Do You Want a Tax-Free Retirement?


A client came to us concerned about the enormous tax liability they would face in retirement as the bulk of their savings was in tax deferred retirement accounts. They wanted to know if there was a strategy to minimize this tax liability and maximize financial security for their future.

The Challenge

  • The client had a large percentage of their retirement savings in tax-deferred traditional IRA accounts.
  • This money had been accumulated during their entire working life and the eventual tax liability would be substantial.
  • Aside from taxes, Medicare surcharges must also be considered. These surcharges can be significant and increase as income rises.  Thus, those in higher income tax brackets pay more for Medicare.
  • Tax-deferred traditional IRA assets needed to be converted to tax-free Roth IRA assets in a tax-efficient manner that minimized upfront-tax liability and Medicare surcharges while aligning with their current financial goals and cash flow.


  • We worked closely with the client’s tax advisor to develop an 8-year plan to convert tax-deferred traditional IRA assets to tax-free Roth IRA assets starting at retirement at age 62.
  • The client postponed pensions and social security until age 70, thereby reducing taxable income in the years when the bulk of the conversions took place with the added benefit of maximizing life-long streams of income. (For instance, social security benefits grow by 8% per year for each year of deferral.)
  • Roth IRAs are an efficient way to pass down generational wealth in a tax efficient manner. Inherited IRA money is tax-free and heirs can leave this money invested within the inherited Roth IRA for up to 10-years to allow for further tax-free growth.
  • Current living expenses were mostly funded with cash and assets held outside retirement accounts that could be sold without material tax gains.
  • Assets held in taxable accounts were invested in more tax-friendly ways, such as individual stocks and exchange-traded funds.

The Benefit

This solution can lower your taxes in retirement and also allow for tax-efficient generational transfer of assets.  The client converted the bulk of their tax-deferred traditional IRA assets to tax-free Roth IRA assets over an 8-year period when they earned no income.  Thus, the money converted during those years was converted at the lowest federal tax-brackets.  Long-term pension and social security income streams were maximized.  The client is positioned to pay very little in federal income taxes starting in their 70’s.  This is especially critical and beneficial if taxes increase from current generational lows in future years.

We can help maximize tax efficiency for you and your heirs while also maximizing social security benefits. The team will analyze your taxes each year, taking into account dividends and capital gains from all accounts. We will also keep an eye on Medicare surcharges. The client was able to mitigate medicate surcharges both now and in the future. We can do this all while maximizing your current lifestyle and monitoring your financial plan to make sure you stay on track.

These case studies do not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted regarding your specific situation.

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