Imran Razvi
Founder, Retire Well Financial Group
Here is a question most retirees never think to ask: of the money you have saved, how much of it is actually yours?
If the majority of your retirement savings sits in a traditional 401(k) or IRA, the honest answer is: less than you think. The IRS is a silent partner in every dollar of that account. When you withdraw, you pay ordinary income tax on every cent — contributions and decades of growth alike. At a 22% federal rate, a $1 million IRA is really worth about $780,000. At 24%, it is $760,000.
The good news: the tax code gives you powerful tools to change this. Roth conversions, backdoor contributions, HSAs, and other strategies can systematically shift your wealth from taxable to tax-free — reducing your lifetime tax bill by tens or even hundreds of thousands of dollars.
This is the tax-free retirement playbook. It is not about tax evasion — it is about using every legal tool the tax code offers to keep more of what you earned.
First: understand the three tax buckets
Every dollar you own sits in one of three tax buckets. The goal of tax planning is to strategically fill the right buckets — and draw from them in the right order.
Tax-Deferred Bucket
Examples
Traditional 401(k), Traditional IRA, 403(b), SEP-IRA
How it's taxed
Contributions reduce taxable income today. Every dollar withdrawn in retirement is taxed as ordinary income — including growth.
Key consideration
RMDs force withdrawals starting at age 73, potentially pushing you into a higher bracket. Tax rates may be higher when you withdraw than when you contributed.
Taxable Bucket
Examples
Brokerage accounts, savings accounts, CDs
How it's taxed
No upfront deduction. Interest taxed as ordinary income annually. Capital gains taxed at 0%, 15%, or 20% when you sell.
Key consideration
Dividends and interest create annual tax drag. However, long-term capital gains rates are often lower than ordinary income rates — making this bucket more flexible than it appears.
Tax-Free Bucket
Examples
Roth IRA, Roth 401(k), Health Savings Account (HSA), cash-value life insurance
How it's taxed
Contributions made with after-tax dollars. All growth and qualified withdrawals are completely tax-free — forever.
Key consideration
No RMDs on Roth IRAs. No income tax on withdrawals. The most powerful bucket in retirement — and the most underutilized.
"A $1 million traditional IRA is not a $1 million asset. It is a $760,000–$780,000 asset with a tax bill attached. The goal is to change that math before you retire."
— Imran Razvi
The RMD time bomb — and why it matters now
Required Minimum Distributions are the IRS's way of collecting the taxes you deferred for decades. Starting at age 73, you must withdraw a percentage of your traditional IRA each year — whether you need the money or not. For many retirees, RMDs create four compounding problems:
RMDs can push you into a higher bracket
At age 73, the IRS forces you to withdraw a percentage of your traditional IRA each year — whether you need the money or not. For a $1.5M IRA, that is roughly $56,000 in Year 1, growing each year. Combined with Social Security, this can push a couple into the 22% or 24% bracket unexpectedly.
RMDs make more of your Social Security taxable
Up to 85% of Social Security benefits are taxable — but only if your "combined income" exceeds certain thresholds. RMDs count toward that calculation. A large traditional IRA can cause your Social Security to become almost fully taxable, creating a hidden tax on income you thought was partially protected.
RMDs can trigger Medicare IRMAA surcharges
Medicare Part B and D premiums are income-based. If your modified adjusted gross income exceeds $103,000 (single) or $206,000 (married), you pay surcharges that can add $2,000–$8,000+ per year per person. RMDs from a large traditional IRA are a common trigger.
Your heirs inherit the tax problem
Under the SECURE Act, most non-spouse beneficiaries must fully distribute an inherited IRA within 10 years — potentially at their peak earning years and highest tax rates. A large traditional IRA left to adult children can result in 30–40% of the inheritance going to taxes.
The solution to all four problems is the same: reduce your traditional IRA balance before RMDs begin. The primary tool for doing that is the Roth conversion.
The Roth conversion ladder: how it works
A Roth conversion is simple in concept: you move money from a traditional IRA to a Roth IRA, pay income tax on the amount converted today, and then that money grows and is withdrawn completely tax-free forever. The art is in the execution — specifically, converting the right amount at the right time to minimize your total lifetime tax bill.
Identify your conversion window
The best time to convert is during a low-income year — after you retire but before Social Security and RMDs begin. This window, typically ages 60–72, is often the lowest-tax period of your entire adult life. Every dollar you convert during this window is taxed at today's rates instead of tomorrow's potentially higher rates.
Calculate how much to convert each year
The goal is to "fill up" your current tax bracket without spilling into the next one. If you are in the 22% bracket and have $40,000 of room before hitting 24%, converting $40,000 per year is often optimal. A fiduciary advisor runs this calculation annually, adjusting for income changes, Social Security timing, and Medicare IRMAA thresholds.
Pay the tax from non-IRA funds
This is critical. If you pay the conversion tax from the IRA itself, you lose the compounding benefit. Pay the tax bill from a taxable brokerage account or savings. This way, the full converted amount moves into the Roth and grows tax-free.
Repeat annually for 5–10 years
A Roth conversion ladder is not a one-time event — it is a multi-year strategy. Consistent annual conversions during your window can dramatically reduce your traditional IRA balance, shrink future RMDs, and build a substantial tax-free reserve.
Coordinate with Social Security timing
Delaying Social Security to age 70 increases your benefit by 8% per year — and creates more low-income years to convert. The two strategies work together: delay Social Security, convert aggressively during the gap years, then turn on a larger, partially tax-free Social Security benefit at 70.
"The years between retirement and age 73 are often the lowest-tax window of your entire adult life. A Roth conversion strategy turns that window into a permanent advantage."
— Imran Razvi
Six tax-free accumulation strategies
Roth conversions address existing savings. These six strategies build new tax-free wealth going forward — from the most accessible to the most advanced.
Roth IRA Contributions
The foundation
If your income qualifies, contribute directly to a Roth IRA every year ($7,000 in 2026; $8,000 if 50+). Contributions can be withdrawn at any time tax- and penalty-free. Growth and qualified distributions are completely tax-free after age 59½ with a 5-year-old account.
Annual limit
$7,000 / year ($8,000 if 50+)
Income rules
Phases out above $146K single / $230K married
Roth 401(k)
High-limit Roth access
If your employer offers a Roth 401(k) option, you can contribute up to $23,500 in 2026 ($31,000 if 50+) on an after-tax basis. No income limits. This is the highest-limit tax-free savings vehicle available to most workers — and dramatically underused.
Annual limit
$23,500 / year ($31,000 if 50+)
Income rules
No income limit
Backdoor Roth IRA
For high earners
If your income exceeds the Roth IRA limit, the backdoor Roth is your workaround. Contribute to a non-deductible traditional IRA, then immediately convert it to a Roth. Done correctly, this is perfectly legal and gives high earners full Roth access regardless of income. Beware the pro-rata rule if you have other traditional IRA balances.
Annual limit
$7,000 / year ($8,000 if 50+)
Income rules
No income limit via backdoor
Mega Backdoor Roth
For the serious saver
If your 401(k) plan allows after-tax contributions and in-service withdrawals or in-plan Roth conversions, you can contribute up to an additional $46,500 per year in after-tax dollars and convert them to Roth. This strategy can move over $70,000 per year into tax-free accounts for the right candidate.
Annual limit
Up to ~$46,500 additional / year
Income rules
Depends on plan rules
Health Savings Account (HSA)
The triple tax advantage
The HSA is the only account in the tax code with a triple tax advantage: contributions are pre-tax, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. After age 65, you can withdraw for any reason (taxed as ordinary income — like a traditional IRA). For healthcare costs, it is completely tax-free forever. Max it out every year you are on a high-deductible health plan.
Annual limit
$4,300 individual / $8,550 family (2026)
Income rules
Must have HDHP
Cash-Value Life Insurance (IUL / Whole Life)
Advanced strategy
Properly structured permanent life insurance — particularly indexed universal life (IUL) — can accumulate cash value on a tax-deferred basis and allow tax-free loans and withdrawals in retirement. This strategy is complex, often misused, and only appropriate for specific situations. When designed correctly by a fee-only fiduciary (not a commission-driven agent), it can supplement Roth savings for high earners who have maxed all other options.
Annual limit
Varies by policy design
Income rules
No income limit
The withdrawal sequence: order matters enormously
Building tax-free accounts is only half the strategy. The other half is knowing which accounts to draw from — and in what order — once you are in retirement. The conventional wisdom is to spend taxable accounts first, then tax-deferred, then Roth. But this is often wrong.
Optimal Withdrawal Sequencing (General Framework)
Required Minimum Distributions
Non-negotiable — take these first to avoid 25% penalty
Taxable brokerage (capital gains harvesting)
Harvest losses, use 0% long-term capital gains bracket if available
Traditional IRA / 401(k) — up to bracket ceiling
Fill current bracket without spilling into the next; run Roth conversions here
Roth IRA / Roth 401(k)
Last resort — let it compound tax-free as long as possible
HSA (for medical expenses)
Use for healthcare costs — tax-free withdrawal at any age for qualified expenses
The right sequence depends on your specific income sources, bracket, Social Security timing, and estate goals. There is no universal answer — only a personalized one. This is exactly the kind of analysis a fiduciary retirement planner runs annually.
The goal: retire with as much tax-free wealth as possible
Tax planning is not a one-time event. It is an ongoing discipline — adjusting conversions as income changes, harvesting losses in down markets, coordinating Social Security timing, managing IRMAA thresholds, and updating the withdrawal sequence as your life evolves.
The families who retire with genuine financial peace are not necessarily the ones who saved the most. They are the ones who kept the most — by planning deliberately, converting strategically, and working with a fiduciary advisor who treats tax planning as a core part of the retirement plan, not an afterthought.
It is well with my soul — and a large part of that peace comes from knowing that the IRS's claim on your retirement has been minimized as much as the law allows.
Imran Razvi
Founder & Lead Advisor, Retire Well Financial Group
Imran specializes in tax-efficient retirement planning for Maryland families — including Roth conversion strategies, withdrawal sequencing, and lifetime tax minimization. His goal: help every client keep as much of their savings as legally possible.