The state and local tax (SALT) deduction has undergone its most significant transformation since 2017. On July 4, President Trump signed H.R. 1, the One Big Beautiful Bill Act (“OBBBA”), into law, bringing substantial changes to how taxpayers can deduct their state and local taxes on federal returns. For millions of Americans—particularly those in high-tax states—these modifications represent both opportunities and complexities that require immediate attention as we move through 2025. 

This analysis examines what changed, who benefits most, and how these modifications affect your tax planning strategies. Whether you’re a business owner, high-net-worth entity, or organization managing complex state tax obligations, understanding these changes is crucial for optimizing your 2025 tax position and beyond. 

Key SALT Changes Affecting High-Earners 

The OBBBA introduces a temporary but substantial increase to the SALT deduction limit. The law increases the $10,000 SALT cap to $40,000 and phases down the $40,000 SALT cap (to $10,000) at a 30% rate for taxpayers making over $500,000. For married filing separate taxpayers, the benefits are proportionally adjusted. The $40,000 cap becomes $20,000, and the income threshold drops to $250,000 for the phaseout calculation. This represents a four-fold increase for eligible taxpayers, providing significant relief for individuals   in high-tax jurisdictions. 

The income-based limitations add complexity to the new structure. An individual with $550,000 of AGI in 2025 would exceed the $500,000 threshold by $50,000. Applying the 30% phaseout, $15,000 of the deduction would be disallowed, leaving them eligible to deduct $25,000 in SALT. For higher earners, those with $750,000 of AGI would see a $75,000 reduction in their allowable deduction, which would phase down to the minimum guaranteed amount of $10,000. 

The timing of these changes creates both immediate opportunities and future planning considerations. The law increases the $40,000 SALT cap and $500,000 income threshold by 1% each year from 2026 through 2029, with the cap reset to $10,000 from 2030 onwards. This temporary nature means individuals need to consider both short-term tax optimization and long-term planning strategies. 

At BPM, we help business clients manage these complex interactions between federal and state tax obligations, ensuring you maximize available deductions while planning for future changes in the tax code. 

How Businesses can Navigate SALT Workarounds 

One of the most significant aspects of the new legislation is what it doesn’t change: the preservation of pass-through entity tax (PTET) workarounds. The OBBBA does not change SALT deductibility for either pass-through businesses—such as S corporations and partnerships—or C corporations. This represents a major victory for business owners who have relied on these state-level strategies to circumvent the federal SALT cap. 

Understanding PTET Mechanisms 

Pass-through entity taxes work by allowing businesses to pay state income taxes at the entity level rather than having individual owners pay them personally. Since the SALT deduction cap generally applies to individual taxpayers and not entities, the pass-through entity can deduct the full amount of state tax paid at the federal level. The owners then receive state tax credits equivalent to the amount paid at the entity level. 

According to the American Institute of Certified Public Accountants, many states have enacted PTET workarounds since the 2017 TCJA limitation. These programs vary significantly in their qualification criteria, election rules, and credit allowances, but they generally follow similar principles. 

Key Points for Business Owners: 

• Deductibility at the entity level, bypassing individual SALT caps 
• Dollar-for-dollar credits to owners for taxes paid by the entity subject to certain limitations 
• Elections and timing of payments vary by state 
• Coordination with multiple state jurisdictions for multi-state businesses 

The preservation of PTET workarounds under the new law means business owners can potentially benefit from both the higher individual SALT cap and the continued availability of entity-level deductions. This dual approach requires careful coordination with tax professionals to optimize the combined benefit. 

For businesses operating across multiple states, the complexity increases substantially. Different states have varying PTET rules, credit mechanisms, and conformity requirements. Some states that previously enacted temporary PTET provisions have sunset clauses at the end of 2025 and will require legislative extensions to continue these benefits. 

Learn more about our State and Local Taxes (SALT) Accounting Consulting Services

Advanced Planning Strategies for Wealth Preservation 

Planning Alert: With the temporary nature of the increased SALT cap, business owners need strategies that work both during the enhanced period (2025-2029) and after the reversion to $10,000 in 2030. 

The enhanced SALT deduction creates several sophisticated planning opportunities that require immediate attention. Given the temporary nature of these changes, timing becomes crucial for maximizing benefits while positioning for the future reversion. 

Strategic Timing Considerations 

The income phaseout mechanism presents unique planning challenges and opportunities. Individuals approaching the $500,000 modified AGI threshold should consider income timing strategies to maximize their SALT deduction benefit. This might involve: 

• Deferring income to stay below the AGI threshold  
• Accelerating deductions to reduce modified AGI calculations 
• Timing asset sales to coordinate with SALT deduction availability 
• Managing retirement plan distributions to optimize total tax impact 

Multi-Entity Structure Optimization 

For business owners with complex entity structures, the interaction between individual SALT deductions and entity-level PTET elections requires careful analysis. Some considerations include: 

Strategy	Benefit	Risk Factor
Entity-level PTET election	Full deductibility regardless of owner income	State law changes could eliminate option
Individual SALT maximization	Direct benefit on personal returns	Subject to income phaseouts and caps
Hybrid approach	Optimizes both entity and individual benefits	Requires ongoing monitoring and adjustment

The ability to use both entity-level PTET elections and enhanced individual SALT deductions creates opportunities for sophisticated tax planning. Business owners might elect PTET for a portion of their state tax obligations while maximizing individual SALT deductions through strategic income management. 

Legislative Outlook and Future Considerations 

Critical Timeline: The enhanced SALT cap reverts to $10,000 in 2030, creating a potential tax increase for businesses owners and individuals who have grown accustomed to higher deduction limits. 

The Congressional Budget Office estimates that the new law will increase federal deficits by $3.4 trillion between 2025 and 2034. This substantial fiscal impact makes future modifications to the SALT provisions likely subjects of political debate. Business owners should prepare for potential scenarios including: 

• Early sunset if fiscal pressures mount 
• Extension negotiations as 2030 approaches 
• Modified caps that differ from current provisions
• Alternative limitations that could replace the current structure 

Technology and Compliance Considerations 

The increased complexity of SALT deduction calculations, combined with varying state PTET rules, places greater emphasis on sophisticated tax compliance systems. Business owners might consider investing in: 

• Tax software capable of handling complex SALT calculations 
• Professional advisory relationships with multi-state experience
• Documentation systems that support both current benefits and future audits 
• Regular compliance reviews to help ensure ongoing optimization 

The interaction between enhanced individual SALT deductions and entity-level PTET elections requires careful tracking throughout the year. Business owners can’t simply “set it and forget it” – these strategies require ongoing monitoring and potential adjustments based on actual income and tax liability developments. 

How BPM helps clients optimize their tax positions 

The complexity of the new SALT deduction rules demands sophisticated tax planning that goes far beyond simple compliance. At BPM, we understand that business owners face a unique challenge: maximizing immediate benefits while preparing for the inevitable reversion to lower caps in 2030. 

Our Integrated Approach to SALT Planning 

We don’t view SALT deduction planning in isolation. Instead, our advisory teams integrate these strategies with broader business objectives, cash flow management, and long-term growth planning. This comprehensive approach helps to ensure that tax optimization supports rather than constrains your business development goals. 

Our process begins with a thorough analysis of your current tax position across all jurisdictions where you operate. We examine entity structures, income streams, and existing PTET elections to identify immediate optimization opportunities. Then we model various scenarios to understand how different strategies perform under changing income levels and future legislative environments. 

Specialized Services for Complex Situations 

Multi-State Business Operations: For clients operating across multiple states, we coordinate PTET elections and individual SALT strategies to maximize total benefits. Our state and local tax specialists understand the nuances of different jurisdictions and can identify opportunities for tax arbitrage between states with different approaches to pass-through entity taxation. 

Entity Structure Optimization: We regularly review client entity structures to help ensure they remain optimal under current tax law. The enhanced SALT deduction may make certain structural changes advantageous. 

Succession Planning Integration: For business owners approaching retirement or considering succession planning, we coordinate SALT strategies with wealth transfer objectives. The temporary nature of the enhanced deduction creates time-sensitive opportunities for tax-efficient business transfers. 

Looking to optimize your business tax strategy under the new SALT deduction rules? Contact BPM to explore personalized solutions that maximize your current benefits while preparing for future tax law changes. 

Most businesses approach workforce planning reactively. They hire when teams are stretched too thin. They restructure after inefficiencies have already affected performance. They address skills gaps only after key employees leave or critical projects stall.  

Workforce optimization offers a different approach. Rather than reacting to workforce challenges as they arise, it creates a proactive framework that aligns your people, organizational structure, and capabilities with your business goals. For organizations navigating growth, change, or transformation, workforce optimization shifts the focus from managing headcount to building a resilient, strategically aligned workforce. 

What is workforce optimization? 

Workforce optimization (WFO) is a strategic approach to designing, deploying, and developing your workforce in alignment with business objectives.  

Unlike tactical workforce management—which focuses on scheduling, employee work associated with time tracking, and day-to-day operations—workforce optimization addresses the structural and strategic questions that determine long-term performance:  

• Do you have the right organizational structure?  
• Are people in roles that match their skills and your priorities?  
• Where are the gaps between current capabilities and future needs?  
• How do you prepare your workforce for what’s ahead? 

We define workforce optimization as the process of aligning talent with strategy through organizational design, workforce planning, skills analysis, and change management. It’s not about software platforms or productivity metrics. It’s about creating clarity, efficiency, and agility in how your organization is structured and how your people are positioned to be set up for success.  

How does workforce optimization work? 

Workforce optimization operates as an integrated system rather than a collection of separate initiatives. It brings together four core components that work in tandem to create a more effective, strategically aligned organization. 

Organizational design  

This creates the structural foundation and often means examining how teams are configured, where responsibilities sit, and whether your current structure supports or hinders business priorities.  

Organizations often carry outdated structures forward through growth or change, creating bottlenecks, unclear accountability, or duplicated effort. Effective organizational design clears these inefficiencies and builds a framework where roles, teams, and reporting lines work together strategically. 

Talent management 

Here, you can ensure you’re deploying people where they create the most value. Rather than filling open positions reactively, this involves analyzing where talent is concentrated, where it’s needed most, and how future business priorities will shift those requirements. The goal is strategic alignment—optimizing employee performance and matching your workforce capabilities to the work that drives results. 

McKinsey research shows that individuals who are top performers in highly critical roles deliver 800% more productivity than average performers in the same role. This finding underscores why strategic talent deployment matters.  

When the right people are in the right roles—and those roles are clearly defined and aligned with business strategy—organizations unlock disproportionate value from their existing workforce. Workforce optimization strategies focus on maximizing this productivity through better talent alignment and role clarity. 

Skills analysis 

These types of analyses identify the gap between what your organization can do today and what it needs to do tomorrow. As business demands evolve, so do skill requirements. This component involves mapping current capabilities, pinpointing development needs, and creating pathways—whether through training, reskilling, or strategic hiring—that close those gaps before they become performance barriers. 

This approach supports performance management by ensuring teams have the capabilities needed, and ability to adjust to meet changing performance goals as the organization evolves. 

Change management  

Change management recognizes that workforce optimization only works if people understand and support it. Structural changes, new role definitions, or shifts in how work gets done require thoughtful communication, leadership alignment, and strategies that help employees adapt. Without this element, even well-designed workforce plans stall during implementation. 

Learn more about our Workforce Optimization Services

Is there a difference between workforce management and workforce optimization? 

Yes. Workforce management handles day-to-day operations—scheduling, time tracking, attendance, and ensuring adequate coverage during peak periods. Workforce optimization addresses the broader strategic questions that determine long-term performance and organizational effectiveness. 

Workforce management provides the operational backbone. It answers questions like:  

• Are workloads distributed fairly? 
• Do we have enough people scheduled for this shift? 

• How is our employee attendance this quarter? 
• What are our upcoming staffing plans for the holidays? 

Workforce optimization is the next evolution. It focuses on agility, strategic insight, and long-term capability rather than just efficiency metrics. Organizations using workforce optimization ask different questions:  

• Is our structure aligned with business priorities?  
• Where are the skills gaps that will affect future performance?  
• How do we prepare our workforce for what’s ahead?  
• How can we improve employee efficiency while maintaining engagement and quality? 
• Are roles clearly defined and positioned for accountability? 

According to SHRM research, organizations that proactively forecast workforce trends are more likely to excel at driving change compared to those that don’t—61% versus 45%. This translates into better operational efficiency and reduced costs.  

The distinction matters because businesses operating reactively—filling positions as they open, addressing skills gaps only after they create bottlenecks—are constantly behind. Proactive workforce optimization builds the structural foundation that allows organizations to adapt, scale, and perform without scrambling. 

Why businesses benefit from proactive workforce planning 

The business case for workforce optimization shows up in measurable ways across financial performance, talent retention, and organizational agility. 

Stronger financial performance 

Strategic workforce planning helps prevent costly mistakes like overstaffing by allowing organizations to prioritize hiring efforts and focus on essential roles versus reactive, last-minute hiring.  

By forecasting workforce needs accurately and aligning headcount with business priorities, organizations avoid the financial drain of overstaffing during slower periods and the revenue loss associated with being understaffed during critical growth phases. This level of precision in workforce deployment directly affects the bottom line—reducing unnecessary labor costs while ensuring adequate capacity to capture revenue opportunities. 

Improved retention 

Strategic workforce planning also improves retention. Employees who see clear development pathways, understand how their roles contribute to business goals, and work within well-designed structures are more likely to stay. This reduces costly turnover and preserves institutional knowledge. When workforce structures support career growth and role clarity, retention becomes a natural outcome rather than a constant challenge. 

Enhanced agility 

The advantages extend beyond talent alignment. Organizations with optimized workforce structures demonstrate stronger agility during market shifts. They can reassign resources quickly, adapt to changing business priorities, and build succession pipelines that ensure leadership continuity.  

Stronger operational efficiency 

Well-designed workforce structures eliminate the inefficiencies that drain organizational resources. When roles are clearly defined, reporting relationships are logical, and responsibilities don’t overlap unnecessarily, work flows more smoothly.  

Teams spend less time navigating organizational confusion and more time executing on priorities. Redundancies are minimized, accountability is clear, and decision-making accelerates.  

These efficiency gains compound over time, creating organizations that can accomplish more with existing resources rather than constantly adding headcount to compensate for structural problems. 

Better strategic execution 

Workforce optimization aligns your talent infrastructure with strategic priorities, making it easier to execute on what matters most. When your organizational structure supports rather than hinders your business strategy, initiatives move faster, cross-functional collaboration improves, and strategic goals become achievable rather than aspirational.  

Organizations with optimized workforces don’t just plan better—they execute better, because the structural foundation exists to turn strategy into results. This workforce optimization solution creates a competitive advantage by enabling data-driven decision-making at every level of the organization. 

The role of technology in workforce optimization 

While workforce optimization is fundamentally a strategic framework rather than a technology solution, workforce optimization software can support and accelerate the process when used appropriately. The right tools provide organizations with real-time data and actionable insights that inform better workforce decisions. 

Effective WFO software helps organizations track key performance indicators across talent deployment, skills coverage, and organizational efficiency. These platforms can surface patterns that might otherwise go unnoticed—such as emerging skills gaps, inefficient resource allocation, or structural bottlenecks that slow execution. By aggregating data from multiple sources, workforce optimization technology creates visibility into how well your current structure supports business priorities. 

Additionally, workforce optimization technology can help organizations meet compliance requirements by tracking certifications, training completion, labor regulations, and other workforce-related mandates. This becomes particularly valuable for organizations operating across multiple jurisdictions or industries with strict regulatory oversight. 

Move from reactive management to strategic workforce optimization 

Organizations that embrace workforce optimization move beyond the cycle of reactive hiring, emergency restructuring, and constant firefighting. They build structures that support agility, create role clarity, and ensure talent is deployed where it creates the most value. 

Whether your organization is navigating change, scaling operations, preparing for evolving work models, or addressing talent gaps, workforce optimization provides the strategic foundation to move forward with confidence.  

Looking to build a more strategic, resilient workforce? Contact BPM’s workforce optimization consultants to explore how we can help align your organizational structure with your business goals. 

If you’re considering retiring at 55, you’ve landed on what many consider the “sweet spot” of early retirement planning. You’re pursuing something ambitious, but you’re also in a much more favorable position than those trying to retire at 40 or even 50. 

At 55, you have some distinct advantages working in your favor. You only have about seven years before you become eligible for Social Security benefits. You’ve had access to catch-up contributions for five years. Perhaps most importantly, savings in qualified retirement plans may be available to you penalty-free access through something called the Rule of 55. 

The challenge lies in building sufficient wealth while managing the ongoing financial commitments that often come with this life stage—maybe you’re still supporting children through college, caring for aging parents, or dealing with your own evolving healthcare needs. 

So, how much do you need to retire comfortably at 55? Let’s find out.  

How much do you need in your portfolio to retire at 55? 

If you’re aiming to retire at 55, you’ll likely need a sizeable nest egg to cover your living expenses (though it’s often much smaller than if you were retiring 10-15 years earlier). 

To get a baseline figure, start by estimating your annual expenses and use a ballpark withdrawal rate. Keep in mind that your nest egg will likely need to last 30+ years. To be more conservative, we created a chart that used a 3.5% annual withdrawal rate.  

Annual Expenses	Portfolio Needed (No Bridge Income)	Portfolio with $100K Bridge Income
$80,000	$2.0 million	$700,000
$120,000	$3.0 million	$1.5 million
$160,000	$4.0 million	$2.5 million
$200,000	$5.0 million	$3.5 million

When we talk about bridge income, we’re referring to additional assets outside of your retirement nest egg, such as part-time work, real estate, or other alternative sources of income.  

By supplementing your retirement savings with additional income, you reduce your reliance on your portfolio alone to cover your expenses, meaning your nest egg may be able to be smaller.  

In the above table, you can see that generating $100,000 annually through part-time work, consulting, or investment income can reduce your needed portfolio by a couple of million dollars. 

Another way to reach your target number is to use the salary multiple rule, which suggests having six to eight times your annual salary saved by the time you reach age 55. If you’re earning $150,000, this would mean targeting $900,000-1.2 million.  

While this guideline tends to be more accurate for conventional retirement in your 60s, it often falls short for retiring at 55 without substantial bridge income or significant lifestyle adjustments. 

Creative ways to work toward your retirement number 

Your retirement spending needs at 55 likely extend well beyond basic living expenses. At this life stage, you’re probably juggling some complex financial obligations that will persist into retirement. 

Understand your lifestyle requirements 

How you want to spend your time—and your money—plays a big role in determining how much you’ll need to retire comfortably at 55. At this life stage, your financial picture is probably more complex than it was in your 30s or 40s, with various commitments that will shape your retirement planning. 

Housing decisions 

As every homeowner knows, owning property is expensive, and those costs don’t disappear just because you retire. Property taxes, insurance, and maintenance are ongoing realities whether you’ve paid off your mortgage or not. 

If you’re like many people at 55, you might own multiple properties or be wrestling with some big decisions about your living situation. Should you downsize to reduce expenses? Stay put and age in place? Maybe you’re dreaming of that retirement home in a different climate or lower-cost area. 

When it comes to debt, the decision isn’t always black and white. Yes, carrying mortgage or credit card debt into retirement will increase how much you need in your portfolio. But if you have a low-rate mortgage and your investments are performing well, paying it off early might not be the smartest financial move. It really depends on your specific situation and comfort level with debt. 

Healthcare considerations 

Here’s something you’ll want to think seriously about: your health and healthcare costs. At 55, you probably have a clearer picture of any ongoing health issues or family medical history that might influence your expenses down the road. 

If you’re managing chronic conditions or know that certain health issues run in your family, these considerations should factor into your healthcare budget planning. It’s not the most exciting part of retirement planning, but it’s one of the most important. 

Family financial commitments 

Family obligations often don’t stop when you hit your 50s. You might still be helping kids through college, supporting graduate school dreams, or even assisting with grandchildren’s education expenses. 

Many people also find themselves supporting aging parents with healthcare costs or long-term care needs while still managing their own family’s financial goals. 

Your insurance needs are probably shifting, too. As your children become financially independent, you might need less life insurance. On the flip side, long-term care insurance becomes something worth considering more seriously at this stage. 

Maximize your savings strategies 

Retiring at 55 means you need to be strategic about every savings opportunity available to you, especially the ones that offer unique benefits for your age group. The good news? You have some powerful tools at your disposal. 

Foundation strategies 

Let’s start with the basics. Maxing out your retirement accounts should still be your priority. Here are the 2025 contribution limits: 

• 401(k) contributions: $23,500 plus $7,500 catch-up 
• IRA contributions: $7,000 plus $1,000 catch-up 
• HSA maximization: $4,300 individual or $8,550 family coverage, plus $1,000 catch-up contribution  

Those catch-up contributions are a real game-changer for 55-year-old retirees. That additional $8,500 in annual tax-advantaged savings can meaningfully accelerate your timeline, especially when you consider you’ve had five years to take advantage of these higher limits. Every dollar you’ve been able to save above the standard limits has been working for you. 

Rule of 55 advantage 

Here’s where retiring at 55 offers a unique advantage that younger retirees simply don’t have: the Rule of 55 allows penalty-free 401(k) withdrawals from your current employer if you retire at 55 or later. This eliminates that costly 10% early withdrawal penalty that affects younger retirees, giving you access to your retirement income sooner.  

There’s an important caveat, though—this rule only applies to your current employer’s plan, not previous employers’ 401(k)s or IRAs. If you’re seriously considering retirement, planning your departure timing around this rule could save you substantial penalty costs during your early retirement years. 

Deferred compensation timing 

If you’re a high earner, you might have deferred compensation that becomes accessible around retirement age. These plans often provide guaranteed returns while shifting income to potentially lower tax brackets in retirement, which can work in your favor. 

You’ll want to review your payout options carefully. Lump sum distributions might push you into higher tax brackets, while annuity payments provide steady income but less flexibility. It’s worth taking the time to understand your options. 

Pension considerations 

If you’re fortunate enough to have a traditional pension, it can significantly impact your retirement calculations. Some pensions offer early retirement options with reduced benefits, while others require waiting until full retirement age. 

Here’s something worth doing: calculate your pension’s present value to understand its impact on your required portfolio size. A pension providing $30,000 annually could reduce what you need from your investment portfolio by approximately $750,000-850,000 using conservative withdrawal rates. That’s a substantial difference that could change your retirement timeline. 

Annuity evaluation 

Fixed annuities can provide guaranteed income to bridge the gap until Social Security eligibility. However, current interest rate environments and inflation protection features deserve careful evaluation. 

Annuities often make the most sense for retirees who prioritize guaranteed income over portfolio flexibility. Think of them as part of a diversified approach rather than your primary retirement strategy—they’re one tool in your toolkit, not the whole solution. 

Bridge the gap to traditional retirement benefits 

When you retire at 55, you’re creating a seven-year gap before you can access Social Security and a 10-year wait for Medicare. It sounds like a long time, but it’s much more manageable than the gaps faced by people retiring in their 40s.  

Your bridge strategy needs to address both income and healthcare needs during this transition period. 

Social Security timing considerations 

Here’s where things get interesting from a planning perspective. You can start claiming Social Security as early as 62, but there’s a trade-off—your benefits will be permanently reduced by about 25-30% compared to waiting until your full retirement age. 

This decision becomes one of those complex financial puzzles where you’re weighing immediate cash flow needs against lifetime benefit optimization. If you’ve built substantial portfolios, you might choose to delay Social Security to maximize those benefits.  

On the other hand, if preserving your portfolio assets is a priority, claiming early might make sense even with the reduced benefits. 

Healthcare coverage planning 

Let’s talk about healthcare—it’s likely going to be one of your largest retirement expenses during that 10-year gap before Medicare kicks in.  

If you’re eligible, you can extend your current employer healthcare coverage via COBRA for up to 18 months, but you’ll be fronting the entire bill, which could be costly. You can also look into private insurance via the ACA marketplace. While you search for plans, bear in mind any specialists, medications, and in-network providers so you can find a plan that works for your health needs.  

Something that catches many people off guard is that premium costs can vary dramatically depending on where you live and your income level. If you’re an early retiree with substantial portfolios, you may not qualify for premium subsidies, which means healthcare coverage could become quite a big monthly expense. 

Income strategies 

The good news is you have several options for generating income during these bridge years, and you can mix and match based on what works best for your situation. 

• Taxable investment accounts become really valuable here because they provide penalty-free income access and offer flexibility in managing your tax liability year by year. You’re not locked into any specific withdrawal schedule and realized gains are taxed at capital gains rates as long as you hold the asset for at least one year.  
• Real estate investments can be particularly appealing at this stage. Whether it’s rental properties generating ongoing income or REITs that give you similar exposure without the headaches of direct property management, real estate can provide both cash flow and tax advantages through depreciation deductions. 
• Roth conversion opportunities become especially valuable during these “lower-income” early retirement years. Since you’re likely earning less than during your peak working years, converting traditional retirement account assets to Roth accounts can optimize your lifetime tax situation. Bear in mind that conversions in your early 60s can impact the cost of Medicare, so ensure your team reviews the pros and cons with you.  
• Part-time work or consulting often provides both income and a sense of purpose that many retirees find they miss. Your established professional network opens doors to flexible arrangements that simply weren’t available earlier in your career—maybe that’s consulting in your field, teaching, or pursuing something you’ve always been passionate about. 

As you’re in this time of lower tax years, it’s also a great opportunity to start planning for larger distributions and events in retirement like RMDs, Medicare, and Social Security.  

Create your customized retirement plan 

Retiring at 55 is an exciting prospect.  

And the truth is, there are a lot of moving pieces to coordinate—planning for Social Security claiming strategies, navigating healthcare coverage gaps, and managing multiple income sources.  

It can feel overwhelming to juggle all these decisions on your own, which is why many people find it helpful to work with professionals who understand not just the technical requirements but also the personal side of what makes retirement fulfilling. 

Everyone’s version of retirement looks different, and your plan should reflect what matters most to you. 

If you’re ready to explore what retirement at 55 could look like for your specific situation, contact BPM’s wealth management team to develop strategies tailored to your timeline, goals, and the retirement lifestyle you’re envisioning. 

This material is for informational purposes only and is not intended to provide specific advice or recommendations for any individual. This information is not intended for use as tax advice. 

The examples given are hypothetical and are for illustrative purposes only. Actual results may vary from those illustrated. Guarantees are based on the claims-paying ability of the issuing company.  

Securities offered through Valmark Securities, Inc. Member FINRA, SIPC | Investment Advisory services offered through BPM Wealth Advisors, LLC and/or Valmark Advisers, Inc. each an SEC Registered Investment Advisor | BPM LLP and BPM Wealth Advisors, LLC are entities separate from Valmark Securities, Inc. and Valmark Advisers, Inc.  

Your prospects are asking about your security practices. You know you need compliance, but which framework should you pursue first? 

SOC 2 and ISO 27001 are two of the most recognized security frameworks in the world. Both demonstrate your commitment to protecting customer data. Both require significant investment. And both can open doors to new business opportunities. 

But they’re not identical, and choosing the wrong one could mean missing out on key prospects or wasting valuable resources. This article breaks down the core differences of SOC 2 vs ISO 27001, helps you understand which standard aligns with your business goals, and shows you how to make the right choice for your organization. 

What Is SOC 2? 

SOC 2 is a security framework developed by the American Institute of Certified Public Accountants (AICPA). It focuses on how you protect customer data from unauthorized access, security incidents, and vulnerabilities.  

When you complete a SOC 2 audit, you receive a report that demonstrates your controls are working effectively over a defined period of time. This report shows prospects and customers that you take data security seriously all the time, not just when you are being audited. 

SOC 2 is the standard framework for service organizations in North America. If you’re selling to US-based companies, they’ll likely request your SOC 2 report during their vendor evaluation process. 

“SOC 2 provides assurance that your data protection isn’t just policy, it’s practice. That credibility is what gives it it’s strength in the North American market.” – Lauren Bradner – Director, IT Security Compliance Operations 

What Is ISO 27001?  

ISO 27001 is an international standard created by the International Organization for Standardization. It outlines requirements for building and maintaining an Information Security Management System (ISMS). 

Unlike SOC 2, ISO 27001 results in a formal certification. This certificate proves you’ve established a comprehensive system for managing information security risks. 

ISO 27001 carries strong recognition worldwide, particularly in Europe and Asia. International prospects often require this certification before they’ll consider doing business with you. 

“ISO 27001 represents global trust. One certification speaks to regulators and clients worldwide, and reflects a mature, risk-based approach to protecting data.” – Lauren Bradner 

How SOC 2 and ISO 27001 are Similar 

These frameworks share more similarities than differences. Both require independent third-party audits. Both focus on core security principles like confidentiality, integrity, and availability. Both demand substantial time and financial investment. 

The AICPA’s mapping analysis shows approximately 80% overlap between the two frameworks. They share nearly all the same controls, with only about 4% variation. This overlap means the work you do for one framework often applies to the other. 

Both frameworks also require you to document your security practices, train your team, and continuously monitor your controls. You’ll need to demonstrate strong risk management and maintain detailed evidence of your security efforts. 

SOC 2 vs ISO 27001: Key Differences 

Geographic Recognition 

Your target market should drive your decision. SOC 2 dominates in North America, where it’s become the expected standard for service providers. ISO 27001 holds more weight internationally. 

That said, many US companies accept ISO 27001, and international organizations may accept SOC 2. The deciding factor is what your specific customers require. 

Framework Flexibility 

SOC 2 gives you more flexibility. You choose which of the five Trust Services Criteria to include in your audit. Only Security is mandatory. You can add Availability, Confidentiality, Privacy, and Processing Integrity based on what your services require. 

ISO 27001 takes a more prescriptive approach. It requires 93 specific controls known as Annex A controls. If you exclude any controls, you must document and be able to justify why they don’t apply to your organization. 

Scope and Documentation 

SOC 2 audits typically have a narrower scope. You’ll need a management assertion, system description, and control matrix. Additional documentation depends on which Trust Services Criteria you select. 

ISO 27001 requires more comprehensive documentation. You’ll create an information security policy, risk assessment, risk treatment plan, formal internal audit process, and Statement of Applicability. You also need a plan for continuous improvement of your ISMS. 

Report Type 

ISO 27001 provides a certificate that confirms your compliance. It’s a binary result:you’re either certified or you’re not. 

SOC 2 produces an attestation report that details the auditor’s opinion on your controls. This report provides more granular information about which aspects of your security program passed evaluation. 

Renewal Requirements 

Both assessment types require annual third-party audits. SOC 2 Type II reports need full annual renewal to stay current. ISO 27001 certificates last three years, but still require annual surveillance audits (50% control testing) to verify ongoing compliance. After three years, you’ll complete a full recertification audit. 

Learn more about our ISO Certification Preparation Services

Which Security Framework Should You Choose? 

Start by asking yourself these questions: 

• Where are your customers located? US companies typically require SOC 2, while international clients expect ISO 27001. 
• What are your customers explicitly requesting? Listen to what prospects ask for during their due diligence process. 
• What’s standard in your industry? SaaS companies often need SOC 2, while global enterprises expect ISO 27001. 
• Where do you plan to expand? If you’re targeting international markets, ISO 27001 may be more valuable long-term. 
• How mature is your security program? SOC 2 can be a good starting point, while ISO 27001 typically requires more operational maturity. 
• Do you prefer flexibility or structure? SOC 2 adapts to your specific services, while ISO 27001 provides detailed requirements. 

Many organizations eventually pursue both frameworks. The overlap between them means your work on one framework accelerates progress on the other. Having both certifications demonstrates a robust security program and builds trust with customers worldwide. 

Get Compliant with BPM  

Choosing between SOC 2 and ISO 27001 depends on your customers, your market, and your business goals. But you don’t have to make this journey alone. 

BPM guides organizations through both SOC 2 and ISO 27001 compliance processes. We help you understand which framework fits your business, prepare for your audit, and maintain compliance over time. Our team works alongside yours to build security programs that not only meet compliance requirements but also strengthen your overall security posture. To discuss which framework is right for your business, contact us. 

The conversation around San Francisco commercial real estate has shifted. After years of headlines focused on vacancy rates and remote work challenges, something fundamental is changing in the Bay Area market—and the implications for property owners, investors, and developers are significant. 

At our recent 2025 Year-End Real Estate Forum – led by BPM’s Real Estate Leader, Mark Leverette – we gathered some of the most influential voices shaping San Francisco’s real estate landscape: brokers navigating deal flow, attorneys structuring transactions, developers planning new projects, and financial leaders managing complex portfolios. The consensus was clear – San Francisco is experiencing a tangible resurgence, driven by economic stabilization, political leadership, and the transformative impact of artificial intelligence on the region’s commercial landscape. 

If you’re making decisions about Bay Area real estate investments, lease commitments, or portfolio strategy, understanding these dynamics is essential to positioning your assets for the opportunities ahead. 

The K-Shaped Recovery and What It Means for Commercial Property 

Chief Economist Paul Single from City National Bank opened the forum with an unflinching look at the current economic environment. His central theme? We’re in the midst of a K-shaped recovery—where different sectors and asset classes are experiencing dramatically different trajectories. 

For commercial real estate, this creates both challenges and opportunities: 

• Top performers: Properties tied to growth sectors like technology and AI are seeing renewed demand and stabilizing valuations 
• Lagging assets: Traditional office spaces not aligned with modern workplace needs continue facing pressure 
• The divide matters: Your property’s position in this recovery depends heavily on tenant mix, location, and adaptability to new market demands 

This divergence means blanket strategies no longer work. Your approach to one property in your portfolio may need to differ significantly from another, even within the same market.  Adding that rock climbing wall, or upgrading the roof to a garden retreat, may be just the answer in some cases.  

Federal Reserve Policy: One Vote Isn’t Everything 

Single offered a particularly valuable reminder for anyone making long-term real estate investment decisions: “Eyes on the Fed Chair… but remember, they’re only one vote.” 

While Federal Reserve policy on inflation and interest rates remains influential, the commercial real estate market is increasingly driven by local fundamentals—employment trends, sector growth, and regional competitive advantages. For San Francisco specifically, these local drivers are proving more powerful than national monetary policy in shaping market direction. 

The takeaway? Don’t let macro uncertainty paralyze your local market strategy. The Bay Area has unique catalysts driving demand that transcend broader economic headwinds. 

Forces Behind San Francisco’s Commercial Real Estate Momentum 

Leadership Stability Creates Investment Confidence 

Political stability matters to commercial real estate markets. The election of Mayor Daniel Lurie has brought renewed focus and consistent leadership to San Francisco’s economic development agenda. For property owners and investors, this translates to: 

• More predictable regulatory environments for development and repositioning projects 
• Coordinated efforts to address street-level conditions that impact property values 
• Strategic initiatives supporting business retention and attraction 

When investors feel confident about a city’s direction, capital follows. We’re seeing this play out in deal flow, tenant expansion discussions, and developer interest in projects that were shelved during more uncertain times. 

The AI Sector: San Francisco’s Commercial Real Estate Catalyst 

Perhaps no single factor is reshaping the Bay Area commercial real estate landscape more dramatically than artificial intelligence. The region’s position as the global epicenter of AI development is creating ripple effects across property markets: 

Office demand is evolving: AI companies need different spaces than traditional tech tenants—more collaborative environments, specialized infrastructure for computing needs, and proximity to the innovation ecosystem 

Competition for prime locations: As AI firms expand rapidly, they’re driving renewed interest in Class A office space in key corridors, particularly in South of Market and parts of downtown San Francisco 

Supporting ecosystem growth: The AI boom is attracting talent, which drives residential demand, which supports retail and hospitality—creating a virtuous cycle for mixed-use developments 

If your portfolio includes Bay Area commercial properties, understanding how AI growth affects your specific assets should be part of your strategic planning conversations. 

The Office Market’s Tangible Resurgence 

The forum participants—people actively working deals and tracking leasing activity—reported something that doesn’t always show up in quarterly statistics: genuine momentum in San Francisco’s office market. 

This doesn’t mean the market has returned to 2019 dynamics. Rather, we’re seeing: 

• Tenant tours increasing for well-positioned, amenitized properties 
• Companies making decisions they’d been delaying, particularly those in growth sectors 
• A flight to quality, where premium spaces are outperforming significantly 
• Renewed interest in flexible lease structures that give tenants growth options 

For property owners, this creates a clear strategic imperative: Assets need to be positioned for the market that’s emerging, not the one we left behind. 

Strategic Considerations for Your Commercial Real Estate Portfolio 

What Market Optimism Means for Your Investment Decisions 

The San Francisco market’s recovery isn’t uniform, and your strategy shouldn’t be either. Consider these actionable perspectives: 

• If you’re an office landlord: The properties attracting interest share common characteristics—modern systems, amenity-rich environments, strong building management, and locations connected to where talent wants to be. Investing in repositioning or amenity upgrades may unlock significantly more value than waiting for market conditions to improve on their own. 
• If you’re evaluating acquisitions: The K-shaped recovery creates opportunities to acquire assets that can be repositioned for growth sectors. Properties that seem challenged in traditional office uses might be perfectly suited for AI companies, life sciences tenants, or mixed-use conversion. 
• If you’re planning development: The combination of political stability, sector growth, and returning market confidence creates a more favorable environment for breaking ground on projects—but success will depend on reading the specific tenant demand signals correctly. 
• If you’re managing a portfolio: Tax strategy becomes even more important in a recovering market. Understanding how to structure asset sales, leverage 1031 exchanges, or optimize holding structures can significantly impact your after-tax returns as property values stabilize and potentially appreciate. 

The Community Factor: Why Energy and Collaboration Matter 

One of the most interesting observations from our forum wasn’t about cap rates or leasing velocity—it was about something less quantifiable but equally important: energy. 

Multiple participants noted that collaboration and optimism are returning to the San Francisco real estate community. Brokers are more active. Developers are having productive conversations with lenders. Property owners are engaging in strategic planning rather than crisis management. 

This matters because commercial real estate is ultimately a relationship-driven business. When the ecosystem is functioning well—when information flows freely, when partnerships form naturally, when there’s collective belief in the market’s direction—deals happen, challenges get solved, and opportunities get realized. 

Positioning for What’s Next 

San Francisco’s commercial real estate market is evolving into something different from what came before. The forces driving this transformation (AI sector growth, political stability, and renewed economic fundamentals) are creating opportunities for property owners and investors. 

As we move through 2025, the Bay Area commercial real estate market will continue to reward those who position their assets thoughtfully, understand sector-specific demand drivers, and structure their holdings for both tax efficiency and operational excellence. 

Ready to discuss how these San Francisco market trends affect your commercial real estate strategy? BPM’s real estate advisory team works with property owners, investors, and developers to navigate complex market transitions, optimize portfolio performance, and structure transactions that align with your long-term objectives. Contact us to start a conversation about your Bay Area commercial real estate holdings. 

Stepping away from your career and retiring at 50 is an exciting goal.  

At 50, you’re in a particularly interesting position, personally, professionally, and financially. You’ve likely accumulated substantial career experience and earning power, plus you now have access to catch-up contributions that weren’t available in your 40s.  

While the average retirement age in America is 62, retiring 12 years earlier is possible with the right approach. 

The question isn’t whether early retirement is possible—it’s how you can build sufficient wealth to maintain the lifestyle you want while navigating the years before traditional retirement benefits kick in. 

How much do you need in your portfolio to retire at 50?  

When you’re planning to retire at 50, you’ll want to analyze all your goals and spending habits holistically to give yourself a better sense of what you’ll need to maintain your lifestyle. 

In terms of your portfolio needs, most people find it helpful to plan with more conservative withdrawal rates (less than 4%) since your portfolio potentially needs to last decades longer than traditional retirement planning assumes. This longer timeline may work in your favor in some ways, but it does require a different approach to the numbers. 

As you start to look at the numbers, you’ll get a better sense of what this could look like for you.  

The following table assumes a 3.5% annual withdrawal rate for a 40+ year retirement: 

Annual Expenses	Portfolio Needed (No Bridge Income)	Portfolio with $100K Bridge Income
$100,000	$2.5 million	$1.0 million
$150,000	$3.8 million	$2.5 million
$200,000	$5.0 million	$3.8 million
$300,000	$7.5 million	$6.3 million

As you can see, bridge income—supplementary income that comes from outside your investment portfolio—can make a significant difference in your requirements.  

For example, if you bring in $100,000 annually through part-time consulting, rental properties, or other sources, you can reduce the size of your portfolio by a couple of million dollars compared to complete financial independence. That’s a substantial reduction that can make early retirement much more achievable. 

Alternative ways to find your ideal retirement number 

There’s not one right way to find your magic retirement number—it’s completely custom to your lifestyle and circumstances.  

If reverse engineering through a planned withdrawal rate feels too ambiguous, you could also consider the income replacement approach. This “rule” suggests maintaining 80-90% of your pre-retirement income. If you’re currently earning $200,000 annually, you might need $160,000-180,000 in retirement income, which would require roughly $4.5-5.1 million using conservative withdrawal rates. 

You may have also heard of the salary multiple method, which recommends saving six times your annual salary by age 50. While this traditional guideline works for conventional retirement, it often falls short for early retirement scenarios. Carrying this rule out, someone earning $150,000 would target $900,000 by 50—which might be insufficient for early retirement without substantial bridge income or lifestyle adjustments. 

Here’s something encouraging: retiring at 50 versus 40 can offer some distinct advantages. Those ten additional earning years provide more time for portfolio growth and contributions. These factors can reduce the aggressive savings rates required for earlier retirement ages. 

Tips to help you reach your retirement number 

Retiring at 50 requires intentional spending and systematic wealth building, but it doesn’t mean you have to change your lifestyle. It’s about being strategic with where your money goes and optimizing your financial plan. 

Here are some ways to start doing that.  

Take an honest look at your spending patterns (and future spending needs) 

Do you really know how much money you spend every month?  

Even the most finance-savvy people can gloss over regular spending habits, but when prepping for an early retirement, pulling out the microscope will be worthwhile.  

One way to get a true sense of your spending is to track your expenses for a few months. This way, you have the data to identify spending patterns and potential optimization opportunities.  

For example, many high earners discover that subscriptions or impulse purchases consume thousands annually without adding much to their quality of life. 

Pay particular attention to fixed expenses that will likely persist in retirement. Housing costs, insurance premiums, and recurring services often represent your largest controllable expenses.  

Debt obligations also deserve special attention—carrying mortgage or credit card debt into retirement can substantially increase your required portfolio size. 

It’s worth considering how retirement might change your spending patterns. Healthcare costs typically increase as employer-sponsored insurance ends. Housing expenses might decrease if you downsize or relocate. Transportation costs often drop significantly without daily commuting. These changes can work in your favor if you plan for them thoughtfully. 

Maximize your tax-advantaged accounts 

Every dollar you invest now will go toward your future. But it’s not just about investing; it’s ensuring you’re investing in tax-efficient accounts that will help you reach your goals.  

A good place to start is your foundation contributions to your retirement accounts: 

• 401(k): $23,500 in 2025, plus $7,500 catch-up if you’re 50+ 
• IRA: $7,000 plus $1,000 catch-up contribution 
• HSA: $4,300 individual or $8,550 family coverage with an extra $1,000 in catch-up contributions.  

Those catch-up contributions provide a crucial advantage for 50-year-old early retirees. The additional $7,500 in 401(k) contributions and $1,000 in IRA contributions can meaningfully accelerate your timeline—that’s an extra $8,500 annually in tax-advantaged savings. 

Advanced strategies might include mega backdoor Roth conversions if your employer plan allows after-tax contributions. Roth conversion ladders can also provide tax-free income during early retirement years before Social Security eligibility. 

Optimize your investment approach 

As we discussed earlier, it’s not enough to just invest; you need to have a strategy tied to those investments.  

Asset allocation becomes particularly important as you approach retirement age. You need growth to build wealth, but you also need some stability to weather market downturns during your early retirement years. Many people consider what’s called a declining equity glide path: higher stock allocations during your wealth-building phase, gradually shifting toward more conservative investments as retirement approaches. 

Tax efficiency becomes increasingly important as your portfolio grows (known as asset location). This involves placing tax-inefficient investments in retirement accounts while keeping tax-efficient index funds and municipal bonds in taxable accounts (like brokerage accounts). It’s all about balancing (and optimizing for) the different tax treatments of your investments, i.e., which are subject to ordinary income tax versus capital gains tax.  

Many early retirees also add real estate to their portfolio as it can provide strong cash flow and tax advantages, with an added bonus of additional portfolio diversification. If you own a rental property, for example, you can generate ongoing income while offering depreciation deductions. If direct property ownership doesn’t appeal to you, Real Estate Investment Trusts (REITs) provide similar exposure without property management responsibilities. 

Think strategically about debt elimination 

Debt isn’t always a bad thing. In fact, leveraging debt strategically can help you reach certain objectives.  

But carrying the wrong debt with you into retirement can take away from other financial avenues you may want to pursue.  

It all depends on the type of debt you have, interest rates, other income sources, and overall spending habits—all of which are extremely personal.  

A great example of this is paying off a mortgage before you retire at 50.  

On the one hand, entering retirement without a housing payment provides valuable cash flow flexibility and can reduce your required portfolio withdrawals.  

However, paying off low-rate mortgages might not optimize your overall wealth if investment returns exceed your borrowing costs. This is one of those decisions where your personal comfort level with debt plays a significant role. 

Consider geographic arbitrage opportunities 

One benefit of retirement is that you likely aren’t bound to one location due to your career. This makes relocation, especially relocation to lower cost-of-living areas, more feasible.  

The difference between retiring in San Francisco versus Austin, or Manhattan versus Nashville, can represent hundreds of thousands in required savings. Geographic arbitrage isn’t just about lower costs and potential tax savings—it’s about accessing different lifestyle opportunities during your retirement years. Maybe you want to live near the beach, in the mountains, or in a vibrant smaller city with great cultural amenities. 

In general, moving from high-cost areas to regions with lower living expenses can reduce your required portfolio size. You’ll, of course, want to factor in family, friends, healthcare, and lifestyle routine considerations into any move.  

Plan for your health 

If you want to retire early at 50, that leaves 12 years before you’d be eligible for Social Security and an even longer 15-year wait for Medicare.  

It’s important to create an income plan that accounts for these gaps, notably in your health. 

One option is COBRA. This law lets you continue with your existing healthcare coverage for up to 18 months after a “qualifying event,” which in this case would be retirement. While your coverage will be seamless, COBRA typically costs quite a bit more than employee premiums. 

After COBRA expires, the private insurance via the ACA marketplace plans become your primary option for securing healthcare. When you get to this point, shop around as premium costs can take big swings depending on your location and income level. Plus, early retirees with substantial portfolios may not qualify for premium subsidies, making healthcare a large retirement expense to prepare for. 

This is where Health Savings Accounts (HSAs) become really valuable. The triple tax advantages—deductible contributions, tax-free growth, and tax-free qualified withdrawals—make HSAs powerful retirement funding vehicles that can extend well beyond their healthcare purpose. 

Create your personalized retirement plan 

How much money you need to retire at 50 depends on your lifestyle, spending goals, debts, health, and investment philosophy.  

There’s no one formula that will tell you when you’ve reached your magic retirement number—building a retirement income plan is all about creating a customized approach that aligns with your values and the retirement lifestyle you actually want. 

If you’re ready to explore what retiring at 50 could look like for your specific circumstances, contact BPM’s wealth management team to develop comprehensive strategies tailored to your income, spending patterns, and retirement lifestyle goals. 

This material is for informational purposes only and is not intended to provide specific advice or recommendations for any individual. This information is not intended for use as tax advice. 
The examples given are hypothetical and are for illustrative purposes only. Actual results may vary from those illustrated.  

Securities offered through Valmark Securities, Inc. Member FINRA, SIPC | Investment Advisory services offered through BPM Wealth Advisors, LLC and/or Valmark Advisers, Inc. each an SEC Registered Investment Advisor | BPM LLP and BPM Wealth Advisors, LLC are entities separate from Valmark Securities, Inc. and Valmark Advisers, Inc.  

Investor confidence doesn’t happen by accident or luck. It’s built through consistent demonstration of transparency, accountability, and robust internal controls. One of the most powerful tools your organization can leverage to foster this confidence is third-party attestation services. 

These independent validations serve as a bridge between your company’s internal assertions and external stakeholder trust, providing the objective assurance that investors, lenders, and business partners increasingly demand. 

The foundation of trust in modern business 

Your stakeholders are operating in an environment where trust is both precious and fragile. High-profile corporate failures and financial scandals have made investors more cautious about where they place their confidence—and their capital. This heightened scrutiny isn’t just reserved for public companies; private enterprises seeking investment, loans, or strategic partnerships face similar expectations for transparency and accountability. 

Third-party attestations address this trust gap by providing independent verification that your organization has established mature internal controls and operates with the transparency stakeholders expect. Rather than relying solely on management’s representations, these services offer objective validation from qualified professionals who have no vested interest in your company’s outcomes. 

Understanding the attestation landscape 

The most familiar form of third-party attestation is the financial statement audit. Financial audits provide a third-party opinion on financial statement accuracy and integrity, offering invaluable insight to help you make the right decisions for impactful change and support company growth. 

Beyond financial statement audits, reviews and compilations offer different levels of assurance depending on your needs: 

• Reviews offer limited assurance through analytical procedures and inquiries, suitable when full audit rigor isn’t necessary

• Compilations present financial information in proper format without providing assurance, often appropriate for smaller businesses

System and Organization Controls (SOC) reporting 

SOC reports instill trust and assurance to customers, investors, and stakeholders that companies have effective controls and processes in place to protect their data and comply with regulatory requirements. These reports have become increasingly valuable as businesses rely more heavily on technology and outsourced services and mandate these type of reports as part of their new vendor or partnership due diligence process.  

SOC 1 reports focus on internal controls relevant to financial reporting, particularly valuable when your organization provides services that impact your clients’ financial statements. By providing a SOC 1 report, companies can effectively communicate information about their risk management and controls framework to multiple stakeholders. 

SOC 2 reports address controls related to security, availability, processing integrity, confidentiality, and privacy—critical areas for any organization handling sensitive data or providing technology services. 

Specialized attestation services 

Beyond traditional financial and operational attestations, specialized services address specific industry needs: 

• Compliance attestations verify adherence to regulatory requirements specific to your industry  
• Cybersecurity attestations validate your information security controls and risk management practices through penetration testing services required by certain laws like HIPAA and GLBA 
• Sustainability reporting assurance provides credibility to environmental and social responsibility disclosures

Learn more about our Blockchain and Digital Assets Consulting Services

How third-party attestations drive investor confidence 

Objective validation of management assertions 

Your management team naturally believes in your company’s controls and processes, but external stakeholders need independent confirmation. Attestation impacts stakeholder trust by providing an independent review of financial reports, building confidence among investors, creditors, and other stakeholders who rely on credible financial data for decision-making. 

This objective validation becomes particularly valuable during critical business moments like fundraising, mergers and acquisitions, or loan applications. Potential investors and lenders can rely on third-party verification rather than solely trusting internal representations. 

Proactive risk identification and management 

Attestation services don’t just verify current controls—they help identify potential weaknesses before they become problems. SOC reports can help organizations lower inherent risks by identifying and addressing potential weaknesses in their systems and proactively identify efficiency issues and duplicate controls. 

This proactive approach demonstrates to stakeholders that your organization takes risk management seriously and continuously works to strengthen its operational foundation. 

Enhanced transparency and communication 

Third-party attestations provide a standardized way to communicate complex information about your controls and processes. Rather than each stakeholder conducting their own evaluation, you can provide comprehensive, professional reports that address common concerns and questions. 

This transparency is critical to advancing your competitive advantage when reliance on outsourced parties grows, helping to deliver comfort and assurance to customers, shareholders, suppliers, regulators, and other stakeholders. 

Strategic benefits beyond compliance 

Competitive differentiation 

In competitive markets, third-party attestations can set your organization apart. They signal to potential customers, partners, and investors that you operate at a higher standard of transparency and control maturity. This differentiation becomes particularly valuable in industries where trust and reliability are key competitive factors. 

Operational improvements 

The attestation process itself often reveals opportunities for operational enhancement. These reports help in identifying potential weaknesses in the organization’s controls and processes and enable management to make decisions regarding risk mitigation. 

Many organizations find that preparing for attestation engagements leads to stronger internal processes, better documentation, and more consistent control execution—benefits that extend far beyond the attestation itself. 

Stakeholder efficiency 

Rather than responding to multiple individual requests for information about your controls and processes, comprehensive attestation reports allow you to address stakeholder inquiries efficiently. These processes offer a cohesive, repeatable approach so you can assess once and then report out to many stakeholders. 

Choosing the right attestation approach 

Assess your stakeholder needs 

Start by understanding what your key stakeholders need. Different types of investors, lenders, and business partners may have varying expectations for the level and type of assurance they require. 

Consider these questions:  

• What specific concerns do your stakeholders have about your organization?  
• Are there industry-specific requirements or expectations you need to meet?  
• How do your competitors approach third-party validation?

Align with your business strategy 

Your attestation strategy should support your broader business objectives. If you’re planning to raise capital, certain types of attestations may be expected or required. If you’re expanding into new markets or launching new services, attestations can help establish credibility with new stakeholders. 

Consider timing and resources 

Attestation engagements require investment in both time and resources. However, the most successful organizations view this as an investment in stakeholder confidence rather than simply a compliance cost. Plan attestation timing to align with your business calendar and key stakeholder communications. 

Building a culture of transparency 

Internal preparation and buy-in 

Successful attestation engagements start with strong internal preparation. Your team needs to understand not just what controls exist, but why they matter and how they support broader business objectives. This understanding helps create a culture where transparency and accountability are valued, not just mandated. 

Ongoing commitment 

Third-party attestations are most effective when they represent ongoing commitment to transparency rather than one-time exercises. Regular attestations demonstrate consistent attention to control effectiveness and continuous improvement. 

Communication strategy 

Don’t let your attestation efforts go unnoticed. Develop a communication strategy that highlights your commitment to transparency and the specific steps you’ve taken to validate your controls and processes. This communication should be tailored to different stakeholder groups and integrated into your broader business development and investor relations activities. 

The long-term value proposition 

Investing in third-party attestations creates compound benefits over time. As your organization builds a track record of successful attestations, stakeholder confidence grows, potentially leading to: 

• Better terms on financing arrangements  
• Faster due diligence processes in transactions  
• Enhanced reputation in your industry  
• Competitive advantages in new business opportunities  
• Reduced insurance premiums and risk-related costs

These reports offer potential buyers assurance that your organization has established mature internal controls, serving as a valuable tool for evaluating company health and independently validating the adequacy of your control environment. 

Moving forward with confidence 

Third-party attestations represent more than compliance requirements or stakeholder expectations—they’re strategic tools for building the kind of transparency and accountability that drives long-term business success. In an increasingly complex business environment, organizations that proactively demonstrate their commitment to robust controls and transparent operations will have distinct advantages in attracting investment, securing partnerships, and achieving sustainable growth. 

The key is approaching attestations not as burdens to be minimized, but as opportunities to showcase your organization’s commitment to operational excellence and stakeholder service. When done thoughtfully and strategically, third-party attestations become powerful assets in building and maintaining the investor confidence that fuels business success. 

Ready to strengthen stakeholder confidence through strategic third-party attestations? BPM’s experienced assurance team can help you develop and implement an attestation strategy that supports your business objectives while demonstrating your commitment to transparency and accountability. Contact us today to discuss how our services can help build the investor confidence that drives your organization’s growth and success. 

High earners face a tax optimization puzzle that most IRA guidance ignores. Generic advice assumes everyone falls into the same tax brackets and has identical retirement goals, but when you’re managing a significant retirement portfolio, the stakes are different.  

Your income likely puts you in phase-out ranges that complicate contribution strategies, and your retirement lifestyle expectations demand sophisticated tax planning that goes far beyond basic traditional IRA vs Roth IRA “pay now or pay later” comparisons.

Our analysis cuts through the generic advice to provide the nuanced perspective that ambitious, high-earning professionals need to maximize their retirement savings efficiency. 

What is a traditional IRA? 

A traditional IRA offers immediate tax advantages by allowing you to deduct contributions from your current taxable income, reducing this year’s tax bill while your investments grow tax-deferred until withdrawal.  

For high earners, however, the deduction isn’t automatic—it depends on your income level and whether you participate in an employer-sponsored retirement plan. 

For 2025, you can contribute up to $7,000 to a traditional IRA, with an additional $1,000 catch-up contribution if you’re 50 or older, bringing your total potential contribution to $8,000. These limits represent a modest increase from previous years and remain consistent across both traditional and Roth IRAs. 

The deduction phase-out creates a critical planning consideration for high earners. If you’re covered by a workplace retirement plan and are married and file jointly, your traditional IRA deduction begins phasing out at $123,000 in modified adjusted gross income and disappears completely at $143,000. For single filers, the phase-out range runs from $77,000 to $87,000.  

Here’s how this impacts your planning: 

• Full deduction available: Your entire $7,000 contribution (or $8,000 with catch-up) reduces your taxable income dollar-for-dollar 
• Partial deduction phase-out: You receive a reduced deduction based on a complex IRS calculation 
• No deduction available: You can still contribute to a traditional IRA, but receive zero current tax benefit 

This phase-out structure means many high earners lose the primary advantage of traditional IRAs—the immediate tax deduction—making the contribution decision far more complex than standard guidance suggests. The 2025 IRS contribution limits provide the complete details on these thresholds and calculations. 

What is a Roth IRA? 

A Roth IRA operates on the opposite tax principle from traditional IRAs: you contribute after-tax dollars now in exchange for completely tax-free withdrawals in retirement. This means no immediate tax deduction, but your investments grow tax-free and you’ll never owe taxes on qualified withdrawals after age 59½. 

The 2025 contribution limits mirror traditional IRAs—$7,000 for most contributors, with an additional $1,000 catch-up contribution for those 50 and older. However, Roth IRAs use income phase-outs that are significantly more generous for high earners than traditional IRA deduction limits. 

For married couples filing jointly, Roth IRA contribution eligibility begins phasing out at $230,000 in modified adjusted gross income and disappears entirely at $240,000. Single filers face phase-out between $146,000 and $153,000. This creates distinct planning opportunities compared to traditional IRAs: 

• Full contribution available: You can contribute the complete $7,000 (or $8,000 with catch-up) to your Roth IRA 
• Partial contribution phase-out: Your contribution limit reduces gradually based on your income level 
• No direct contribution allowed: You exceed income thresholds but may still access Roth benefits through backdoor conversion strategies 

The higher income thresholds mean that many high earners who lose traditional IRA deduction benefits can still contribute directly to Roth IRAs, making this option often more accessible for sophisticated retirement planning. 

Learn more about our Wealth Management Solutions

Traditional IRA vs Roth IRA: Which should high-earners invest in? 

The choice between traditional and Roth IRAs becomes particularly nuanced for high earners.  

Compare present vs future tax brackets 

Your decision hinges on comparing current tax brackets against projected retirement brackets, but the calculation extends beyond simple rate comparisons. 

Current income tax brackets favor traditional IRA deductions for many high earners, particularly those in the 32% or 35% brackets who expect lower retirement tax rates. If you’re earning enough to place you in these brackets today but plan to withdraw conservatively in retirement, the immediate tax savings from traditional IRA deductions may compound over decades. 

However, Roth IRAs offer compelling advantages for high earners who expect to maintain substantial income streams in retirement or face higher future tax rates.  Tax-free growth may become particularly valuable when managing large portfolios, as it eliminates required minimum distributions (while the account owner is alive) and provides maximum estate planning flexibility. 

Guidelines for making the choice: A practical framework for high earners 

Keep in mind that everyone’s goals and financial situation are different. Before committing to any investment strategy, consider speaking with a qualified financial advisor or wealth management professional.  

That said, this chart could be a good starting point for you to begin to consider whether a traditional IRA vs Roth IRA is better for you.  

Consider traditional IRAs when you: 

• Currently pay 32% or 35% marginal tax rates and expect to be in the 22% or 24% brackets during retirement 
• Can deduct contributions (income below phase-out thresholds) 
• Plan to relocate to a lower-tax state in retirement 
• Need current-year tax deductions to optimize your overall tax strategy 

Consider Roth IRAs when you: 

• Expect to maintain high income in retirement from business ownership, rental properties, or substantial portfolio withdrawals 
• Have maximized other tax-deferred options and want diversification 
• Prioritize estate planning benefits and tax-free wealth transfer 
• Are already phased out of traditional IRA deductions 

For many high earners, the right retirement savings plan involves contributing to both traditional and Roth IRAs at different points in your career or even concurrently. Tax diversification provides flexibility to optimize withdrawals based on your actual retirement tax situation rather than today’s projections.  

You might prioritize traditional IRA contributions during peak earning years when marginal rates are highest, then shift toward Roth strategies as income stabilizes or during years with lower taxable income.  

This approach also allows you to manage retirement tax brackets strategically—withdrawing from traditional accounts up to favorable bracket thresholds, then drawing from Roth accounts for additional needs without pushing yourself into higher tax territory. 

Keep your IRA investments tax-efficient 

No matter which IRA you contribute to (likely a combination of both), it’s important to be strategic about the investments within those accounts to help maximize your return.  

Asset location strategies optimize tax efficiency by placing different investment types in traditional versus Roth accounts based on expected returns and tax characteristics.  

High-growth investments may perform better in Roth accounts where gains remain tax-free, while bond investments may suit traditional accounts where current tax deductions offset lower expected returns. 

Create your personalized IRA strategy 

The traditional IRA vs Roth IRA decision isn’t one-size-fits-all, particularly for high earners navigating complex tax situations and substantial retirement portfolios. Your optimal strategy depends on current versus projected retirement tax brackets, income phase-out thresholds, estate planning priorities, and long-term wealth accumulation goals. 

Ready to optimize your IRA strategy for your specific situation? BPM’s wealth management team specializes in sophisticated retirement planning for high earners with complex portfolios. We help you navigate phase-out thresholds, coordinate tax-efficient strategies, and build retirement plans designed for your lifestyle goals. Get in touch with us today.  

After years of regulatory uncertainty, the U.S. Securities and Exchange Commission is preparing to introduce a framework under their “Project Crypto” that could fundamentally reshape the crypto industry, reshore crypto businesses that fled the U.S, and establish a more robust regulatory framework for crypto in the U.S. Project Crypto is expected to provide clear guidelines to use in determining whether a crypto asset is a security or subject to an investment contract. Project Crypto follows President Trump signing the GENIUS Act in to law, which helps ensure that the U.S. will continue to lead the world in global payments with a stablecoin regulatory framework. 

SEC Chair Paul Atkins recently confirmed that the agency is “on track” to release an innovation exemption for crypto activities, expected in January 2026. This marks the clearest signal yet that federal regulators are moving toward a more defined, accessible framework for crypto assets and blockchain technology, rather than the enforcement-first approach that characterized recent years. 

Understanding Project Crypto and the Innovation Exemption 

The proposed exemption would allow crypto firms to launch certain blockchain-based products more easily while still operating under formal SEC oversight. Rather than forcing companies offshore to navigate uncertain regulatory waters, this framework aims to keep innovation and economic activity within U.S. borders. 

Chair Atkins stated the agency is providing technical assistance to Congress on pending crypto asset legislation, suggesting a coordinated approach between regulatory bodies. While the recent government shutdown delayed the timeline, the SEC appears committed to finalizing this framework within weeks. 

In his speech, Paul Atkins, Chairman of the SEC, highlighted that he has:  

• Directed the Commission staff to develop a framework that will allow non-security crypto assets and crypto asset securities to be traded side-by-side on SEC-regulated platforms. 
• Asked the staff to evaluate the use of Commission authority to permit non-security crypto assets that are subject to an investment contract to trade on trading venues that are not registered with the Commission.  

Mr. Atkins also envisions an innovation exemption, permitting innovators and visionaries to enter the U.S. market with new technologies and business models without compliance with incompatible or burdensome prescriptive regulatory requirements that hinder productive economic activity. Instead, the innovator will comply with certain principles-based conditions designed to achieve the core policy aims of the federal securities laws.  

Under the direction of Mr. Atkins, the SEC will pursue such a solution to enable state-licensed crypto asset platforms that are not registered with the SEC to list certain crypto assets, as well as clear the way for CFTC-regulated platforms to offer these products with margin capabilities. 

What Makes This Different 

This represents a significant departure from previous regulatory strategy. The innovation exemption would provide: 

• Clearer compliance pathways for companies exploring blockchain-based products 
• Formal oversight structures that reduce regulatory ambiguity 
• Competitive positioning for U.S.-based firms versus offshore alternatives 
• Defined parameters for tokenized assets and on-chain products 

However, the move hasn’t been universally welcomed. Major stock exchanges warned in November that exemptions could “dilute” investor protections and create competitive imbalances by giving crypto platforms regulatory advantages unavailable to traditional markets. 

Learn more about our Blockchain and Digital Assets Consulting Services

How Major Financial Institutions Are Responding 

While concern has been expressed by some businesses and market participants, the largest U.S. financial institutions are signaling a notable shift in their approach to crypto assets and blockchain technology.  

• Blackrock’s CEO Larry Fink is on record that he would like to see the SEC rapidly approve tokenization of bonds and stocks.  
• Robinhood launched tokenized versions of U.S. stocks and ETFs for European customers, starting in June 2025.   
• Large banks such as Bank of America and Morgan Stanley have reportedly advised clients to allocate 1% – 4% of portfolios to crypto.  
• In December 2026, JP Morgan Chase arranged a $50M short-term bond on the Solana blockchain.  

What This Means for Your Business 

Federal regulators are moving toward a more defined, accessible framework for crypto assets and blockchain technology, ensuring that frameworks are built to maintain U.S. dominance in crypto asset markets. In the very near future, we should see rules for crypto asset distributions, custody, and trading for public notice and comment.  

Strategic Planning Opportunities 

For businesses exploring crypto assets or blockchain technology, the innovation exemption could open new possibilities: 

Operational Applications: Blockchain technology offers potential benefits for supply chain management, smart contracts, and transaction processing. A clearer regulatory framework may make these applications more viable for risk-conscious businesses. 

Investment Decisions: As institutional guidance normalizes crypto allocations, business owners and executives need to evaluate whether crypto assets align with their treasury management strategy and risk tolerance. 

Competitive Positioning: Companies in fintech, financial services, or technology sectors may need to assess how competitors are leveraging blockchain technology and whether the new framework creates strategic opportunities. 

The Tokenized Securities Question 

One particularly significant aspect involves tokenized stocks—traditional equities converted into blockchain-based assets that can be traded fractionally around the clock. While this technology could democratize access to equity markets, it also raises complex questions about: 

• Market structure and after-hours trading implications 
• Fractional ownership rights and shareholder protections 
• Cross-border transaction considerations 
• Integration with existing accounting and financial reporting systems 

Planning for 2026 and Beyond 

The January timeline means businesses have limited time to prepare for potential changes. Working with advisors who understand both the tax implications and the strategic considerations can help you position your business appropriately as regulations crystallize. 

This is particularly important because initial guidance often creates as many questions as it answers. Having a plan in place—and trusted advisors who can help navigate emerging details—will be more valuable than attempting to address everything reactively after the framework launches. 

Moving Forward with Confidence 

The SEC’s Project Crypto innovation exemption represents a significant moment in U.S. crypto asset and blockchain regulation. Whether it ultimately delivers on its promise of regulatory clarity while maintaining investor protections remains to be seen, but the trajectory toward more defined frameworks appears clear. 

For businesses, this is a time to stay informed, assess implications thoughtfully, and position strategically. The regulatory landscape is evolving rapidly, and understanding how these changes affect your specific situation will be increasingly important in 2026. 

Need guidance on how cryptocurrency regulations and crypto asset considerations affect your business? BPM’s tax and advisory professionals can help you navigate the evolving regulatory landscape and develop strategies that align with your business objectives. Contact us to discuss your specific situation. 

If you’re seeking financial independence by 40, you’re part of a growing movement of ambitious professionals who want to redefine what retirement looks like.  

Perhaps you have your heart set on a passion project, want to spend more time with family, or desire the freedom to choose how you spend your days. 

Retiring at 40 may seem challenging, but for high earners with the right financial plan, this goal is ambitious yet attainable.  

If you’re planning to retire at 40, it’s easy to think that aggressive saving is the only thing you’ll need, but it’s so much more than that. This goal requires sophisticated investment strategies, careful tax planning, and honest lifestyle evaluation. 

How much do you need to retire at 40? 

The amount of money you need to retire comfortably at 40 depends on several factors, with your savings strategy and timeline carrying the most weight. 

It’s much easier to visualize your portfolio requirements when you look at hypothetical numbers, so we’ve created a couple of scenarios to illustrate what retiring at 40 could look like: 

Scenario 1 

• Annual expenses: $300,000 (includes travel, multiple properties, family obligations, healthcare) 
• Required portfolio: $7.5 million 

Using the 4% withdrawal rule, this generates $300,000 before taxes annually to cover your expenses for 50+ years.  

Keep in mind that the 4% withdrawal rule wasn’t built for multiple decades’ worth of withdrawals, so your rate may need to be adjusted depending on various personal circumstances and economic conditions.  

Scenario 2 

• Annual expenses: $150,000 (modest travel, single residence, basic family needs, healthcare) 
• Required portfolio: $3.75 million 

We’ll dive deeper into the 4% rule later in this piece, but again, using this “rule”, you’d assume about $150,000 in annual income before taxes. 

In both scenarios, the calculations assumed that you wouldn’t bring in any additional income from part-time work, consulting, or other employment avenues.  

This isn’t typical for early retirees. Instead, many opt for hybrid approaches, such as consulting work, board positions, or passion projects that generate additional income. 

For example, if your chosen work brings in $50,000 to $100,000 annually, this partial income can reduce your required portfolio by $1.25-2.5 million, since you’re not entirely dependent on investment returns. 

And remember, the 4% rule isn’t an exact science and may need to be adjusted over the years, particularly during market downturns, given the longer retirement time horizon. 

Let’s look at some other calculations considering a lower withdrawal rate of 3%.  

Annual Expenses	Portfolio Needed (No Bridge Income)	Portfolio with $100K Bridge Income
$150,000	$5.0 million	$1.7 million
$200,000	$6.7 million	$3.3 million
$300,000	$10.0 million	$6.7 million
$400,000	$13.3 million	$10.0 million

These numbers are just numbers without your specific context—lifestyle goals, debts, and existing or planned financial commitments.  

Guidelines to help determine how much money you’ll need to retire at 40 

You’ve probably come across various “rules of thumb” for retirement planning, and while they can be helpful starting points, retiring at 40 requires a more nuanced approach.  

Let’s explore a couple of the most common frameworks and how they could apply to your situation: 

The 4% rule 

The 4% rule is a guideline that suggests retirees can withdraw 4% of their retirement portfolio in the first year and then adjust that amount for inflation in subsequent years. It’s based on historical market data and has become a cornerstone of retirement planning for a long time. 

While this can be helpful in certain circumstances, retiring at 40 presents some unique challenges for this rule: 

• Extended retirement periods: When you retire at 40, your portfolio potentially needs to last 50+ years—that’s 20 years longer than the original study that created the 4% rule was designed to handle. 
• Sequence of returns risk: According to more recent research, with a withdrawal rate in the 3.25-3.50% range, you would have survived even during the most challenging historical market conditions. This suggests 4% may be too aggressive for early retirement when you have such a long horizon ahead. 
• Higher absolute withdrawal amounts: A $4 million portfolio following the 4% rule generates $160,000 annually, but market volatility on larger portfolios can create swings in your available funds from year to year. 

So what other approaches might you consider? 

25x expense rule 

The traditional FIRE (Financial Independence, Retire Early) movement suggests saving 25 times your annual expenses—which is essentially the inverse of the 4% rule. For high earners, this calculation may require some careful adjustment for lifestyle costs. 

For example, a $200,000 annual expense budget would traditionally require $5 million using the 25x rule.  

But, an executive with $300,000 in annual living expenses might actually need $10 million (33x expenses) rather than $7.5 million (25x expenses) to safely support early retirement, especially given the extended timeline and lack of Social Security supplementation. 

The truth is, no single approach is perfect for everyone. Your specific situation may require custom planning based on your risk tolerance, other income sources, existing debts, planned expenses, and how your expenses might change over time. 

Evaluate your true retirement lifestyle costs 

When planning for an early retirement, it’s important to be honest with yourself about your desired lifestyle, both now and in the future, so you can create the best plan to suit your goals and dreams.  

Travel and entertainment expenses 

If you love to travel and entertain—as many successful professionals do—you should build that into your retirement savings plan. 

Consider things like: 

• Vacations—how many trips do you tend to take per year? How much do you typically spend on transportation, lodging, and experiences while there?  
• Dining—consider your current dining habits and if you’ll want to carry those over into retirement. This could be dinners out, at home chefs, catered parties, etc.  
• Hobbies—not all hobbies are created equal for your wallet. Consider the time, equipment, gear, and location expenses you may incur, especially if you plan to take up a new hobby in retirement.  

As you can start to see, these costs will add up quickly. Plus, these discretionary expenses often increase in early retirement as you have more time to pursue leisure activities and explore new interests. 

Real estate considerations 

Real estate can be quite lucrative for early retirees, but it’s important to consider all the costs that come with it, especially if you own multiple properties (primary residences, vacation homes, investment properties, etc.).  

In addition to regular mortgage payments, you’ll also need to prepare for property taxes, insurance, maintenance, and utilities. 

This makes the conversation about where you live in retirement really interesting. As you likely know, property insurance costs vary by location. Florida, for example, faces higher premiums due to hurricane risks, while California properties may carry earthquake insurance considerations.  

These nuances can make a big difference in terms of your bottom line annually per property. 

Family obligations 

Family financial commitments have a way of persisting well into retirement years, and they’re often more significant than people anticipate. 

If you have children, you might be thinking about private schooling, college, graduate programs, or even home down payment assistance.  

Many high earners also find themselves supporting aging parents with healthcare costs or providing financial assistance to adult children for home purchases or business ventures.  

Expenses like these are choices that need to align with your values—something critical to a fulfilling retirement—but they will need to be properly factored into your retirement planning. 

Healthcare expenses 

Here’s one that catches many early retirees off guard: healthcare premiums can represent one of your largest unexpected costs. 

Without employer-sponsored coverage, the average cost for a family marketplace plan is $1,483 monthly for a 40-year-old married couple with two children who don’t receive government subsidies. That totals approximately $17,800 annually—and this is before any actual medical expenses occur. 

Tax implications 

Tax considerations can become quite complex when you’re withdrawing large amounts from retirement accounts before age 59½, and this is where many people underestimate the real cost of early retirement. 

Early withdrawal penalties of 10% apply to traditional 401(k) and IRA distributions, while high earners may face federal tax rates up to 37% plus state income taxes.  

Here’s how this could play out in an example: A $300,000 annual withdrawal could result in approximately $141,000 in combined federal taxes and penalties alone. That’s nearly half your withdrawal going to taxes and penalties. 

This makes building a tax-efficient investment and withdrawal strategy extremely important. Our wealth management team can help you strategically pull from the right accounts to help minimize your tax liability and align with your lifestyle goals.  

Social Security and Medicare gaps 

Retiring at 40 creates some long-term gaps that are worth understanding upfront.  

You’ll have 25+ fewer working years contributing to Social Security, which may reduce your future benefits calculation. More importantly, you won’t qualify for Medicare until 65, requiring 25 years of private healthcare coverage. 

The combination of higher healthcare costs, tax considerations, and lack of traditional retirement benefits means early retirees typically need substantially larger portfolios than those retiring at 65. These additional costs often require portfolio value well beyond what you’d need just for basic living expenses. 

Maximize high-income saving strategies in your 20s and 30s 

Building a $4-7 million portfolio by age 40 isn’t just about saving more—it’s about saving smarter. This requires sophisticated strategies that make the most of your high earnings and take advantage of every available tax benefit. 

Max out your retirement accounts 

If you’re serious about retiring at 40, maximizing your available retirement accounts should be among your first priorities: 

• The Traditional IRA or Roth IRA contribution limit is $7,000 in 2025 
• Regular 401(k) contributions are capped at $23,500 in 2025 
• Health Savings Account (HSA) contributions allow up to $4,300 for individual coverage or $8,550 for family coverage in 2025 

Many high earners focus on maximizing these foundational contributions first, particularly capturing full employer matching—that’s essentially free money you don’t want to leave on the table. 

HSAs deserve special attention in your early retirement planning. They offer what’s often called a “triple tax advantage”: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.  

When you’re planning to retire at 40, maximizing your HSA contributions becomes even more valuable since healthcare costs will likely represent one of your largest expense categories during those gap years before Medicare eligibility. 

Prioritize taxable investment accounts 

Here’s something many people don’t fully appreciate: taxable investment accounts become really helpful for covering expenses during those bridge years from age 40 to 59½.  

Since early withdrawal penalties make retirement accounts costly to access before age 59½, you’ll need substantial taxable investments to bridge this gap. 

The key is focusing on tax-efficient investments within these accounts—think index funds with low turnover ratios, municipal bonds, and growth stocks that generate minimal taxable distributions. Plus, realized gains from taxable accounts get preferential capital gains tax treatment (instead of ordinary income tax) if you held the investment longer than a year.  

You want your money working for you, not generating unnecessary tax bills along the way. 

Explore Backdoor Roth IRA conversions 

If you’re a high earner, you’ve probably bumped up against income limits for Roth IRA contributions. In 2025, the income limits are $165,000 for single filers and $246,000 for married couples filing jointly for direct Roth IRA contributions. 

But here’s where strategy comes in: high earners who exceed these limits can utilize the backdoor Roth approach by contributing $7,000 to a non-deductible traditional IRA and immediately converting it to a Roth IRA, effectively avoiding the income restrictions entirely. 

Level up with Mega backdoor Roth strategies 

This is where things get interesting for high earners.  

The IRS allows total annual contributions—including employee deferrals, employer matches, and after-tax contributions—of up to $70,000 total. This can create opportunity for substantial additional tax-free savings: 

• After-tax 401(k) contributions: You may be able to contribute additional after-tax dollars into your 401(k) account, up to the 401(k) contribution limits.  
• Immediate Roth conversions: If permitted by your plan, these after-tax contributions can then be converted to a Roth IRA or Roth 401(k). Future qualified withdrawal from Roth accounts are tax free.  

Plan for stock options, RSUs, and deferred compensation  

If you’re a high earner, you may also receive equity compensation, and the timing of these decisions can make a meaningful difference in your retirement timeline. 

This is often where professional guidance becomes valuable. You might want to consider consulting with BPM’s tax advisory services to optimize the timing of: 

• RSU vesting schedules to manage tax brackets across multiple years 
• Stock option exercises to take advantage of lower capital gains rates 
• Deferred compensation elections to shift income to potentially lower-earning retirement years 

The key insight here is that retiring at 40 can become much more achievable when you maximize these strategies during your peak earning years in your 20s and 30s—when both your income and time horizon for compound growth are working most powerfully in your favor. 

Design your path to financial independence 

Achieving financial independence by 40 isn’t just about hitting a specific portfolio number—though that’s certainly important. It’s about designing a retirement that genuinely aligns with your values and goals. 

The truth is, everyone’s version of early retirement looks different. Some people want to travel the world, others want to focus on family, and still others want to pursue passion projects or give back to their communities. Your plan should reflect your unique circumstances and aspirations. 

If you’re ready to explore what financial independence by 40 could look like for your specific situation, contact BPM’s wealth management team to discuss tax-efficient investment strategies, retirement account optimization, and comprehensive financial planning designed specifically for high-earning professionals pursuing early retirement. 

This material is for informational purposes only and is not intended to provide specific advice or recommendations for any individual. This information is not intended for use as tax advice. 

The examples given are hypothetical and are for illustrative purposes only. Actual results may vary from those illustrated. Securities offered through Valmark Securities, Inc. Member FINRA, SIPC | Investment Advisory services offered through BPM Wealth Advisors, LLC and/or Valmark Advisers, Inc. each an SEC Registered Investment Advisor | BPM LLP and BPM Wealth Advisors, LLC are entities separate from Valmark Securities, Inc. and Valmark Advisers, Inc.