Tom and Barb had done everything by the book.
Tom, age 66, had worked as an engineer for decades, diligently saving into his company’s 401(k), while Barb, age 64, built her career in education and contributed consistently to her retirement accounts too. Together, they had accumulated $3.5 million – mostly in IRAs and 401(k)s.
They were proud of their hard work and savings, but when we first met, they were feeling uneasy about retirement for two reasons:
- They weren’t sure when to claim Social Security – and they worried whether the system would even be around long enough to benefit them.
- They admitted they’d never thought much about how taxes would affect their retirement.
They thought retirement would be simpler:
“We saved our money, we’ll just take it out when we need it, right?”
But once we started working together, they realized they were sitting on a massive, hidden problem.
The Shocking Tax Reality They Didn’t Expect
When we walked through their numbers, their eyes widened.
Between the two of them, their Required Minimum Distributions (RMDs) – which kick in at age 73 – would eventually force them to withdraw well over $250,000 per year from their IRAs and 401(k)s, even if they didn’t need the money.
That kind of forced income would push them into much higher tax brackets than they ever expected. Worse, it would trigger higher Medicare premiums (IRMAA surcharges) and cause up to 85% of their Social Security benefits to be taxed.
Tom shook his head and said exactly what many clients say in this moment:
“Holy crap, we had no idea. We’re going to owe a fortune in taxes.”
They were also worried about future tax increases and what would happen to their plan if Social Security benefits were reduced.
The Solution: Multi-Year Tax Planning + Social Security Strategy
We built them a strategy to tackle both issues head-on:
✅ Multi-Year Roth Conversions:
We developed a multi-year Roth conversion plan to move significant amounts from their traditional retirement accounts into Roth IRAs during their “gap years” before RMDs start. This allowed them to:
- Pay taxes now at lower rates
- Reduce future RMDs dramatically
- Create a bucket of tax-free income they could tap anytime
✅ Social Security Coordination:
Given their concerns about Social Security’s long-term viability, we ran multiple scenarios. They ultimately decided to delay Tom’s Social Security benefit to maximize his future payout, but we offset this by using IRA withdrawals and Roth conversions to fund their early retirement years.
This approach gave them flexibility, reduced their lifetime tax bill, and allowed them to hedge against potential Social Security changes.
The Outcome: Confidence + Control Over Their Tax Future
Today, Tom & Barb no longer feel in the dark about taxes or Social Security.
They now understand:
- How to reduce their tax bill over the next several decades
- How to manage their Social Security benefits wisely
- How their accounts work together to support their goals
Most importantly, they’ve flipped the script from being reactive to being proactive. Instead of worrying about hidden tax surprises, they have a clear plan to minimize taxes, manage their withdrawals, and protect their lifestyle – regardless of what happens with Social Security or tax laws.
Could This Be Your Story Too?
If you’ve been saving diligently for retirement – but haven’t yet looked at the huge tax bills coming from IRAs, 401(k)s, and RMDs – you could be facing the same problem Tom & Barb discovered.
We specialize in helping retirees create proactive tax plans that minimize lifetime taxes, optimize Social Security, and give you total control over your retirement income.
