How to Avoid Paying Taxes on Over $100,000 a Year in Retirement

I'm Tyler, a former financial advisor and portfolio manager. Now, I create financial content for free so that you don't have to pay for it.

Step-by-Step Strategy

Assume I'm a married couple filing jointly at 30 years old.
I'll put $1,000 a month into a Roth 401(k) and invest it in low-cost index funds.
I'll put another $1,000 a month into a taxable brokerage account and invest it in low-cost index funds.
At 65, assuming a 7% real rate of return, each account should be worth about $1.6 million.

Tax Minimization Tactics

Here's where it gets interesting. I'll start by drawing down 7% a year from my taxable brokerage account. That's about $116,000. After the married filing joint standard deduction of $30,000, I can tell the government that I only made $85,000. This puts us in the 0% tax bracket for capital gains.

Long-Term Security

Even if the worst were to happen and we depleted the taxable brokerage account within a decade, I'd still sleep well at night knowing that the Roth 401(k) will have most likely grown to just over $3.4 million by that time. At that point, we can withdraw just about whatever we want, 100% tax-free.

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