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Case Study: A $500K Qualified Account Transformed into Tax-Free Income and Legacy

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For many professionals approaching retirement, there’s an unspoken anxiety behind their account balances.

 

Yes, the 401(k) looks strong. Yes, they’ve been consistent. But there’s a looming question behind those numbers:

 

"Is this really mine—or will taxes, markets, and longevity quietly take it all back?"

 

The reality is, qualified accounts—IRAs, 401(k)s, and similar plans—may appear abundant on paper, but they often hold hidden vulnerabilities. Taxes, required distributions, and market losses can dramatically reduce what you take home. And without a clear exit strategy, those dollars may be distributed inefficiently or even lost in probate.

 

Let’s walk through a real-world inspired case that shows how we can reimagine a traditional retirement plan using Fixed Indexed Annuities (FIAs) and Indexed Universal Life (IUL) to create stable income, tax advantages, and generational wealth.

 

From Traditional to Strategic: Meet Bryan

 

Bryan, a 59-year-old engineering executive, had done "everything right" on paper.

  • $510,000 in his 401(k)

  • No debt

  • Target retirement age: 65

  • Married, two adult children

  • Concerned about taxes in retirement and the long-term care burden on his wife

 

But as he reviewed his finances, two big concerns emerged:


  1. "I’m going to get hammered by taxes once I start pulling this money out."

  2. "If something happens to me, there’s no plan for how this money benefits my family."

 

The 401(k) had become a ticking tax time bomb—and Bryan knew it.

 

The Plan: Redesigning the $500K to Work Smarter

 

A two-part strategy was designed that would transition Bryan from accumulation to preservation, income, and legacy—without relying on the market or deferring taxes indefinitely.

 

Phase 1: The Roth Conversion Bridge

 

Bryan didn’t want a huge tax bill all at once. So a 3-year Roth conversion ladder was designed:


  • $170K per year converted from his 401(k) to a Roth IRA

  • Taxes paid incrementally during lower-income years pre-retirement

  • Each Roth conversion was then rolled into a Fixed Indexed Annuity with a 20% premium bonus, designed to begin income payments at age 67

 

Why this worked:


  • The premium bonus helped offset the tax cost of conversion

  • His income base grew during the deferral period

  • At 67, he’ll have guaranteed lifetime tax-free income

 

Phase 2: The IUL for Liquidity and Legacy

 

A $100,000 IUL policy was also funded, spread across five years:


  • Projected to accumulate over $200,000 in tax-advantaged cash value by age 70

  • Offers tax-free withdrawals or policy loans if needed

  • Delivers a $400,000 tax-free death benefit to his wife or kids

  • If used with a trust, can avoid probate entirely

 

The Result

 

At age 67:

  • Bryan has $46,000/year in guaranteed tax-free income from his Roth-funded FIA

  • No Required Minimum Distributions

  • A $400,000+ death benefit secured for his heirs

  • Liquidity through his IUL if life throws a curveball

  • He’s created a structure that his wife and children can easily follow if he passes first

 

"I feel like I just reclaimed my retirement," he said.

"This money finally feels like it’s working for me—not against me."

 

Let’s Talk Strategy

 

It’s not about the number in your 401(k). It’s about what you keep, how it serves you, and what it becomes once you no longer need it.

 

If you’ve accumulated $500K or more in qualified accounts, now is the time to consider converting that balance into a tax-advantaged income strategy and a clear, protected legacy plan.

 

Let’s explore whether a combination of Fixed Indexed Annuities and IULs could help you do the same.

 

 

 

 


 
 
 

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