Retirement Planning Case Study | Tax Planning for an Oregon Couple with PERS

Case Study: Retiring Together With Confidence – PERS, Social Security, and Tax Planning for an Oregon Couple

Background

A married couple living in Lane County, Oregon came to Tidepool Wealth Strategies with a simple hope: retire at the same time, enjoy their grandkids in the Midwest, and create space for travel and church involvement. She's a 59-year-old Tier 2 PERS teacher. He's 61 and works as a project manager in the lumber industry, often putting in 50-hour weeks because of staffing shortages and increasing demands.

He was worried he might become a reduction-in-force casualty at any time, and he assumed he needed to work until 67. Not because he wanted to, but because he believed they could not afford to retire earlier, especially with the pre-65 health insurance gap on his mind. Together, they expected to need about $8,000 per month in retirement. "Which means we need like $10,000 a month before the government takes their cut."

Over the years they had built approximately $1.6 million in retirement savings across multiple 401(k)s, 403(b)s, Traditional and Roth IRAs, and her Oregon PERS accounts, including an IAP balance of about $145,000. They also had a $325,000 inherited taxable investment account that they had never touched (for fear of triggering 'big gains'), plus roughly $60,000 in savings. 

On the liability side, they carried a home equity line of credit (HELOC), an auto loan with five years of payments remaining, and a mortgage that was on pace to be paid off in about four years. All in all, on track to pay off the debts before they retired.

From the outside, it looked like they were doing well. On the inside, they were unsure how to bring all these pieces together into a clear plan.

The Retirement Questions They Brought In

They arrived with a list of important questions:

• How do they retire at the same time; or did her retirement depend on his job stability and his ability to keep working until 67?
• How should her PERS pension be structured, and how does it coordinate with Social Security for both of them?
• What is the smartest way to handle the pre-Medicare health insurance window?
• Should they pay off existing debts before they retire, or stay on the current schedule?
• What should they do with the inherited taxable account that felt too dangerous to touch because of perceived capital gains?
• Were they actually on track using the 4% rule as their guide?
• Most of all, were they missing anything important?

They expected the conversation to focus on a simple "Can we retire? Yes or No." The deeper question turned out to be: how do we optimize the retirement we have already built?

What the Planning Revealed

1) He did not need to work until 67

After testing their plan with realistic spending, taxes, and healthcare costs, we found that he did not need to work until 67. The numbers supported him retiring at age 64 - even sooner if desired!

Their cash flow needs were not a strain on a moderate long-term portfolio return. They were actually projected to die with quite a bit more left over than they were on track to retire with. 

With her intention to retire when he does, that allowed a joint retirement at age 64 for him and 62 for her, with their $8,000 of net income per month spending target.

This changed his mindset. Instead of hoping his company would keep him on until 67, they now had a financially viable target at 64 and a clear plan if a layoff or reduction in force arrived earlier than expected.

2) Structuring the PERS pension for both spouses

She knew she had a PERS pension and an IAP balance, but she had not looked closely at her payout options. The choice felt overwhelming and very permanent. After analysis, Option 2a, the “pop-up” survivor benefit, (learn more about PERS here) emerged as the best fit.

That option:

• Provided a survivor benefit for the spouse who outlives the other.
• Allowed the benefit to adjust if the non-PERS spouse passed away first.
• Integrated well with their Social Security plan and portfolio withdrawals.

It gave them a balanced combination of security and flexibility instead of a single-life option that might have left the survivor exposed.

3) Coordinating Social Security for income and survivor protection

Their original plan was for both to file at their full retirement ages. When we modeled different filing strategies, a better pattern emerged:

• She files for her own benefit at full retirement age (FRA).
• He delays his Social Security benefit until age 70.
• Once he claims, she steps up to receive one-half of his delayed benefit as a spousal benefit if that is higher than her own (in this scenario, it was!).

This pattern increased their guaranteed income in the second half of retirement and provided stronger protection for the surviving spouse if one of them passes away earlier than expected.

4) Simplifying the balance sheet by addressing debt

Before planning, they saw their debts as manageable but routine. Looking at the numbers showed a different story:

• Their HELOC carried an interest rate of about 7%.
• Their car loan cost them $600 per month at 4.25% interest.
• Their savings account earned significantly less than these rates.

Once we discussed the eroding factor of a 7% HELOC interest, roughly double the rate on their high-yield savings, the math became clear.

The strategy we built:

• Pay off the HELOC, reducing an expensive liability and freeing roughly $700 per month in cash flow.
• Directed extra cash flow to double the car payments so that it would be paid off before retirement.
• Preserved a reasonable cash cushion instead of draining savings entirely.

Paying down loans sooner was projected to save them over $3,000 of interest and reduce their fixed obligations going into a potentially earlier retirement.

5) Turning the inherited account into a flexible planning tool

For two years, they had treated the $325,000 inherited taxable account as untouchable. They believed that selling any investments would trigger a very large capital gains bill based on his father’s original purchase prices.

A closer look revealed:

• The step-up in cost basis at inheritance significantly reduced their actual capital gains exposure.
• Several investments were sitting at a loss, not a gain.
• They could harvest those losses, create cash, and still keep a long-term investment strategy in place.

With a tax-aware plan, they began gradually repositioning the portfolio into more tax-efficient investments over a few years. In the process, they were able to harvest losses and create enough cash to pay off the car entirely. What had felt like a tax trap became a flexible bucket they could use to support travel, large purchases, and targeted withdrawals as needed. This account also became one of two options available to source tax-efficient income to cover pre-65 health insurance premiums.

Long-Term Taxes, IRMAA, and Estate Planning

1) The hidden impact of RMDs and IRMAA

Before our work together, they had never heard of IRMAA. They also assumed taxes would naturally decrease in retirement. In reality, their Traditional IRA balances would continue growing until RMDs begin at age 75, creating a sharp rise in taxable income later in life.

Based on projections, their RMDs were likely to trigger Medicare IRMAA surcharges beginning in their mid-80s. And if either spouse passed away "earlier than planned," the survivor would find themselves filing as a single taxpayer, pushing them into the 22% tax bracket and exposing them to IRMAA Tier 2 (+$220/month) for most of their remaining years. In their late 80s or early 90s, the survivor was projected to reach IRMAA Tier 3 (+$353/month).

2) A Roth conversion plan that saves over $700,000 of lifetime taxes

They had heard of Roth conversions, but only as something to "maybe" consider. They did not realize the size of the opportunity in front of them. Converting up to the top of the 12% bracket for the first ten years of retirement produced a projected lifetime combined Federal and Oregon income tax savings of over $700,000, if done with care.

Even more importantly, this strategy:

• Helped prevent IRMAA surcharges in their 80s.
• Protected the survivor from higher single-filer tax brackets.
• Used years when both spouses were alive and in favorable tax brackets.

3) Estate planning that reduces their Oregon estate tax exposure

They had no estate documents on file. They also did not realize that Oregon's $1 million estate tax threshold meant their future projected estate could owe more than $300,000 in state estate taxes without planning.

We helped them identify the right documents: wills, powers of attorney, advance directives, and a properly structured trust. This would help to ensure:

• Their wishes are clearly outlined.
• The surviving spouse is protected.
• Their taxable estate could be reduced after the first spouse passes.

4) The 4% rule did not match their pension and portfolio mix

They had used the 4% rule to guess whether they were on track. After reviewing their pensions, Social Security timing, and portfolio structure, we showed that a guardrails-based income plan would provide:

• Higher spending flexibility.
• More resilience during market downturns.
• Better coordination between taxable, tax-deferred, and Roth accounts.

Not on Their Radar

When we began working together, several key risks and opportunities were not on their radar:

• IRMAA exposure driven by RMDs beginning at age 75.
• Survivor tax brackets pushing the surviving spouse into the 22% bracket and IRMAA surcharges.
• Roth conversions providing over $700,000 of projected lifetime tax savings.
• The inherited taxable account having far fewer capital gains than assumed, and containing positions with losses.
• Loss harvesting unexpectedly providing cash to eliminate their car loan entirely.
• The 7% HELOC quietly eroding their net worth each year.
• Oregon estate tax potentially exceeding $300,000 in the future.
• The 4% rule being too rigid for a household with pension income and multiple account types.
• He did not need to work until age 67! Age 64 was fully viable and aligned with their retirement hopes.

The Outcome

By coordinating their PERS pension, Social Security timing, debt elimination, Roth conversions, taxable account strategy, and estate planning needs, the couple can comfortably retire together earlier than expected.

They have the opportunity to leave the workforce with:

• A flexible, tax-efficient income plan.
• Reduced long-term tax and Medicare exposure.
• A simplified and strengthened balance sheet.
• A clear plan for legacy and estate protection.
• The financial flexibility to travel, visit their grandchildren in the Midwest, and volunteer with their church community.

For these two, retirement is no longer a question of “Can we?” It is now an intentional, coordinated plan built around what matters most to them.

Converting from a traditional IRA to a Roth IRA is a taxable event.

A Roth IRA offers tax free withdrawals on taxable contributions.

To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.