Stay Retired

Vinnie & Maria

Vinnie (70) & Maria (70) are retired and want steady, after-tax income with less tax drag—and a simpler, consolidated portfolio—before RMDs begin at 73.

Goal

Create a coordinated, tax-smart retirement income plan that simplifies accounts, lowers future RMDs, manages Medicare IRMAA, and supports their giving.

Challenges

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

  • Accounts scattered across multiple institutions; hard to rebalance and plan withdrawals.

  • No clear withdrawal order (taxable vs. IRA vs. Roth), making AGI unpredictable.

  • Risk of crossing IRMAA thresholds without careful pacing.

Approach

  • Consolidation & simplification (both spouses): Combined old IRAs/401(k)s to tighten control over rebalancing, withdrawals, and future RMDs.

  • Gap-years Roth conversions (ages 70–72, MFJ): Converted each year up to the top of a targeted bracket (e.g., 22%/24%) to shrink pre-tax IRAs before RMDs start at 73.

  • IRMAA management (per spouse): Modeled the 2-year Medicare lookback and timed conversions/capital gains to keep most years within targeted tiers.

  • Withdrawal order: Sequenced taxable → IRA → Roth to manage AGI and reduce bracket creep.

  • Asset location: Kept tax-inefficient income (bonds/REITs) inside IRAs/Roth; used more tax-efficient holdings in taxable for better after-tax outcomes.

  • QCD setup (70½+): Established Qualified Charitable Distributions so future RMDs can be satisfied without increasing AGI.

Results (illustrative)

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

  • Reduced estimated lifetime taxes with smoother, more predictable after-tax income.

  • Fewer projected IRMAA years due to paced conversions and withdrawal sequencing.

  • 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.