Summary:
A tax-free retirement sounds like a fantasy—but it’s actually possible with smart planning and a little discipline.
In this episode of The Retirement Cheat Code, JD White walks through a real client case using his financial planning software to show exactly how one Colorado couple built a retirement plan where they’ll never write another check to the IRS. From Roth conversions to filling tax brackets strategically, JD proves that with the right moves, you really can retire tax-free (or at least pretty darn close).
Hi everyone, JD White here, and welcome back to The Retirement Cheat Code. Today, I’m doing something a little different. We’re going behind the scenes into my financial planning software so I can show you—numbers and all—how I helped a real couple plan for a tax-free retirement. Let’s dive in.
A Real Colorado Couple’s Plan
These clients recently joined me, and I think their situation will look familiar to many people. They’re not sitting on millions—most of their net worth is tied up in their home, which is common here in Colorado. Their mortgage is small, and they’ve got a few investment accounts:
- A joint taxable investment account
- Some pre-tax retirement accounts
- No Roth accounts (until now)
One of them also had employer stock inside a 401(k), which we handled in a unique way.
The Key Move: NUA Strategy and Roth Conversions
We started by taking the employer stock and doing what’s called a Net Unrealized Appreciation (NUA) withdrawal. In simple terms, that means:
- We moved the stock from the 401(k) into an individual account.
- The client paid income tax only on the cost basis (what they originally paid for the stock).
- Now, any future gains will be taxed at the long-term capital gains rate—which, for their bracket, is 0%.
That’s already a huge win. But we didn’t stop there.
Next, we used Roth conversions to start filling up their current 22% tax bracket every year. That means we’re taking just enough out of their pre-tax accounts each year, converting it to Roth, and paying taxes now while their rate is still relatively low. Then, it grows tax-free—and comes out tax-free in retirement.
The Numbers Behind a Tax-Free Retirement
Looking at the plan inside the software, here’s what we see:
- Their effective tax rate right now is just under 15%, and it declines gradually as we do more conversions.
- By the time they retire, everything in their pre-tax bucket will have been converted to Roth.
- They’ll have no future withdrawals from taxable or tax-deferred accounts—just tax-free income from their Roth accounts and tax-advantaged Social Security.
Their projected income in retirement will come from:
- Social Security: around $49,000/year
- A small pension: about $11,000/year
- Tax-free withdrawals: from their Roth IRA to cover the rest
That setup covers all their needs without triggering new taxes or higher Medicare premiums.
What Could Change (and Why That’s Okay)
Now, could life throw them a curveball? Of course.
If a health event or unexpected expense forces them to sell assets or generate taxable income, they could owe a bit of tax—but it would be minimal compared to what they’d owe if they’d stayed in all pre-tax accounts.
The key is intentional planning—filling tax brackets, paying what’s due now, and removing uncertainty later.
Why This Strategy Works
This couple’s success came down to three big things:
- Acting early — giving the plan time to work before retirement.
- Using Roth conversions strategically each year.
- Avoiding tax surprises by shifting growth into the tax-free bucket while they controlled the timing.
They may end up with slightly less in total account value on paper, but their after-tax income—the money they actually get to use—is higher, more predictable, and far less stressful.
So yes, a tax-free retirement is possible. It’s rare, but achievable with the right tools and discipline.
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