Bob and Lisa have spent their working lives saving diligently, building significant wealth, including a fully paid-off home. Recently retired, they’re ready to embrace this new chapter by traveling the world and creating lasting memories—all while ensuring they leave a meaningful legacy for their two successful adult children.
While they prefer to remain in their home state of California, they’re mindful of its high income taxes and want to understand how staying there might impact their cash flow and long-term financial goals. With $2 million in Traditional IRA assets and $1 million in a taxable brokerage account, Bob and Lisa feel confident in their resources but are concerned about the potential impact of inflation and future tax increases on their financial security.
The Numbers
3000000
Investable Assets
150000
Annual Living Expenses
30
Years of Retirement
Scenario Analysis
What did we look at?
The Outcome
Bob and Lisa’s retirement was already secure but by optimizing their income and accounts they can securely enjoy their travel goals and preserve tax free assets for their heirs.
Retirement planning is often about trade-offs but there are also easy wins.
Bob and Lisa’s strategic use of Roth conversions between ages 65 and 73, combined with delaying Social Security benefits until age 70, significantly enhanced their retirement security. By converting portions of their traditional IRA to a Roth IRA during a lower tax bracket window, they effectively reduced their future required minimum distributions (RMDs) and the associated tax burden. This proactive approach resulted in an estimated tax savings of over $1.4 million, allowing their retirement assets to grow more efficiently. Furthermore, delaying Social Security to maximize their benefit provided a steady, inflation-adjusted income stream, reducing their reliance on taxable withdrawals and offering greater financial flexibility throughout retirement.
This tax savings alone meant that Bob and Lisa’s children stand to inherit almost $1.5 million more dollars on an after-tax basis.
The provided examples are fictitious and designed for illustrative purposes only. They are not intended to represent the experiences of any specific client or individual. Financial North Partners and NewEdge Advisors do not provide tax, legal, or accounting advice. You should consult your own tax, legal, and accounting professionals before making any decisions based on the strategies or concepts discussed.
5000
Additional annual spending with confidence.
1479250
Estimated tax savings over retirement.
1495815
Additional dollars passed down to heirs after-tax.