic conditions vary from the assumptions, your actual results will vary from those presented in RightCapital. Small changes in these inputs and assumptions may have a significant impact on the results.

8.4 RightCapital considers investments in only a few Broad Investment Categories. RightCapital utilizes U.S. Large Growth, U.S. Large Value, U.S. Mid Cap, U.S. Small Cap, Real Estate, International Equities, Emerging Markets Equity, U.S. Government, U.S. Corporate, U.S. High Yield, International Bonds and Cash. These broad investment categories are not specific securities, funds, or investment products. The assumed rates of return of these broad categories are based on the returns of indices. These indices do not include fees or operating expenses and are not available for investment. These indices are unmanaged and the returns are shown for illustrative purpose. It is important to note that the broad categories that are used are not comprehensive and other investments that are not considered may have characteristics that are similar or superior to the categories that are used in RightCapital.

8.4.1 Investment Risk. Clients and prospective clients should be prepared to bear investment loss including loss of original principal. Clients should assess their tolerance for risk with their financial professional and update when a change in financial status occurs. Investments are subject to many risks depending on the asset class, including but not limited to: Large Growth, Large Value, Mid Cap, Small Cap, Real Estate: Either the stock market as a whole, or the value of an individual company, may go down resulting in a decrease in the value of client investments. Common stocks are susceptible to general stock market fluctuations and to volatile increases and decreases in value as market confidence in and perceptions of their issuers change. If you held common stock, or common stock equivalents, of any given issuer, you would generally be exposed to greater risk than if you held preferred stocks and debt obligations of the issuer. Small cap stocks may be subject to risks such as but not limited to volatility, lack of available information and liquidity due to low trading volume. International Equities, Emerging Markets: Foreign investments may carry risks associated with investing outside the United States, such as currency fluctuation, economic or financial instability, lack of timely or reliable financial information or unfavorable political or legal developments. Those risks are increased for investments in emerging markets. Foreign securities can be more volatile than domestic (U.S.) securities. Government, Municipal, Corporate, High Yield, International Bonds: Investments in fixed income are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors. Investing in securities involves risk of loss. Further, depending on the different types of investments there may be varying degrees of risk.

8.6 Fees and expenses. The portfolio returns assume that the portfolio is rebalanced on an annual basis to reflect the target allocation. No portfolio rebalancing costs are deducted from the portfolio value. Fees and expenses are not included, and thus, are excluded, including, but not limited to, fund fees, account fees, product fees and advisor fee. Inclusion of those fees results in lower returns, which would affect the probability of achieving any particular outcome.

8.7 Taxes. RightCapital includes limited accounting for taxes. RightCapital calculates taxes based on your input. RightCapital estimates federal, state and local taxes based on current laws with simplified deduction, exemption, and tax bracket parameters of the current year. In the projection, tax parameters are adjusted by an inflation assumption provided by you or your financial professional. Future tax laws may be significantly different than current tax laws and may result in higher or lower taxes due than what are reflected within this report. Roth IRA distribution are tax free if made 5 years after the initial contribution to the plan and you are over 59 1/2. Before investing in a 529 plan, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits. RightCapital includes limited accounting for Federal and State Estate Tax with simplified deduction, exemption, and tax bracket parameters of the current year.

8.8 Current Dollars and Future Dollars. The results of RightCapital calculations are in future dollars. To help you compare dollar amounts in different years, results can also be expressed in current dollars by discounting the future dollars by the inflation rate you or your financial professional provides.

9 Liquidation of holdings. This report may include liquidation of holdings, recommended by your financial professional. The transaction cost of liquidation is not included in the analysis. The liquidation will also result in the loss of future earnings.

Source: RightCapital report disclosure, reproduced for the projections in this post. Sections 8.5, 8.9, and 8.10, which cover insurance products and current versus proposed plans, do not apply to this illustration.

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