Meet the Sandovals: Retired at 60, Raising an 8-Year-Old

Michael and Laura Sandoval have just stepped into retirement, both at age 60. After decades in demanding careers—Michael as a systems engineer and Laura as a healthcare administrator—they decided it was time to enjoy a slower pace of life and more time with their 8-year-old son, Ethan.

They live in the Sacramento area and value time together, national park road trips, and volunteering with local nonprofits. Their plan? A purpose-filled retirement that also leaves a financial legacy for Ethan.

But even in retirement, the Sandovals are making taxable income by choice. In 2025, they executed a $157,000 Roth conversion, a strategy designed to lower future Required Minimum Distributions (RMDs), reduce taxes in their 70s and beyond, and build tax-free wealth for their son.

Let’s look at how this works—and what it means for their taxes today.

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Their 2025 Income at a Glance

Even without a paycheck, the Sandovals generated significant income this year:

• $157,000 in Roth conversion income (taxed as ordinary income)
• $54,557 in interest income from U.S. Treasury bonds (taxable federally, exempt in California)

They had no capital gains, pensions, or Social Security income yet—delaying those streams until it makes tax sense.

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Federal Tax Overview

Category	Amount
Federal AGI	$157,000
Federal Taxable Income	$127,000
Standard Deduction	$30,000
Child Tax Credit	$2,000
Federal Tax Due	$16,046

• The $157,000 Roth conversion formed the backbone of their AGI.
• The $2,000 Child Tax Credit for Ethan helped reduce their liability.
• No capital gains taxes were owed since they didn’t sell appreciated assets.

Federal Effective Rate: 11.49%
Federal Marginal Rate: 22%

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California State Tax Overview

Category	Amount
CA Taxable Income	$200,477
CA Tax Due	$11,950
CA Marginal Rate	8.53%
CA Effective Rate	5.96%

While the Treasury bond interest was exempt from California tax, the Roth conversion was fully taxable. California doesn’t allow deductions for IRAs or offer child-related credits like the federal government.

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Why Roth Conversions Make Sense at 60

Many retirees wait too long to start Roth conversions. The Sandovals are doing it now, while their income is low and before they’re forced to take RMDs at 73:

• Reduces future RMDs, potentially lowering future tax brackets
• Avoids future Medicare IRMAA surcharges
• Builds a tax-free inheritance for Ethan
• Prevents widow’s penalty, where the surviving spouse may be taxed more harshly as a single filer

At age 60, they’re in the sweet spot: too young for RMDs, not yet collecting Social Security, and able to control how much taxable income they report.

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Raising a Child in Retirement: Opportunities and Responsibilities

Most retirees don’t have school-age children, but the Sandovals’ late-in-life parenthood adds complexity and motivation to their financial plan:

• Child Tax Credit helps reduce the federal tax burden
• ACA marketplace insurance is carefully managed to avoid subsidy cliffs
• College savings remains a priority—they contribute regularly to a 529 Plan
• Estate planning includes Roth IRAs and a family trust to ensure that Ethan is provided for tax-efficiently

Their lifestyle is modest, but intentional. They avoid debt, live off savings, and use Roth conversions as their key strategy for tax and legacy planning.

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Takeaways

The Sandovals’ 2025 return is a great example of what smart retirement looks like, especially when you retire at 60 and still have a dependent child. With no job income, they’ve created their own “paycheck” through Roth conversions and Treasury interest.

Their tax-smart plan reduces their burden today, minimizes taxes tomorrow, and sets up Ethan for a future with fewer financial barriers.

Thinking of retiring soon? Ask yourself:

• Should I be doing Roth conversions before RMDs?
• How will my income affect ACA subsidies and IRMAA?
• What will my child or spouse inherit—and how much tax will they owe?

If you want peace of mind in retirement, start planning with taxes in mind now, just like the Sandovals.

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