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When approaching retirement, it's crucial to have a well-thought-out plan that addresses your income, taxes, and investment strategy. In this case study, we'll walk through a real-life example (with names changed for privacy) of how I helped David and Allen, a couple preparing to retire in 2025, build a retirement plan that secures their financial future.
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David and Allen are a Florida-based couple who own a successful medical practice. As they prepare to sell their business and retire, they have several key objectives:
To determine how David and Allen can confidently spend $10,000 per month, I used a retirement guardrails strategy. This approach offers more flexibility than the traditional 4% rule by adjusting spending based on market performance.
Why This Strategy Works: By planning adjustments in advance, David and Allen can avoid panic during market downturns and reduce the risk of running out of money.
Tax planning is a critical part of maximizing retirement income, especially with significant 401(k) balances and large asset sales.
To minimize taxes long-term, I recommended filling up the 24% tax bracket through Roth conversions. By strategically converting funds from their 401(k) to Roth IRAs, they will:
✅ Reduce future RMDs for both David and Allen.
✅ Lower their lifetime tax burden by an estimated $650,000.
✅ Maximize tax-free growth in their Roth accounts.
Key Timing: With Allen delaying Social Security until age 67, they have several years where they can strategically convert funds at lower tax rates.
Since David and Allen will generate substantial cash from their property and business sales, they’ll use these proceeds to pay taxes on their Roth conversions — allowing more money to end up in the Roth for tax-free growth.
A well-balanced portfolio is essential to support both their lifestyle and long-term financial security.
Why This Allocation Works: By combining safer assets with growth-oriented investments, David and Allen can confidently meet their spending goals while reducing the risk of needing to sell stocks in a market downturn.
No retirement plan is complete without stress testing. Using financial planning software, I modeled how their plan would have held up during past market downturns, such as the 2008 financial crisis.
This proactive approach gives them peace of mind, knowing they can adjust if market conditions take a downturn.
David and Allen’s case highlights several essential strategies for retirees:
✅ Plan for Taxes Early: Selling assets over multiple years and using Roth conversions can reduce lifetime taxes significantly.
✅ Adopt Flexible Spending Strategies: A guardrails approach helps retirees confidently spend more in good markets while protecting their future during downturns.
✅ Diversify Investments Wisely: Balancing growth with stability ensures you can meet cash flow needs without selling investments at a loss.
✅ Use Stress Testing: Modeling your retirement plan under past market conditions can reveal weaknesses before they become real problems.
If you're preparing for retirement and want to create a plan that optimizes your income, taxes, and investment strategy, consider working with a trusted financial advisor. At Spark Wealth Advisors, we specialize in helping diligent savers like you transition confidently into retirement.
For personalized guidance, contact us today — and start turning your retirement dreams into reality.
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