The $120,000 Roth Strategy That Cuts Retirement Taxes to $20,000 Instead of $35,000

A self-employed architect retires at 65 with about $300,000 of annual retirement cash flow and roughly $20,000 in federal taxes. The tax outcome depends on which retirement dollars are withdrawn from different account types. Roth IRA and Roth Solo 401(k) withdrawals are tax-free, and HSA reimbursements for qualified medical expenses are also tax-free. Traditional IRA and Solo 401(k) withdrawals are fully taxable, while Social Security is partly taxable. Qualified dividends from a taxable brokerage are taxed at long-term capital gains rates. Only taxable withdrawals, dividends, and taxable Social Security appear on the 1040, keeping adjusted gross income lower and placing dividends in the 15% bracket. The OBBB senior bonus deduction may phase out above $75,000 of MAGI for single filers, affecting higher-income retirees.

"The trick comes down to which account each dollar is pulled from. Roth IRA and Roth Solo 401(k) draws: $120,000, tax-free. HSA reimbursements for qualified medical: $30,000, tax-free. Traditional IRA and Solo 401(k) draws: $80,000, fully taxable. Social Security: $40,000, partly taxable. Qualified dividends from a taxable brokerage: $30,000, taxed at long-term capital gains rates."

"Only the traditional draws, the dividends, and a slice of Social Security ever hit the 1040. That alone keeps adjusted gross income low enough to land in middle brackets rather than the 24% or 32% zones. Under the 2026 brackets, a single filer pays 10% up to $12,400, 12% to $50,400, 22% to $105,700, and 24% to $201,775. The standard deduction is $16,100, with an additional senior amount on top."

"Qualified dividends inside this income range are taxed at 15%. One detail worth verifying yourself: the OBBB senior bonus deduction phases out above $75,000 of MAGI for single filers, so a high-income retiree does not get it. Shift the mix toward Roth, and the math improves fast. Heavier traditional draws push more Social Security into the 1040."

"Most self-employed architects spend decades with lumpy income: strong project years, lean transition years, and a handful of windows where taxable income drops sharply. That uneven pattern is the gift. It lets a sole practitioner build four distinct tax buckets while a salaried peer stays locked into one. By the time the principal turns the lights off, the retirement paycheck can pull from each bucket in whatever mix produces the lowest IRS bill."

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