Doing It Right From the Start: A Tax-Free Retirement Case Study

In this episode of the Divorce the IRS Podcast, Jimmy Miller begins a new three-part case study series showing how the concepts discussed throughout the podcast can work in real life.

This first case study focuses on Mary, a fictional saver who starts making smart retirement planning decisions at age 30. By using Roth accounts, taking advantage of her employer match, and carefully managing withdrawals in retirement, Mary creates a strategy designed to keep her in the 0% tax bracket throughout retirement.

Jimmy walks through how Mary contributes to a Roth 401(k), receives a traditional 401(k) employer match, funds a personal Roth IRA, and allows those accounts to grow over 30 years. He then explains how Mary structures her income in retirement using Roth withdrawals, traditional IRA withdrawals, Social Security, the standard deduction, and required minimum distribution planning.

In this episode, Jimmy discusses:

Why starting early can make a tax-free retirement much easier to achieve
How Roth 401(k) contributions can build future tax-free income
Why employer matching contributions usually go into a traditional pre-tax account
How Mary saves 15% of her income each year for 30 years
How her accounts grow to more than $2.2 million by age 60
Why Roth accounts can provide flexibility in early retirement
How the standard deduction can help offset traditional IRA withdrawals
Why provisional income matters when Social Security begins
How Mary keeps her Social Security benefits from becoming taxable
What happens when required minimum distributions begin at age 73
How QLACs and charitable giving may help manage future RMDs
Why saving taxes while working may not be worth paying much more in retirement

Jimmy also compares Mary’s Roth-focused strategy to friends who followed conventional tax-deferral advice. While Mary gave up tax deductions during her working years, her retirement income was structured to remain tax-free, while her friends ended up owing significantly more in retirement taxes.

In the next episode, Jimmy will look at another case study involving a couple closer to retirement who already has more than their ideal amount saved in tax-deferred accounts.

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