From the tax return to the plan, and each year after.
We start with a household's tax return, project every future return on its current path, and test strategies and a backup plan until we have the strongest plan we can find. With The Relationship, we then stay on it through the year, calculate this year's conversion from the year's real income once it is known, not from an estimate, and check it on the return.
1. Your plan
Both ways of working with us.
In planning software, on the household's own numbers, before anything else happens, we do the work both ways start with: the long-term strategy, a Backup Plan, and what we tested.
- Backup Plan: the same plan run as if one spouse dies first and the other files single. For someone on their own, the same plan run over fewer years than the projection assumes, in case the focus moves to the next generation.
- What we tested: the strategies run against staying on the current path, with the result of each.
- Each year's conversion: the strategy sets how each year's conversion is decided. In a year with a required minimum distribution (RMD: the yearly amount the law requires to come out of a pre-tax account), the RMD comes out first.
2. Through the year
The Relationship.
We talk through the plan as the year goes, as income, spending or the household changes. In the fall, a review looks at where the year's income is heading and sets this year's conversion.
3. The December work
The Relationship.
A year's income isn't known until the year is nearly over. So this year's conversion amount is calculated from the year's real income, once it is known, not from an estimate. In a year an RMD is due, the RMD comes out first and cannot be converted, so the conversion is calculated after it. The tax on the conversion is planned with it, before the return is filed.
4. Your return, prepared and checked
The Relationship.
With The Relationship, we prepare the tax return each year. A short recap checks the filed return against the plan: that comparison is how we grade our own work, and the next year starts from what really happened.
The full projection: Harold and Diane, a hypothetical couple
Projected federal income tax, if nothing changes and with the plan
Harold 66 and Diane 64 in 2026; $1,400,000 in traditional IRAs; projected 2026–2057.
| If nothing changes | With the plan | Difference | |
|---|---|---|---|
| Their lifetime tax, 2026–2057 | $1,053,091 | $463,409 | $589,682 less |
| Their heirs' estimated tax, on what is left at the end of 2057 | $1,239,362 | $99,508 | $1,139,854 less |
| Together | $2,292,453 | $562,917 | $1,729,536 less |
Projected for this hypothetical couple: about $1.7 million less, including the heirs' tax. Every household's numbers come out differently.
Only three tax choices changed: Roth conversions · withdrawal order · which account holds the growth.
How it was calculated
- The household. Harold and Diane are a hypothetical couple. The $1,400,000 is what they hold in traditional IRAs when the projection starts; it is not everything they own.
- The projection. Planning software, in future dollars (the dollars of each future year), federal income tax only, 2026 to 2057, with both living long: Harold to 92, Diane to 95. Pennsylvania does not tax Roth conversions, so the projection is federal income tax. "If nothing changes" is the current plan with no changes. "With the plan" changes only the three tax choices above. Spending, what the couple owns, the assumed return and Social Security are the same in both.
- The assumed return. Every projection needs one. Each year's RMD is the account's value on December 31 multiplied by a life-expectancy factor, so projecting future RMDs means projecting growth. Here it is 7.8% a year. With a real client, the rate is worked out together with them. It fits this household and may not fit others, and it is an input the tax figures rest on, not a promise.
- The three tax choices. Roth conversions move money from the traditional IRAs into a Roth, with the tax paid in the year it moves. Withdrawal order is which accounts the couple's spending comes from first; money taken out of a traditional IRA is taxed as ordinary income and money taken out of a Roth, after age 59½ and once the Roth has been open five years, is not, so the order changes how much of each year's income is taxed. Which account holds the growth: what the couple owns is the same in both, and only which account holds the growth changes; growth inside a Roth is not taxed when it comes out and growth inside a traditional IRA is, so where the growth sits changes the lifetime tax.
- The heirs' estimated tax. The software does not print it, so it is built from what the software does print. At the end of 2057, $3,338,300 is left in traditional IRAs if nothing changes and $268,031 with the plan. Each balance is taken out over the 10 years the law allows, in equal shares of what is left, still growing at the assumed return, and every withdrawal is taxed at the software's 24% estimated rate. The 24% is a floor: at a higher rate, the heirs' tax and the difference are both larger.
Hypothetical household. Projection, future dollars; federal income tax only; the current plan with no changes; 2026–2057, with the heirs' tax on what is left at the end of 2057.
Why the year is built this way
Every pre-tax dollar in a traditional IRA is taxed as ordinary income when it comes out. RMDs begin at 73 or 75, depending on birth year: 73 for anyone born from 1951 through 1959, and 75 for anyone born in 1960 or later.
For Harold and Diane, nothing is required before 2035. That year, when Harold turns 75, the first RMD arrives, and the RMDs grow from there, to about $386,000 in 2057.
For most households, the lowest-bracket years come after retirement and before RMDs begin. In those years, more of the IRA can be converted to a Roth at a low tax rate. Those low-bracket years don't end all at once. Income rises in steps: when Social Security starts, when RMDs start, and when a joint return becomes a single one. Each step fills more of the low brackets, so less of the IRA can be converted at a low rate.
If you are on your own now, after the death of your husband or wife, the step from a joint return to a single one is not a projection for you. Your plan starts from this year, with your accounts as they stand today. Your plan is built on your own return, with every future return projected for you as one person, and it still has a backup plan: the same plan run over fewer years than the projection assumes, in case the focus moves to the next generation. If Social Security or RMDs have not started, those steps are ahead of you, and the years before them are planned the same way. You can work with us at any balance, starting with the quiz and the free 30-minute call.
If you inherited an IRA from someone other than your husband or wife, you must generally empty it within 10 years (for deaths after 2019). Its tax falls inside those years, so how much comes out in each of them is part of the same yearly decision.
Illustrative, for most households. The size of each step differs from one household to the next.
A conversion is not free. The tax is paid now, on purpose, ideally from money outside the IRA. A large conversion year can raise Medicare premiums two years later, through the Medicare premium surcharge (IRMAA). It can also make more of Social Security taxable.
So the decision comes every year, before the next step: how much to convert, and at what rate.
Harold and Diane are a hypothetical household. Projection by planning software, in future dollars; the current plan with no changes.
Two skills
In retirement tax planning, strategy and execution are two different skills. We do both.
The strategy is The Blueprint. Calculating each year's conversion from the year's real income and checking it on the return are the execution.
Every Tax Return, Planned: two ways to work with us
| The Blueprint | The Relationship | |
|---|---|---|
| Long-term strategy | ✓ | ✓ |
| Backup Plan | ✓ | ✓ |
| What we tested | ✓ | ✓ |
| Delivered as a report and gone through together | ✓ | ✓ |
| The December work: calculating this year's conversion amount | – | ✓ |
| Tax return preparation | – | ✓ |
| The strategy compared to the tax return each year | – | ✓ |
The Blueprint is the strategy for every year ahead, delivered and gone through together once, ready to take to the professional who helps with the household's taxes. With The Relationship, the December work is ours: we calculate each year's conversion from the year's real income, once it is known, and we stay on the strategy through the year.
With The Blueprint, you keep working with whoever helps you now, and the finished strategy goes with you as a report. With The Relationship, we calculate each year's conversion, prepare the return, compare the return to the strategy, and start next year from what happened.
How it starts
1 · The 60-second quiz. It says, from your answers, whether a free 30-minute call makes sense. If it does, you pick a time on the next page; if not, a free guide arrives by email. The answers are in front of Dan when the call starts.
2 · The first call. A free 30-minute Microsoft Teams call with Dan Fratantoro, CPA, CFP®. He goes through which retirement tax questions apply to the household, how we approach each one, and what the work looked like for Harold and Diane, the hypothetical couple above, and he quotes the cost for the household. Last year's tax return in front of you is optional; it makes the questions more specific.
3 · What happens next is agreed on the call.
For retirees and near-retirees with $1 million or more saved for retirement in all accounts combined, often mostly in pre-tax accounts such as traditional IRAs, 401(k)s and 403(b)s.
The 60-second quiz says, from your answers, whether a free 30-minute call makes sense. If it does, you pick a time on the next page; if not, a free guide arrives by email.