When the Simple Math Misses the Point 

Starting point

We began working with a married couple approaching retirement. The husband had spent his career at the Department of Defense; his wife was a former teacher with a pension of her own. Between their two pensions and future Social Security, they had roughly $160,000 a year in pretax income — and their projected spending, even at the high end, was around $130,000 after taxes. Their baseline needs weren’t just covered; they had a surplus.

The question was what to do with the rest: approximately $2 million sitting in pretax retirement accounts — Thrift Savings Plan, IRAs, and similar vehicles — that they didn’t need for daily life.

Realization

When you ran their numbers through a standard Roth conversion calculator — as many people in their position do — the answer came back clearly: don’t convert. You’d pay a significant tax bill today, and the pretax balance, left alone, would remain the bigger number.

But that calculator was answering a narrow question — comparing two account values side by side, without seeing anything around them. It couldn’t see that this couple would barely touch their pretax accounts, allowing the balances to compound for years. It couldn’t project that their Required Minimum Distributions would start at over $100,000 a year and climb past $300,000 by their 90s — forced withdrawals they neither wanted nor needed. It couldn’t account for the fact that their children would likely inherit during peak earning years, when the SECURE Act’s ten-year distribution window would compress those inherited balances into the highest marginal tax brackets. And it couldn’t weigh what mattered to this couple: not just having enough, but passing it forward efficiently.

Studying the complete picture — spending, surplus, growth trajectory, RMD timeline, and the family’s tax exposure across generations — produced a fundamentally different answer.

Approach

Because their pensions and Social Security fully covered their expenses, the couple had an unusual degree of freedom: they didn’t need their portfolio to generate income, and they didn’t need to de-risk. We kept roughly 80 percent of their assets in a globally diversified equities portfolio built through a custom indexing approach that stripped out unnecessary fees and focused on holdings with strong risk-adjusted return profiles.

The remaining 20 percent we structured as a safety net using a buffered ETF strategy. The couple had no interest in bonds, which hadn’t performed well, but they wanted to know that if they needed to dip into savings — a new car, a trip with the grandchildren — they could do so without selling into a down market.

Then we turned to the tax strategy. We recommended beginning Roth conversions immediately, sized each year to fill up to the top of the 24 percent tax bracket — aggressive enough to meaningfully reduce their future pretax balances, but calibrated to avoid pushing them into a higher bracket in any given year.

Looking ahead

The projected impact is approximately $1.6 million in lifetime tax savings. With the conversion strategy, their projected estate value is several million dollars higher than without it — a difference driven not just by the conversions themselves, but by the compounding effect of moving assets into an environment where future growth is never taxed again.

Just as importantly, the assets their children eventually inherit will arrive in Roth accounts rather than traditional ones — meaning their kids won’t face six-figure annual distributions stacked on top of their own income during their highest-earning years.

The conventional wisdom — and the calculator built to deliver it — was technically correct on its own terms and completely wrong for this family. The difference was seeing the whole picture.