MML #073: You've Been Saving on Taxes for 30 Years. Now What?

I had a call with a client this week. She told me, "I've spent my whole career trying to lower my tax bill. I never stopped to ask what happens when all of it has to come back out."

She's right. And she's not alone.

If you've spent the last 25 or 30 years as a high-earning attorney, chances are you've done exactly what every good adviser, CPA, and 401(k) brochure has told you to do. Max out the 401(k). Look at the deferred comp plan. Consider the 1031 exchange. Maybe an annuity. Anything that pushes the tax bill into the future.

That's a smart move. But it creates a side effect that doesn't show up for decades.

The bill always comes due

By age 65, a lot of attorneys are sitting on a mountain of tax-deferred money. The only way to turn it into retirement income is to distribute it and pay ordinary income taxes on every dollar.

Necessary evil? Maybe. But "necessary" is doing a lot of work in that sentence.

What I'd rather see is you choosing when you pay taxes and at what rate. Right now, the IRS and your calendar make that call for you.

Pick your bracket

This is where tax liquidity comes in. The idea is simple. You build up money in different "buckets" so you can choose which one to pull from based on the year you're in.

I wrote a piece a while back called The Three Buckets That Will Make or Break Your Retirement. Quick refresher:

• Tax-deferred (401(k), Traditional IRA): every dollar out gets taxed as ordinary income.
• Taxable (your regular brokerage): you've already paid tax on the contributions, so you only owe on the gains.
• Tax-free (Roth IRA, Roth 401(k)): zero taxes on the way out.

When you have all three, you get to play offense with your tax bracket. Want to keep income low one year so your Medicare premiums don't spike? Pull from the brokerage. Want to soak up some space in a lower bracket before RMDs kick in? Do a Roth conversion. Need $200,000 for that beach house down payment? Pulling it all from a Traditional IRA spikes your income by exactly $200,000. Spread it across accounts and you might barely move the needle.

That's the kind of control you can't buy back later.

Quick word before we keep going

I want to be clear about something. Having the assets in the first place is the most important thing here. If you've built a healthy retirement portfolio, you're already winning. This conversation is for the readers who want to go from winning to optimized.

If that's you, keep reading.

The easiest place to start

For most high-earning attorneys, the simplest way to start building tax liquidity is the taxable brokerage account.

Long-term capital gains, which is what you pay on investments held over a year, are taxed at lower rates than ordinary income. For an attorney still in peak earning years, that's often the difference between a 35% or 37% ordinary income rate and a 15% or 20% capital gains rate. Already a big swing.

Now check this out. In 2026, a married couple filing jointly with up to $98,900 in taxable income pays 0% on long-term capital gains. Zero. My goodness.

Once you layer in Social Security, a pension, a partnership exit, and a Roth conversion or two, most retired attorneys won't fully live in that 0% bracket. But years spent in the 15% bracket are common, and 15% beats 35% any day of the week.

Flexibility is the whole point

I don't know what tax law will look like in 5 years. You don't either. Your CPA doesn't either, no matter how confident she sounds.

If you've built tax liquidity, you just adjust as the rules change. Need more income? Roth conversion. Need less? Brokerage withdrawal. Want to stay right under the next bracket? Mix and match.

You end up in the driver's seat with your taxes.

Where to go from here

Back to my client. After we walked through it, she said something else: "I wish someone had explained this to me 10 years ago."

The good news is 10 years isn't always the deadline. There's almost always a move available, even a couple years into retirement.

If you're inside 5 years of stepping back from the practice, this is the conversation worth having now, while you still have income coming in to fund the buckets. If any of that resonated, I'd love to walk through where you stand today.

Cheers, David