$2M Strategy

Nick Davis, CFP

Once you have $2M in traditional IRA/401k and start pulling withdrawals, you become visible to risk.

At 73 (now 75) RMDs begin. A $2M IIRA will force about $80k/year that will drive taxes higher.

This stack on top of SS and Pension, then if reliant on IRMAA, you will pay more in Medicare premiums.

Provisional: Income—85% of SS will be taxable. If all income in one bucket.

Solution

Create 3 tiers of income

  1. The Suppression Bucket (tax deferred)

  2. The Invisible Bucket (Roth IRA)

  3. The Stealth Bucket (taxable brokerage)

Returns vs Structure

  • 6% return @ 30% tax rate = Keep Less

  • 5% return @ 15% tax rate = Keep More

  • Structure determines what you keep:; Returns determine what you earn

The Suppression Bucket

  • Flexibility Control

  • Limit size of IRA to $600k max at age 73 (or 75)

  • RMD ~ $25k/yr, which is manageable

  • Note SS + Pension + RMD impacts tax bracket

  • For IRA of $2M at age 73, RMD ~ $80k/yr (triggers IRMAA & SS taxation)

  • RMDs grow each year

  • Low Income Window between retirement & age 70 (no paycheck, no RMDs, no SS

  • Convert now at 12-22% tax rate vs being forced later at 24%

The Invisible Bucket

  • Liquidity Control

Why Roth is invisible:

  • Not counted as provisional income

  • Don’t trigger IRMAA

  • No RMDs

The Stealth Bucket

The taxable brokerage

  • Tax efficient ETFs—use low-turnover ETFs that allow you to control when capital gains are realized, rather than a fund manager forcing taxable events upon you.

  • Growing Dividend Payers—Invest in quality companies that raise dividends steadily. Income grows faster than inflation and can remain tax-efficient when managed well.

  • The benefit—this Stealth Income can fund a lifestyle without appearing on your 1040’tax return, helping you stay below penalty thresholds.

Michael Wei