Late August and early September is an interesting time in retirement planning.

Summer isn't quite over. The holidays still feel comfortably distant despite seeing the ads. And April 15 is far enough away that taxes probably aren't occupying much space in your thoughts, which is exactly why this can be a good time to think about them.

Once December arrives, many financial decisions and tax strategies can feel rushed if not yet implemented. Roth conversions, charitable gifts, investment gains and losses, retirement-plan withdrawals and Medicare considerations suddenly compete with Thanksgiving, Christmas and everything else on the calendar.

But tax planning is usually more valuable before the tax return is completed.

This year offers a particularly good reason to start early. The 2026 federal tax brackets and standard deductions have increased, while several provisions of last year's tax legislation are now fully in effect. For married couples filing jointly, for example, the 12% federal bracket extends through $100,800 of taxable income and the 22% bracket through $211,400.

Those numbers aren't interesting by themselves, but what really matters is whether there's unused room inside them.

Most people think about taxes once a year. Their accountant tells them what happened.

Here's your income, your deductions, what you owe and here's what you should send the IRS. That's tax preparation.

Tax planning is different. Tax planning asks what we can still change before the year ends and for the next 5-10 years. For someone approaching or already in retirement, that distinction can become incredibly important.

Imagine a retired couple, Mark and Susan. They're both 66. Their careers have ended, but they haven't started Social Security yet. They have money in traditional IRAs, a brokerage account and cash.

Their taxable income for 2026 is considerably lower than it was during their working years.

At first glance, that's ideal. Lower income and lower taxes.

But suppose their projected taxable income leaves a significant portion of their current tax bracket unused. That empty space has value. They might convert part of a traditional IRA to a Roth. They could realize certain investment gains. They could accelerate income they expect to recognize later anyway.

The objective isn't to create taxes unnecessarily.

It's to ask whether paying some tax at today's known rate could reduce taxes they may otherwise face later.

That doesn't mean everyone should immediately convert their IRA to a Roth. Far from it.

A conversion itself increases taxable income. For someone on Medicare, enough additional income can eventually affect Medicare premiums. State taxes, charitable giving, investment gains, future tax rates and the surviving spouse's situation can all change the calculation.

That's why this is planning rather than a rule of thumb.

There's another reason married couples should look farther ahead. Eventually, one spouse will likely file taxes as a single taxpayer and single tax brackets are much narrower.

For 2026, the 24% federal bracket begins above $105,700 of taxable income for a single filer but above $211,400 for a married couple filing jointly.

Same retirement assets, potentially similar income, but much less room in the tax brackets.

That's sometimes called the widow's penalty, and it's one reason retirement tax planning shouldn't simply optimize the next tax return.

You're planning for two lives and eventually, potentially, one.

If charitable giving is part of your retirement plan, there's another 2026 provision worth knowing.

Beginning this year, taxpayers who don't itemize can generally deduct up to $1,000 of qualifying cash charitable contributions, or $2,000 for married couples filing jointly.

For larger charitable goals, retirees may have other strategies worth evaluating as well, particularly once qualified charitable distributions become available from IRAs.

Again, the important question isn't simply, "Can I deduct this?"

It's:

"Which assets should I give, when should I give them, and how does the gift interact with the rest of my plan?"

Before autumn gets busy, I'd review five things:

1. Project your 2026 taxable income.
Don't wait for the tax return. This is a good time to do a mock tax return for 2026 so you have an idea of what to expect and what opportunities are available to you.

2. Estimate where you'll land within your federal bracket.
Unused bracket space may create income tax and long-term capital gains tax planning opportunities.

3. Review traditional IRA balances.
Ask what future required distributions could look like, not simply today's withdrawals.

4. Review realized and unrealized investment gains and losses.
The portfolio and tax return shouldn't operate in separate silos. Coordination is key here.

5. Coordinate Social Security, Medicare and charitable giving.
Each decision can influence another and knowing how your past and future income affects Social Security, Medicare and charitable giving can help you avoid fees, surcharges and penalties while also creating income and tax-saving opportunities

One of the biggest misunderstandings about retirement tax planning is that the goal is always to pay the least tax possible this year.

I don't think that's the right goal. It’s better to ask:

How do we potentially pay less tax over the entire retirement?

Sometimes that means deferring income or it means recognizing income.

And occasionally it means intentionally paying a tax today that we could have avoided because doing so gives us more flexibility tomorrow for your financial plan.

The calendar matters. Once December 31 passes, some opportunities don't come back.

Here’s where a seemingly simple decision can travel much farther than expected.

Large traditional IRA → Continues growing tax-deferred → Future required distributions → Creates higher Taxable Income → Potentially more Social Security subject to tax → Possible Medicare IRMAA surcharges → Less control over retirement income

That doesn't mean everyone should immediately convert their IRA to a Roth. Far from it.

A conversion itself increases taxable income. For someone on Medicare, enough additional income can eventually affect Medicare premiums two years later. State taxes, charitable giving, investment gains, future tax rates and the surviving spouse's situation can all change the calculation. And there are other variables not mentioned here that can also change calculations based on others’ .

That's why this is planning rather than a rule of thumb. Remember, everything is connected. Nothing happens in isolation.

At the beginning of this week, investors were waiting for three important pieces of information: Nvidia's earnings, the Federal Reserve's preferred inflation report, and Fed Chair Kevin Warsh's first Jackson Hole address.

We now have all three. And taken together, they paint an interesting picture.

Artificial intelligence spending remains remarkably strong. Corporate earnings, at least among the largest technology companies, continue to demonstrate considerable momentum. But inflation remains stubbornly above the Federal Reserve's target, and Warsh made it clear Friday that investors shouldn't assume the next move in interest rates.

There’s an important dynamic at play here. Warsh knows that he needs to fulfill the Fed’s mandate of bringing down inflation closer to their 2% target, which means an increase interest rates. However, the Treasury Secretary, Scott Bessent, wants rates to lower to decrease the interest the U.S. pays on it’s debt obligations through bonds and treasury notes.

Currently, the U.S. national debt is sitting at just over $40 trillion and the U.S. is paying just over $1 trillion annually in interest alone. An increase in rates means the U.S. will be paying more than that in interest alone. Trump also echoes Bessent’s sentiments on debt as well.

Since Trump nominated both Warsh and Bessent, there’s a chance rates will stay the same or decrease. Only time will tell.

The annual Jackson Hole Economic Policy Symposium often becomes an opportunity for Federal Reserve leaders to signal how they're thinking about the economy.

This year's gathering carried additional importance because it was Kevin Warsh's first Jackson Hole address as Federal Reserve chair.

His message was fairly straightforward:

The Federal Reserve isn't satisfied with where inflation is today.

Warsh reiterated the Fed's commitment to its 2% inflation objective and said policymakers would have "work to do" if they don't gain confidence that inflation is moving convincingly back toward that target. His comments represented his clearest indication yet that another interest-rate increase remains possible if inflation doesn't improve.

That's important because some investors had been hoping the combination of slower employment growth and signs of economic cooling would eventually push the Fed toward lower rates.

Jackson Hole reminded markets that the Fed has another problem.

Inflation. And right now, the inflation data aren't giving policymakers much reason to declare victory.

We received fresh confirmation of that this week.

The Personal Consumption Expenditures Price Index (the Federal Reserve's preferred inflation measure) was 3.7% higher in July than a year earlier. Core PCE, which removes the more volatile food and energy categories, increased 3.3% from a year ago.

That core number is particularly important. Core inflation was also 3.3% in June.

In other words, underlying inflation didn't meaningfully improve last month. That's the problem confronting the Fed.

Inflation has fallen considerably from the extremes we experienced several years ago, but getting from roughly 3% inflation back toward the Fed's 2% objective is proving much more difficult.

For households, that distinction matters too. A lower inflation rate doesn't mean prices are falling. It means they're increasing more slowly. Your grocery bill, insurance premium, restaurant tab and healthcare expenses don't reset simply because inflation improves.

That's particularly important for retirees living on income that doesn't always adjust at the same pace as their expenses.

Markets reacted quickly to Friday's speech.

The two-year Treasury yield, which tends to be particularly sensitive to expectations about Federal Reserve policy, rose to roughly 4.29%, its highest level in about a month. The 10-year Treasury yield remained around 4.67%, while the 30-year Treasury was around 5.16%.

Those numbers deserve attention from investors in retirement from an income standpoint.

For much of the decade following the financial crisis, retirees faced an uncomfortable problem: high-quality bonds simply didn't produce much income.

That's no longer the environment we're in. Yields around today's levels mean bonds can once again play a meaningful role in generating retirement income.

But there's another side to that equation. Higher interest rates can also put pressure on stock valuations, housing, commercial real estate and highly leveraged businesses.

That's why the bond market may be just as important to watch as the stock market heading into the fall.

The other major test this week came from Nvidia. And the numbers were extraordinary.

Nvidia reported quarterly revenue of $96.2 billion, an increase of 106% from a year earlier. Its data-center business generated $89 billion in revenue, up 117% year over year.

Those aren't normal growth numbers for a company of Nvidia's size. They provide additional evidence that spending on artificial-intelligence infrastructure remains extremely strong.

That answers one question:

Is the AI buildout still happening?

Clearly, yes. However, another question remains unanswered:

Will the companies spending hundreds of billions of dollars on AI eventually generate enough additional profit to justify those investments?

That's the question I think becomes increasingly important over the next several years. AI may very well transform large portions of the economy, but transformational technology and attractive investment returns aren't automatically the same thing.

Price still matters, expectations matter, and diversification still matters.

Stocks responded cautiously to Warsh's comments Friday.

The major indexes finished lower as investors increased their expectations that the Fed could raise rates rather than cut them. The reaction wasn't dramatic, the S&P 500 fell roughly 0.2%, the Nasdaq about 0.4%, and the Russell 2000 around 1.1%, but the change in expectations was meaningful.

That's an important distinction. Markets aren't suddenly signaling that a recession or bear market is imminent. They're recalculating the price of money.

If interest rates remain higher for longer, or move higher still, investors have to reconsider what they're willing to pay for stocks, particularly companies whose valuations depend heavily on profits expected many years into the future.

Jackson Hole answered one question, but it created several others.

Heading into September, there are five developments I'm watching particularly closely.

Before Jackson Hole, investors could reasonably debate when the Fed might eventually begin lowering rates.

That's no longer the only question. Now we have to consider whether the Fed could actually raise rates again to fulfill their mandate or bow to Bessent and Trump by lowering rates.

Following Warsh's speech, traders increased bets on a September rate increase, although markets remained divided between a hike and leaving rates unchanged.

I wouldn't spend much time trying to predict the vote. What matters more is the change in direction. The assumption that the next major move in rates must eventually be downward has become less certain.

For retirement investors, that makes today's fixed-income opportunities more interesting, but it also argues against making an all-or-nothing interest-rate bet.

Inflation is only half of the Federal Reserve's challenge. Employment is the other.

The next major labor reports will help determine whether the economy is simply cooling gradually or whether something more significant is developing underneath the surface.

This creates a difficult balancing act. If employment remains resilient while inflation stays above 3%, the Fed has considerably more freedom to keep rates elevated or potentially raise them.

If employment deteriorates rapidly while inflation remains stubborn, policymakers face a much less comfortable situation. They would effectively be choosing between supporting the economy and fighting inflation.

That's the scenario I'll be watching most closely.

The 10-year Treasury around 4.7% and the 30-year above 5% are already meaningful levels.

If those yields continue rising, the effects could begin spreading more visibly throughout the economy. Mortgage rates could remain elevated, business financing becomes more expensive, commercial real estate faces additional pressure, and investors in equities may begin asking why they should accept substantial equity-market risk when high-quality bonds offer increasingly attractive yields.

For retirees, however, higher yields also create opportunity.

This is one of those unusual situations where the same economic development can be both a risk and an opportunity depending upon which side of the balance sheet you're standing on.

Nvidia's results tell us AI infrastructure demand remains exceptionally strong.

Now, I want to see what happens downstream.

If the answer increasingly becomes yes, the AI investment cycle could have considerably farther to run.

If the answer becomes less clear, markets may become much more selective about which AI-related companies deserve premium valuations. That's an important distinction for investors.

The next phase of the AI story may be less about who is spending money and more about who is actually making money from it.

Finally, I'm watching household behavior. Consumers have absorbed several years of higher prices, elevated borrowing costs and increasingly expensive housing. Yet spending has remained surprisingly resilient.

The question heading into fall is whether that continues. If consumers gradually become more cautious, it could actually help inflation cool without causing serious economic damage. If spending drops sharply, however, corporate earnings and employment could eventually follow.

That would change the market conversation very quickly.

Jackson Hole didn't really give investors an answer. In some ways, that's the point.

We don't know whether the Fed's next move will be a rate increase, a rate cut months from now, or an extended period of doing nothing. We don't know whether AI enthusiasm will continue driving markets higher. And we don't know whether inflation will finally resume its decline toward 2%.

But we don't need to know and try to guess market dynamics.

If you're retired or approaching retirement, I'd focus less on predicting the Fed's next decision and more on asking whether your financial plan can handle several different outcomes and downside risk.

If rates remain high, can your fixed-income investments benefit? If stocks decline, do you have enough liquidity to avoid selling them at an inconvenient time? If inflation remains stubborn, does your income have the ability to grow? And if markets continue higher, do you still have enough equity exposure to participate?

That's the difference between trying to predict the economy and preparing for it.

The goal isn't to know which road markets take next. It's to make sure your retirement doesn't depend upon only one of them.

There's a theme running through this week's issue that has very little to do with predicting the future.

It's optionality and flexibility.

Tax planning gives us choices about when income appears. Diversification gives us choices when markets behave differently than expected. An adaptable home gives us choices as we age. Healthy habits give us choices about how we spend our later years. And hobbies give us choices about what we do with the time we've worked so hard to create.

I don't believe a successful retirement is one where everything goes according to plan. I'm not sure such a retirement exists.

A successful retirement is one where the plan has enough flexibility to adjust when things don't go according to plan. Hope for the best, but expect the worse.

Markets will surprise us, tax laws will change, our health will change and our priorities may change.

The objective isn't to eliminate those uncertainties. It's to build enough margin into the plan that they don't get to make every decision for us.

Until next week, look through and beyond the headlines because that’s where you’ll find The Margin.