Is Financial Software Giving You False Retirement Confidence

High earners approaching retirement often face a different kind of financial challenge not how to save, but how to optimize. For Wendy and Joe, both in their mid-50s and nearing the peak of their earning years, the focus isn’t on accumulating assets anymore but on managing taxes, investments, and spending with precision. According to financial software, their net worth could exceed $10 million at passing, though such projections come with important caveats. They currently own a $1.1 million home with a $500,000 mortgage at a low 2.5% rate and hold $579,000 in taxable accounts, $2.2 million in tax-deferred accounts, and $500,000 in tax-free accounts. With such a strong foundation, the real question becomes how to convert that wealth into lasting, efficient retirement income.

One of Wendy’s main considerations is whether to continue doing Roth conversions while still working in a high tax bracket. The couple already makes full Roth 401(k) contributions and converts around $10,000 in after-tax contributions annually. However, with a total annual savings rate of $64,000 including $12,000 in tax-deferred contributions they face diminishing returns on further Roth conversions at their current income level. The hosts of the discussion noted that while Roth strategies are powerful, the assumptions built into financial software can often create unrealistic expectations. A projected $10 million estate sounds promising, but long-term projections depend heavily on future market returns, inflation, and spending behavior all variables that need to be revisited annually.

Wendy hopes to retire at age 60, with an initial annual spending goal of $170,000 that tapers to $160,000 over time. Based on their projected $4 million in liquid assets, that would amount to a withdrawal rate of roughly 4.7%, slightly above the standard guideline for sustainability. Combined with expected Social Security benefits of about $3,700 each at full retirement age, their income outlook is solid. Still, the hosts recommend working at least until 62 to allow for stronger Social Security benefits and to preserve more investment capital. This would create a greater financial cushion and reduce the need for higher withdrawals in the early years of retirement.

When it comes to Roth conversions, the key is timing and flexibility. The couple is encouraged to continue maximizing after-tax 401(k) contributions and converting those funds to Roth accounts for tax-free growth. They could also consider rolling existing IRAs into a 401(k) to open the door for backdoor Roth contributions, which are ideal for high earners. Viewing their liquid assets collectively rather than in isolated buckets will also help them make smarter tax decisions and ensure that each account taxable, tax-deferred, and tax-free plays its proper role in their long-term strategy.

The discussion also touched on the importance of financial flexibility in retirement. While Wendy focuses on maximizing tax-free growth, it’s equally vital to maintain accessible cash reserves. Spending from non-qualified accounts can help facilitate Roth conversions without triggering financial strain. Maintaining an emergency fund while continuing to invest ensures they can enjoy retirement without feeling overly restricted. Ultimately, the goal is to strike a balance growing wealth efficiently while also living a fulfilling, regret-free retirement.

The conversation also featured other listener cases, offering a broader perspective on mortgage and savings decisions. Kurt and Courtney from New York, for instance, are considering paying off their $350,000 mortgage on a $450,000 home. With a 4.75% interest rate, the question becomes whether to pay it down early or continue investing. Paying off the mortgage would reduce financial stress and guarantee a 4.75% “return,” but investing those funds in the market where historical returns average closer to 7% could yield more growth over time. The recommendation is to reassess as they near retirement, factoring in emotional comfort and financial flexibility.

Tim and Faith from Boston offer another example. Earning between $1.2 million and $1.5 million annually, they’ve built a strong portfolio that includes $2 million in unvested RSUs, over $1 million in brokerage assets, and multiple retirement accounts totaling $1.3 million. With expected annual retirement expenses of $144,000, they face the common high-earner question: should they continue with Roth 401(k) contributions or switch to traditional 401(k)s? Given their 32% tax bracket and a 35% effective rate, the hosts suggest that shifting to traditional contributions could offer meaningful short-term tax relief. However, the long-term benefits of Roth growth especially in retirement when tax rates could be higher make it worth reevaluating periodically. A blended approach with future Roth conversions may deliver the best of both worlds.

The overarching takeaway from these discussions is that retirement planning for high earners is not about one-size-fits-all answers it’s about precision and adaptability. Strategies that include Roth conversions, balanced asset allocation, tax-smart withdrawals, and flexible mortgage management can make a substantial difference. Annual plan reviews and scenario testing are essential for adjusting to market realities. Ultimately, the goal isn’t just to retire rich it’s to retire ready, resilient, and in control of your financial destiny.

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.

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• 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.