Retired

Bob & Beth

Bob (66) & Beth (64) are retired with a comfortable spending target and a sizable pre-tax IRA balance. Their priority is to maintain their lifestyle while reducing lifetime taxes.

Goal

Create a coordinated, tax-smart retirement income plan that lowers future RMDs, manages Medicare IRMAA, and keeps after-tax income steady.

Challenges

  • Large pre-tax balances pointing to higher RMDs at 73.

  • Need to control AGI through smart withdrawal sequencing.

  • Potential exposure to IRMAA surcharges without careful pacing.

  • Desire to integrate charitable giving efficiently.

Approach

  • Multi-year Roth conversions (ages 66–72): Converted annually up to the top of the 24% bracket to pre-pay tax at known rates and shrink future RMDs.

  • RMD minimization: Entered RMD age with a smaller IRA due to conversions.

  • IRMAA management: Modeled the 2-year lookback to keep most years within targeted IRMAA tiers.

  • Withdrawal sequencing: Coordinated taxable dividends/cap-gains, IRA draws, and Roth fills to control AGI each year.

  • QCD ready (70½+): Aligned charitable giving as Qualified Charitable Distributions to satisfy part of RMDs without increasing AGI.

  • Asset location & rebalancing: Used tax-efficient placements and bracket-aware rebalancing to maintain risk targets with fewer tax surprises.

Results (illustrative)

Bob and Beth hired a financial planner, and the plan they created helped them in several ways:

  • Lower first-year RMD at 73 vs. a no-conversion baseline.

  • Reduced estimated lifetime taxes and fewer IRMAA years.

  • Stable after-tax income and portfolio risk level.

  • Potentially more tax-efficient assets passed to beneficiaries (larger Roth balances; taxable assets may receive a step-up in basis under current law).

 

Note: The above case study is hypothetical and does not involve an actual Milestone client. No portion of the content should be construed by a client or prospective client as a guarantee that he/she will experience the same or certain level of results or satisfaction if Milestone is engaged to provide investment advisory services.