The True Value of Professional Investment Management: Why It's Not About Beating the Market
TL;DR
Professional investment management isn't about beating the market, it's about making better decisions consistently. Research suggests advisors may add value over time through areas such as implementation, rebalancing, behavioral coaching, tax considerations, and withdrawal planning; the magnitude and timing of any benefit varies by investor and market conditions. The biggest value? Preventing costly emotional mistakes during market extremes. Even capable DIY investors often benefit from professional guidance while freeing time for what they actually enjoy.
Interested in exploring whether professional management might add value? Let's discuss your goals, current approach, and whether we might work well together.
Note: "bps" = basis points. See explanation below.
What Actually Motivates People to Hire Advisors?
Dimensional Fund Advisors research identified four reasons families hire advisors:¹
"I need help, I don't know what I'm doing." Financial management is complex.
"I need accountability." Humans make expensive mistakes during market extremes.
"I don't want to spend time on this." Even capable people prefer allocating time elsewhere.
"I want my spouse involved in our financial decisions." Equal partnership in money matters is critical.
Notice what's missing? "I want someone who can beat the market."
"I Don't Want to Spend Time on This"
Even if you possess every skill needed to manage investments effectively, you might reasonably prefer not to. Your time and mental energy may be better spent elsewhere.
Investment management might rank between "tedious chore" and "necessary evil" on your preferred activities list. Your calendar already bursts with obligations. Or perhaps having one partner shoulder the entire investment burden creates uncomfortable dynamics.
What if you could build a relationship with a trusted financial professional and simply know it's handled competently?
While you might be capable of DIY investing, choosing not to is valid.
The Research: Quantifying Adviser's Alpha
Vanguard research suggests that following certain practices may improve investor outcomes over time, though results vary and are not consistent year to year.2 This isn't predictable annual outperformance, it's irregular value-add peaking when investors are most tempted to abandon well-designed plans.
Investment management encompasses vastly more than choosing funds. The real value lies in everything around those choices.
A Quick Note on Basis Points
"Basis points" (bps) measure small percentages:
1 basis point = 0.01%
100 basis points = 1%
So "~150 basis points" means approximately 1.5% annually. "34-70 basis points" means 0.34% to 0.70%.
Why use basis points? These small differences compound dramatically over decades. A 50 basis point (0.50%) annual advantage can mean tens or hundreds of thousands of dollars over 30 years.
The Four Pillars of Value
Dimensional organizes the value proposition into: Competence, Coaching, Convenience, and Continuity.¹
1. Competence: Technical Expertise That Matters
Cost-Effective Implementation: 34-70 Basis Points
Average investors pay 57-79 bps annually in fund expenses. Those using low-cost funds pay just 16-20 bps. This 34-70 bps differential compounds relentlessly over decades.³
Understanding Your Portfolio Composition
Many investors contributing for years without a coherent philosophy end up with suboptimal portfolios. The most common pattern I see: significant overconcentration in the S&P 500 through multiple index funds, target-date funds that hold S&P exposure, and individual holdings that overlap with the index.
When we review these portfolios, clients often realize for the first time that they have virtually no exposure to smaller U.S. companies, international markets, or meaningful fixed income allocation. Everything is essentially the same 500 large-cap U.S. stocks, held multiple times across different accounts.
Your portfolio's composition (asset allocation and market exposure) is your returns' primary driver. It's about intentionally accessing different sources of expected return across size (large vs. small), geography (U.S. vs. international vs. emerging), and asset classes (stocks vs. bonds vs. real estate).
Heavy concentration in the S&P 500 is an implicit bet that large-cap U.S. stocks will keep outperforming everything else. That might work. Or not. But it should be conscious, not accidental.
Beyond knowing what you own, you need to know why. Your investment strategy should connect directly to actual financial goals.
We examine both sides: return drivers (asset allocation, market exposure, emphasizing higher expected return areas) and cost drags (implementation costs, taxes, expense ratios). We evaluate every holding: keep, sell, or donate, ensuring each serves a deliberate purpose aligned with your timeline and goals.
Your net returns come from assembling these components thoughtfully. Not just picking "best" funds, but how everything works together.
Converting Idle Cash Into Working Capital
Cash accumulation where it shouldn't be is widespread: substantial balances in checking/savings without purpose, RSU proceeds languishing, or money transferred to investment accounts but never deployed. We systematically review and invest these idle positions.
Disciplined Rebalancing: 26-86 Basis Points
Market movements push portfolios from target allocations. A portfolio designed with a certain stock/bond mix will naturally drift as different asset classes perform differently. Rebalancing primarily controls risk.⁴ A portfolio that's drifted to hold more stocks than intended has taken on more volatility and downside exposure than originally planned.
The challenge? Rebalancing is psychologically uncomfortable, selling winners and buying losers when instincts scream otherwise.
Calibrating Risk to Timeline
Risk is the probability of insufficient funds when needs arise. Someone purchasing a home in five years needs dramatically different allocation than someone two decades from retirement.
We construct appropriate equity/fixed income/cash combinations based on your timeline and risk tolerance. Vanguard research shows simple portfolios (like 60/40 index funds) deliver returns comparable to complex endowment portfolios.⁵ Simplicity has genuine advantages.
Tax Optimization: 0-110+ Basis Points
The goal: minimize lifetime tax burden, not this year's bill. Sometimes accepting higher current taxes positions you for dramatically lower lifetime taxes.
Strategies include:⁶
Strategic asset placement (tax-efficient equities in taxable accounts, bonds in retirement accounts)
Loss harvesting during declines
Gain harvesting during low-income years
Replacing tax-inefficient funds
Donating appreciated securities versus cash
Retirement Withdrawal Strategies: 0-153 Basis Points
For retirees with multiple account types, withdrawal order significantly impacts lifetime taxes. Informed strategies add 0-153 bps annually while extending portfolio longevity.⁷
And Many More
Research suggests over 100 distinct ways advisors add value across planning domains.¹³ Effective advisors go deep on services most relevant to their clients' needs.
2. Coaching: The Behavioral Advantage (The Biggest Value-Add)
Behavioral coaching adds approximately 150 basis points annually, the single most valuable service advisors provide.⁸
Here's a paradox: clients don't hire advisors for emotional guidance. Yet advisors recognize this as among our most valuable contributions.
Vanguard analyzed 58,168 self-directed investors: those who made portfolio changes sacrificed 104-150 bps due to poor market timing.⁹ European analysis revealed investors consistently underperforming their own fund holdings, a persistent "behavior gap."¹⁰
The pattern: when markets surge, investors extrapolate gains indefinitely and increase risk. When markets crash, fear drives capitulation at exactly the wrong moment.
An advisor's function during these periods is rational perspective: "I understand this feels urgent. Let's review the Investment Policy Statement we created together. Do these changes align with that framework?"
Clients engage advisors not from lack of intelligence, but recognizing the value of accountability.¹¹ Advisors aren't immune to emotion, we've developed systematic processes prioritizing rational analysis over emotional reaction.
Building relationships before market extremes enables advisors to function as behavioral circuit breakers.
3. Convenience: Integrated Management and Peace of Mind
Modern financial lives are extraordinarily complex: multiple accounts, former employer plans, pensions, business interests, estate planning, tax optimization, long-term care.
Families engage advisors to spend time with family rather than managing portfolios, gain professional oversight, ensure continuity for spouses/children, and have someone seeing how all pieces fit together.
Navigating Administrative Complexity
We help navigate (often handling directly) tasks like: account establishment, automated contributions, 401(k) consolidation, Roth conversions, annual IRA contributions including backdoor Roths, investment selection in employer plans/HSAs, beneficiary updates, trust funding, among many other administrative details that would otherwise consume your time and attention.
Clear, Comprehensive Reporting
Quality reports help you understand your portfolio without needing an advanced degree.
Total-Return vs. Income-Only Strategies
With suppressed bond yields, many retirees' portfolios don't generate sufficient income. The temptation: chase yield through high-yield bonds or dividend strategies.
The problem? These typically concentrate portfolios, reduce diversification, and often expose principal to greater risk than disciplined total-return strategies.¹²
Total-return approaches (considering both income and appreciation) can provide broader diversification, potential tax efficiency advantages, and may support portfolio sustainability depending on the investor’s circumstances.
4. Continuity: Family, Legacy, and Multigenerational Planning
Professional advisors facilitate spouse involvement, children's financial education, wealth transfer, philanthropy, multigenerational planning, and legacy creation.
For many families, this broader coordination represents the deepest value.
Systematic Ongoing Reviews
Well-designed portfolios provide initial value. Ongoing oversight ensuring strategy remains appropriate, provides equal or greater value over time. Regular reviews catch drift before it becomes problematic.
The Quantified Value
Research shows:
Value varies by circumstances, but cumulative effects meaningfully improve outcomes.²
The Bottom Line
The true value isn't about "delivering" returns or picking winning stocks.
It's about making better decisions consistently, avoiding behavioral mistakes during emotional moments, creating clarity amid complexity, ensuring money serves your goals, maintaining discipline when instincts scream otherwise, and handling administrative minutiae.
Investment selection is part of professional management. But comprehensive planning, behavioral coaching, tax optimization, administrative execution, and coordinated oversight typically create the most significant impact.
The question isn't "Can I manage investments myself?"
It's: "Would I make consistently better decisions (and feel genuinely confident) with a professional partner? Would I rather spend my time and energy on things I enjoy?"
For many, research and experience strongly suggest yes. And unlike beating the market, those are areas where we aim to provide support and a disciplined process, based on each client’s circumstances.
Interested in exploring whether professional management might add value? Let's discuss your goals, current approach, and whether we might work well together.
Sources and References
¹ Lupescu, Apollo. "Communicating the Value of Your Advice." Dimensional Fund Advisors Applied Communications Workshop, November 13, 2024.
² Kinniry, Francis M. Jr., Colleen M. Jaconetti, Michael A. DiJoseph, Yan Zilbering, Donald G. Bennyhoff, and Georgina Yarwood. "Putting a Value on Your Value: Quantifying Adviser's Alpha." Vanguard Research, June 2020.
³ Ibid. Analysis based on asset-weighted expense ratios across mutual funds and ETFs available in Europe as of December 31, 2019.
⁴ Ibid. Vanguard research on portfolio rebalancing showing value-add of 26-86 basis points depending on market conditions and geography.
⁵ Based on 2019 NACUBO-Commonfund Study of Endowments, as cited in Kinniry et al., "Putting a Value on Your Value: Quantifying Adviser's Alpha."
⁶ Kinniry et al., "Putting a Value on Your Value: Quantifying Adviser's Alpha." Asset location value-add ranges from 0-110 basis points depending on jurisdiction and individual circumstances.
⁷ Harbron, Garrett L., Warwick Bloore, and Josef Zorn. "Withdrawal Order: Making the Most of Retirement Assets." Vanguard Research, 2019, as cited in Kinniry et al.
⁸ Kinniry et al., "Putting a Value on Your Value: Quantifying Adviser's Alpha." Behavioral coaching estimated at approximately 150 basis points annually.
⁹ Weber, Stephen M. "Most Vanguard IRA Investors Shot Par by Staying the Course: 2008–2012." Vanguard Research, 2013, as cited in Kinniry et al.
¹⁰ Kinniry et al., "Putting a Value on Your Value: Quantifying Adviser's Alpha." Analysis of European investor returns versus fund returns showing median negative gaps across categories.
¹¹ Bennyhoff, Donald G. "The Vanguard Adviser's Alpha Guide to Proactive Behavioural Coaching." Vanguard Research, 2018, as referenced in Dimensional Fund Advisors communications.
¹² Kinniry et al., "Putting a Value on Your Value: Quantifying Adviser's Alpha." Discussion of total-return versus income-only investing strategies for retirees.
¹³ Van Deusen, Adam. "101 Things That Advisors Actually DO To Add Value (Beyond Just Allocating A Portfolio)." Kitces.com, November 28, 2022. Available at: https://www.kitces.com/blog/advisors-add-value-proposition-financial-planning-ideal-clients-target-persona-differentiation/
¹⁴ Tharp, Derek. "Quantifying (More Accurately) The Real Impact Of A Financial Advisor's Costs On Their Clients' Nest Eggs." Kitces.com, October 23, 2024. Available at: https://www.kitces.com/blog/financial-advisor-costs-fees-aum-fee-only-high-new-worth-ramit-sethi-facet/
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark in the United States, which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Financial Wellness Isn't Optional, It's Foundational
You track your steps. You hit the gym. You meal prep. You've mastered the wellness routines that optimize your physical and mental health. But there's one dimension of wellness you might be overlooking.
The Hidden Health Crisis No One Talks About
Money is the leading factor negatively affecting Americans' mental health, ahead of politics, world news, climate change, and even physical health concerns.4 Let that sink in for a moment.
The statistics paint a sobering picture:
Nearly 70% of Americans say financial uncertainty has made them feel depressed and anxious, an 8-percentage point increase from just two years ago 9
Over 50% of Americans feel stressed or anxious about their finances multiple times per week, with overall financial stress intensity rated at 3.2 out of 5 2
83% of Americans report financial stress driven by inflation, rising living costs, and recession concerns7
56% say financial stress affects their sleep, 55% their mental health, 50% their self-esteem, 44% their physical health, and 40% their relationships at home 5
Perhaps most troubling: 60% of people have avoided seeking mental health care due to financial constraints. 7 The very stress that's damaging their wellbeing prevents them from getting help.
This isn't just about feeling worried. Nearly 4 in 10 Gen Z and Millennials report feeling depressed and anxious on at least a weekly basis due to financial uncertainty. 9 Financial stress has become a chronic condition, one that compounds over time if left untreated.
Why Financial Wellness Gets Left Behind
You probably wouldn't hesitate to invest in a gym membership, therapy, or organic groceries. These feel productive, healthy, empowering (right?). But financial planning? Why does that feel overwhelming, complicated, shameful, or uncomfortable?
Here's the reality: We often learn our money mindset from our families. You likely absorbed attitudes, fears, and behaviors about money long before you understood what money actually was. Many of those patterns may not be serving you anymore, but they could still be running in the background, influencing your financial decisions. (These are sometimes called "money scripts," a whole topic we could explore another time.)
And unlike organizing your closet or meal prepping for the week, you may not see the results of financial planning immediately. There's no before-and-after photo. No dopamine hit from a perfectly labeled container.
That's probably why only 48% of Americans have emergency funds that would cover three months of expenses, even though this is considered the baseline for financial security.3 It may also explain why nearly 1 in 4 households lived paycheck to paycheck in 2025, despite total household debt reaching $18.59 trillion.6
What True Financial Wellness Actually Looks Like
Financial wellness isn't about making as much money as possible. It's about using money as a tool to make your overall life better.
It means:
Financial security - The ability to handle an emergency without panic
Strategic debt management - A manageable debt load skewed toward "good" debt like a mortgage, not high-interest credit cards crushing your monthly budget
Aligned spending - Money flowing to the right places at the right times, supporting what matters most to you
Freedom from anxiety - Confidence that you're making sound decisions, not constant worry about what you might be missing
This isn't about restriction. It's about abundance. Making conscious choices that create the life you actually want to live.
The Money Mindset Shift That Changes Everything
Most people approach budgeting as punishment. A list of things they can't have. A constant reminder of scarcity.
But here's the reframe: Your goal is to spend as much of your money as possible over the course of your life (on the things that actually matter to you).
Budgeting, saving, and investing are simply techniques to smooth out spending across earning years and non-earning years. The purpose isn't deprivation, it's ensuring your lifestyle remains at the level you want, both now and in retirement, while avoiding the trap of high-interest debt that can sabotage your financial future.
This shift from scarcity to abundance mindset transforms everything:
You're not "giving up" dining out. You're choosing to allocate those dollars toward paying down that 21% credit card balance6that's costing you thousands in interest
You're not being "deprived" of luxury purchases. You're investing in your future self's freedom—whether that's eliminating debt, taking a sabbatical, or retiring early
You're not "restricting" your spending. You're directing it toward what brings you lasting satisfaction instead of fleeting dopamine hits that often end up on high-interest credit cards
When you understand this, budgeting becomes an act of self-care, not self-denial.
Breaking the Silence: Why Talking About Money Matters
Money remains one of our last cultural taboos. We'll discuss our relationships, our therapy sessions, our trauma, but our credit card debt? Our salary? Our fear that we're falling behind? Those topics remain off-limits.
This silence keeps you stuck.
The majority of people whose mental health is negatively impacted by money cite inflation and rising prices as the culprit 4, but they're likely suffering alone, convinced everyone else has it figured out.
In relationships, financial silence is toxic. Shame over debt or unequal wealth sabotages progress toward shared goals. One partner quietly panics while the other remains oblivious. Resentment builds. Trust erodes. (An objective third party could help navigate these conversations, right?)
In friend groups, financial transparency creates both reassurance and knowledge. How did they handle that situation? What professionals helped them? What strategies actually worked? This information is invaluable, but only if people are willing to share it.
The irony? 78% of Gen Z say financial responsibility is an important attribute when choosing a significant other, and 66% don't feel pressured by friends to spend beyond their means.8 The younger generation is already normalizing these conversations. It's time the rest of us catch up.
The Six Pillars You Can't Afford to Ignore
Financial wellness isn't about mastering one thing. It's about creating a comprehensive system across six critical areas:
1. Cash Flow & Emergency Planning
Beyond just "spending less than you earn," this means understanding your patterns, optimizing your savings rate, and maintaining 3-6 months of living expenses for true emergencies. Only 20% of lower-income adults report being in excellent or good financial shape currently, 1 but this isn't about income level. It's about having a plan.
2. Strategic Debt Management
The average credit card interest rate crossed 21% in 2025, making high-interest debt incredibly expensive.6 Should you consolidate? Pay down aggressively? Use a home equity loan? The answers depend on your specific situation and goals.
3. Investment Strategy
Your portfolio should reflect your timeline, goals, and risk tolerance, not last quarter's hot stock. Are you properly diversified? Are tax implications part of your strategy? Research from major financial institutions consistently shows that diversification across asset classes reduces portfolio volatility and risk without necessarily sacrificing returns.12
4. Multi-Year Tax Planning
This isn't about filing your return. It's about maximizing tax-advantaged accounts, planning for retirement distributions, and, if you're a business owner, structuring your affairs for maximum efficiency. While the tax code is complex, strategic planning could help optimize your tax situation.
5. Comprehensive Risk Management
Health insurance, life insurance, disability coverage, umbrella policies, and long-term care: each serves a different purpose. 27% of adults had trouble paying for medical care in the past year.3 The right insurance protects you from catastrophic financial loss.
6. Estate Planning
Who cares for your children if something happens to you? Who makes healthcare decisions? How do your assets transfer, and what are the tax implications? These aren't comfortable conversations, but they're essential ones.
Why Going It Alone Isn't Working
You likely know much of this intellectually. You probably understand you should have a budget, pay down debt, invest for retirement, get proper insurance, and create an estate plan.
But here's what the research shows about people who try to do it themselves:
They make expensive mistakes. Behavioral mistakes may reduce wealth significantly.15 Common errors include market timing, panic selling during downturns, chasing performance, and failing to rebalance portfolios systematically.
They let emotions drive decisions. Behavioral mistakes may reduce wealth significantly.15 When markets drop, panic sets in. When they soar, greed takes over. Both can undermine long-term returns.
They don't know what they don't know. Tax strategies, estate planning nuances, insurance gaps, investment allocation. These are complex domains where missteps can have long-term consequences.
They run out of time and energy. U.S. employees 56% spend 3 or more work hours per week dealing with personal financial issues.5
The Measurable Value of Professional Guidance
The financial advice industry has been rigorously studied. The data is clear and consistent:
Leading research from Vanguard, Morningstar, and Russell Investments has examined the potential value professional advisors may add through their "Advisor's Alpha" and "Gamma" frameworks.10,17,13These studies explore how tax optimization, behavioral coaching, strategic asset location, disciplined rebalancing, and comprehensive planning could contribute meaningful value over time by supporting better decision-making and helping clients avoid costly mistakes.
Beyond portfolio optimization:
94% of households advised by CFP® professionals feel confident in their ability to achieve their financial goals, compared to 85% of those working with other advisors and 81% of unadvised Americans.11
CFP® professional clients are significantly more prepared: 83% maintain emergency funds covering three months of expenses (versus 68% with other advisors and 53% unadvised), and 61% have a will in place (versus 46% with other advisors and 24% unadvised).11
Half (51%) of people who work with a CFP® professional report living comfortably, compared to 40% with other advisors and 31% of unadvised households.11
Advised investors report greater peace of mind related to their finances: 86% feel more peace of mind, with 60% experiencing less anxiety, worry, sadness, and disappointment, and instead feeling more confident, satisfied, secure, and proud.16
Working with an advisor may also save time: 76% report time savings, with a median of two hours per week (over 100 hours annually) that can be redirected toward activities like leisure, time with family, and exercise.16
The Emotional ROI You Can't Ignore
Over half of consumers who work with CFP® professionals report that financial advice positively impacted their mental health and family life.11 Given the financial stress we discussed earlier, consider what addressing it might mean: the potential for better sleep, less anxiety, improved relationships, greater confidence, and more time with your family.
Research also shows that clients of CFP® professionals report higher quality of life scores compared to those who work with other financial planning professionals or manage finances independently.11 Investors with human advisors perceive meaningful progress toward their financial goals compared to managing finances on their own.14
This isn't just about money. It's about reclaiming your mental bandwidth, your emotional energy, and your time.
Can you quantify peace of mind? Can you put a price on knowing you've made sound decisions that keep your goals on track? Can you measure the value of not lying awake at 3 AM worrying about money?
The Real Cost of Waiting
Each month without a comprehensive financial plan may mean:
Potential compounding interest not captured
Tax savings that may be missed
Possible insurance gaps that could leave you exposed
Ongoing emotional stress that may affect your health and relationships
Time spent worrying that could be redirected toward living your life
Near the end of 2024, only 73% of adults reported doing okay financially or living comfortably, down from 78% in 2021.1 The trend suggests challenges for many Americans.
Meanwhile, 28% of adults expect their financial situation to be worse a year from now, up significantly from 16% who said this in 2024.3
The environment presents ongoing challenges: inflation, rising costs, economic uncertainty. The question is whether you'll face them with a plan or without one.
What Makes Financial Wellness Different From Every Other Form of Organization
When you organize your closet, you feel satisfied for a few weeks. Then life happens, and you're back to chaos.
When you establish financial wellness with a competent advisor, you create a system that:
Compounds over time with ongoing adjustments rather than constant upkeep
Adapts to your life instead of becoming obsolete
Streamlines future decisions rather than adding complexity
Builds on itself instead of needing to start from scratch
A good financial advisor should quarterback your entire financial life, not just help you create a budget. This means coordinating your investments, taxes, insurance, and estate plan. Working with your CPA and attorney to ensure nothing falls through the cracks. Monitoring and adjusting as markets change, laws change, and your life changes.
If your current advisor isn't providing this level of comprehensive guidance, it may be worth considering whether you're getting the value you deserve.
Most importantly, the right advisor should transform financial planning from a source of anxiety into a source of confidence.
From Overwhelmed to In Control: What Working Together Looks Like
If you're thinking, "I need to do something about this," here's what taking action actually involves:
Step 1: An Honest Conversation
No judgment, no sales pressure. Just a candid discussion about where you are, where you want to be, and what's standing in your way. Many people find this conversation provides helpful clarity as a starting point.
Step 2: Comprehensive Assessment
We examine all six pillars of financial wellness together. Where are the opportunities? Where are the vulnerabilities? What's working, and what's quietly undermining your goals?
Step 3: Your Customized Plan
Not a template. Not generic advice. A written financial plan that addresses your specific circumstances, values, and goals, with clear action steps and realistic timelines.
Step 4: Implementation & Ongoing Partnership
You don't get a binder to put on a shelf. Your advisor helps you execute the plan, automate what can be automated, and adapt as your life evolves (by the way, this is how I work with clients). Regular check-ins ensure you stay on track and adjust course when needed.
This is what financial wellness actually looks like: not perfect budgets that fail after two weeks, but sustainable systems that support the life you want to live.
The Bottom Line: Financial Wellness Is Wellness
You can't exercise your way out of financial stress. You can't hydrate your way to retirement security. You can't sleep your way to financial freedom (especially if you're stressed about your finances 5). And ignoring it won't make it disappear.
Physical health, mental health, and financial health are interconnected. 73% of clients who work with CFP® professionals generally feel they can cope well with any health issues compared to 64% of unadvised consumers.11 Financial wellness doesn't just reduce money stress: it makes you more resilient across all areas of life.
The cultural narrative tells you that needing help with money is a sign of failure. That's backwards.
You wouldn't think twice about hiring a trainer to optimize your physical health or a therapist to support your mental health. Your financial health deserves the same level of professional attention, especially since it impacts other dimensions of your wellbeing.
Your Next Step
Financial wellness isn't about having definitive answers. It's about asking the right questions and working with someone who can help you find answers that fit your life.
The choice isn't between managing everything yourself or delegating everything to someone else. It's between struggling alone with uncertainty or partnering with a professional who can provide clarity, strategy, and peace of mind.
Ready to make financial wellness part of your overall wellbeing?
Schedule your complimentary financial wellness consultation (below)
Let's transform financial stress into financial confidence, together.
Sources and References
Federal Reserve. (2025). Report on the Economic Well-Being of U.S. Households in 2024. https://www.federalreserve.gov/publications/2025-economic-well-being-of-us-households-in-2024-overall-financial-well-being.htm
Motley Fool Money. (2024). Financial Stress, Anxiety, and Mental Health Survey. https://www.fool.com/money/research/financial-stress-anxiety-and-mental-health-survey/
Pew Research Center. (2025). More Americans now say personal finances will be worse a year from now. https://www.pewresearch.org/short-reads/2025/05/07/growing-share-of-us-adults-say-their-personal-finances-will-be-worse-a-year-from-now/
Bankrate. (2025). Money and Mental Health Survey. https://www.bankrate.com/banking/money-and-mental-health-survey/
PwC. (2023). Employee Financial Wellness Survey. https://www.pwc.com/us/en/services/consulting/business-transformation/library/employee-financial-wellness-survey.html
CoinLaw. (2025). Household Financial Stress Statistics 2025. https://coinlaw.io/household-financial-stress-statistics/
LifeStance Health. (2025). 2025 Study: How Financial Stress ("Stressflation") Impacts Americans' Mental Health. https://lifestance.com/insight/financial-stress-impact-mental-health-statistics-2025/
Bank of America. (2025). Better Money Habits Financial Education Study. https://newsroom.bankofamerica.com/content/newsroom/press-releases/2025/07/confronted-with-higher-living-costs--72--of-young-adults-take-ac.html
Northwestern Mutual. (2025). Planning & Progress Study. https://news.northwesternmutual.com/2025-06-03-Nearly-70-of-Americans-Say-Financial-Uncertainty-Has-Made-Them-Feel-Depressed-and-Anxious,-According-to-Northwestern-Mutual-2025-Planning-Progress-Study
Vanguard. Putting a Value on Your Value: Quantifying Vanguard Advisor's Alpha. https://advisors.vanguard.com/advisors-alpha
CFP Board. (2026). Trust. Confidence. Impact: 2025 Financial Planning Longitudinal Study. https://www.cfp.net/news/2026/01/cfp-professional-advised-americans-experience-greater-financial-preparedness
Vanguard. Framework for Constructing Globally Diversified Portfolios. https://investor.vanguard.com/investor-resources-education/portfolio-management/diversifying-your-portfolio
Russell Investments. Value of an Advisor Study. Referenced in multiple industry analyses of advisor value-add through holistic financial planning.
Vanguard. Why Clients Prefer Financial Advisors Over Robo Advisors. https://advisors.vanguard.com/advisors-alpha/advice-that-clients-value
Covenant Wealth Advisors. (2025). The True Value of a Financial Advisor: What You Need to Know. https://www.covenantwealthadvisors.com/post/value-of-a-financial-advisor-what-you-need-to-know
Vanguard. (2025). Advice Pays in Peace of Mind and Time. https://corporate.vanguard.com/content/corporatesite/us/en/corp/who-we-are/pressroom/press-release-advice-pays-in-peace-of-mind-and-time-vanguard-survey-reveals-hidden-value-of-financial-advice-07072025.html
Blanchett, D. and Kaplan, P. (2013). Alpha, Beta, and Now...Gamma. Morningstar. https://www.morningstar.com/financial-advisors/gamma-action
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark in the United States, which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.
The Smart Money Moves You're Probably Not Making: Roth Strategies
Roth Conversions
The first strategy I’m going to talk about is called a Roth conversion, and here's the simple version: you move money from your traditional retirement account (where you'll pay taxes later) into a Roth account (where qualified withdrawals may be tax-free). Yes, you pay taxes now when you convert, but you may pay less overall depending on your tax rates, timing, and other factors.
The idea is simple: pay taxes when your rate is low, not when it's high. The catch? You can't perfectly predict your future tax rate. (This is one area where doing a financial plan can shine).
The Basics: Two Types of Retirement Accounts
Traditional 401(k)/IRA: You get a tax break now, pay taxes later when you withdraw in retirement.
Roth 401(k)/IRA: No tax break now, but your money grows tax-free forever. Qualified withdrawals are generally tax-free (withdrawals on growth before you are 59½ are not tax-free).
Roth conversion: Moving money from traditional → Roth. You pay taxes on the amount you convert this year, but then it's tax-free as it grows in the Roth account.1
When NOT to Convert
Skip Roth conversions if:
You'll be in a lower tax bracket later. If retirement income will be much lower than now, wait and pay less tax later.
You need the money within 5 years. There's a 5-year waiting period to avoid penalties on the converted funds.5
You don't have cash to pay taxes. Don't use the retirement money itself to pay the increased tax bill; in part, this defeats the purpose (especially for those under 59½, where the tax withholding will be penalized as an early distribution).
Your health insurance costs are affected more than the tax benefit of the conversion. Conversions count as income and can reduce ACA subsidies, and may push you into a higher IRMAA bracket if you are on Medicare.6
Quick Action Steps
Check your current tax bracket. Will it be higher or lower in retirement?
Determine how much. You don't have to convert everything, and should base the amount you convert on your tax estimates.
Time it right. Many people wait until Q4 to see their full-year income before converting.
Remember: no take-backs. You can't reverse a Roth conversion after 2018 tax law changes.10 Make sure you're confident before doing it.
You can convert a little each year or a lot—whatever makes sense for your situation.2
There’s More: Mega Backdoor Roth
The second Roth strategy applies if you max out your 401(k) and want to save even more tax-free. The mega backdoor Roth lets you contribute up to $47,500 extra (in 2026) to a Roth account.11,12
How it works:
Regular 401(k) limit (ignoring the additional ‘catch-up’ for those 50+): $24,500
Total contribution limit (including employer match): $72,000
The gap between these? You can fill it with "after-tax contributions"
Then immediately convert those to Roth
Requirements:
Your employer's 401(k) must allow after-tax contributions
Your plan must allow in-service conversions or withdrawals13,14
Common at big companies
Example: You contribute $24,500, your employer adds $4,500 match. That's $29,000 total. You can add another $43,000 as after-tax contributions and convert to Roth, giving you nearly $72,000 in retirement savings for the year.
Tax tip: Convert the after-tax contributions frequently to avoid taxes on earnings. Many plans do this automatically.15
Check with your HR department to see if your plan offers this option.
Benefits of Roth Accounts
Beyond saving on taxes, Roth accounts give you:
No forced withdrawals. Traditional IRAs have ‘Required Minimum Distributions’ (RMDs) which require you to start taking money out once you reach the required age.3 Roth accounts don't.
Flexible retirement planning. Roth withdrawals don't count as taxable income, so they won't increase your Medicare costs or affect Social Security taxes.4
Better for heirs. Your beneficiaries inherit Roth accounts tax-free.
Bottom Line
Using Roth accounts effectively may save you thousands in taxes over your lifetime, but the key is timing.
Best candidates for Roth Strategies:
Between jobs or careers
Early retirees (ideally before Social Security & RMDs)
Anyone in an unusually low tax year
High earners who can do a mega backdoor Roth
Now that you know these options exist, pay attention to your income each year. When you spot a low-income window, you may have an opportunity to convert at a lower rate if it aligns with your tax and planning considerations.
Next step: Talk to a financial planner with experience with software to see if a conversion makes sense for your situation this year, or in the near future.
This article is for educational purposes only and should not be considered tax or financial advice. Individual circumstances vary, and you should consult with a qualified financial planner or tax professional before making decisions about Roth conversions.
Sources and References
Internal Revenue Service. "Publication 590-B (2026), Distributions from Individual Retirement Arrangements (IRAs)." https://www.irs.gov/publications/p590b
Vanguard. "Is a Roth IRA conversion right for you?" Vanguard Investor Resources & Education. https://investor.vanguard.com/investor-resources-education/iras/ira-roth-conversion
Internal Revenue Service. "Retirement topics - Required minimum distributions (RMDs)." Updated January 29, 2026. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
Charles Schwab. "Required Minimum Distributions: What's New in 2026." https://www.schwab.com/learn/story/required-minimum-distributions-what-you-should-know
Lord Abbett. "Quick Answers: The Five-Year Rule and Important Info on Roth IRA Conversions." August 7, 2024. https://www.lordabbett.com/en-us/financial-advisor/insights/retirement-planning/quick-answers-the-five-year-rule-and-important-info-on-roth-ira-.html
Vision Retirement. "Roth IRA Conversions: Rules, Restrictions, and Taxes." January 2026. https://www.visionretirement.com/articles/investing/basics-of-roth-ira-conversions
Fidelity. "Qualified Charitable Distributions (QCDs)." https://www.fidelity.com/retirement-ira/required-minimum-distributions-qcds
Internal Revenue Service. "IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill." October 9, 2025. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
Tax Foundation. "2026 Tax Brackets and Federal Income Tax Rates." February 11, 2026. https://taxfoundation.org/data/all/federal/2026-tax-brackets/
Internal Revenue Service. "Publication 590-B (2026), Distributions from Individual Retirement Arrangements (IRAs)." https://www.irs.gov/publications/p590b
Internal Revenue Service. "Retirement topics - 401(k) and profit-sharing plan contribution limits." Updated January 2026. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
Empower. "Mega Backdoor Roth: How It Works and Its Benefits." 2026. https://www.empower.com/the-currency/money/mega-backdoor-roth
Fidelity. "What is a mega backdoor Roth?" February 28, 2025. https://www.fidelity.com/learning-center/personal-finance/mega-backdoor-roth
NerdWallet. "Mega Backdoor Roths: How They Work, Limits." Updated February 2, 2026. https://www.nerdwallet.com/retirement/learn/mega-backdoor-roths-work
Internal Revenue Service. "Rollovers of after-tax contributions in retirement plans." https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans
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