The Power of Purpose in Retirement

Month: February 2026

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At a Glance

  • Retirement isn’t just financial — it’s psychological. Losing structure, identity and daily rhythm can affect both mental and physical health.
  • Unstructured freedom can backfire. Research links social isolation and loss of purpose to higher risks of dementia, heart disease and premature mortality.
  • Purpose must be designed. A fulfilling retirement requires intentional planning around meaning, relationships, activity and engagement — not just income.

Retirement is often imagined as a well-earned season of freedom—time away from deadlines, schedules, and professional responsibilities. But when the structure that shaped your days for decades suddenly disappears, what replaces it? Endless relaxation may sound appealing, but the reality is often more complex.

Retirement is a major life shift, one that impacts more than just your schedule. It can reshape your sense of identity, daily habits and even your health. In fact, research has shown that retirement can raise the risk of heart disease and other medical issues by up to 40%. The reason? Experts point to a loss of purpose and reduced social connection, both of which can take a toll on mental and physical well-being.

Without a plan for how to spend your time meaningfully, the transition can bring unexpected emotional challenges.

The Risks of Unstructured Retirement

Many retirees begin this new chapter with a “honeymoon phase”—a period marked by the novelty of free time, relaxation or long-awaited travel plans. But this initial high can eventually fade.

When the excitement of sleeping in and checking items off the bucket list wears off, retirees can find themselves facing unexpected emotional challenges. Common struggles include boredom, loss of routine, identity shifts and social isolation. In fact, 24% of older adults are considered to be socially isolated. Isolation can also have a ripple effect on health: It’s associated with a 50% increase in risk of developing dementia and increased risk of premature mortality.

Designing a Retirement with Purpose

To avoid some of the potential pitfalls of an unstructured retirement, it’s important to think carefully—and proactively—about purpose. What do you want this next phase of life to look and feel like? Beyond financial planning, consider how you’ll meet the deeper needs your pre-retirement life—including work and raising kids—may have fulfilled: structure, identity, accomplishment, social connection and a sense of meaning.

What brings you pleasure and meaning? What have you always wanted to try or learn? Pursuing these activities can provide purpose and help ensure retirement’s not just a long vacation, but a rewarding chapter of your life.

Feeling stuck here? Try asking close friends or family what they see light you up. Often, others can reflect back passions or strengths that are hard to see on your own.

Staying Connected and Active

Relationships and physical routines matter more than ever when you retire. Staying active, both physically and socially, offers measurable health benefits. Regular physical activity lowers risks, including the likelihood of dementia, heart disease, stroke and eight types of cancer.

People-centered activity is important, too. Look for ways to stay engaged, whether through volunteering, mentoring, part-time work, creative pursuits or community involvement. Older volunteers, aged 55 and up, who gave 100 hours or more each year were two-thirds less likely to report poor health than non-volunteers.

Spending more time with family is a high priority for many retirees and can be a great way to fulfill social needs. But make sure that vision is shared. Open conversations with loved ones about time together, expectations and boundaries can help align plans and avoid disappointment down the road.

The Retirement Identity Shift

In many ways, it’s hard to define what retirement is. After all, it’s not a single moment but a series of transitions. For instance, rather than an abrupt shift to not working at all, you may consider bridge employment—usually part-time work in a temporary position or as a consultant in your field or in a different industry. This can offer a gradual shift into retirement, providing continued income and engagement as you adjust.

Retirement is not merely about stepping away from work—it is about stepping intentionally into your next season of influence, relationships, and legacy.

As your vision for retirement evolves, keep us in the loop. We’d love to hear what you’re planning—and we’re here to help ensure your financial strategy stays aligned with your goals.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.

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At a Glance

  • US large cap stocks: +17.88% (third consecutive double-digit year)
  • 2026 earnings growth projected near 15% (Wall Street consensus)
  • Elevated valuations and concentration reinforce disciplined diversification

Equity markets delivered a third consecutive year of double-digit returns in 2025. Several crosscurrents shaped 2025 market performance — from earnings strength and AI enthusiasm to shifting Federal Reserve policy and elevated valuations. Below, we review the key drivers and outline our 2026 investment outlook for disciplined long-term investors.

Investment Principles That Guide Our Decisions

I’ll begin by briefly restating the core principles that shape our planning and investment decisions:

  • We are long-term, goal-focused investors. Our investment policy is designed to support your objectives through broadly diversified portfolios of high-quality equities and bonds.
  • Studies and empirical evidence indicate that the economy cannot be forecast with consistency, nor markets timed with reliability in the short-term. Therefore, to trade profitably, after taxes, on short-term news or market movements is very difficult.
  • From this, we conclude that the best way to capture the long-term return premium of equities is to remain invested through their inevitable, uncomfortable, but normally temporary declines (excluding extraordinary periods such as 1929).
  • As long as your long-term goals remain unchanged, our investment strategy for achieving them will remain consistent. And as long as the investment strategy remains consistent, so too will your portfolio—aside from disciplined, periodic rebalancing.
  • We believe long-term compounding in quality equities, with an appropriate allocation to high-quality bonds, is the most effective way to capture attractive investment returns to support your goals. In that spirit, we remain mindful of Charlie Munger’s reminder that “the first law of compounding is to never interrupt it unnecessarily.”

Economic and Market Backdrop

1. Equity Performance in 2025

In 2025, the broad equity market delivered its third consecutive year of double-digit returns, supported by solid economic growth and meaningful gains in corporate earnings. A broad index of US large cap stocks finished the year up 17.88%.

2. Earnings Growth and AI Expectations

Looking ahead, the general expectation among major financial institutions is that company profits will continue their upward climb, with earnings growth forecasted at nearly 15% for 2026 (source: Yardeni Research). Experts believe this expansion in profits will be fueled by artificial intelligence and a resilient consumer, as detailed in the following earnings per share (EPS) projections:

Select Wall Street 2026 Earnings Per Share (EPS) Forecasts
Institution 2026 EPS Estimate EPS Growth Forecast Notable Driver
Morgan Stanley $317 17% AI-driven efficiency and tax benefits
JPMorgan $306 - $314 13% - 15% AI "supercycle" and resilient economy
Goldman Sachs $305 12% Productivity gains from AI adoption
Consensus (FactSet) $309 14.9% Average of all major analyst estimates

Remarkably, profit margins have also continued to expand, reaching 13.1% in the third quarter of 2025—the highest level in 15 years (source: FactSet). Many expected rising input costs and consumer resistance to price increases to squeeze margins. To date, those concerns have not materialized.

3. Labor Market and Productivity Trends

The main weak spot in the economy has been employment, which continues to soften. However, even this has a bright spot. The relatively flat employment levels have been offset by strong growth in supply, which has led to higher productivity. Though unemployment has risen slightly to about 4.7%, most workers are producing more per hour, enabling wage growth without reigniting inflation.

4. Federal Reserve Policy and Inflation

After six consecutive rate cuts, Federal Reserve policy is now roughly 175 basis points more accommodative than a year ago, while CPI inflation has remained relatively tame near three percent. It is reasonable to expect the lagged effects of this easing to become more visible in 2026—hopefully through continued economic growth as long as productivity remains high.

5. Fiscal Tailwinds and Tax Policy

This tax season, middle-income households are expected to receive meaningful refunds—estimated at around $150 billion in aggregate, or roughly a half percentage point boost to GDP. Key drivers include a higher standard deduction and the temporary increase of the SALT deduction cap to $40,000 from $10,000, which could provide a near-term economic tailwind.

Unfortunately, much of this positive economic data is often under-reported in the financial news because it does not align with their prevailing narrative, which tends to emphasize negative developments—most notably the softening labor market. The information we receive from financial “news” is often skewed toward pessimism because it sells better.

6. Valuations and Market Concentration

Regardless, the strongly rising equity market may already reflect much of this positive information. As a result, the dominant question of 2025 became whether markets have moved into an AI-driven bubble—supplanting 2024’s concern about rate cuts and 2023’s concern about a recession.

There is no denying that today’s market is more concentrated in a small number of large technology companies than at any point in recent decades, and that valuations for the broad US large-cap stock indexes sit near historical highs.

Portfolio Implications

Our response to this environment is straightforward:

  1. Valuations and Expected Returns: While higher starting valuations have historically pointed towards lower-than-average expected returns over the next 5-10 years, valuations have not been a reliable market-timing tool in the short term.
  2. Concentration Risk and Diversification: While higher starting valuations and concentration risk are not ideal, these risks can be addressed through disciplined portfolio construction and systematic rebalancing to provide an attractive investment experience.
  3. Long-Term Plans vs. Short-Term Narratives: Generally, long-term plans should not be altered in response to short-term narratives, popular fears, or even higher starting valuations.
  4. Asset Allocation Discipline: Pick a stock-to-bond ratio you are comfortable with, and only make changes to the ratio if your circumstances change. Cash and bonds are necessary to help you weather inevitable market declines.

Closing Perspective

History suggests that the next market disruption will likely come from an unexpected source (in the jargon, an unknown unknown, as opposed to a known unknown like higher starting valuations or the national debt). Such events tend to matter little to the plans of long-term stock investors except as opportunities to rebalance and invest at more attractive prices.

Plus, the alternatives of trying to invest in private real estate deals or a private operating business can subject you to even greater costs, risks, and, potentially, a permanent loss of capital as opposed to the normally temporary declines a long-term stock investor may experience.

We continue to follow an approach that has worked over full market cycles in that it has provided the best chance to help investors achieve their most precious financial goals. We do not assume “this time is different,” nor do we adjust strategy to accommodate the fears or fashions of the moment. We avoid abandoning markets during periods of stress, and we avoid overcommitting to any single “new era” narrative—AI included.

We wish you and your family a healthy, happy, and prosperous 2026. As always, we are here to answer questions and discuss your plan at any time. Thank you for the trust you place in us—it is a privilege to serve you.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.

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At a Glance

  • Higher thresholds, but limited impact for high earners. The standard deduction and Child Tax Credit increased, though many new deductions phase out quickly at higher income levels.
  • Estate exemption remains elevated. The lifetime gift and estate tax exemption rose to $15 million in 2026, providing clarity for long-term gifting and trust planning.
  • New reporting and deduction rules require coordination. Crypto transactions now generate Form 1099-DA, certain new deductions apply through 2028, and IRA contributions remain available before the April filing deadline.

2025 Tax Changes: What to Review Before Filing Your Return

Filing your tax return might seem routine. In reality, small rule changes can have significant planning implications — especially for higher‑income households balancing investment income, business interests, charitable giving, and multi‑generational wealth strategies.

The 2025 tax year introduced several structural changes affecting income reporting, deductions, and estate planning, stemming from the One Big Beautiful Bill Act (OBBBA), passed in July. While many headlines highlight broad taxpayer benefits, some provisions phase out quickly at higher income levels. For affluent families, the technical details, not the headlines, determine the real impact. Understanding how these changes fit into your overall financial plan ultimately shapes the outcome.

A Boost for Traditional Deductions

The OBBBA made several taxpayer-friendly provisions permanent, starting with a higher standard deduction. For 2025, the standard deduction increases to $15,750 for single filers, up from $15,000 in 2024. For married couples filing jointly, the deduction rises to $31,500, up from $30,000.

The legislation also expanded the Child Tax Credit, increasing it to $2,200 per qualifying child, compared with $2,000 under prior law.

For higher‑income households who typically itemize, the increased standard deduction may have limited practical impact — particularly when charitable contributions, mortgage interest and property taxes remain significant. Still, the higher threshold can reduce the marginal benefit of smaller itemized deductions and may influence charitable “bunching” or timing strategies.

New Tax Deductions to Be Aware Of

The OBBBA introduced several new deductions for 2025. Many have income phaseouts that limit their usefulness for higher earners, but they may still be relevant for certain family members or key employees in privately owned businesses.

  • Personal deduction for seniors: If you were born before Jan. 2, 1961, you can take a $6,000 deduction ($12,000 if married filing jointly) in addition to your standard or itemized deduction. This deduction is phased out if your modified adjusted gross income (MAGI) is between $75,000 ($150,000 for joint filers) and $175,000 ($250,000 for joint filers).
  • Tax deduction for tips: Often described politically as “no tax” on tips and overtime, the reality is more nuanced. In practice, there is now a deduction for voluntary cash or charged tips earned in industries where tipping is customary. From 2025 through 2028, eligible single filers can deduct up to $25,000 in tipped income, though the deduction begins to phase out for individuals with MAGI above $150,000.
  • Tax deduction for overtime pay: A similar deduction applies to a portion of qualified overtime pay from 2025 through 2028. In most cases, this refers only to the premium portion of overtime—for example, the extra “half” in “time-and-a-half” pay—rather than the worker’s full hourly wage. For single filers, the deduction is capped at $12,500 of eligible compensation for those with MAGI below $150,000. The deduction is phased out above that amount and is zeroed out once above $275,000.
  • Car loan interest deduction: If you financed the purchase of a new vehicle in 2025, you may be eligible to deduct up to $10,000 in interest paid on that loan, provided the vehicle was built in the United States and is used for personal use. To determine if your car fits the bill, look at your vehicle identification number (VIN). Cars built in the United States will have a VIN that starts with a 1, 4, or 5. The deduction phases out for single filers with MAGI above $100,000. Given the income limits and the fact that many higher‑income households either pay cash or lease vehicles, this provision may have a limited impact in affluent planning contexts. In future years, lenders will be required to report auto loan interest payments directly to both taxpayers and the IRS. For this year, you may need to do a little digging through your loan statements, or you can request a summary of interest paid from your lender.

Gift and Estate Tax Exemptions: Long-Term Clarity

The OBBBA provided clarity to a crucial estate planning rule. The lifetime estate and gift tax exemption was previously scheduled to sunset on December 31, 2025, potentially reducing the exemption from nearly $14 million to approximately $6 million. Instead, the higher exemption has been made permanent. Here’s where things stand now:

  • The estate and gift tax exemption rose to $15 million in 2026 and is indexed to inflation going forward.
  • The annual gift tax exclusion is $19,000 per recipient in 2026.
  • While it’s too late to make a tax-free gift for 2025, now is a good time to begin planning gifting strategies for 2026.

 

While permanence provides welcome clarity, it does not eliminate planning considerations. Families with estates approaching the exemption threshold should continue evaluating lifetime gifting strategies, trust structures, and long-term liquidity planning. Asset growth, legislative risk, and multi-generational objectives still warrant proactive review.

Tax Reporting on Cryptocurrency

Beginning in 2025, the IRS requires reporting of digital asset transactions. If you sold or exchanged digital assets through a platform such as Coinbase, you should receive a Form 1099‑DA, a form created specifically for digital asset reporting.

Capital gains taxes generally apply to crypto sales and trades. Digital assets received as compensation may be taxed as ordinary income.

Investors holding digital assets outside centralized platforms should pay particular attention to basis tracking and transaction documentation, as reporting discrepancies may increase audit risk.

It’s Not Too Late to Fund Your IRA

While the window for 2025 401(k) contributions closed at year‑end, you may still make 2025 traditional or Roth IRA contributions until the April 15 filing deadline.

The contribution limit for IRAs remains $7,000, with an additional $1,000 catch‑up contribution available for individuals age 50 or older.

Higher‑income households considering backdoor Roth contributions should coordinate carefully to avoid unintended pro‑rata tax consequences.

Planning Ahead Matters

Tax rules change regularly. What matters more is how those rules integrate with your long‑term investment strategy, liquidity needs, and estate planning objectives.

Reviewing your situation before filing allows for greater flexibility — whether that involves IRA funding decisions, charitable contributions, gifting strategies, or managing realized gains.

If you would like to review how these 2025 changes apply to your specific circumstances, we are happy to schedule a conversation.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.

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How to Have Family Conversations About Money

Money plays a role in so many of the decisions we make, yet it remains one of the last true taboos in American life. Despite its importance, 62% of people say they don’t talk about money at all—not with family, not with friends and in nearly half of cases, not even with their spouse or partner. In fact, most Americans feel more comfortable discussing politics, religion or even the details of their love lives than their bank accounts.

In our work with families, we see this reluctance constantly—and the avoidable problems it creates. Money is tied to identity and emotion, including feelings of self-worth, fear of judgment, embarrassment or shame around things like spending, saving and debt. As uncomfortable as these feelings may be, avoiding these conversations carries a real cost. Silence can create stress, undermine financial security and strain relationships across generations.

These conversations are especially important to have with family. Understanding each other’s expectations, responsibilities and values leads to smarter planning and strengthens families along the way. Talking about money—even imperfectly—is one of the most powerful steps families can take toward long-term financial well-being.

Discussing Finances with Adult Children: Setting Expectations Early

For parents with adult children, looping them into your financial plan helps give them the information and tools they may need to help you one day or ensure your estate plan and legacy wishes are fulfilled. Consider discussing:

Your financial plan: Share how you expect to spend your retirement and what lifestyle adjustments you expect to make. For instance, do you plan to downsize or relocate? Are you planning to spend more time with the grandkids? Take the time to understand if your plans align with your children’s so there are no misunderstandings.

Your estate plan: Let children know what you intend to leave behind, whether it’s financial assets, property or personal valuables. Surprises can lead to conflict, while clarity early on can help prevent it. There are no hard and fast rules about what you need to share. If you’re uncomfortable with specific dollar amounts, for instance, you could use percentages or rough ballparks.

Your goals and values: Wealth planning isn’t just about assets; it’s also largely about purpose. Explain what’s important to you and what you hope to accomplish with your wealth. For instance, are you hoping to help fund your grandchildren’s education? Are there philanthropic causes you value? Helping your children understand the “why” behind financial decisions can make it more likely your legacy is carried out.

Discussing Finances with Aging Parents: Planning Before a Crisis

For children of aging parents, approaching financial topics can feel daunting. It might feel like prying, or maybe money is a topic you’ve never broached with them before. But doing so now is far easier than navigating decisions in a crisis. Honest conversations about future plans and resources can prevent stressful last-minute decisions later. Consider discussing:

Long-term care plans: Do your parents have long-term care insurance or funds set aside for potential future health care needs? Have they thought about where they want to live as they age?

Key decision-making roles: Understanding responsibilities in advance can eliminate confusion when timing matters most. Find out who holds powers of attorney and will oversee medical or financial decisions if parents are unable to.

Financial safety and organization: Ask how parents have organized important documents and where they are kept. Who needs to know passwords to important accounts and where are they stored? Is there an estate planning attorney who has copies of documents such as wills and trusts?

How to Have Productive Money Conversations

While knowing what to talk about is important, having this discussion is another matter. They can be uncomfortable, to say the least, and they’re often downright emotional. A structured, thoughtful approach helps. Consider the following:

Choose the right setting: Avoid holidays and major family events. These are often already stressful times when emotions may be running high. Instead, schedule a dedicated time that allows for calm, uninterrupted conversation. Let participants know the topic in advance so they can come prepared with questions and concerns.

Set an agenda: Be clear about the purpose of the conversation. Are you educating loved ones about your financial situation? Discussing an estate plan? Addressing specific concerns like debt or spending? Putting the agenda in writing can help keep the discussion focused.

Acknowledge emotions: Money is deeply emotional, and strong feelings are a normal part of the conversation. Acknowledging that reality upfront can help defuse tension. Aim to create an environment where everyone feels heard and respected—by asking open-ended questions, encouraging family members to share their perspectives and resisting the impulse to blame or shame.

Turn conversation into action: By the end of the discussion, make sure everyone understands their role. Sometimes the goal of a meeting is simply transparency, and no follow-up is required. In other cases, families may need to outline next steps or ask for help.

We’re Here to Help

Conversations about money within families can be complex, emotional, and consequential. As your financial advisor, we can help clarify complex issues and outline planning strategies for you and your family to consider. We can also help facilitate family meetings, serving as a resource to guide conversation and answer questions as they come up. If you’re ready to talk to your family about money, reach out. We’re here to support you every step of the way.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.