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

A self-employed architect who spent 30 years running a small practice retires at 65 with around $300,000 of annual retirement cash flow. The federal tax bill is roughly $20,000, an effective rate under 8%. The trick comes down to which account each dollar is pulled from.

The scenario in plain English

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.

The architect we are modeling is single, age 65, and pulling income from the accounts below.

• 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.

Account location drives the results

Only the traditional draws, the dividends, and a slice of Social Security ever hit the 1040. The Roth and HSA dollars do not show up at all. 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 taxable column (up to 85%). They also stack ordinary income into the 22% and 24% brackets. The architect who built bigger Roth and HSA balances pays roughly $20,000 instead of the $35,000 a traditional-heavy peer pays on the same $300,000.

Three moves that actually built this outcome

1. Solo 401(k) with a Roth bucket. Self-employed architects can open a Solo 401(k) and direct employee deferrals to the Roth side, then layer employer profit-sharing on the pretax side. Plans that allow roll-ins also let you move old pretax IRAs in, clearing the path for clean backdoor Roth conversions later.
2. HSA stockpiling for 20 plus years. Pay current medical bills out of pocket, invest the HSA in low-cost index funds, and let it compound. An HSA invested this way produces tax-free contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses, which retirees use heavily.
3. Roth conversions during lean years. The architect who took a sabbatical, switched firms, or had a quiet project year used that window to convert traditional IRA dollars at 12% or 22%, locking in low rates that look cheap once required minimum distributions begin.

What to do with this

Audit the ratio of Roth plus HSA to traditional balances. If traditional dominates, every dollar drawn in retirement drags Social Security into taxation and stacks ordinary income. The costly mistake is treating the Solo 401(k) as a pure tax deduction in peak years and ignoring the Roth side. The deduction feels good at 32%. The bill at 65, with Social Security in the mix, is what the architect above quietly avoided.

One more anchor: state tax. With the 10-year Treasury near 4.5%, even safe income is taxable somewhere. Retiring in a no-income-tax state can shave another 5% to 9% off the all-in rate, often more than any federal optimization.