How Ray and Roy Can Retire Smart: Tax Strategies, Roth Conversions, and Real-Life Planning Tips
Retirement looks different for everyone and for Ray and Roy, it’s all about turning years of disciplined saving into a sustainable plan that works. With $2 million saved, they’re in a solid position, but like many nearing retirement, their biggest question isn’t if they can retire it’s how to do it smartly. Their story offers valuable lessons for anyone planning to make work optional in the next few years.
Ray and Roy’s financial picture is strong: 85% of their savings sit in taxable accounts, 10% in tax-deferred accounts like 401(k)s, and the remaining 5% in other investments. Their fixed income starts at $50,000 annually largely from Ray’s teacher pension and will rise to $70,000 when Roy begins collecting Social Security at 67. Their goal is to spend about $96,000 per year, but they’re wondering if one of them should take a part-time job to smooth the early years of retirement.
The challenge? Their tax structure. Because most of their assets are in taxable accounts, every withdrawal triggers potential tax implications. Spending from their brokerage accounts first could make sense—it allows their tax-deferred and Roth accounts to keep growing but it requires careful coordination to avoid bumping into higher tax brackets. That’s why they’re exploring Roth conversions, which could give them more flexibility later by creating a pool of tax-free income.
Roth conversions are particularly powerful before Social Security benefits and required minimum distributions (RMDs) kick in. Converting a portion of their pre-tax savings to Roth while their income is lower can reduce future tax exposure. The key is managing conversions in the “sweet spot” between too little impact and too high a tax hit in any single year. For couples like Ray and Roy, it’s about long-term efficiency, not short-term gains.
Pensions and Social Security also play a big role in shaping the plan. Ray’s pension provides steady income, but it doesn’t count as “earned income,” meaning it can’t be used to qualify for Roth contributions. The same applies to Social Security. This distinction often surprises retirees who still want to contribute to Roth IRAs in early retirement, but unless they have earned income from a job or business, they’ll need to rely on conversions instead.
Meanwhile, another case on the show Elwood Blues illustrated what financial readiness looks like at the top end. With nearly $8 million in assets, Elwood plans to spend up to $300,000 a year in retirement. Deferred compensation from his company will add another $1.5 million, giving him flexibility and a tax advantage. Deferred comp plans allow executives to delay receiving income until they’re in a lower tax bracket, creating what’s known as “tax arbitrage.” For high earners, that’s a huge advantage and a strategy that can also apply to entrepreneurs or anyone with uneven income streams.
Beyond taxes, the show touched on something lighter but telling: lifestyle choices. When the hosts asked listeners about their favorite vehicles, the Ford F-150 topped the list. It’s not just about horsepower it’s about practicality. Like retirement planning, it’s a balance of reliability, comfort, and function.
The episode closed with a reminder that no single strategy fits everyone. Ray and Roy’s success will depend on ongoing adjustments balancing their spending, optimizing their tax strategy, and reviewing their plan annually. For anyone in a similar spot, the takeaway is simple: don’t just save for retirement plan for it. Make every dollar work harder, last longer, and align with the life you actually want to live.
Intended for educational purposes only. Opinions expressed are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Neither the information presented, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Consult your financial professional before making any investment decisions. Opinions expressed are subject to change without notice.
IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC. A Registered Investment Advisor.
• Pure Financial Advisors, LLC. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
