If you’re an executive nearing retirement, chances are your wealth is tied up in a mix of 401(k)s, stock options, brokerage accounts, and possibly deferred compensation. You’ve built a strong financial foundation—but now you’re asking:
How do I turn this into income I can actually use, without giving too much to taxes?
At Decima Wealth Consulting, we help high-income professionals answer that question through personalized cash flow modeling. One of the most powerful strategies we use is building tax-free income streams—so you can retire on purpose and with purpose. This article explores tax-free income strategies using tools like Roth conversions, HSAs, and personalized income modeling.
Here’s how to do it.
Why Tax-Free Income Matters in Retirement
Most retirees focus on the amount in their accounts. But what really matters is after-tax, spendable income.
If all your assets are tax-deferred (like a 401(k) or traditional IRA), then every dollar you withdraw in retirement is fully taxable as ordinary income. That means:
- Higher tax brackets in retirement
- More taxes on Social Security
- Possible Medicare IRMAA surcharges
- Less flexibility during market downturns
- Higher Required Mandatory Distributions
Tax-free income gives you control. It allows you to:
- Withdraw without triggering higher tax brackets
- Strategically supplement income during high-expense years
- Reduce the tax impact of required minimum distributions (RMDs)
- Protect your surviving spouse from bracket creep later in life
4 Ways to Build Tax-Free Income Before and During Retirement
Let’s walk through four practical strategies executives over 55 can use—especially when paired with a personalized bucket plan and tax modeling.
1. Roth Conversions with Bracket Topping
If you’re in a lower tax bracket in early retirement you can convert funds from a traditional IRA to a Roth IRA each year, “topping off” your current bracket without jumping into the next one. There is no limit to the amount you convert, but every dollar of conversion is added to your annual income.
This creates a future source of tax-free income, and:
- Reduces future RMDs
- Gives your surviving spouse tax flexibility
- Helps with estate planning for adult children in higher brackets
Pro Tip: Roth conversions work best when paired with a detailed income and tax projection model that spans multiple decades, not just this year. We use Holistiplan software to model out the cost of the Roth Conversion, model the breakeven point, and show you the reduction in future taxes by making each change.
2. Explore After-Tax 401k Contributions While You Still Can
If you’re still working and your budget allows itcheck if your employer allows after-tax contributions to your 401(k), which can sometimes be rolled over into a Roth via the Mega Backdoor Roth strategy. This allows you to still take advantage of tax deferral while in a higher bracket, but also allows you to fund large amounts into a Roth by doing a Roth In Plan Conversion of the after-tax dollars.
Executives often miss this window in their final working years—and lose a powerful lifetime benefit.
3. Use Cash Value Life Insurance Strategically
For high-income earners who’ve already maxed out Roth and HSA options, properly structured life insurance (like Indexed Universal Life or Whole Life) can be a secondary source of tax-free income through policy loans.
This is not for everyone. But in the right situation and structure it can:
- Provide long-term tax-free access to funds
- Serve as a supplemental income source in volatile years
- Reduce reliance on taxable accounts during downturns
Caution: These products must be designed with minimal commissions and maximum funding to be efficient. We often review existing policies to evaluate if they still fit your retirement income plan.
4. Health Savings Accounts (HSAs) for Tax-Free Medical Withdrawals
If you’re still working and enrolled in a high-deductible plan, HSAs are triple tax-advantaged:
- Tax-deductible contributions
- Tax-free growth
- Tax-free withdrawals for qualified healthcare expenses
You can treat your HSA as a long-term tax-free bucket—and reimburse yourself years later with qualified receipts.
How We Integrate Tax-Free Income into Your Retirement Plan
At Decima Wealth Consulting, we don’t look at your accounts in isolation. We use a three-bucket framework:
- Growth – Long-term investments for inflation protection and legacy
- Guarantees – Reliable income sources like pensions or annuities
- Liquidity – Accessible funds for short-term needs and flexibility
Then we layer on tax-aware withdrawals—including bracket topping, Social Security timing, RMD management, and charitable giving—to create a retirement income plan that’s personalized, tax-smart, and adaptable over time.
A Tax-Free Retirement Isn’t Accidental—It’s Engineered
Too many executives spend their working years focused on growth, only to reach retirement and realize they’ve created a tax bomb.
With the right strategie, executed in the right order, you can convert your savings into income that gives you freedom, not friction.
Whether you’re 5 years out or already retired, now is the time to design a retirement income plan that works for you, not just your tax bill.
Brennan Decima, CFP®
Founder, Decima Wealth Consulting
Retire on purpose. With purpose.
This content is provided for informational purposes only and should not be considered tax, legal, or investment advice. Individual circumstances vary, and strategies discussed may not be suitable for everyone. Consult your tax advisor, legal professional, or financial planner before implementing any strategy. Roth conversions and other tax-planning strategies may have long-term implications and should be evaluated within the context of a comprehensive retirement plan.
